Federal Election Commission Main Page
Washington, DC 20463
October 4, 1996
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
ADVISORY OPINION 1996-38
Michael H. Chanin
Powell, Goldstein, Frazer & Murphy
1001 Pennsylvania Avenue, N.W.
Sixth Floor
Washington, D.C. 20004
Dear Mr. Chanin:
This responds to your letters dated July 18 and August
19, 1996, requesting an advisory opinion on behalf of the
American Seniors Housing Association ("ASHA") concerning the
application of the Federal Election Campaign Act of 1971, as
amended ("the Act"), and Commission regulations to ASHA's
relationship to a political committee formed by its members
and the affiliation of that committee with another political
committee.
Factual Background
ASHA is an unincorporated association of businesses
involved in the development, construction, financing, and
management of multifamily housing for senior citizens. ASHA
members include sole proprietorships, partnerships, joint
ventures, and corporations, as well as individuals employed
by such business entities. ASHA's goal "is to improve the
financial, legislative and regulatory environment that
affects the ability of ASHA members to provide quality
housing to the nation's senior citizens." To achieve that
end, and in view of the inability of an unincorporated
association to form a separate segregated fund ("SSF"),
individual members of ASHA's Executive Board plan to form a
political committee, tentatively named the Seniors Housing
Political Action Committee ("Seniors Housing PAC"), to
support Federal candidates.
You state that ASHA was originally constituted as the
Seniors Housing Committee of the National Multi Housing
Council ("NMHC"). NMHC is an incorporated trade association
representing the interests of the multifamily housing
industry, and NMHC members are involved in all aspects of
the development and operation of rental housing. The NMHC
established an SSF, NMHC PAC, which filed a statement of
organization with the Commission on July 7, 1980.
For the first several years of its existence, the
Seniors Housing Committee "functioned as any other committee
of the NMHC, seeking to achieve the broad goals established
by the NMHC Board of Directors." Due to the perception that
the seniors housing community had specialized needs, the
NMHC Board and the Executive Board of the Seniors Housing
Committee agreed in June 1992 "to reconstitute ASHA as a
separate organization affiliated with the NMHC."1 You
assert that the two organizations are governed by separate
boards and pursue separate legislative and regulatory
agendas.
Although ASHA has no by-laws, you note a number of
relevant rules and circumstances. The members of ASHA are
required to be members of NMHC. The members pay annual dues
to the NMHC, which uses the funds to support the activities
of both organizations. There is no requirement that members
of the NMHC Board also sit on the ASHA Executive Board, but,
from time to time, individuals have served on both Boards
simultaneously. Seven of the 110 members of the NMHC Board
serve on the 25-member ASHA Board. The Executive Director
of ASHA (ASHA's only full-time staff member) is an officer
of NMHC.2
The members of the ASHA Executive Board who are
interested in forming a political committee intend to pay
the initial costs of organizing the Seniors Housing PAC from
their personal funds. Thereafter, all of the PAC's
operational expenses will be paid solely from contributions
received by the PAC. You state that neither ASHA nor NMHC
will provide any direct or indirect financial support for
the establishment, administration, or operation of the
Seniors Housing PAC.
You assert that the organizational structure of the
Seniors Housing PAC will be designed to ensure that the
committee is "operationally independent" of both ASHA and
NMHC. The Seniors Housing PAC by-laws will provide that the
PAC Board of Directors (which will decide which candidates
receive PAC assistance) will be elected by the contributors
to the PAC, regardless of whether they are members of ASHA
or NMHC. The by-laws will not require that members of the
PAC Board be members of either the ASHA or NMHC Boards. For
administrative convenience, the PAC organizers intend to
appoint ASHA's Executive Director as committee treasurer.
Accordingly, the PAC would share office space with NMHC.
