Federal Election Commission Main Page
June 30, 1995
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
ADVISORY OPINION 1995-15
Beth Taylor, Treasurer
Allison Engine Company Political Action Committee
P.O. Box 420
Indianapolis, IN 46206-0420
Dear Ms. Taylor:
This responds to your letter dated April 27, 1995, on
behalf of Allison Engine Company Political Action Committee
("Allison PAC" or "the PAC"), requesting an advisory opinion
concerning the application of the Federal Election Campaign
Act of 1971, as amended ("the Act"), and Commission
regulations to the conduct of a program whereby Allison
Engine employees may earmark contributions to candidates.
Allison PAC is the separate segregated fund of Allison
Engine Company ("the company"). The company is a corporation
organized under Delaware state law, and its principal place
of business is Indianapolis, Indiana. On November 21, 1994,
Rolls-Royce plc ("Rolls-Royce"), a corporation registered in
the United Kingdom, indicated its intention to acquire the
company by purchasing 100 percent of its stock. In order to
ensure that contributions by Allison PAC would not be
considered to be foreign national contributions after the
company is purchased by Rolls-Royce, the PAC has adopted
by-laws governing its conduct. These by-laws will be
discussed in more detail below. You seek the Commission's
opinion as to the adequacy of these arrangements.
In addition, Allison PAC proposes to implement an
earmarking program whereby an employee voluntarily fills out
a contribution election form on which he or she designates up
to three candidates to receive a disbursement from the
employee's contribution to Allison PAC in an amount
determined by the employee. You wish to know whether Allison
PAC may implement such a program.
Finally, you seek clarification as to whether "salaried,
non-managerial employees who receive a solicitation at home
no more than twice a year" may use the contribution election
form (which you have attached to your request) to establish a
fully revocable payroll deduction as their method of
contribution. You note that this group of employees, which
is not in the restricted class under 11 CFR 114.5, does not
include employees covered in the collective bargaining unit.
Foreign National Contributions
The Act and Commission regulations prohibit foreign
nationals from making a contribution directly or through any
other person, or making an expenditure, in connection with an
election to any political office. In addition, it is
unlawful to solicit, accept or receive a contribution from a
foreign national. 2 U.S.C. §441e(a); 11 CFR 110.4(a)(1) and
(2). As defined in the Act, the term "person" includes a
corporation or a committee. 2 U.S.C. §431(11).
The term "foreign national" includes a "foreign
principal" as defined by 22 U.S.C. §611(b). 2 U.S.C.
§441e(b)(1); 11 CFR 110.4(a)(4). Section 611(b) defines a
"foreign principal" as including:
(1) a government of a foreign country and a
foreign political party;
(2) a person outside of the United States, unless
it is established that such person is an individual
and a citizen of and domiciled within the United
States, or that such person is not an individual
and is organized under or created by the laws of
the United States or of any State or other place
subject to the jurisdiction of the United States
and has its principal place of business within the
United States; and
(3) a partnership, association, corporation,
organization, or other combination of persons
organized under the laws of or having its principal
place of business in a foreign country.
Under 22 U.S.C. §611(b), a corporation organized under
the laws of any state within the United States, with a
principal place of business within the United States, is not
a foreign principal and, accordingly, would not be a foreign
national under 2 U.S.C. §441e. As a discrete corporate
entity organized under the laws of Delaware and with its
principal place of business in Indiana, the company is not a
foreign principal and, accordingly, would not be a foreign
national under 2 U.S.C. §441e.
In addressing situations involving the political
committee of a foreign corporation's domestic subsidiary, the
Commission has consistently sought to ensure that foreign
nationals do not make contributions in connection with an
election through the direction or control of the PAC. See
Advisory Opinion 1990-8 and opinions cited therein.
Commission regulations state as follows:
A foreign national shall not direct, dictate,
control, or directly or indirectly participate in
the decision-making process of any person, such as
a corporation, labor organization, or political
committee, with regard to such person's Federal or
nonfederal election-related activities, such as
decisions concerning the making of contributions or
expenditures in connection with elections for any
local, State, or Federal office or decisions
concerning the administration of a political
committee.
11 CFR 110.4(a)(3). In applying this regulation to a
domestic subsidiary of a foreign corporation, the Commission
conditioned its approval of the establishment and operation
of an SSF by the subsidiary on the basis that the foreign
national members of the subsidiary's board would abstain from
voting on matters concerning the SSF and that such board
members would abstain from voting on the selection of
individuals to operate the committee and exercise
decision-making authority with respect to its contributions
and expenditures. Advisory Opinion 1990-8. See Advisory
Opinion 1992-16.
