Federal Election Commission Main Page
August 15, 1997
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
ADVISORY OPINION 1997-13
Timothy W. Jenkins
O'Connor & Hannan
1919 Pennsylvania Avenue, N.W.
Suite 800
Washington, D.C. 20006-3483
Dear Mr. Jenkins:
This responds to your letter dated July 8, 1997, on
behalf of the United Space Alliance Political Action
Committee ("USA 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 relationship between USA PAC and other
political committees.
Your request presents the situation of the
establishment of a political committee, USA PAC, by a joint
venture limited liability company ("LLC") equally owned by
two corporations that are connected organizations of
separate segregated funds (SSFs). You ask whether USA PAC
would be affiliated with those committees and the effects of
any affiliated relationship.
I. Background
United Space Alliance, LLC ("USA") is a Delaware LLC
established on November 7, 1995. It was created by a joint
venture entered into by Rockwell Space Alliance Company, a
wholly-owned subsidiary of Rockwell International
Corporation, and Lockheed Martin Space Alliance Company, a
wholly-owned subsidiary of Lockheed Martin Corporation
("LMC"). On December 6, 1996, The Boeing Company ("Boeing")
acquired some of the interests in Rockwell, including all of
Rockwell's interest in USA.1
LMC is the connected organization of the Lockheed
Martin Employees Political Action Committee ("LMEPAC") and
Boeing is the connected organization of The Boeing Company
Political Action Committee ("BPAC"). Both SSFs are
multicandidate committees. USA PAC's statement of
organization, filed on May 1, 1997, denoted that the
committee was a non-connected committee affiliated with
LMEPAC and BPAC. On May 19, USA PAC amended its statement
of organization to indicate that it is an SSF affiliated
with LMEPAC and BPAC and that LMC and Boeing are its
connected organizations. USA PAC intends to raise funds by
soliciting executive and administrative personnel of USA.
Employees of LMC and Boeing will not be solicited.
You ask five questions pertaining to the relationship
between USA and USA PAC, on one hand, and the two
corporations and their respective SSFs, on the other. They
are re-ordered as follows:
(1) Is USA PAC affiliated with LMEPAC and BPAC?
(2) Are LMC and Boeing both connected organizations of
USA PAC?
(3) May Boeing, LMC, and/or USA pay establishment,
administration, and solicitations costs for USA PAC?
(4) Assuming LMC and Boeing are connected
organizations to USA PAC, must the full name of both
organizations appear in the name of USA PAC?
(5) Assuming affiliation with LMEPAC and BPAC, how
will contributions by USA PAC be tallied for purposes of the
Act's limitations?
II. Legal Analysis
A. Response to Question 1
The Act and Commission regulations provide that
committees, including separate segregated funds, that are
established, financed, maintained or controlled by the same
corporation, person, or group of persons, including any
parent, subsidiary, branch, division, department, or local
unit thereof, are affiliated. 2 U.S.C. 441a(a)(5); 11 CFR
100.5(g)(2). Contributions made to or by such committees
shall be considered to have been made to or by a single
committee. 2 U.S.C. 441a(a)(5); 11 CFR 100.5(g)(2),
110.3(a)(1), and 110.3(a)(1)(ii). In addition, a
corporation may make communications to and solicit the
restricted class (i.e., executive and administrative
personnel and stockholders, and the families thereof) of its
subsidiaries or other affiliates for contributions to the
corporation's separate segregated fund. 2 U.S.C.
441b(b)(2)(A) and (4)(A)(i); 11 CFR 114.3(a)(1) and
114.5(g)(1). The Commission has long held that affiliates
may include entities other than corporations, such as
partnerships. Advisory Opinions 1996-49, 1994-11, 1992-17,
1989-8, 1987-34, and 1983-48. See also Advisory Opinion
1996-38.
Where an entity is not an acknowledged subsidiary of
another entity, as in 11 CFR 110.3(a)(2)(i),2 Commission
regulations provide for an examination of various factors in
the context of an overall relationship to determine whether
one company is an affiliate of another and, hence, whether
their respective SSFs are affiliated with each other. 11
CFR 100.5(g)(4)(i) and (ii)(A)-(J), and 110.3(a)(3)(i) and
(ii)(A)-(J).3 The relevant factors in the situation you
have presented are as follows: (A) whether a sponsoring
organization owns a controlling interest in the voting stock
or securities of another sponsoring organization; (B)
whether a sponsoring organization has the authority or
ability to direct or participate in the governance of
another sponsoring organization through provisions of
constitutions, by-laws, contracts or other rules, or through
formal or informal practices or procedures; (C) whether a
sponsoring organization has the authority or ability to
hire, appoint, demote or otherwise control the officers, or
other decisionmaking employees of another sponsoring
organization; and (I) whether a sponsoring organization had
an active or significant role in the formation of another
sponsoring organization. 11 CFR 110.3(a)(3)(ii)(A), (B),
(C), and (I).
