Federal Election Commission Main Page
FEDERAL ELECTION COMMISSION
Washington, DC 20463
June 10, 1999
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
ADVISORY OPINION 1999-9
Robert F. Bauer, Attorney
Perkins Coie LLP
607 14th Street, N.W. Suite 800
Washington, DC 20005-2011
Dear Mr. Bauer:
This refers to your letters dated March 18, and April
12, 1999, which request an advisory opinion on behalf of
Bill Bradley for President, Inc. ("the Committee"),
concerning application of the Presidential Primary Matching
Payment Account Act ("the Matching Act"), 26 U.S.C. 9031-
9042, and Commission regulations to the matching of credit
card contributions made through the Internet. Your request
also includes reference to the Federal Election Campaign Act
of 1971, as amended ("the Act" or "FECA").
FACTUAL DISCUSSION
Solicitation Proposal
You state that Bill Bradley has filed the candidate
agreements and certifications and threshold submissions to
receive Federal matching funds under the Matching Act. His
principal campaign committee for the 2000 presidential
election cycle is Bill Bradley for President Inc. You
explain that "[Mr. Bradley] is raising funds for his
campaign from the broadest possible base of Americans
consistent with the intent of Congress when it passed the
Act." As part of this, the Committee plans to solicit and
accept contributions from supporters through its World Wide
Web site. Prospective donors visiting the Committee's web
site will be able to contribute by filling out an electronic
form and transmitting it to the Committee.
The donor will then directly provide credit card, debit
card or other electronic fund transfer information to the
Committee through the electronic form. The Committee will
send a confirmation of the contribution to the donor via
electronic mail, and will submit the information for payment
through the appropriate card issuer. To avoid the receipt
of corporate contributions, the Committee will pay all the
applicable processing fees.
The Committee, you affirm, will observe disclaimer and
best efforts requirements and will screen for prohibited
contributions. (See discussion below.) The Committee will
also retain all information related to the contributions, as
required by Commission regulations.
The Committee wishes to submit contributions collected
in this manner for matching under the Matching Act. You
state that the Committee will submit, to the Commission,
copies of the electronic forms submitted by the donors both
in hard copy and electronic form, along with documentation
which indicates that the contribution was deposited into a
designated depository.
Screening Procedures
The Committee intends to use the services of an
Internet credit card processing vendor which has the
capability to compare the contributor information submitted
to the Committee with the name, address and other billing
information on file with the issuer of the contributing
credit or debit card. (Hereinafter use of the term "credit
card" by itself should be read to include "debit card" as
well as other similar electronic fund transfer methods.)
This capability will allow the Committee to verify the
identity of those who contribute via credit card with the
same degree of confidence that political committees
generally accept checks via direct mail and other forms of
solicitation that are consistent with Commission
regulations, while not necessarily involving direct personal
contact between Committee staff and donors. Your request
provides specific detail regarding the screening procedures.
The Committee intends to screen for impermissible or
nonmatchable contributions by taking a series of sequential
measures. First, on the web page that contains the
contribution solicitation form, the Committee will post
language in a clear and conspicuous manner informing
prospective donors of the Act's source restrictions and
contribution limits. This language is derived from the
Commission's guidance in Advisory Opinion 1995-9, and will
consist of the following:
We may accept contributions from an individual
totaling up to $1,000. Federal law prohibits
contributions to the campaign from:
ú the general treasury funds of corporations,
labor organizations or national banks (including
corporate or other business entity credit cards);
ú any person contributing another person's funds;
ú foreign nationals who lack permanent resident
status; and
ú government contractors.
We may accept contributions from minor children
(i.e., persons under 18 years of age) if the minor
makes the decision to contribute knowingly and
voluntarily, and the child contributes his or her
own funds, and the
contribution is not controlled by another
individual or made from the proceeds of a gift
given to provide funds to be contributed.
Second, to contribute to the Committee, a donor will
have to successfully complete an electronic form on the
Committee's web site, and decide to transmit that form to
the Committee for further processing. The form will require
a prospective donor to provide detailed information
including, among other things:
ú the contributor's name
ú the contributor's name as it appears on the card;
ú the billing address on record with the issuer of the
credit or debit card;
ú the credit or debit card number;
ú the expiration date of the card;1
ú the contributor's residential address; and
ú the amount of the contribution,2
In the event a prospective donor fails to provide any of the
required information, or leaves one of these fields blank,
the Committee's web site will reject the form and prompt the
prospective donor to provide the missing information.