You have enclosed the by-laws adopted by Allison Engine
PAC, in anticipation of the acquisition by Rolls-Royce, to
ensure compliance with election laws pertaining to foreign
national involvement. The by-laws list the ten members of
the PAC, by name and company position, and note that they are
all U.S. citizens. In addition, the by-laws note (in
pertinent part) the following: (1) that the PAC has elected
three of those ten members as PAC officers; (2) that changes
to the PAC, including PAC membership, and determinations as
to disbursements by the PAC are to be made by a majority vote
of the PAC and all PAC members must be U.S. citizens; (3)
that all contributors to the PAC must be U.S. citizens; (4)
that contributors must certify that they were not influenced
by any intervention or action by a foreign national to make
the designation of the ultimate recipient candidate or
committee; and (5) that no PAC disbursement will be made on
the basis of any action by a foreign national to influence
the disbursement, and members of the PAC will disclose any
such effort to influence.
The Commission concludes that the proposed activities of
the PAC described in its by-laws indicate that, after the
company is acquired by a foreign corporation, foreign
nationals will not direct, control, or otherwise participate
directly or indirectly in the decision-making process of the
PAC, including the administration of or contributions by the
PAC. In addition, the by-laws indicate that the PAC will not
receive contributions from foreign national sources. See
11 CFR 110.4(a)(2). The Commission, therefore, considers
your proposed safeguards to be sufficient to ensure the PAC's
compliance with the prohibition on foreign national
participation.
Employee Earmarking Program
Each year, the employees of the company voluntarily fill
out a contribution election form issued by Allison PAC. The
form gives a choice of making a contribution in the form of a
payroll deduction or a personal check in an amount to be
chosen by the individual; no amount is suggested. The
payroll deduction option provides for a monthly deduction
from the employee's salary in the amount designated, with the
funds to be forwarded to the PAC. Such deduction would
continue until the amount is amended or revoked by the
employee. The form also provides for a certification by the
contributor that he or she has been informed that no favor or
disadvantage from the company will result by reason of the
amount given or the decision not to contribute.
In the lower portion of the form, the employee may
designate a percentage of his yearly deduction total to go to
as many as three candidates of the employee's choice. No
candidates are suggested by the PAC. The form states that
the disbursements so designated will be made in October of
each year and that, after October, a re-designation would be
needed. It is also stated that if no designee is named, the
PAC "will distribute the contributions."
You provide the following example of how the program
works: An employee contributing $30 per month, for a total
of $360 per year, may choose to designate that one-third goes
to candidate A, one-third to candidate B, and that the
remaining third is spent pursuant to the PAC's determination.
Each month, the $30 is deposited into the PAC. In October of
each year, PAC checks with accompanying letters from the PAC
are sent to candidate A in the amount of $120 and to
candidate B in the same amount, and the PAC will determine
what disbursements, if any, will be made with the remaining
$120. The PAC reports the $360 as a contribution to the PAC
and the disbursements of $120 as PAC contributions to
candidates A and B, to be counted against the Act's limits.
Another possible variation is that an employee may notify the
PAC that he or she wishes to make a designation later in the
year. In those cases, the individual may make a designation
in October or shortly before. You state that the same
treatment as described above is applied to these
contributions for reporting and limitation purposes.
The letter from the PAC to the recipient candidate that
accompanies the check states that the check is from Allison
PAC and that the amount "was determined through the specific
request of one or more Allison Engine employee(s) who
designated all or a portion of their voluntary contribution."
The letter also states that the check does not represent a
decision by the PAC but solely reflects the contributor's
designation.
The Act and Commission regulations permit "the
establishment, administration, and solicitation of
contributions to a separate segregated fund to be utilized
for political purposes by a corporation." 2 U.S.C.
§441b(b)(2)(C). Because you choose to treat the
contributions raised and made under the program as
contributions to and by the PAC, the company's funds may be
used to administer the program and solicit the contributions.
Commission regulations permit corporations to use a payroll
deduction plan for contributions to its separate segregated
fund from the personnel in its restricted class, i.e.,
executive and administrative personnel. 11 CFR 114.5(k) and
114.1(c)(1). Advisory Opinions 1994-23, 1991-29, and
1991-19. Your proposal raises a number of questions,
however, as to the timing and attribution of contributions.
The Act provides that contributions made by a person
which are earmarked or otherwise directed through an
intermediary or conduit to a candidate shall be treated as
contributions from that person to the candidate. 2 U.S.C.
§441a(a)(8). Commission regulations define "earmarking" as:
a designation, instruction, or encumbrance,
whether direct or indirect, express or implied,
oral or written, which results in all or any part
of a contribution or expenditure being made to, or
expended on behalf of, a clearly identified
candidate or a candidate's authorized committee.
