Federal Election Commission Main Page
FEDERAL ELECTION COMMISSION
Washington, DC 20463
March 31, 2006
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
ADVISORY OPINION 2006-04
Mr. Jon Ponder
Treasurer
Tancredo for Congress Committee, Inc.
P.O. Box 3756
Littleton, CO 80121-3756
Dear Mr. Ponder:
We are responding to your advisory opinion request on
behalf of Tancredo for Congress Committee, Inc. ("TFC"), the
principal campaign committee for Representative Thomas
Tancredo, concerning the application of the Federal Election
Campaign Act of 1971, as amended (the "Act"), and Commission
regulations to certain activities by Representative Tancredo
and TFC on behalf of Defend Colorado Now ("DCN"), a State
ballot initiative committee. The Commission concludes that
while donations from TFC to DCN are generally permissible,
donations in the proposed amounts would constitute
"financing" of DCN by TFC for the purposes of 2 U.S.C.
441i(e)(1) and 11 CFR 300.2(c). TFC may produce and
disseminate communications in which Representative Tancredo
endorses the ballot initiative supported by DCN. Any
polling data DCN gives to TFC would be an in-kind
contribution and would be subject to the limitations and
prohibitions of the Act.
Background
The facts presented in this advisory opinion are based
on your letters received on November 21, 2005 and January
31, 2006, and a phone conversation on February 6, 2006.
Representative Tancredo is a member of Congress
representing the Sixth Congressional District of Colorado
and is a candidate for reelection in 2006. He is closely
identified with the issue of immigration reform and is the
Chairman of the Congressional Immigration Reform Caucus in
the U.S. House of Representatives.
DCN is a registered State committee established on
February 12, 2004 for the purpose of qualifying and
advocating for a Colorado ballot initiative that would
restrict certain State services to persons lawfully present
in the United States. DCN intends to collect sufficient
signatures to qualify the initiative for the November 7,
2006 election. It will solicit and accept funds that are
permitted under Colorado law, but that are in excess of the
amounts permitted and from sources prohibited by the Act.
Should the initiative successfully qualify for the ballot,
DCN will spend funds to advocate for the passage of the
initiative, including paying for mail and media advertising
in Representative Tancredo's district. DCN does not intend
to support or oppose Federal or non-Federal candidates on
the November 7, 2006 ballot.
Representative Tancredo intends to endorse the ballot
initiative and use campaign funds from TFC to run newspaper,
radio, and television advertisements in his Congressional
District publicizing his endorsement. No other entity,
including DCN, will pay for these advertisements.
Representative Tancredo and TFC anticipate receiving polling
data from DCN, and plan to use the polling data to craft
these endorsement messages. Representative Tancredo will
not solicit funds on behalf of DCN in these endorsements or
in any other manner.
TFC would like to make a donation to DCN. Your request
presents three possible scenarios. In the first
alternative, TFC would donate either $50,000 or 50% of the
total receipts of DCN at the time of the contribution,
whichever is less. The second alternative would limit the
donation to $50,000 or 25% of total receipts of DCN at the
time of the donation, whichever is less. Finally, under the
third alternative, TFC would not donate any funds directly
to DCN, but would instead pay up to $50,000 directly to
signature vendors for their services in providing signatures
to DCN to qualify the initiative.
Questions Presented
1. May TFC donate campaign funds to DCN?
2. Would Representative Tancredo directly or indirectly
establish, finance, maintain, or control DCN if:
(a) TFC donates to DCN the lesser of $50,000 or 50% of
DCN's total donations?
(b) TFC donates to DCN the lesser of $50,000 or 25% of
DCN's total donations?
(c) TFC pays vendors up to $50,000 for providing
signatures to DCN to qualify its initiative for the
ballot?
3. May TFC pay for communications in which Representative
Tancredo endorses the ballot initiative supported by DCN?
4. May TFC accept opinion polling data from DCN?
Legal Analysis and Conclusions
Question 1. May TFC donate campaign funds to DCN?
Yes, TFC may donate campaign funds to DCN. The Act
lists six categories of permissible uses of contributions
received by a Federal candidate, including "otherwise
authorized expenditures in connection with the campaign for
Federal office of the candidate." 2 U.S.C. 439a(a)(1); see
also 11 CFR 113.2(a). Representative Tancredo's support for
immigration reform is a part of his reelection campaign and
is an issue with which he is closely identified. His
donation of campaign funds to a ballot initiative committee
that shares his policy goals regarding this issue is
considered "in connection with [his] campaign for Federal
office." Thus, these donations are permissible under
2 U.S.C. 439a(a)(1). See Advisory Opinion 2004-29 (Akin).
The proposed activity may also fall within other permitted
uses of contributions enumerated by 2 U.S.C. 439a(a),
including the use of contributions "for any other lawful
purpose" under 2 U.S.C. 439a(a)(6).
