Federal Election Commission Main Page
FEDERAL ELECTION COMMISSION
Washington, DC 20463
February 9, 2007
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
ADVISORY OPINION 2006-34
Joseph E. Sandler, Esquire Frederick K. Lowell,
Esquire
Neil P. Reiff, Esquire Kathryn E. Donovan,
Esquire
Sandler, Reiff & Young PC Pillsbury Winthrop Shaw
Pittman LLP
50 E Street, S.E. #300 400 Capitol Mall, Suite
1700
Washington, D.C. 20003 Sacramento, CA 95814-4419
Dear Messrs. Sandler and Lowell:
We are responding to your advisory opinion request on behalf
of Working Assets, Inc. ("Working Assets"), concerning the
application of the Federal Election Campaign Act of 1971, as
amended (the "Act"), and Commission regulations to a proposed
program in which political committees would serve as sponsors of
wireless telephone service provided by Working Assets to
individual customers. Specifically, you ask whether the proposed
arrangements between Working Assets and the sponsoring political
committees would result in impermissible corporate contributions
by Working Assets to the political committees.
The Commission concludes that the arrangements would not
result in impermissible corporate contributions, so long as
Working Assets and the political committees comply with the
conditions described below.
Background
The facts presented in this advisory opinion are based on
your letters received on October 6, October 30, and November 15,
2006.
a. Current Programs
Working Assets is a closely held for-profit corporation
specializing in donation-linked telecommunications and credit
card services. During its more than 20 years of existence, it
has contracted with various non-profit organizations to provide
to those organizations a portion of the billed amounts paid by
Working Assets' customers. Under some of these "affinity"
programs, ten cents of each of a credit cardholder's purchases
and one percent of each long distance or wireless phone
customer's charges were donated to a fixed pool of non-profit
organizations (along with the customer's optional donation of a
"round-up" of the monthly bill payment). Working Assets has also
established affinity programs specific to particular non-profit
organization "partners," in which one percent of the long-
distance charges of a customer associated with a given non-profit
partner was donated to that partner.
In addition, Working Assets recently entered into affinity
sponsor programs with two large non-profit, section 501(c)(3)
organizations to market wireless service to their members and
supporters. Working Assets donates ten percent of each
customer's monthly charges to his or her organization. Working
Assets is currently negotiating with several other large section
501(c)(3) and (c)(4) organizations for their participation, and
this program is available to any section 501(c)(3) or (c)(4)
organization that meets Working Assets' criteria for commercial
viability. You state that this non-profit affinity program
represents a "major component of [Working Assets'] growth
strategy," and that two senior level positions in Working Assets'
management are dedicated exclusively to managing and marketing
non-profit affinity partnerships. Working Assets projects that
affinity programs with the ten percent donation feature will
account for 29 percent of its wireless revenue by the end of
2007.
In 1991, Working Assets also created a "Citizen Action"
program to provide its long-distance and wireless customers with
an opportunity to communicate their views on legislative and
public policy issues to elected and appointed officials. Each
customer's monthly bill contains "alerts" urging the customer to
take action on specific issues and identifying officials to
contact. The customer can call the identified officials free of
charge on the customer's regular or wireless phone or can have
Working Assets send a letter to the official for a fee paid by
the customer.
b. The Proposed Program
Working Assets proposes to expand its affinity relationships
to Federal political committees and to qualified non-profit
corporations ("QNCs") as described in 11 CFR 114.10. The
proposed affinity program would be made available to any
political party committee, non-connected political committee, or
QNC that asks to participate, without regard to party affiliation
or ideological orientation, "but subject to each particular
program's commercial viability determined by common commercial
principles," including, for example, size of membership and hence
number of potential customers, potential for long-term customer
commitment, strength of trademark, and credit rating of
membership.1 (Political committees and QNCs that would partner
with Working Assets are hereinafter referred to as "political
committee sponsors" or "committee sponsors.") You state that
information about the political affinity program would be made
available on the Working Assets website, which is publicly
accessible, with contact information enabling interested parties
to approach Working Assets. As with the non-profit affinity
program, Working Assets would also actively approach potential
political committee sponsors.
i. The Political Committee Sponsor Program
Under the political committee sponsor program, each
committee sponsor would allow Working Assets to use the committee
sponsor's name, trademark, and supporter list in marketing
Working Assets' mobile phones and wireless services to the
committee sponsor's individual members and supporters. Working
Assets would pay the costs of this marketing, which would include
direct mail and/or on-line communications that contain messages
from the political committee sponsor soliciting support. The
messages might refer to past elections or electoral results, but
would not refer to current or future elections or current Federal
candidates.