11 CFR 110.6(b)(1). Contributions that are earmarked shall
be forwarded by the conduit to the ultimate recipient
candidate in accordance with the requirements of 11 CFR
102.8. 11 CFR 110.6(b)(2)(iii). This means that
contributions designated for a candidate's authorized
committee shall be forwarded no later than 10 days after the
conduit's receipt of such contributions. See 11 CFR
102.8(a).
Under your proposal, the employee would designate a
portion of his or her contribution to be sent to a specific
candidate or committee during the next October. The PAC
would forward the contribution long after its receipt of the
funds and long after its receipt of the designation. By
forwarding the funds in this belated manner, the PAC would
not be in compliance with the 10 day time limit applicable to
committees acting as conduits for donor designated
contributions to candidates. Accordingly, Allison PAC will
have to implement its earmarking program in another manner.
In Advisory Opinion 1991-29, the Commission addressed a
proposal by which employees would make contributions to the
separate segregated fund in anticipation, and with the stated
intention, of subsequently making earmarked contributions to
candidates from the funds. A corporation provided a payroll
deduction plan to permit eligible employees to contribute
funds to "individual accounts" maintained by the SSF in its
general bank account through administrative recordkeeping.
Contributions to candidates from employees' "accounts"
required approval by means of employees' signatures on a form
requesting that a check for a specific amount be contributed
to a candidate.
The Commission concluded that the funds received by the
SSF's bank account were contributions to the SSF at the time
it received the funds. In addition, the Commission treated
this process as a deferred earmarking program whereby
contributions resulting from employee designations under the
program later became earmarked contributions from the
employees through the conduit SSF. Because the designations
of candidate donees were made by the employee after the funds
were received by the SSF in accordance with a specific
program which contemplated designations in that manner, the
contributions were treated as subject to a "designation,
instruction, or encumbrance" within the meaning of 11 CFR
110.6. See Advisory Opinion 1981-21. The Commission,
however, did not address a situation where the forwarding of
the designated contribution by the conduit would occur many
weeks or months after the designation.
Assuming Allison PAC wishes to send the funds to
designated committees in October of each year, it may still
operate its plan subject to modification as to when the
employee actually makes the designation. The PAC may send a
solicitation requesting the approval by the employee of a
monthly payroll deduction in a certain amount or the pledge
of a check in a certain amount. That solicitation would also
inform the employee that the opportunity for designating
candidate recipients, and the amounts they each should
receive, would occur during a certain ten day window of time,
specified in the solicitation, in the following October, and
that the PAC would disburse the funds according to the
designation instructions at the end of that period. Since
the PAC also wishes to provide an opportunity for
non-designation, and the disbursement by the PAC of
non-designated funds for political uses it determines, the
solicitation would permit the employee to denote a percentage
of funds that he or she wished to have subject solely to the
PAC's discretion for distribution at any time.
As in Advisory Opinion 1991-29, the funds that the
employee wished to be subject to a future candidate
designation would be accounted for in individual book
accounts. See Advisory Opinion 1981-21. This would
constitute a reasonable accounting method for assuring that
funds to be designated for a candidate would not be used
until the time of designation. During the ten day period,
the PAC would accept a designation form completed by the
employee which lists the candidates, if any, that he or she
wishes to receive contributions and in what amounts or
percentages. The PAC may also take the opportunity to allow
the employee to denote that funds in the book account may be
used in a manner solely to be determined by the PAC.
There are a number of reporting considerations with
respect to your program based upon the above analysis.
Consistent with Advisory Opinion 1991-29, Allison PAC should
report receipts from participating employees as contributions
to the PAC at the time the PAC receives the monthly deduction
proceeds from the employee's salary or receives the
employee's check. These contributions are received into the
PAC's bank account at that time and are held for a period of
months, as opposed to situations in which the conduit passes
on the funds shortly after receipt of the funds. Such
contributions are itemizable when the employee's total for
the calendar year exceeds $200. 2 U.S.C. §434(b)(3)(A);
11 CFR 104.3(a)(4)(i). They are subject to the limits of
individual contributions to PACs under 2 U.S.C.
§441a(a)(1)(C).
As a conduit of earmarked contributions, Allison PAC
should identify the original donor and disclose the conduit
transaction in its reports, pursuant to 11 CFR 110.6(c)(1).
The contributions to Federal candidates through your program
are viewed as being made by the original participant and,
since you are counting the disbursements as PAC contributions
to the candidate, as contributions made by the PAC. The
limits of 2 U.S.C. §441a(a)(1)(A) apply to the employees and
the limits of 2 U.S.C. §441a(a)(2)(C) apply to the PAC.