To screen further for corporate or business entity
cards, the Committee intends to take advantage of the fact
that corporate or business entity credit cards are generally
billed directly to the entity's offices, rather than to an
individual's home. If the billing and residential addresses
provided by the prospective donor are different, the
Committee's web site will display the following message:
We've noticed that the billing address on your
card is different from
your home address, please remember that we cannot
accept corporate or business entity credit cards,
and that your contribution must be made on a card
that represents your own personal funds.
The donor will then be prompted either to continue with the
transaction or cancel it altogether.
The Committee also intends to require the donor to
check a series of boxes within the contribution form
attesting that their contribution is made with funds within
the source restrictions and contribution limits of the Act.
Specifically, the donor will be asked to attest to the
legality of their contribution by checking the following
boxes:
1. This contribution is made from my own funds, and not
those of another.
2. This contribution is not made from the general treasury
funds of a corporation, labor organization or national bank.
3. I am not a Federal government contractor, nor am I a
foreign national who lacks permanent resident status in the
United States.
4. This contribution is made on a personal credit or debit
card for which I have the legal obligation to pay, and is
made neither on a corporate or business entity card nor on
the card of another.
The failure to check any of the attestation boxes will
cause the Committee's web site to reject the form, and
display a message noting the applicable source restriction,
for example: "We're sorry. Federal law prohibits
contributions from the general treasury funds of
corporations, labor organizations or national banks." It
will then prompt the donor either to correct any missing or
inaccurate information, or to cancel the transaction.
When the form has been successfully completed, the
donor transmits it to the Committee for "real time"
processing. The credit card data will be sent directly to
the credit card processing company. The company will cross-
check the contributor information submitted with its own
information on the name, billing address, account number and
expiration date of the card, and process the transaction.
In the event the contribution is rejected by the
processing company, the campaign will then send a message to
the prospective donor that the contribution has been
rejected.
In the event the credit card submission is approved,
the Committee will send a confirming message to the donor
expressing appreciation for the contribution, will note the
contribution in its database, and will then receive the
contribution, less the processing fee, into the campaign
depository. The Committee also will request that the donor
contact the Committee promptly either by phone or by e-mail
with any questions or concerns about the contribution, or
about the process through which it was made.
In addition to these screening and notification
procedures, the Committee intends to employ the same
practices it would follow if a donor would write checks
through different or multiple checking accounts. Upon
receipt of a contribution, it will enter the donor's name
into a database of contributors, checking as an initial
matter to see if the donor had given before. If the
contribution appeared to be excessive, the Committee will
either seek a timely reattribution, or refund the excessive
portion.
MATCHING ACT AND COMMISSION REGULATIONS
For purposes of entitlement to Federal matching
payments, the term contribution "means a gift of money made
by a written instrument which identifies the person making
the contribution by full name and mailing address, but does
not include a subscription, loan, advance, or deposit of
money, or anything of value or anything described in
subparagraph (B), (C), or (D) of section 9032(4)." 26
U.S.C. 9034(a); see also 11 CFR 9034.2. Commission
regulations define written instrument to mean "a check
written on a personal, escrow or trust account representing
or containing the contributor's personal funds; a money
order; or any similar negotiable instrument." 11 CFR
9034.2(b). Finally, Commission regulations delineate a
category of contributions that cannot be matched. This list
currently includes contributions made through: "A contract,
promise, or agreement, whether or not legally enforceable,
such as a pledge card or credit card transaction, to make a
contribution for any such purposes (but a gift of money by
written instrument is not rendered unmatchable solely
because the contribution was preceded by a promise or
pledge)." 11 CFR 9034.3(c).
APPLICATION TO COMMITTEE PROPOSAL
The Commission notes the rising popularity of the use
of the Internet, both as a form of information gathering and
as a vehicle for financial transactions. As you note in
this request, approximately half of U.S. adult consumers
have access to the Internet, and studies during the 1998
holiday season had projected that 10% of Americans would
shop for at least one item over the Internet. The vast
majority of this spending was expected to be done with
credit cards. Several nonprofit organizations currently
accept credit card donations over the Internet, including
the American Red Cross, UNICEF and the Sierra Club.
