Federal Election Commission Main Page
July 5, 1988
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
ADVISORY OPINION 1988-22
J. Miles Reid
McCormick, Barstow, Sheppard, Wayne a Carruth
P.O. Box 24013
Fresno, California 93779-4013
Dear Mr. Reid:
This responds to your letters of March 31 and May 4, 1988,
requesting an advisory opinion on behalf of the San Joaquin
Valley Republican Associates ("Republican Associates") concerning
application of the Federal Election Campaign Act of 1971, as
amended (the "Act"), and Commission regulations to proposed
activities involving operation of a library, publication of a
newsletter, and sponsorship of debates and luncheons.
Your letters explain that Republican Associates is a non-profit,
non-member, mutual benefit corporation under California
law, and is prohibited by its charter from engaging in "business
activities." You state that Republican Associates is a tax
exempt "political organization" under section 527 of the Internal
Revenue Code, and that all of its income has been for tax-exempt
functions, but that its charter does not permit it to endorse or
financially contribute to political candidates.1/ You also state
that Republican Associates may eventually seek to change its
status from a section 527 organization to a section 501(c)(4)
1/ The term "Political organization" is defined by the Code as "a
party, committee, association, fund, or other organization
(whether or not incorporated) organized and operated primarily for
the purpose of directly or indirectly accepting contributions or
making expenditures, or both, for an exempt function"; "exempt
function" is defined as "influencing or attempting to influence
the selection, nomination, election, or appointment of any
individual to any Federal, State, or local public office or office
in a political organization ..." 26 U.S.C. SS 527(e)(1) and (2).
organization under the Code. As a 501(c)(4) organization,
Republican Associates would be precluded by the general
prohibitions of 2 U.S.C. SS 441b from financing activity "in
connection with" Federal elections from its general corporate
treasury. A section 501(c)(4) organization may, however, make
expenditures and contributions to influence Federal elections
through a separate segregated fund. 2 U.S.C. SS 441b(b)(2). See
Advisory Opinion 1984-17.
You state that Republican Associates was formed for the
express purpose of promoting political ideas, that it has "no
ties" to any political party and, as previously noted, that it is
"unable to endorse or make financial contributions to any
political candidate." Republican Associates' "Articles of
Incorporation" describe its "specific purpose" as being "to help
elect more Republicans to office by enhancing significantly the
visibility of the Republican Party, Republican ideas, Republican
thought and Republican personalities within the San Joaquin Valley
of California."
You propose to engage in four types of activities that, as
discussed below, may involve the providing of some benefit to
candidates for Federal office: publication and distribution of a
Periodical newsletter, sponsorship of luncheons, sponsorship of
debates and operation of a "campaign" library. You ask whether,
under the Act and regulations, the financing of such activities by
Republican Associates would constitute "contributions" to
or "expenditures" on behalf of any candidates for Federal office,
and, if it finances such activities, whether receipts of
Republican Associates would constitute "contributions" to it.
Under the Act and Commission regulations, the term
"contribution" means 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.
SS 431(8)(A); 11 CFR 100.7(a)(1). Similarly, the term "expenditure"
is defined to include any purchase, payment, distribution, loan,
advance, deposit, or gift of money or anything of value, made by
any person for the purpose of influencing any election for Federal
office. 2 U.S.C. SS 431(9)(A); 11 CFR 100.8(a)(1). Contributions
to candidates, whether made in monetary form or "in-kind," are
subject to limitation under 2 U.S.C. SS 441a(a). Moreover,
expenditures by any person in cooperation, consultation or concert
with a candidate are considered contributions to that candidate.
2 U.S.C. SS 441a(a)(7)(B)(i).
Your questions necessarily raise another issue: if the
proposed activities or any other activities engaged in by
Republican Associates are considered to involve contributions or
expenditures "for the purpose of influencing any election for
Federal office" under the Act and are made or received in amounts
in excess of $1000 in a calendar year, Republican Associates would
then be subject to registration and reporting requirements as a
"political committee" under the Act. 2 U.S.C. SS 431(4)(a); 11 CFR
100.5(a).2/ For purposes of this opinion, the Commission is not
treating Republican Associates as a subordinate committee of a
State committee of a political party (see 2 U.S.C. SS 441a(d)) or a
local committee of a political party (see 2 U.S.C. SS 431(4)(C);
431(8)(B)(v), (x), (xii); 431(9)(B)(iv), (viii), (ix)). See also
11 CFR 110.7(b), (c); 100.5(e)(4); 2 U.S.C. SS 441a(a)(5) ; 11 CFR
100.5(g).