The Commission notes that the PAC's letter to the
designated committee accompanying the contribution check
describes the check as "a check in the amount of $__ from
[Allison PAC]." It proceeds to state that the check does not
represent the PAC's decision but solely "the designated
request of the voluntary contribution(s)." The letter does
not state that this check is a contribution from the PAC.
The fact that an earmarked contribution is forwarded by a
conduit's check does not mean, by itself, that it is a
contribution from the conduit. See 11 CFR 110.6(d) and
110.6(c)(1)(v). In order to clarify that Allison PAC
considers the amounts sent to the designee as contributions
from the PAC, it should state that this check is a
contribution from the PAC.
The letter also does not identify the individuals who
earmarked the contributed amounts. The letter should state
the pertinent identifying information for each employee and,
if the check includes designations by more than one employee,
the amount earmarked by each employee. Otherwise, the
recipient will not be able to properly report the receipt of
the contribution. See 11 CFR 110.6(c)(1) and (2).
Use of Payroll Deduction for Non-Restricted Employees
You ask whether a written authorization solicited
through twice yearly mailings directly to the home address of
non-restricted class employees provides an acceptable basis
for the company to establish a payroll deduction for PAC
contributions by such employees.
As stated above, contributions by restricted class
personnel may be facilitated through a payroll deduction.
11 CFR 114.5(k). Employees who are not executive or
administrative employees under 11 CFR 114.1(c)(1) and (2)
will not be able to participate in a payroll deduction plan
under 11 CFR 114.5 (i.e., for solicitations at any time)
unless they qualify for the restricted class in another way,
e.g., as a stockholder. See Advisory Opinion 1983-17.
The Act and Commission regulations also provide that a
corporation or its SSF may solicit contributions to its SSF
from corporate employees who are not in the restricted class.
These solicitations may be sent only twice a year, must be in
written form, and must be mailed to the employee's residence.
The solicitation program must be designed so that neither the
corporation nor its SSF may determine who makes a
contribution of $50 or less, or who does not contribute.
2 U.S.C. §441b(b)(4)(B). Commission regulations require the
establishment of a custodial arrangement, whose requirements
are described in detail, in order to protect the anonymity of
employees who do not wish to contribute or who wish to
respond with a single contribution of $50 or less or
contributions aggregating $200 or less in a calendar year.
11 CFR 114.6(d). In addition, Commission regulations
specifically forbid the establishment of a payroll deduction
plan to facilitate contributions in response to these
twice-yearly solicitations. 11 CFR 114.6(e)(1). Advisory
Opinions 1994-23, 1991-19, and 1981-14. This prohibition
exists along with, not in place of, the other above-described
conditions. The Commission concludes, therefore, that the
employees you describe in your final question may not
participate in a payroll deduction plan.
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. See 2 U.S.C. §437f.
Sincerely,
(signed)
Danny L. McDonald
Chairman
Enclosures (AOs 1994-23, 1992-16, 1991-29, 1991-19, 1990-8,
1983-17, 1981-21, and 1981-14)
Endnotes:
1/ Allison PAC filed its statement of organization with the
Commission on July 25, 1994.
2/ The company's hourly workers are represented by the
United Auto Workers and make their PAC contributions to
UAW-PAC.
3/ Your contribution election form states that the PAC may
accept contributions only from U.S. citizens or permanent
residents. The form also contains the contributor's
certification of no influence by a foreign national.
Although the certification is a helpful assurance, the Act
and regulations contain no requirement for a signed
certification by the contributor.
4/ The Commission notes that, while the PAC by-laws appear
in some instances to use U.S. citizenship as the criterion
for participation or making contributions, the Act permits
such activity by legal "permanent residents" as well. 11 CFR
110.4(a)(4)(ii).
5/ The restricted class, i.e., the class that may be
solicited by a corporation or its SSF for contributions to
the SSF at any time, consists of the corporation's
stockholders, its executive and administrative personnel, and
the families of such persons. 2 U.S.C. §441b(b)(4)(A);
11 CFR 114.5(g)(1).
6/ The solicitation should inform the employee that the
amounts designated for candidates will be treated as
contributions from Allison PAC, as well as from the
individual employee, and that the PAC will be subject to the
$5,000 per election limit on contributions by a
multicandidate committee to a particular candidate. The
solicitation, therefore, should also note the possibility
that all or part of the amount designated by an individual
for a particular candidate will not be sent to that candidate
and should also explain other options for the PAC's use of
the funds. After the designations are made, and the funds
sent by the PAC, the PAC should send a notice to the
individual employee informing him or her as to the amount of
contributions attributed to the employee with respect to each
candidate.