Question 2. Would Representative Tancredo directly or
indirectly establish, finance, maintain, or control DCN if
(a) TFC donates to DCN the lesser of $50,000 or 50% of DCN's
total donations; or (b) TFC donates to DCN the lesser of
$50,000 or 25% of DCN's total donations; or (c) TFC pays
vendors up to $50,000 for providing signatures to DCN to
qualify its initiative for the ballot?
The Act states that any entity "directly or indirectly
established, financed, maintained, or controlled" by a
Federal candidate or officeholder shall not solicit,
receive, direct, transfer, or spend funds in connection with
an election for Federal office or any election other than an
election for Federal office, unless those funds comply with
the contribution limits and source prohibitions of the Act.
2 U.S.C. 441i(e)(1). To determine whether a Federal
candidate or officeholder directly or indirectly
established, financed, maintained, or controlled another
entity the Commission applies the factors set forth in 11
CFR 300.2(c)(2). Specifically, the Commission examines the
ten factors identified in 11 CFR 300.2(c)(2)(i) through (x),
as well as any other relevant factors, in the context of the
overall relationship between the Federal candidate or
officeholder and the entity. See 11 CFR 300.2(c)(2).
Under the facts presented, the key factor is whether
TFC will provide funds "in a significant amount" to DCN.1
11 CFR 300.2(c)(2)(vii). The Commission has approached the
question of what constitutes a significant amount on a case-
by-case basis in view of all the relevant circumstances. It
has stated that "amounts that are so large or. that comprise
such a substantial percentage of the organization's
receipts" would be considered "financing" a committee under
11 CFR 300.2. Advisory Opinions 2004-29, n. 4 (Akin), 2004-
25 (Corzine).
You have not proposed the donation of a specific dollar
amount to DCN. Instead, your proposal is that TFC will
donate a specific percentage of DCN's total receipts (either
25% or 50%), up to $50,000. Therefore, the only inquiry the
Commission can perform is to determine whether the proposed
percentage is "a significant amount" under 11 CFR
300.2(c)(2)(vii).
The Commission will examine the percentage of TFC's
donation compared to the total donations received by DCN
under each of the three alternatives proposed in your
request in the context of the overall relationship between
TFC and DCN to determine whether TFC's proposed donation to
DCN is "in a significant amount" under 11 CFR
300.2(c)(2)(vii).
A. Alternative One - TFC donates to DCN the lesser of
$50,000 or 50% of DCN's total donations.
Alternative One proposes a donation from TFC to DCN in
an amount up to 50% of the total receipts of DCN at the time
of the donation. A donation of 50% of an organization's
total receipts must be considered a "significant amount."
For the Commission to find otherwise would essentially
rewrite the regulation to require that a "majority" of an
entity's funds come from a single source before that source
would be deemed to have financed the entity. Accordingly,
a donation by TFC that represents 50% of DCN's total funds
is a "significant amount" that would result in TFC
"financing" DCN for the purpose of 11 CFR 300.2(c).
B. Alternative Two - TFC donates to DCN the lesser of
$50,000 or 25% of DCN's total donations.
Alternative Two proposes a donation from TFC to DCN in
an amount up to 25% of the total receipts of DCN at the time
of the donation, which must be examined in the context of
the overall relationship between TFC and DCN to determine
whether this donation is a significant amount under 11 CFR
300.2(c)(2)(vii).
DCN was established on February 12, 2004 and has not
been active on any issue other than advocating for the
proposed ballot initiative. TFC seeks to donate a
substantial amount of money to support DCN's sole mission of
placing this initiative on the 2006 ballot and urging voters
to support it. Through the fourth quarter of 2005 DCN
received donations of $9,285.40. DCN also received pledges
for an additional $45,500 but these funds have not yet been
received as of the date of your request. TFC has indicated
that it would like to donate up to $50,000. This amount of
money would represent substantial "seed money" for DCN and
would result in DCN depending in large part on TFC for its
initial existence.
DCN will also share with TFC both its polling data and
general "campaign strategy." Representative Tancredo also
intends to use his own campaign funds to create and
distribute advertisements to endorse the initiative. He
supported an identical initiative in the past and is closely
identified with this issue on a State-wide and national
basis. Representative Tancredo will appear on the same
ballot as the initiative and has made the issue of
immigration reform a part of his reelection campaign.