You state that, based on the presence of factors set
out in the Commission regulations, USA PAC "concedes
affiliation." You note that the initial operating budget of
USA derives from capital contributions made equally from LMC
and Boeing. Thus, each of the corporations (whose wholly-
owned subsidiaries are the LLC's members) owns a 50 percent
interest in USA. The approval of LMC and Boeing is required
for significant policy determinations of USA, including
entering into contracts valued in excess of $250 million,
approving single transactions in excess of $10 million, and
settling litigation claims in excess of $10 million. The
chief executive officer, chief operating officer, chief
financial officer, and comptroller are selected by LMC and
Boeing officials. These officers are vested with
responsibility for managing and supervising day-to-day
operations of the company, including most hiring decisions
and approving contracts and business transactions below the
above-referenced dollar thresholds. The operations of USA
are overseen by a seven-member advisory board composed of
two individuals appointed by Boeing, two individuals
appointed by LMC, and three individuals appointed jointly by
LMC and Boeing (but who shall not be employees of either
company).
Although neither LMC nor Boeing has the predominant
position in owning or controlling the company, the above
information indicates that the assent of each of the two
companies is necessary for certain major hiring and
governance decisions of USA.4 The Commission concludes
therefore that USA is an affiliate of each of those
companies. This is consistent with prior advisory opinions
involving the relationship of a joint venture entity owned
50-50 by two corporations where the Commission concluded
that the parent corporations' PACs were affiliated with the
joint venture entity's PAC, but not with each other.
Advisory Opinions 1992-17 and 1979-56.
Although the Act does not specifically provide for the
establishment of SSFs by non-corporate entities other than
labor organizations, the Commission has concluded that a PAC
established and sponsored by a partnership is affiliated
with the SSF of an affiliated corporation. Advisory
Opinions 1996-49, 1994-9, and 1992-17. The Commission does
not see any material distinction in the situation presented
here where a PAC is established and sponsored by an LLC, and
concludes, therefore, that USA PAC is affiliated with LMEPAC
and BPAC. See Advisory Opinion 1996-13, n.7.
B. Response to Questions 2 and 3
Under 2 U.S.C. 441b(b)(2)(C), a corporation may use
its general treasury funds to pay for the costs of
establishing, administering, or soliciting contributions to
its SSF, without a resultant contribution or expenditure.
See also 2 U.S.C. 431(8)(B)(vi) and (9)(B)(v). A
corporation that directly or indirectly establishes,
administers, or financially supports a political committee
is the connected organization of that committee. 2 U.S.C.
431(7) and 11 CFR 100.6(a). In applying this law in the
context of affiliation, the Commission has permitted a
corporation that is affiliated with another corporation to
pay the administration and solicitation costs of the latter
corporation's SSF. Advisory Opinions 1996-26 and 1983-19.
Similarly, it has permitted incorporated entities to pay
such costs for the political committees of its affiliated
entities that are not incorporated. Advisory Opinions 1996-
49, 1996-38 and 1992-17. Therefore, Boeing and LMC may pay
for the establishment, administration, and solicitation
costs for USA PAC.
With respect to the ability of USA itself to establish
an SSF, the Commission notes that the Act does not extend to
a partnership the ability granted to a corporation at
2 U.S.C. 441b(b)(2)(C) to conduct itself as a connected
organization and avail itself of the exemptions. Advisory
Opinions 1991-1 and 1990-20. See also California Medical
Association v. Federal Election Commission, 453 U.S. 182
(1981). Nevertheless, the Commission has treated joint
venture partnerships differently as a result of the
partnership's ownership by, and affiliation with,
corporations. Advisory Opinions 1996-49, 1994-11, 1994-9,
1992-17, and 1987-34, n.2. If a partnership is owned
entirely by corporations and affiliated with at least one of
them, it may perform the functions of a connected
organization for its PAC. Advisory Opinions 1996-49, 1994-
11, 1994-9, and 1992-17.