Individual customers who purchase the phones and wireless
services from Working Assets would be offered an automatic rebate
of ten percent of their monthly charges. At the time of
enrollment, customers would be given the option either (1) to
receive the rebate in the form of a credit on the customer's next
bill, or (2) to direct the rebate amount as a contribution to the
political committee sponsor. Customers would be able to change
their rebate designations at any time by contacting customer
service. In addition, customers would receive annual notices in
their bills allowing them to affirm or change their rebate
designations. Regardless of which option a customer chooses, the
customer would also be able to contribute to the political
committee sponsor by "rounding up" monthly charges and specifying
the rounded up amount as a contribution. When the customer
authorizes the forwarding of rebates as contributions, the
customer would provide his or her name, address, occupation, and
employer name to Working Assets, which Working Assets would
forward to the political committee sponsor.
You state that the donation form in the bill would include
all the required "disclaimer" language in connection with the
solicitation of contributions (see 2 U.S.C. 441d and 11 CFR
110.11) and would describe the source prohibitions and amount
limitations on contributions. The form would require
contributors to provide their name, address, occupation, and
employer's name. Working Assets would transmit this information
to the political committee sponsor "in time to meet the Sponsor's
recordkeeping and reporting requirements" under the Act and
Commission regulations.
All rebates directed to the political committee sponsor
would be credited to the sponsor's depository account through an
automated clearinghouse transaction within 24 hours after Working
Assets receives payment of the customer's bill. All
contributions received as a result of a round-up would be
forwarded to the political committee within 24 hours of Working
Assets' receipt.
Political committee sponsors may also insert and pay for
issue advocacy "Citizen Action" alerts in the customers' bills.
As with the current Citizen Action programs, customers could call
the identified decisionmakers without paying a charge, or could
pay Working Assets to send a letter to the decisionmaker. The
bills may also include advertising space for content created, and
paid for, by the political committee sponsor. The advertising
space would include the committee sponsor's disclaimer as
required by 2 U.S.C. 441d and 11 CFR 110.11.
ii. Financing
Each political committee sponsor would allow Working Assets
to use the committee sponsor's supporter list in exchange for the
costs incurred by Working Assets in soliciting individuals on the
list to enroll in the committee sponsor program. You state that
the list, in all cases, (1) will have been developed by the
committee sponsor in the normal course of its operations
primarily for its own use, rather than for sale to, or lease by,
others, and (2) will have an ascertainable fair market rental
value.
You acknowledge that the full cost of the marketing effort
will exceed the fair market rental value of the list, but assert
that because the marketing services will benefit both Working
Assets and the political committee sponsor, only a portion of the
marketing costs should be attributable to the committee sponsor.
Working Assets proposes to allocate these costs on the basis of
the division of the wireless charges. Specifically, because each
individual customer would get a ten percent rebate which could be
contributed to the committee sponsor, and Working Assets would
retain 90 percent of the proceeds, Working Assets would allocate
the marketing costs on a ten percent (committee sponsor)/90
percent (Working Assets) basis. Working Assets would rely
primarily on direct mail to communicate with prospective
customers but would use a less expensive method of communication
to ensure that ten percent of the solicitation costs does not
exceed the fair market list rental value. If Working Assets uses
a committee sponsor's list multiple times, the fair market list
rental value of the multiple uses would equal or exceed ten
percent of the marketing costs. Additional marketing of the
program may be accomplished through the political committee
sponsor's already existing means of communication with its
supporters, at no cost to Working Assets.
In addition, the political committee sponsor would pay
Working Assets for any costs incurred by Working Assets to
process the rebates and rounded-up contributions directed to the
committee sponsor and to transmit the contributions and
contributor information to the committee sponsor. The committee
sponsor would also pay for any space in the bills that it uses
for advertisements or Citizen Action Alerts, and all expenses
related to the customers' calls to decisionmakers. The
individual customers would pay for their Citizen Action letters
to decisionmakers.
Question Presented
Would Working Assets' proposed political committee sponsor
program result in impermissible corporate contributions by
Working Assets to the political committee sponsors?
Legal Analysis and Conclusions
No, the arrangements would not result in impermissible
corporate contributions, so long as Working Assets complies with
the conditions set out below.
The Act and Commission regulations specifically prohibit
corporations from making a contribution in connection with a
Federal election. See 2 U.S.C. 441b(a); 11 CFR 114.2(b)(1). A
"contribution" includes "any gift, subscription, loan, advance,
or deposit of money or anything of value made by any person for
the purpose of influencing any election for Federal office."
