Federal Election Commission Main Page
February 10, 1983
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
ADVISORY OPINION 1982-63
Terry D. Garcia
Manatt, Phelps, Rothenberg & Tunney
811 West Seventh Street, Twelfth Floor
Los Angeles, California 90017
Dear Mr. Garcia:
This responds to your letter of December 13, 1982,
requesting an advisory opinion concerning application of the
Federal Election Campaign Act of 1971, as amended ("the Act"), to
the establishment of a contribution "check-off system."
Your letter states that Manatt, Phelps, Rothenberg & Tunney
("the Firm") is an unincorporated law firm. The Firm is
comprised of 37 partners of whom 18 are professional
corporations. The Manatt, Phelps, Rothenberg & Tunney Political
Action Committee ("the PAC") is a political committee as defined
under 2 U.S.C. SS 431(4)(A). */ You state that the PAC solicits
voluntary contributions from each of the Firm's noncorporate
partners as well as from the employees of each of the Firm's
professional corporations.
In order to facilitate the making of contributions to the
PAC, the Firm proposes to institute a "check-off system."
Specifically, you propose to permit noncorporate partners to
*/ Section 431(4)(A) defines the term "political committee" to
include "any, committee, club, association, or other group of
persons which receives contributions aggregating in excess of
$1,000 during a calendar year or which makes expenditures
aggregating in excess of $1,000 during a calendar year." This
type of political committee is distinct from a separate
segregated fund (which is also a "political committee under
SS 431(4)(B)) established pursuant to SS 441b(b).
authorize the Firm to withhold a specified amount from their
share of Firm profits and to transfer said amount directly to the
PAC. In the case of professional corporations, it is proposed
that the employee of each corporation be permitted to direct the
contribution to the PAC. To further expedite this transfer, the
corporation would, in turn, authorize the Firm to deduct the
amount of the proposed contribution from the corporation's share
of Firm profits and transfer said amount directly to the PAC on
behalf of the professional corporation's employee. You ask
whether the Firm may offer this check-off system to its
noncorporate partners, as well as to the employee of each
professional corporation/partner.
Your questions pose a threshold issue regarding the
application of 2 U.S.C. SS 441b to the Firm and to the 18 partners
that are professional corporations. As your request indicates,
the PAC is not registered or operated as a separate segregated
fund under 2 U.S.C. SS 441b(b)(2), (3) and (4). This means, among
other things, that the PAC is not restricted as to the categories
of Firm personnel who may be solicited for contributions.
Advisory Opinion 1979-77, copy enclosed. At the same time,
however, the PAC may not receive unlimited assistance, in kind or
in financial contributions, from the Firm since the SS 441b(b)
exceptions for expenses of establishment, administration, and
solicitation of contributions to a separate segregated fund are
only available to national banks, corporations, labor
organizations, including also certain corporate organizations
specifically mentioned: membership organizations, cooperatives,
nonstock corporations, and trade associations. Advisory Opinions
1981-56 and 1981-54, copies enclosed; see California Medical
Association v. Federal Election Commission, 453 U.S. 182, 101 S.
Ct. 2712 (1981). Partnerships are not mentioned or otherwise
covered under SS 441b except to the extent that by operation of
Commission regulations, 11 CFR 110.1(e), a partnership comprised
of corporations may not make contributions which are attributed
to the corporate partners. Advisory Opinions 1981-56, 1981-54,
and 1980-132. Accordingly, any expenses paid by the Firm on
behalf of the PAC, as well as any unreimbursed use of Firm
facilities, supplies, or personnel, would constitute a
contribution of anything of value to the PAC by the Firm. 11 CFR
100.7(a)(1)(iii).
As an alternative to the Firm making contributions of
administrative support to the PAC as discussed above, the PAC may
pay the Firm for such support using the funds the PAC receives
from its contributors. To avoid a contribution, these payments
by the PAC must equal the "usual and normal charge" for the goods
and services provided by the Firm. See 11 CFR 100.7(a)(1)(iii).
Payments by the PAC to the Firm for these purposes must be
reported by the PAC as operating expenditures. 2 U.S.C.