With a view toward preventing the use of NMHC's facilities
from constituting impermissible financial support for a
nonconnected political committee, the PAC will reimburse the
NMHC for the actual cost of all administrative expenses,
including rent, photocopying, and telephone charges.3
Questions Presented
You inquire as to the relationship of the Seniors
Housing PAC to ASHA and NMHC and to the NMHC PAC.
Specifically, you ask whether either ASHA or NMHC would be
considered to be a connected organization of the Seniors
Housing PAC. You also posit the assumption that the Seniors
Housing PAC and the NMHC PAC are affiliated, and ask
whether, as a result of this relationship, solicitations by
the Seniors Housing PAC for contributions will be limited by
the restrictions of 2 U.S.C. 441b(b)(4).
You maintain that the solicitable class for
contributions to the Seniors Housing PAC should not be
limited. In support of your position, you argue that your
situation differs from previous advisory opinions
affiliating SSFs with non-connected committees that have
restricted the solicitable class for contributions to the
non-connected committees. You explain that when the
Commission has addressed the affiliation of a corporate SSF
with a committee sponsored by members of a partnership, the
parent corporation "legally and operationally control[led]
the partnership and the partnership in effect control[led]
the committee." You state that the NMHC does not exercise
operational control over ASHA:
ASHA's directors set ASHA's policies separate and
apart from the NMHC. Although members of ASHA
must be members of the NMHC, members of ASHA
individually choose to be members. Although the
NMHC provides staff support, office space and
administration for ASHA, these costs are paid from
the total budget of the NMHC which includes the
dues of ASHA members. However, the provision of
this support and overlapping membership do not
grant the NMHC control over ASHA or its policies
and activities. The assent of NMHC is not
required for major decisions of ASHA.
You also assert that the decisions of the Senior
Housing PAC, whose Board will be elected by the PAC
contributors, "will be completely independent of the NMHC or
ASHA," and that neither organization will pay the PAC's
administrative costs.
If the Commission determines that the Seniors Housing
PAC will be subject to the solicitation rules applicable to
NMHC PAC, you ask whether the Seniors Housing PAC will be
able to seek solicitation permission from all corporate
members of NMHC and ASHA that have not granted permission to
NMHC or to any other incorporated trade association. You
also ask whether payment by NMHC of the Senior Housing PAC's
costs for administration and solicitation would be
impermissible contributions.
Legal Analysis
The Act and Commission regulations provide that a
corporation, including an incorporated trade association,
may make payments for the establishment or administration
of, or the solicitation of contributions to, an SSF to be
utilized for political purposes by that organization without
such payments resulting in a contribution to that fund. 2
U.S.C. 441b(b)(2)(C); 11 CFR 114.1(a)(2)(iii). An
organization such as an incorporated trade association,
which is not itself a political committee, but which
directly or indirectly establishes, administers, or
financially supports a political committee, is a "connected
organization" of that committee. 2 U.S.C. 431(7); 11 CFR
100.6(a). The connected organization and its SSF are
subject to restrictions as to the category of persons who
may be solicited for contributions to the committee. 2
U.S.C. 441b(b)(4)(A) and (D); 11 CFR 114.5(g)(1) and
114.8(c). Specifically, an incorporated trade association
may solicit its executive and administrative personnel, the
families of such personnel, and its unincorporated members.
11 CFR 114.7(a). In addition, it may solicit the
stockholders and executive and administrative personnel, and
the families of such stockholders and personnel, of the
member corporations that separately and specifically approve
the solicitations and that have not approved a solicitation
by any other trade association for the same calendar year.
11 CFR 114.8(c).
The Act and Commission regulations "do not prescribe
qualifications on the individuals who may establish,
organize, and direct a nonconnected political committee; nor
do they necessarily prohibit individuals who have some
association with a corporation, labor organization, or trade
association from such activity." Advisory Opinion 1984-12.