Your request also broadly raises the question of whether
Republican Associates falls within the exemption from the Act's
prohibition against corporate contributions or expenditures "in
connection with" federal elections prescribed by the U.S. Supreme
Court for independent spending by certain incorporated political
organizations. FEC v. Massachusetts Citizens for Life, Inc.,
107 S.Ct. 616 (1986) ("MCFL"). See 2 U.S.C. SS 441b. Your
description of Republican Associates generally tracks the three
features" of MCFL that the Court found "essential" to its
holding: 1) formed for the express purpose of promoting political
ideas and not engaged in business activities, 2) having no
shareholders or other' persons affiliated so as to have a claim on
2/ Commission regulations permit a political committee that
finances political activity in connection with Federal, State and
local elections to either establish a separate Federal account
that is used for all its receipts and disbursements in Federal
elections or to establish a political committee that will receive
only contributions subject to the prohibitions and limitations of
the Act. 11 CFR 102.5(a)(1). Where a political committee
establishes a separate Federal account, such an account shall
comply with the registration and reporting requirements of the
Act. See generally 11 CFR Parts 102 and 104. Only funds subject
to the prohibitions and limitations of the Act shall be deposited
in such separate Federal account. 11 CFR 102.5(a)(2). All
disbursements, contributions, expenditures, and transfers by the
committee in connection with any Federal election shall be made
from its Federal account. Moreover, no transfers may be made to
the Federal account from any other account maintained by such
organization for the purpose of financing activity in connection
with non-federal elections. 11 CFR 102.5(a)(1). Pursuant to
11 CFR 106.1(c) ,administrative expenses shall be allocated
between the Federal account and any other account maintained by
the political committee for the purpose of financing activity in
connection with non-federal elections. 11 CFR 102.5(a)(1)(i).
its assets or earnings and 3) not established by nor accepting
donations from, business corporations or labor unions (under one
of two hypothetical "alternatives" that your request proposes for
your sources of funding). MCFL, 107 S.Ct. at 631.
The Commission concludes, however, that Republican Associates
would not be entitled to the exception drawn in MCFL that exempts
"independent" spending of voluntary political organizations from
either the prohibitions of SS 441b or the requirements of
registering and reporting a "political committee." First, the
Commission observes that some of Republican Associates' proposed
activity on behalf of candidates would not be "independent
expenditures," but rather would involve coordination with
candidates and result in "in-kind contributions" to candidates.
Second, and more importantly, the Court in MCFL was addressing
political organizations "that only occasionally engage in
independent spending on behalf of candidates." Id. at 630. The
Court stated:
[S]hould MCFL's independent spending become
so extensive that the organization's major
purpose may be regarded as campaign activity,
the corporation would be classified as a
political committee ... As such, it would
automatically be subject to the obligations
and restrictions applicable to those groups
whose primary objective is to influence
political campaigns.
Id. Therefore, Republican Associates will be required to
register a political committee, or register itself as a political
committee, if its proposed activity, or any other political
activity it conducts, constitutes contributions or expenditures
under the Act and crosses the $1000 per year threshold.3/
1. Republican Associates Newsletter
Republican Associates proposes to publish and distribute a
monthly or quarterly newsletter that will discuss political
events and activity that may be of interest to supporters of the
Republican party, including discussions of candidates and
campaigns for Federal office and opportunities for involvement in
such campaigns. As your request suggests, and the newsletter
examples you provided indicate, discussions of candidates may
3/ The Commission notes that its regulations specifically allow
political committees to incorporate "for liability purposes
only." 11 CFR 114.12(a). See 26 U.S.C. SS 527(e)(1) .
not, or need not necessarily, include statements of actual
endorsement or explicit advocacy, but may include statements
generally supporting or promoting Republican candidates or
criticizing their Democratic opponents. The newsletter will also
regularly feature a calendar which lists meetings and events
sponsored by various candidates for Federal and other elective
offices, by political party organizations, and by Republican
Associates itself. Republican Associates will distribute the
newsletter to persons who are contributors, who have attended
previous Republican Associates' events, and who are prospects for
contributing or attending in the future.