The conclusion does not differ because of the fact that
USA is an LLC. In Advisory Opinion 1992-17, the Commission
noted that its conclusion was compatible with the dual
attribution principle for partnership contributions at 11
CFR 110.1(e). Contributions by partnerships are not only
attributed to the partnership as a whole but are also
attributed to the partners. The Commission stated that the
administrative and solicitation support may be construed as
coming from the affiliated corporations. Advisory Opinion
1992-17. In past advisory opinions, the Commission has not
applied this same dual attribution principle to LLCs.
Advisory Opinions 1997-4, 1996-13, and 1995-11.
Nevertheless, in concluding in those opinions that the LLC
could make contributions, the Commission stated that it was
assuming that none of the LLC's members were corporations
(because no support may come from a corporation outside
exceptions such as 2 U.S.C. 441b(b)(2)(C)). This is
similar to the analysis made with respect to partnerships as
to ownership and control resting with the corporations. In
this situation, USA, as a joint venture of two corporations,
is in a similar posture to that of a joint venture
partnership of two corporations. USA is entirely owned by
corporations, whose control over USA is essentially the same
as corporate joint venture partners, and USA is affiliated
with at least one of the corporations. Therefore, USA may
pay the establishment, administration, and solicitation
costs of USA PAC without a resulting contribution from USA.
Even though the Commission has concluded that an LLC
can perform the functions of a connected organization under
the above-described circumstances, Commission regulations
defining "connected organization" do not include LLCs. 11
CFR 100.6(a). LMC and Boeing would be the connected
organizations of USA PAC and would pay for the exempt costs
either by themselves or through USA. In other words, if
such support is provided by USA itself, the support is still
deemed to be from LMC and Boeing by virtue of their
relationship to USA. Advisory Opinions 1996-49, 1994-11 and
1992-17.5
C. Response to Question 4
According to 2 U.S.C. 432(e)(5) and 11 CFR 102.14(c),
the name of an SSF shall include the full name of its
connected organization. This full name must appear on the
SSF's statement of organization, on all reports filed by the
SSF, and in all notices required by 11 CFR 109.3 and 110.11
(i.e., non-authorization notices for independent
expenditures and disclaimer notices). 11 CFR 102.14(c).
The regulation further provides, however, that an SSF
established by a corporation that has subsidiaries need not
include the name of each subsidiary in its name and that an
SSF established by a subsidiary need not include the name of
its parent or another subsidiary of the parent. Id.
Although USA is not technically a subsidiary of LME or
Boeing, it is owned 50 percent by each company and the
assent of each company is necessary for certain major
decisions of USA. USA is therefore in virtually the same
position as a subsidiary of each of the two companies.
Moreover, disclosure of the names of all the connected
organizations is required on USA's statement of
organization, and the information is thus available to the
public. 2 U.S.C. 433(b)(2); 11 CFR 102.2(a)(1)(ii). The
Commission concludes therefore that USA PAC need not include
the names of LME or Boeing in its name. To the extent that
Advisory Opinion 1996-49 requires the inclusion, in the name
of a joint venture partnership PAC's name, of the full name
of an incorporated joint venture partner in a similar
position to that of LME or Boeing, that opinion is hereby
superseded.
D. Response to Question 5
Because USA PAC is affiliated with LMEPAC and BPAC,
both of which are multicandidate committees, USA PAC
qualifies as a multicandidate committee. See Advisory
Opinions 1995-12, n.12, 1993-23, and 1991-13.
Multicandidate committees are subject to the limits of 2
U.S.C. 441a(a)(2), i.e., $5,000 to a candidate per
election, $15,000 to a national party committee in any
calendar year, and $5,000 to any other political committee
in a calendar year. 2 U.S.C. 441a(a)(2)(A), (B), and (C).
However, as indicated above, contributions by affiliated
political committees are treated as contributions by one
committee and cannot exceed the limits when aggregated with
each other. 2 U.S.C. 441a(a)(5); 110.3(a)(1).
In advisory opinions addressing contributions by PACs
of joint ventures owned and controlled on a 50-50 basis, the
limit of the joint venture PAC was apportioned half to the
limit shared with one corporation's SSF and half to the
limit shared with another corporation's SSF. Advisory
Opinions 1992-17 and 1987-34. This was based on an analogy
to the dual attribution concept of 11 CFR 110.1(e) discussed
above which includes the apportionment of each contribution
on a pro rata basis to the partners. See 11 CFR
110.1(e)(1). Although, as indicated above, LLCs are not
subject to the same dual attribution treatment as
partnerships, USA is still similarly situated to the
partnerships in those opinions with respect to corporate
ownership and control.6 Therefore, contributions by USA PAC
should be apportioned half to the limit of LMEPAC and half
to the limit of BPAC.7 Such apportioned contributions are
only permitted to the extent the aggregate 441a(a) limits
shared with LMEPAC and BPAC are not exceeded by virtue of
USA PAC's contributions.