In the context of the overall relationship between TFC
and DCN, the Commission concludes that the donation of 25%
of DCN's total receipts by TFC is a significant amount of
funds that would result in TFC "financing" DCN for the
purpose of 11 CFR 300.2(c).
C. Alternative Three - TFC pays vendors up to $50,000 for
providing signatures to DCN to qualify its initiative for
the ballot.
You propose that TFC pay an amount up to $50,000
directly to signature vendors for their services in
providing signatures to DCN to qualify the initiative for
the November 7, 2006 ballot. Section 300.2(c)(2)(vii)
states that the provision of funds in a significant amount
"through direct or indirect payments for administrative,
fundraising, or other costs" is relevant for determining
whether committees are directly or indirectly established,
financed, maintained, or controlled by a Federal candidate
or officeholder. Paying vendors who gather signatures for
DCN would constitute providing funds through "indirect
payments" for the "other costs" of DCN. Therefore, the
legal effect of paying up to $50,000 to these vendors on
behalf of DCN is identical to donating up to $50,000 to DCN.
As discussed above, such a donation is a permissible use of
campaign funds, but the donation may result in TFC financing
DCN if that donation is a "significant amount" of DCN's
total receipts. The determination of whether the amount is
significant may be dependent to some extent on what
percentage of DCN's total receipts the donation by TFC
represents. See analysis of questions 2(a) and 2(b), above.
Question 3. May TFC pay for communications in which
Representative Tancredo endorses the ballot initiative
supported by DCN?
Yes, TFC may use campaign contributions to pay for
communications in which Representative Tancredo endorses the
ballot initiative supported by DCN. As stated above,
contributions may be used by candidates "for otherwise
authorized expenditures in connection with the campaign for
Federal office" of that candidate. 2 U.S.C. 439a(a)(1).
The Commission has previously determined that an
advertisement in which a candidate endorses a ballot
initiative on an issue with which he is associated is an
expenditure in connection with a campaign for Federal
office. See Advisory Opinion 2004-29 (Akin). In this case,
Representative Tancredo is closely identified with the issue
of immigration reform. Therefore, communications in which
he endorses a ballot initiative addressing this issue would
be permissible uses of campaign contributions under 2 U.S.C.
439a(a)(1). See also 11 CFR 113.2(a).
Question 4. May TFC accept opinion polling data from DCN?
Yes, TFC may accept opinion polling data from DCN
subject to the prohibitions and limitations of the Act and
Commission regulations.
A contribution includes "anything of value" given by
any person for the purpose of influencing a Federal
election. 2 U.S.C. 431(8)(A)(i); 11 CFR 100.52(a).
Specifically, 11 CFR 106.4(b) states that the purchase of
opinion poll results by a person not authorized by a
candidate to make expenditures and the subsequent acceptance
of the poll's results by a candidate or a candidate's
authorized committee is an in-kind contribution by the
purchaser to the candidate, and an expenditure by the
candidate. Because Representative Tancredo and TFC will
"have access" to DCN's polling data, and because TFC will
use this data in creating advertisements it will run, TFC's
acceptance of DCN's poll results is an in-kind contribution
from DCN to TFC. However, if the poll results were to be
made public prior to receipt by TFC, and were made public
without any request, authorization, prearrangement, or
coordination between TFC and DCN, then there would not be an
in-kind contribution. See 11 CFR 106.4(c).
This in-kind contribution is subject to the source
prohibitions and amount limitations of the Act. You
indicate that to the best of your knowledge, DCN is not a
prohibited source under the Act, such as a corporation.
Therefore, TFC may receive an in-kind contribution from DCN
subject to the limitations of 2 U.S.C. 441a(a)(1)(A) and 11
CFR 110.1(b)(1). The amount of the contribution is the
amount that would be attributed to TFC under 11 CFR
106.4(e). The precise amount of the in-kind contribution
must also take into account the length of time between DCN's
receipt of the poll results and TFC's receipt of those
results, pursuant to 11 CFR 106.4(g).2 See Advisory Opinion
1990-12 (Strub).
The Commission expresses no opinion regarding whether
the activities you propose are permissible under Colorado
law.
This response constitutes an advisory opinion
concerning the application of the Act and Commission
regulations to the specific transaction or activity set
forth in your request. See 2 U.S.C. 437f. The Commission
emphasizes that, if there is a change in any of the facts or
assumptions presented, and such facts or assumptions are
material to a conclusion presented in this advisory opinion,
then the requestor may not rely on that conclusion as
support for its proposed activity.