2 U.S.C. 431(8)(A)(i) and 11 CFR 100.52(a); see also 2 U.S.C.
441b(b)(2) and 11 CFR 114.2(b)(1). "Anything of value" includes
all in-kind contributions, including the provision of goods or
services without charge or at a charge that is less than the
usual and normal charge. See 11 CFR 100.52(d)(1). "Usual and
normal charge" is defined as the price of goods in the market
from which they ordinarily would have been purchased at the time
of the contribution, or the commercially reasonable rate
prevailing at the time the services were rendered. See 11 CFR
100.52(d)(2).
In previous advisory opinions, the Commission has examined
various affinity programs and similar programs involving
political committees and providers of credit card or telephone
services. See Advisory Opinions 2003-16 (Providian National
Bank), 2002-07 (Careau & Co.), 1995-34 (Politechs), 1994-33
(VITEL International), 1992-40 (Leading Edge Communications),
1991-20 (Call Interactive), 1990-1 (Digital Corrections), 1988-12
(Empire of America Federal Savings Bank), and 1979-17 (RNC). In
these advisory opinions, the Commission permitted each of the
corporations to offer an affinity or similar program so long as
the corporation and the political committee (1) enter into a
commercially reasonable transaction in which the political
committee pays the usual and normal charge for any services
provided or such services are provided in exchange for bargained
for consideration of equal value, such as the use of a
committee's mailing list (see, e.g., Advisory Opinions 2003-16,
2002-07, and 1995-34); and (2) the amounts contributed to the
political committee are from the individual customer's funds and
not from the corporation's funds. See, e.g., Advisory Opinions
2003-16 and 1994-33.
a. Usual and Normal Charge
In determining whether Working Assets' proposed program
would be commercially reasonable, the Commission must consider
whether the political committee sponsors would provide sufficient
compensation, i.e., the usual and normal charge, including a
reasonable profit, to Working Assets for the services that
Working Assets would provide to them. See Advisory Opinions 2004-
19 (DollarVote), 2002-07 and 1994-33; see also Advisory Opinion
2003-16. The Commission assumes that the commercial viability of
Working Assets' relationship with each committee sponsor would
stand or fall on its own, based on your statement that the
availability of the political affinity program to any given
political committee would be subject to "each particular
program's commercial viability determined by common commercial
principles." Thus, Working Assets would not depend on
profitability from its relationships with other clients to
sustain the arrangement with a particular committee sponsor.
i. The Political Committee Sponsor Program
Working Assets proposes to pay the costs of marketing its
mobile phones and wireless services to political committee
sponsors' members and supporters. The marketing would include
direct mail and/or on-line communications with messages from the
political committee sponsor soliciting support. Working Assets
proposes to provide solicitation services in exchange for the use
of the political committee sponsor's mailing list.
The sale or rental of a political committee's mailing list
is permissible under certain conditions, if the mailing list has
an ascertainable market value and will be used in a
commercially reasonable manner consistent with a bona fide arm's
length transaction.2 See Advisory Opinion 2003-16. You state
that each political committee sponsor's mailing list would have
an ascertainable market value. If, however, the value of the
solicitation services provided by Working Assets to a political
committee sponsor exceeds the usual and normal rental charge for
the committee sponsor's mailing list, then Working Assets would
be making a contribution to the committee sponsor. See 11 CFR
100.52(d).
The marketing services to be provided by Working Assets
would differ from solicitation services usually provided by
commercial vendors to political committees. Typically, political
committees hire commercial vendors to help them raise funds by,
for example, mailing requests for contributions to the political
committees to potential contributors, along with postage paid
return envelopes in which to send checks made out to the
political committee. In some cases, a commercial vendor may be
hired by or help a political committee to raise funds by selling
products or services on behalf of the political committee, such
as T-shirts or 900-line services, in which the entire amount of
the caller's payment is a contribution to the political
committee. See, e.g., Advisory Opinions 1995-34 and 1989-21
(Create-A-Craft); see also 11 CFR 100.53. In such cases, the
purpose of the communication is to raise funds for the political
committee, and any money raised will go to the political
committee (in some cases, after the commercial vendor deducts its
fees). Accordingly, the fair market value of the solicitations
must be paid by the political committee.
By contrast, Working Assets' communications with potential
customers would serve two distinct purposes. The primary purpose
of the solicitations would be to generate customers for Working
Assets from the names on the political committee sponsor's
mailing list. The secondary purpose would be to generate
contributions for the political committee sponsor. The
fulfillment of the secondary purpose is also contingent in
nature, because a solicitation could not result in a contribution
to a political committee sponsor unless and until a potential
customer subscribed to Working Assets' wireless services and then
opted either to round up a bill payment or to instruct Working
Assets to direct the customer's ten percent billing rebate to the
political committee sponsor.