This modification of the usual manner for aggregating
contributions by affiliated committees means that, as among
all three committees, there will be two sets of contribution
limits available. Thus, the aggregate contributions to the
same candidate may not exceed $10,000 per election from all
three committees, and may not exceed $5,000 from any one of
the committees. Advisory Opinion 1987-34, n.3. The
contributions made by LMEPAC or Boeing will not be
aggregated with those of USA PAC for the purposes of USA
PAC's $5,000 limit, but USA PAC's contributions will be
aggregated with each of the corporate PAC's contributions on
a half and half basis for the purposes of the corporate
PACs' $5,000 limits; thus, USA PAC's contributions may be
held under $5,000 because of a need to avoid the exceeding
of the limits by the corporate PACs.
For example, if USA PAC made a $2,000 contribution to
Federal candidate X, $1,000 would count toward the limit
shared with LMEPAC and $1,000 would count toward the limit
shared with BPAC. If LMEPAC subsequently made a $3,000
contribution to Federal candidate X for the same election,
USA PAC could only contribute an additional $2,000 to X for
that election, because $1,000 of that would be attributed to
LMEPAC, bringing the latter up to its $5,000 limit.
Assuming BPAC had not made any contributions to X at that
point, BPAC could only contribute $3,000 because $2,000 of
USA PAC's contributions have already been attributed to
BPAC.8
As stated in prior opinions, an alternative
apportionment may be used in specific cases as long as
LMEPAC, BPAC, and USA PAC agree and no excessive
contributions result. In that event, USA PAC should provide
written instructions to recipient political committees or
candidates so those committees can monitor their acceptance
of contributions subject to the shared limits of the three
contributing committees. 2 U.S.C. 441a(f); 11 CFR
110.9(a). The written instructions should also be
maintained as contribution records of USA PAC for three
years after the contribution is reported. 11 CFR 104.14(b);
see also 11 CFR 102.9(b)(1) and (c). Advisory Opinions 1992-
17, 1991-13, and 1987-34.
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)
John Warren McGarry
Chairman
Enclosures (AOs 1997-4, 1996-49, 1996-38, 1996-26, 1996-13,
1995-12, 1995-11, 1994-11, 1994-9, 1993-23, 1992-17, 1991-
13, 1991-1, 1990-20, 1989-8,
1987-34,1983-48, 1983-19, and 1979-56)
_______________________________
1 USA was established to maximize the ability of its
corporate owners to respond to NASA's determination to
consolidate contracts relating to the NASA Space Flight
Operations Program. Under the joint venture agreement, USA
is authorized to complete the execution of NASA contracts to
which LMC and Boeing are parties, and to perform other
contracts for the Space Flight Operations Program.
2 According to Commission regulations, committees
established by a single corporation and its subsidiaries are
affiliated per se. 11 CFR 110.3(a)(2)(i).
3 Specifically, the regulations, at 11 CFR 110.3(a)(3)(ii),
state in part:
The Commission will examine these factors in the
context of the overall relationship between
committees or sponsoring organizations to
determine whether the presence of any factor or
factors is evidence of one committee or
organization having been established, financed,
maintained or controlled by another committee or
sponsoring organization.
4 The Commission also notes, with respect to factor (I),
that LMC was one of the creators of USA.
5 USA's amended statement of organization, as described
above, is therefore correct in its characterization of USA
PAC as an SSF and its indication that LMC and Boeing are
connected organizations. See 2 U.S.C. 433(b)(2); 11 CFR
102.2(b)(2).
6 The Commission also gave similar treatment to a labor
union that was a local unit of two international unions.
Advisory Opinion 1991-13.
7 In referring to the contributions made by each of the
corporate PACs, the amount considered also includes the
amounts contributed by other PACs affiliated with the
corporate PAC.
8 The Commission notes that, under this scenario, a
combined total of $10,000 has been contributed ($4,000 from
USA PAC and $3,000 each from LMEPAC and BPAC) with no PAC
exceeding the $5,000 limit.