Sincerely,
(signed)
Michael E. Toner
Chairman
Enclosures (AOs 2004-29, 2004-25, 1990-12)
DISSENTING OPINION IN ADVISORY OPINION 2006-04
OF
CHAIRMAN MICHAEL E. TONER
AND COMMISSIONER HANS A. VON SPAKOVSKY
We write separately to express our disagreement with
the approach taken in the majority opinion. We would have
preferred to answer this advisory opinion request by
concluding that regardless of whether a state ballot
initiative committee is "financed" by a Federal candidate or
officeholder, state ballot initiative committees are not
restricted by the soft money restrictions of federal
campaign finance law because their activities are not in
connection with an election for office within the meaning of
2 U.S.C. 441i(e). Thus, approaching the issues this way,
the question of whether Defend Colorado Now ("DCN") is
"financed" by the Tancredo for Congress Committee ("TFC") is
irrelevant. We are also concerned with our colleagues'
method of analysis in examining the question of "financing."
We hope that the Commission will have occasion to revisit
these issues in the future.
I. THE SOFT MONEY RESTRICTIONS IN SECTION 441i(e) ARE
LIMITED TO ACTIVITIES IN CONNECTION WITH CANDIDATE ELECTIONS
TFC requested an advisory opinion from the Commission
to seek assurances that certain contributions to DCN would
not violate 2 U.S.C. 441i(e)(1) or other provisions of the
Federal Election Campaign Act of 1971 as amended (the
"Act").3 The requester sought "guidance as to whether the
amount of the contribution both in nominal and percentage
terms is not so large as to consider DCN being `financed' by
Congressman Tancredo" within the meaning of section
441i(e)(1). See Advisory Opinion Request of Jon Ponder,
Treasurer, Tancredo for Congress Committee, Inc., November
18, 2005. The request noted that "DCN will solicit funds in
excess of amounts permitted and from sources prohibited by
the Act (`soft-money')." Id. Subsequent correspondence
indicated that Congressman Tancredo had no plans to solicit
donations to DCN. See Correspondence from Jon Ponder to
Rosemary C. Smith, January 26, 2006.
The threshold legal question in determining whether
the fundraising restrictions of section 441i(e) apply is
whether the activities in question are in connection with an
election. Sections 441i(e)(1)(A) and (B) prohibit Federal
candidates and officeholders, and entities directly or
indirectly established, financed, maintained or controlled
by a Federal candidate or officeholder, from soliciting,
receiving, directing, transferring, or spending funds
outside the prohibitions and limitations of the Act.
However, those provisions apply only with respect to
activities conducted "in connection with an election for
Federal office" or "in connection with any election other
than an election for Federal office."
We believe, as a matter of law, that state ballot
initiatives and referenda are not elections for office under
2 U.S.C. 441i(e)(1). The phrases "election for Federal
office" and "election other than an election for Federal
office" unambiguously refer to candidate elections for
public office. This view was recently set forth in Advisory
Opinion 2005-10, Concurring Opinion of Vice Chairman Toner
and Commissioner Mason. There, it was noted that "the
legislative history supports this interpretation of Section
441i(e). In debating the Bipartisan Campaign Reform Act of
2002 (`BCRA'), not a single Member of Congress, including
the legislation's sponsors, indicated that the soft-money
ban would apply to initiatives and referenda. Moreover,
Members of Congress who voted for BCRA, including House
Minority Leader Nancy Pelosi (D-CA), filed comments in this
proceeding indicating that it was not their understanding
that 441i(e)'s soft money restrictions would apply beyond
the candidate elections to ballot measure activities."
Therefore, based on the plain meaning of section
441i(e) and the statute's legislative history, the state
ballot initiative-related activities of DCN, even if
"financed" by TFC, are not subject to the soft money
restrictions of the Act.
II. ANALYZING "FINANCING" UNDER SECTION 441i(e)
The foregoing discussion notwithstanding, we also
believe the Commission's method of analysis with regard to
the matter of "financing" takes an insufficiently
comprehensive view of the totality of the circumstances
surrounding the proposed donations. The application of that
analysis to the proposed donation in the amount of 25% of
receipts reaches an incorrect conclusion.
The Act does not define the terms "establish, finance,
maintain, or control." See 2 U.S.C. 441i(e)(1). The
Commission's regulations, at 11 CFR 300.2(c)(2), state
that
To determine whether a sponsor directly or indirectly
established, finances, maintains, or controls an
entity, the factors described in paragraphs (c)(2)(i)
through (x) of this section must be examined in the
context of the overall relationship between sponsor and
the entity to determine whether the presence of any
factor or factors is evidence that the sponsor directly
or indirectly established, finances, maintains, or
controls the entity.