Under these circumstances, it would be inequitable to
require a political committee sponsor to pay the full value of
Working Assets' marketing services. Working Assets proposes to
value its solicitation services to a political committee sponsor
at ten percent of Working Assets' marketing costs, and this ten
percent figure reflects the usual and normal charge for the
services being provided to political committee sponsors under the
facts presented. The provision of solicitation services so
valued in exchange for use of the political committee sponsor's
mailing list would not be a contribution to the political
committee sponsor.
ii. Working Assets' Other Services
Under your proposal, the political committee sponsor would
pay Working Assets directly for expenses related to processing
and transmitting contributions and contributor information;
expenses related to Citizen Action Alerts from the sponsor and
related phone calls by individuals to decisionmakers at the
sponsor's behest; and advertising space in bills sent to the
customers. As part of a commercial arrangement for the types of
services that Working Assets already provides in its ordinary
course of business to non-profit committee sponsors, the sponsor
need not pay in advance for these services, but must pay the
usual and normal charge within a commercially reasonable period
of time in the ordinary course of business. See 11 CFR 100.52(d)
and 116.3(b), (c), and (d).
The Commission therefore concludes that Working Assets would
act as a commercial vendor in providing solicitation services in
exchange for the political committee sponsor's membership and
supporter list, and other services in exchange for payment by the
sponsor, and thus would not make or facilitate a corporate
contribution to the political committee sponsor. See 11 CFR
114.2(b), (f)(1), and (f)(2)(i); see also Advisory Opinions 2004-
19 and 2003-16. This conclusion is premised on the facts,
conditions, and assumptions set out above.
b. Customer Contributions
The Commission concludes that the provision by Working
Assets of rebated and rounded-up amounts to political committee
sponsors would be contributions by Working Assets' customers,
rather than impermissible contributions by Working Assets through
its customers, for two reasons. See 2 U.S.C. 441f; 11 CFR
110.4(b). First, the rebates and round-ups would occur in the
ordinary course of Working Assets' business.3 Although Working
Assets has not offered
rebates to customers in the past, its existing and developing
affinity arrangements with 501(c)(3) and (c)(4) organizations,
under which ten percent of Working Assets' wireless charges to
customers affiliated with an organization are donated to that
organization, result in a similar reduction in the amount of
customer charges kept by Working Assets. You indicate that these
arrangements for ten percent donations will account for 29
percent of Working Assets' wireless business by the end of 2007.
Working Assets' existing affinity programs also provide for the
donation of rounded-up amounts.
Second, Working Assets' customers, rather than Working
Assets, would control the disposition of rebates and round-ups
under your proposal. See Advisory Opinion 2003-16. Working
Assets would forward to a political committee sponsor only
rebated amounts that the customer has directed Working Assets to
forward to the committee sponsor, or amounts that the customer
has elected to pay as a round-up for the committee sponsor. Each
customer would direct Working Assets either to forward rebated
funds to a committee sponsor or to credit them to the customer's
next bill, and each customer could change this direction at any
time. Working Assets must not forward any contributions to a
political committee sponsor until after Working Assets receives
and deposits the customer's bill payment. Otherwise, the
contributions would constitute an advance of corporate funds,
prohibited by 2 U.S.C. 441b(a). See 2 U.S.C. 441b(b)(2); 11 CFR
114.1(a)(1).
c. Collection and Transmittal of Contributions
You indicate that all rebates directed by the customer to
the political committee sponsor would be credited to the
committee sponsor's depository account through an automated
clearinghouse transaction within 24 hours of Working Assets'
receipt of the bill payment, and that contributions of rounded-up
amounts would also be forwarded within 24 hours of receipt. When
corporate commercial vendors receive one payment that includes
both amounts to be forwarded to political committees and amounts
sent to the corporation, the corporation must keep the funds
separate to avoid commingling corporate funds with contributions.
See Advisory Opinions 2004-19, 1999-22 (Aristotle Publishing),
and 1991-20, n.5. Hence, Working Assets would have to place the
contributed amounts from rebates and round-ups in an account
separate from its other accounts, i.e., a separate bank account
for payments by check, or a merchant account for credit card
transactions, before transmitting them to the political committee
sponsors, rather than transmitting funds from Working Assets'
usual treasury accounts. See Advisory Opinions 2004-19 and 2002-
07. Working Assets may establish one separate merchant account
and one bank account for payments by check for all political
committee sponsors, so long as Working Assets maintains separate
records for contributions to each committee sponsor. See
Advisory Opinion 1999-22.