Preliminarily, the Commission notes that the proposed
newsletter would not appear to fall within the exception to the
definition of "expenditure" known as the "press exemption."
2 U.S.C. SS 431(9)(B)(i). It does not seem from your description
that the newsletter would be a regularized periodical deriving
revenues from subscriptions or advertising, but rather a free
communication that Republican Associates will send out to
encourage continued or potential financial and organizational
support from among the general public. See Advisory Opinion
1980-109. Furthermore, if Republican Associates' activities
trigger registration and reporting requirements as a political
committee under the Act, the express statutory language of the
"press exemption" excludes publications of political committees.
Also, Commission regulations state that expenditures made on
behalf of more than one candidate shall be attributed to each
candidate in proportion to, and shall be reported to reflect, the
benefit reasonably expected to be derived. 11 CFR 106.1(a). In
previous advisory opinions involving political party committee
newsletter activities, the Commission concluded that a reasonable
allocation basis would be the percentage of column inches or space
in the newsletter which pertained to Federal elections or
candidates for Federal office. Advisory Opinions 1981-3 and
1978-46. Accordingly, payment for costs associated with those
candidate-related statements or references in Republican
Associates' newsletters that should be attributed to Federal
candidates as "contributions" or "expenditures" under the Act
should be allocated to those candidates or to a Federal "account,"
as discussed below, based on column inches in the newsletter or on
some other reasonable basis that reflects the benefit reasonably
expected to be derived.
The Commission concludes that differing legal consequences
will result under the Act and regulations for candidate-related
statements or references appearing in the proposed newsletters,
depending upon the nature of the statement and whether such
statement is made in coordination with the Federal candidate
to whom the statement refers. As described below, those
consequences determine whether the costs incurred in publishing
the newsletters containing such statements or references will be
considered to be contributions to or expenditures on behalf of,
and, therefore, allocable to, candidates for Federal office, and
further determine if or how such costs must be reported to the
Commission and whether those costs count toward the threshold for
incurring political committee obligations.
a. Independent expenditures.
If statements, comments or references regarding clearly
identified candidates appear in the newsletter and expressly
advocate their election or defeat, or solicit contributions on
their behalf, and such communications are not made with the
cooperation, consultation or prior consent of, or at the request
or suggestion of, the candidates or their agents, then the
payments for the allocable costs incurred in making the
communications will constitute "independent expenditures" on
behalf of the identified candidates. 2 U.S.C. SS 431(17); 11 CFR
109.1. See Advisory Opinion 1979-80. All such payments count
toward the $1000 political committee threshold for registration
and reporting requirements, since they constitute "expenditures"
on behalf of candidates under the Act.
If such expenditures on behalf of any one candidate exceed
$250 and Republican Associates has not otherwise qualified or does
not thereby qualify for reporting obligations as a political
committee, then the payments must be reported by letter or other
communication to the Commission as an "independent expenditure" on
behalf of that candidate or candidates; if such expenditures on
behalf of any one candidate do not exceed $250, and Republican
Associates does not qualify for reporting obligations as a
political committee, then no reporting obligation is incurred on
the basis of that activity alone. 2 U.S.C. SS 434(c)(1) and (2);
11 CFR 105.4 and 109.2.
If Republican Associates qualifies for reporting obligations
as a political committee, such payments to any person aggregating
in excess of $200 in a calendar year must be reported on
Schedule E as itemized "independent expenditures" on behalf of
that candidate or candidates, and such payments to any person not
exceeding $200 in a calendar year must be reported on Schedule E
as unitemized. 2 U.S.C. SS 434(b)(6)(B)(iii); 11 CFR
104.3(b)(3)(vii).
b. In-kind contributions.