SS 434(b)(4), (b)(5) and 11 CFR 104.3(b)(1), (b)(3)(i).
While contributions of administrative support may be made by
the Firm to the PAC, assuming they are exclusively attributed to
and made only by noncorporate partners of the Firm under an
agreement as provided in 11 CFR 110.1(e), they would be limited
to $5,000 per calendar year as to the partnership 2 U.S.C.
SS 441a(a) (1) (C). They would also be charged to the individual
noncorporate partners and subject to each individual partner's
$5,000 per year limit on contributions to the PAC. 2 U.S.C.
SS 441a(a)(1)(C) and 11 CFR 110.1(e).
In addition, the PAC would be required to report lawful
contributions whether in kind or monetary; such contributions
aggregating in an amount or value in excess of $200 within the
calendar year are required to be itemized. 2 U.S.C. SS 434(b)(3);
11 CFR 104.3(a)(4), 104.13(a). The PAC may also receive services
rendered by individuals who are compensated by the Firm for those
services if the compensated services are solely for the purpose
of ensuring the PAC's compliance with the Act and Commission
regulations, and if the Firm is the "regular employer" of those
individuals. 2 U.S.C. SS 431(8)(B)(ix)(II), 11 CFR 100.7(b)(14).
Amounts paid by the Firm for these services are required to be
reported under Commission regulations at 11 CFR 104.3(h). The
amounts paid are not subject to the limits or prohibitions of the
Act and would not have to be allocated to any Firm partners under
SS 110.1(e) of Commission regulations. See 11 CFR
114.1(a)(2)(vii).
With respect to your specific questions, the Commission
concludes that the Firm may offer the described check-off PAC
contribution system to its noncorporate partners and to the
employees of its corporate partners. The Firm's implementation
of the system requires that all its unreimbursed costs and in
kind assistance in connection with operating the system--including
any use of Firm facilities, equipment, supplies,
personnel, or other goods or services for which no charges are
assessed and paid (or to the extent PAC payments are less than
"usual and normal charge")-- shall be treated as contributions by
the Firm and shall be attributed, by agreement of the partners
under 11 CFR 110.1(e), only to noncorporate partners of the Firm.
See discussion and citations above.
The noncorporate partners in making a PAC contribution
through the system would be required to take a deduction in their
share of Firm profits, or an increase in their share of Firm
losses, which is in direct proportion to their interest in
partnership profits or which is determined according to some
other agreement of the partners. 11 CFR 110.1(e). Employees of
professional corporations in the Firm must take a deduction from
the salaries they receive from their respective corporations. In
addition, the corporation's authorization of a deduction from its
share of Firm profits may not have the effect of reducing any
portion of Firm profits (payable to the corporation) that the
corporation would use for purposes other than payment of the
contributing employee's salary. Nor may the employee's salary be
established or in any way altered on the basis of his or her
contributions to the PAC. See 11 CFR 114.5(b)(1). These
conditions are necessary to assure that corporate partners do not
indirectly make contributions to the PAC in violation of 2 U.S.C.
SS 441b.
The situation here is distinguishable from earlier advisory
opinions involving partnership "contribution plans." In those
opinions, the partnerships never undertook to establish and
maintain a separate political committee; rather, they proposed to
make partnership contributions to candidates under various types
of administrative mechanisms. In this case, the PAC is
registered with the Commission as a nonconnected political
committee, under 2 U.S.C. SS 431(4)(A), which is located on Firm
premises and operated by Firm personnel; it makes contributions
to candidates as a separate political committee, not as a
partnership. Compare Advisory Opinions 1982-13, 1981-50,
1975-104 and 1975-17; also see Advisory Opinions 1980-72 and
1979-77, and the Commission's response to Advisory Opinion
Request 1976-102, copies enclosed.
The Commission expresses no opinion with respect to the tax
ramifications of the described check-off system since those
issues are not within its purview.
This constitutes an advisory opinion concerning application
of the Act, or regulations prescribed by the Commission, to the
specific transaction or activity set forth in your request. 2
U.S.C. SS 437f.