The Commission has permitted the formation of a non-
connected political committee that is organized by
individuals associated with one entity and that receives and
pays for services furnished by that entity, or by the same
company that services that entity. Advisory Opinions 1991-
37 and 1984-12. See also Advisory Opinion 1982-63. Even if
Seniors Housing PAC is considered to be a non-connected
committee, however, the legal framework for solicitations by
non-connected committees changes when the committee is
affiliated with an SSF under 11 CFR 100.5(g)(2) and
110.3(a). Normally, non-connected committees are not
limited in the categories of persons who may be solicited
for contributions, other than those persons described in
2 U.S.C. 441b(a), 441c, and 441e. As you indicate, the
Commission has determined that a non-connected PAC sponsored
by a partnership was affiliated with the SSF of a related
corporation. Advisory Opinions 1992-17 and 1979-77. The
Commission has also made clear, however, that, even though
partnership PACs do not, by themselves, carry the
solicitation restrictions applicable to SSFs, the
restrictions apply to the PAC of a partnership that is an
affiliate of a corporation with an SSF. Advisory Opinions
1992-17 and 1989-8. Thus, contributions to the partnership
PAC could be solicited only from
the shareholders or owners and the executive and
administrative personnel of the corporation or the
partnership (and their families). 11 CFR 114.5(g)(1).
The only ways for the Seniors Housing PAC, as a non-
connected committee, to avoid the solicitation restrictions
would be if NMHC or ASHA had no sponsoring relationship with
the Seniors Housing PAC, or if ASHA were not affiliated with
NMHC.
With respect to the first way, the Commission notes
that the Seniors Housing PAC will be formed by ASHA
personnel to achieve ASHA's legislative and regulatory
goals. Even if ASHA is not a connected organization, it
would be no less a sponsor of the Seniors Housing PAC than
is a partnership with a related PAC.
The Act and Commission regulations provide for the
affiliation of committees established, financed, maintained,
or controlled by the same corporation, labor organization,
person, or group of persons, including any parent,
subsidiary, branch, department, or local unit thereof. 2
U.S.C 441a(a)(5); 11 CFR 100.5(g)(2) and 110.3(a)(1)(ii).
In making this determination, the Commission may examine the
relationship between organizations that sponsor committees,
between the committees themselves, or between one sponsoring
organization and a committee established by another
organization. 11 CFR 100.5(g)(4)(i) and 110.3(a)(3)(i).
Your request correctly assumes, based on the relationship
between ASHA and NMHC, that NMHC PAC and the Seniors Housing
PAC will be affiliated committees.4 If two entities are
affiliated under the Act, it makes no difference whether the
affiliation results from varying degrees or types of
relationship; for example, 60 percent control of one entity
by another, or maintenance of one entity by another, does
not result in any different or lesser form of affiliation
than would 90 percent control. Solicitations for
contributions to the Seniors Housing PAC will therefore be
limited to the executive and administrative personnel (and
their families) of NMHC and ASHA, the unincorporated members
of NMHC, and the executive and administrative personnel and
shareholders (and their families) of those incorporated NMHC
members that give separate and specific solicitation
approval, as set out in 11 CFR 114.8(c).5
The affiliation of NMHC PAC with the Seniors Housing
PAC is relevant to your question as to whether the Seniors
Housing PAC will be able to seek solicitation permission
from all corporate members of NMHC and ASHA that have not
granted permission to NMHC or to any other incorporated
trade association. As a result of the affiliation, any
permission granted for solicitations of contributions to
either of the PACs applies to the other PAC. Advisory
Opinion 1995-12. Therefore, NMHC corporate members,
regardless of whether they are also members of ASHA, who
have not given any other solicitation permission for this
calendar year, may give permission for the solicitation of
contributions to the Seniors Housing PAC. However, by doing
so, they will also foreclose the grant of permission for
solicitation of contributions by any other trade association
SSF except NMHC PAC. In addition, if a corporate member of
NMHC has given contribution solicitation approval to NMHC,
that approval will also allow the solicitation of the
qualified personnel of that corporation for contributions to
Seniors Housing PAC.6
With respect to the question as to NMHC's payment of
the administration and solicitation costs of the Seniors
Housing PAC, the Commission notes the ability of
incorporated entities to pay such costs for the political
committees of affiliated entities. See Advisory Opinions
1996-26, 1995-12, and 1983-19. Most relevant to this
situation is the Commission's approval of payments of such
costs by corporations for the PAC of an affiliated
partnership that is jointly owned by the corporations.