If statements, comments or references regarding clearly
identified candidates appear in the newsletter and are made with
the cooperation, consultation or prior consent of, or at the
request or suggestion of, the candidates or their agents,
regardless of whether such references contain "express advocacy"
or solicitations for contributions, then the payment for allocable
costs incurred in making the communications will constitute
"expenditures" by Republican Associates and "in-kind
contributions" to the identified candidates. 2 U.S.C.
SS 441a(a)(7)(B) . All such payments count toward the $1000
"political committee" threshold for registration and reporting
requirements.
As presented by your proposed and sample newsletters,
reportable "in-kind contributions" to candidates would include
those instances where," in coordination with candidates,
newsletters contained substantive statements generally favoring a
candidate or criticizing his opponent or contained references to a
candidate's campaign events in a scheduling feature. The
Commission bases its conclusion on the presumption that the
financing of a communication to the general public, not within the
"press exemption," that discusses or mentions a candidate in an
election-related context and is undertaken in coordination with
the candidate or his campaign is "for the purpose of influencing a
federal election." See Advisory Opinion 983-12. Such a
communication made in coordination with a candidate presumptively
confers "something of value" received by the candidate so as to
constitute an attributable "contribution," even though the value
of the benefit so conferred may be relatively minor. Given the
nature and purposes of your organization as described in your
request, it is unlikely that such a presumption of a "purpose of
influencing a Federal election" could be rebutted with reference
to newsletter activity undertaken in coordination with Federal
candidates. Compare Advisory Opinions 1982-56 and 1978-56.
c. Expenditures lacking express advocacy or coordination.
If statements, comments or references regarding clearly
identified candidates appear in the newsletter and do not
expressly advocate their election or defeat, nor solicit
contributions on their behalf, and such communications are not
made with the cooperation, consultation or prior consent of, or at
the request or suggestion of, the candidates or their agents, then
the payment for allocable costs incurred in making these types of
communications will constitute operating expenses generally
allocable to federal political activity. Payments for such
communications are not specifically allocable to candidates, since
they lack "express advocacy" or a solicitation for contributions
so as to constitute "independent expenditures," and lack
coordination with a candidate in their making, or any other
indicia of receipt, so as to constitute "in-kind contributions."4/
Expenses associated with these communications nevertheless
constitute "expenditures" for federal political activity within
the meaning of the Act, so as to count toward the political
committee threshold and to require reporting if made by a
political committee.
Payments for these communications that are allocable to
federal political activity must be made from funds raised
permissibly under the Act and regulations. 11 CFR 102.5(a). If
Republican Associates has qualified as a political committee, or
crosses the $1000 threshold by engaging in this activity, payments
for these communications must be made from a separate federal
account or from a political committee which has accepted only
contributions subject to the prohibitions and limitations of the
Act. 11 CFR 102.5 (a)(1). If Republican Associates does not
qualify as a political committee and does not maintain a federal
account, it must be able to demonstrate through a reasonable
accounting method that sufficient funds permissible under the Act
were received by it to permit payments for these communications.
11 CFR 102.5(b)(1)(ii).
Republican Associates Sponsored Luncheons
You state that Republican Associates will sponsor monthly
luncheons for those persons who receive the newsletter.
Republican Associates will charge attendees an amount that covers
the cost of the lunch and the facilities and will keep any excess
revenue. The luncheons will feature speakers, some of whom may be
candidates for Federal office. Candidates will be permitted to
make their literature available, but no campaign posters or other
political decorations will be permitted in the facility.
Additionally, Republican Associates will request that candidates
not solicit contributions, but will permit requests for campaign
volunteers.
A payment of costs to sponsor and finance public appearances
by candidates for Federal office that are "campaign-related" is
considered made "for the purpose of influencing Federal elections"
4/ The previously cited opinions regarding allocation of
newsletter expenses to candidates, Advisory Opinions 1981-3 and
1978-46, involved political party committees, for which
coordination with candidates is presumed and "independence"
precluded. See FEC v. Democratic Senatorial Campaign Committee,
454 U.S. 27, 28, n.1, (1981).
and to constitute a "contribution" to or "expenditure" on behalf
of such candidates, unless such payment is specifically exempted
by the Act or regulations. See Advisory Opinions 1986-37 and
1986-26. As sponsor of these luncheons, Republican Associates
appears to be responsible for payment of the costs associated with
the event and will keep any profits and, presumably, cover any
shortages arising out of the receipts from luncheon attendees.