You indicate that the donation form would inform the
customer of the contribution limits and source prohibitions of
the Act,4 and that Working Assets would obtain and forward
contributor information to the committee sponsor in time for the
committee sponsor to meet its reporting obligations. Please be
advised that, under 2 U.S.C. 432(b)(2)(B) and 11 CFR 102.8(b)(2),
Working Assets must transmit contributor information for any
contribution exceeding $50, and the contribution, within ten days
of receipt of the bill payment, even if a later transmittal of
the information would enable the committee sponsor to meets its
reporting obligations.5
d. Solicitations and Other Communications
You state that solicitations sent to prospective individual
customers would include a message from the committee sponsor
asking for support, but would not refer to current or future
elections or current Federal candidates. This aspect of the
proposal is consistent with the solicitations to prospective
customers approved by the Commission in Advisory Opinion 2003-16.
The Commission notes your representations that the bills
would include disclaimers pursuant to 11 CFR 110.11. Since the
political committee sponsors are not authorized committees, the
bills must contain the disclaimers required by 2 U.S.C.
441d(a)(3) and 11 CFR 110.11(b)(3). The initial and any follow-
up solicitations to prospective customers must also include the
disclaimer described by 2 U.S.C. 441d(a)(3) and 11 CFR
110.11(b)(3). See also
2 U.S.C. 441d(c) and 11 CFR 110.11(c)(2).
e. Impact of Proposal on QNCs
Unlike other corporations, QNCs may engage in political
spending by making independent expenditures and electioneering
communications. See 11 CFR 114.10(d)(1) and (2). Only a non-
profit 501(c)(4) corporation that meets certain specified
criteria will be deemed a QNC. See 11 CFR 114.10(c)(5). These
criteria include the requirement that the corporation have "[n]o
persons who are offered or who receive any benefit that is a
disincentive for them to disassociate themselves with the
corporation on the basis of the corporation's position on a
political issue."6 11 CFR 114.10(c)(3)(ii).
Under your proposal, Working Assets would offer affinity
wireless service to supporters of a QNC sponsor, with the
accompanying ten percent rebate that could be applied as a credit
on the customer's next bill. Based on your request, the
Commission assumes that the service and rebate would be available
on the same terms to individuals who are not members of the QNC,
and that individuals could continue to be eligible for the
service and rebate even after they terminate their membership
with the QNC. In light of this, a corporation would not lose its
QNC status by becoming a committee sponsor.
The Commission expresses no opinion regarding any tax
ramifications of the proposed activities because those issues are
not within the Commission's jurisdiction.
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. All cited
advisory opinions are available on the Commission's website at
www.fec.gov.
Sincerely,
(signed)
Robert D. Lenhard
Chairman
_______________________________
1 The program will not be made available to separate segregated
funds or authorized committees of candidates.
2 In addition, the mailing list must have been developed by the
political committee over a period of time in the normal course of
its operations primarily for its own political or campaign use,
rather than for sale or lease to others, and rental of the list
must be only a small percentage of the committee's overall use of
the list. See Advisory Opinions 2003-19 (Democratic
Congressional Campaign Committee) and 2002-14 (Libertarian
National Committee). You indicate that the committee sponsors'
mailing lists would satisfy these criteria.
3 See Advisory Opinions 2004-18 (Friends of Joe Lieberman) and
1985-28 (Friends of Lane Evans) (concluding that a discount or
rebate to a political committee does not result in a contribution
if it is made available in the ordinary course of business, and
on the same terms and conditions to the company's customers that
are not political committees or organizations).
4 The Commission notes that the initial and any follow-up
solicitations to prospective customers must also provide that the
contributions will be subject to the Act's limitations and
prohibitions. See 11 CFR 102.5(a)(2)(iii).
5 In addition, any contribution of $50 or less must be forwarded
to the sponsor within 30 days of Working Assets' receipt of the
bill payment. See 2 U.S.C. 432(b)(2)(A); 11 CFR 102.8(b)(1).
You have already indicated that each contribution would be
forwarded within 24 hours of the bill payment's receipt by
Working Assets.
6 The corporation must also: (1) have as its only express
purpose the promotion of political ideas; (2) not engage in
business activities; (3) have no shareholders or other persons
(other than employees or creditors) who are affiliated in such a
way that they could have a claim on the corporation's assets or
earnings; and (4) not be established by a business corporation or
labor organization, nor accept donations from such organizations.
See 11 CFR 114.10(c)(1), (2), (3)(i), and (4).