Advisory Opinion 1992-17. In view of the affiliated
relationship of NMHC and ASHA, the use by NMHC of its
corporate funds to pay for the exempt costs would be
permitted under 2 U.S.C. S441b.
Finally, the Commission notes that, when the Seniors
Housing PAC files its statement of organization, it should
identify NMHC PAC as an affiliated committee.
2 U.S.C. 433(b)(2); 11 CFR 102.2(a)(1)(ii) and (b)(1). In
addition, in the event that NMHC pays for the administration
and solicitation costs of Seniors Housing PAC (either
directly or through ASHA), the PAC must amend its statement
of organization to identify NMHC as a connected
organization. 2 U.S.C. 433(b)(2); 11 CFR 102.2(a)(1)(ii)
and (b)(1) and (2); Advisory Opinion 1992-17.
This response constitutes an advisory opinion
concerning the 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)
Lee Ann Elliott
Chairman
Enclosures (AOs 1996-26, 1996-21, 1995-12, 1992-17, 1991-37,
1989-8, 1984-12,
1983-19, 1982-63, and 1979-77)
_______________________________
1 According to the minutes of ASHA's June 23, 1992,
meeting, ASHA's name change was approved by NMHC's Board of
Directors. In addition, the minutes state that ASHA's
"letterhead will maintain its ongoing relationship as part
of the National Multi Housing Council."
2 According to Washington Representatives - 1996, ASHA's
Executive Director, David S. Schless, is also the Vice
President of Seniors Housing at NMHC.
3 For example, rental costs will be based on an allocation
method whereby the amount of time that the space is devoted
to Seniors Housing PAC activities will be compared to the
total amount of time the space is used for all business and
political activities. Telephone charges will be based on
the actual cost of the PAC's long distance charges plus a
time-based portion of the base monthly charge.
4 Commission regulations provide for an examination of
various factors, found at 11 CFR 110.3(a)(3)(ii)(A)-(J), in
the context of the overall relationship between committees
or sponsoring organizations to determine whether
organizations and, hence, their committees are affiliated.
11 CFR 110.3(a)(3)(ii). Pertinent to these factors are that
all members of ASHA are required to be members of NMHC;
ASHA's activities are funded by NMHC from the annual dues
paid to the latter organization; ASHA itself was founded by
the NMHC Board and persons associated with NMHC; and there
are common significant personnel (as evidenced by the
partial Board overlap and the fact that an NMHC officer is
Executive Director of ASHA and the prospective treasurer of
the Seniors Housing PAC). The foregoing facts indicate that
ASHA was established by NMHC, and continues to be financed
and maintained by NMHC and the persons associated with NMHC.
See 11 CFR 110.3(a)(3)(ii)(D), (E), (G), (H), and (I).
5 Your request does not seek clarification of which
members of NMHC would qualify as "members" for purposes of
the Act. Therefore, issues related to the application of 11
CFR 114.1(e)(2) and 100.8(b)(4)(iv)(B) are not discussed
in this opinion. For a recent treatment of these issues,
see Advisory Opinion 1996-21.
6 See 11 CFR 114.8(d)(5) for limitations by a member
corporation on the solicitation approval it grants to an
incorporated trade association. See also 11 CFR 114.8(f)
prohibiting the solicitation of the qualified personnel of
an incorporated member's subsidiary corporation, unless that
subsidiary is a member of the trade association.