The Commission has considered the nature and purposes of an
event sponsored by a group and involving the active participation
of a candidate for Federal office to determine if such an event is
campaign-related. The Commission has stated that if an event
involves (i) the solicitation of political contributions or
(ii) the express advocacy of a candidate's election or defeat,
then the event would be viewed as a campaign event for the purpose
of influencing a Federal election; the Commission has also
concluded that the absence of express advocacy or solicitations
will not preclude a determination that public appearances are
campaign-related. See Advisory Opinions 1986-37, 1984-13,
1982-50, and 1982-16.
The active participation by candidates for Federal office as
featured speakers at luncheons sponsored by Republican Associates
would involve coordination with the candidate in the providing to
and receipt of a benefit for the candidate. Payment of the costs
of such an appearance would presumptively constitute a
"contribution" by Republican Associates to the candidate. Given
the nature and purposes of your organization as described in your
request, it is unlikely that such a presumption of a "purpose of
influencing a Federal election" could be rebutted with reference
to your sponsoring of candidate appearances. Compare Advisory
Opinions 1931-37, 1981-26, 1930-89 and 1978-4. Payments for
luncheon expenses constituting "contributions" to candidates
would, of course, count toward the $1000 threshold for qualifying
as a political committee and be reportable.
Republican Associates Sponsored Debates
Republican Associates proposes to sponsor and finance debates
between candidates for Federal office. In advance of the debates,
you will request that candidates not make any solicitation for
contributions, but candidates will be permitted to make requests
for campaign volunteers.
Commission regulations provide that payments made by a
qualified non-profit corporation to finance a nonpartisan
candidate debate are exempted from the definition of
"contribution" or "expenditure" under the Act. 11 CFR
100.7(b)(21) and 100.3(b)(23). See also 11 CFR 110.13 and
114.4(e). Your request indicates that you are "contemplating
seeking status as a 501(c)(4) organization" but are not presently
a qualified nonprofit corporation within this exemption.
Therefore, sponsorship by Republican Associates of debates
involving candidates for Federal office would be considered in the
same manner as sponsorship of candidate appearances (discussed
above), with an increased likelihood that such appearances would
be viewed as campaign-related and that payments to fund such
appearances would constitute "contributions" to the participating
Federal candidates.
Republican Associates Library
Republican Associates proposes to maintain a library composed
of publications concerning "campaign management" and clippings
from newspapers and other periodicals related to political events,
personalities and issues. Republican Associates will also obtain
lists of campaign contributors and registered voters from public
records and make those lists available to interested persons.
Although use of library materials will be free of charge to all
registered Republicans, persons using the library must pay for all
copies requested, and Republican Associates will not conduct any
research activities on behalf of candidates.
The Commission concludes that funding of a "campaign" library
by Republican Associates would constitute general administrative
expenses, incurred in the context of its day-to-day operation, and
not "contributions" or "expenditures" attributable to any
particular Federal candidate. See 11 CFR 106.1(c). If Republican
Associates meets the threshold for "political committee" reporting
obligations, the operating expenses incurred by Republican
Associates to maintain the library would require allocation
between federal and non-federal functions on a reasonable basis,
and must be so reported. See 11 CFR 106.1(e). The allocable
federal share of such expenses must be paid from funds raised
permissibly under the Act and regulations for financing federal
political activity, and made from a separate federal account or as
a political committee which has accepted only contributions
subject to the prohibitions and limitations of the Act. See
11 CFR 102.5. Furthermore, the Commission concludes that if
Republican Associates provides additional library services for a
federal candidate that result from the request of or coordination
with such candidate, any additional expenses incurred in providing
such services would be attributable to that candidate as an
in-kind contribution. See 11 CFR 106.1(a) and 106.1(c).
This response 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.