The regulation then lists 10 factors, but notes that they
are not exclusive. In other words, the regulations create a
"totality of the circumstances" test.
A. Proposed Alternative One
With respect to Alternative One, the majority opinion
contains no examination of the relevant facts and
circumstances. The Commission simply concludes that "[a]
donation of 50% of an organization's total receipts must be
considered a `significant amount.'" While we agree with the
result here, we believe that 11 CFR 300.2(c)(2) requires
an actual examination of the surrounding facts and
circumstances. The two organizations (TFC and DCN) are, and
would continue to be, independent of each other, with
distinct leadership not indicative of a formal or ongoing
relationship.4 DCN would like to share polling data and
campaign strategy with TFC. Representative Tancredo is
closely associated with the issues promoted by DCN, intends
to endorse the ballot initiative, and will appear on the
same ballot as the initiative. Thus, the "overall
relationship" between TFC and DCN is one in which the former
has an interest in the latter's success. In light of these
facts, this donation may represent much-needed "seed money"
for DCN.
The facts provided in the request indicate that through
the fourth quarter of 2005, DCN had received donations of
$9,285.40, plus pledges for an additional $45,500. Whether
these pledges have been realized is unknown. A donation of
50% of DCN's total actual receipts as of the time of the
request, would equal $4,642.70. While this is not an
especially large amount of money, it may represent a
substantial sum for a nascent organization, especially if
this donation is required to fund efforts to collect the
additional $45,600 in pledges. The facts set forth above
and the overall relationship between TFC and DCN indicate
that the proposed donation of 50% of receipts could be a
"significant amount" that results in "financing" for
purposes of 2 U.S.C. 441i(e)(1) and 11 CFR
300.2(c).
However, we disagree with our colleagues that "[a]
donation of 50% of an organization's total receipts must be
considered a `significant amount'" (emphasis added). See
Advisory Opinion 2006-04, at page 4. 11 CFR 300.2(c) does
not impose any per se thresholds, but rather, requires a
full examination of the relevant facts. If, for example,
DCN receives the additional $45,600 in pledges, the
$4,642.70 contributed by Representative Tancredo may not be
a "significant amount" in comparison to the total of
$59,406.10 raised by DCN. Under such circumstances,
Representative Tancredo's donation would represent less than
8% of DCN's total funding.
B. Proposed Alternative Two
The Commission examines the overall relationship of TFC
and DCN for purposes of analyzing Alternative Two, and
concludes that a donation from TFC to DCN in an amount up to
25% of the total receipts of DCN at the time of the donation
is a "significant" amount that would result in TFC
"financing" DCN for purposes of 2 U.S.C. 441i(e)(1) and
11 CFR 300.2(c). We disagree with this conclusion.
DCN has received donations of $9,285.40. A donation of
25% of DCN's total actual receipts as of the time of the
request would equal $2,321.25. In light of the overall
relationship between TFC and DCN, as examined above, we do
not agree that this relatively modest amount constitutes TFC
"financing" DCN. This amount is less than half the
permissible annual individual contribution limit to a
federal political action committee, and would be less than
4% of the total funding collected by DCN if all its pledges
are fulfilled.
We do not read our colleagues' opinion to stand for the
proposition that a donation of 25% of total receipts must
always lead to a finding that one entity is financed by
another. Rather, "the context of the overall relationship
between TFC and DCN" appears to be the crucial predicate for
their conclusion. See Advisory Opinion 2006-04, at page 5.
Regardless, we hope the Commission soon has an opportunity
to revisit soon the issues raised in this advisory opinion
so that it can provide further guidance to the regulated
community.
May 16, 2006
_________(signed)____________
_________(signed)____________________
Michael E. Toner, Chairman Hans A. von
Spakovsky, Commissioner
_______________________________
1 The Commission notes that while other factors may also
indicate that DCN is directly or indirectly established,
financed, maintained, or controlled by Representative
Tancredo, your request does not provide sufficient
information for the Commission to apply these factors in the
context of this Advisory Opinion.
2 The amount of a contribution received and expenditure made
by a candidate or committee receiving poll results would be
50 percent of the original amount if received during a
period of 16 to 60 days after the initial recipient obtained
the results, five percent of the original amount during a
period 61 to 180 days after the initial receipt, and zero if
after 180 days. See 11 CFR 106.4(g).
3 We agree with our colleagues' decision that the proposed
donations are permissible under 2 U.S.C.
439a(a)(1) and (6).
4 The Advisory Opinion Request states that "Congressman
Tancredo did not establish and will not control DCN."