The Commission has not previously considered the
matchability of credit card contributions made through the
Internet. In previous opinions the Commission has concluded
that contributions, otherwise permissible under the Act,
could be solicited through the Internet. See Advisory
Opinions 1995-35 and 1995-9.3
In the first instance, your proposal entails the
matchability of contributions which are not made through a
traditional written instrument, as provided in 26 U.S.C.
9034(a). Where possible, the Commission has interpreted the
Act and its regulations in a manner consistent with
contemporary technological innovations, including the
maintenance of records in non-paper form and the performance
of committee transactions, where the use of the technology
would not compromise the intent of the Act or regulations.
See Advisory Opinions 1999-3, 1995-35, 1995-9, 1994-40 and
1993-4. 4
In this regard, the Commission's resolution of Advisory
Opinion 1999-3 is relevant to your request. In that opinion
a corporation wished to use a payroll deduction system to
facilitate contributions to its PAC from the corporation's
executive and administrative personnel. As part of this
system, it was proposed that these employees would authorize
payroll deductions by either digital electronic signature or
traditional written signature before the deductions would be
made. Prior Commission precedent and case law had required
that such authorizations be made in writing.5 The opinion
examined whether the use of an electronic signature by a
restricted class employee would constitute a valid written
authorization for the deductions to be made. The Commission
determined that this was permissible since the safeguards
and procedures required for the use of the signature allowed
it to function as a "unique identifier of the authorizing
employees" and it did not run contrary to any specific rule.
The Commission notes that while there are important
distinctions between your proposal and that considered in
Advisory Opinion 1999-3,6 the analysis therein is applicable
to your situation. The Commission observes the numerous
safeguards built into your proposal, both as to the
identification of contributors and the related issues of
screening for impermissible contributions. These procedures
would offer substantial assurance that your proposal to
solicit and accept contributions through the Internet, by
the submission of an electronic form and use of credit card,
would comply with the Matching Act.7 Your proposed
screening procedures would "allow the Committee to verify
the identity of those who contribute via credit card with
the same degree of confidence that political committees
generally accept checks via direct mail and other forms of
solicitation that are consistent with Commission
regulations."8 In such circumstances, the electronic
contributor form with the "checking off" of the appropriate
boxes could be the functional equivalent of a written
instrument described in 26 U.S.C. 9034(a). These
procedures will produce the electronic signature uniquely
identified with each contributor form and would be
tantamount to a written signature on that form.9 An
important aspect of this approach would be retaining the
electronic records in a form which would allow the
electronic record to be printed in hard (paper) form, as
needed.
The difficulty in your proposal, however, is that the
current Commission regulations at 11 CFR 9034.3, which
interpret 26 U.S.C. 9034(a), explicitly state that
contributions made by means of credit card transactions
cannot be matched. This regulation, promulgated by the
Commission in 1979, has governed the interpretation of the
Matching Act and the definition of matchable contributions
for the past six presidential election cycles. 10 Therefore,
under the current regulatory regime, your proposal appears
contrary to the regulations.
However, after careful consideration of the legal and
policy issues involved in your proposal, the Commission has
approved revisions to the above cited regulations that would
allow Federal matching payments for credit card
contributions in the circumstances and under the conditions
set forth in your proposal. These regulations have been
submitted to Congress, but are subject to the 30 day
legislative review period at 26 U.S.C. 9039(c) before they
may be promulgated as final regulations.
Assuming they are issued by the Commission as final
regulations, they will have retroactive application to
otherwise qualified credit card contributions made on
January 1, 1999, and thereafter, unless Congress and the
President disapprove the regulations. Having determined in
the proposed regulations that credit and debit card
contributions may be matched, the Commission believes it is
appropriate to retroactively match such contributions, since
many presidential campaigns will have engaged in substantial
fundraising by the time the rules take effect. Because
Federal matching funds will not be disbursed until after the
start of the matching payment period on January 1, 2000,
this provides ample notice to those campaigns that wish to
utilize this fundraising approach.11
On the foregoing provisional basis, the Commission
approves your proposal to accept lawful and matchable
contributions by credit card, subject to the conditions set
forth in this opinion. However, this approval will be of no
effect if Congress and the President disapprove the cited
regulation revisions within the 30 legislative day review
period set forth in 26 U.S.C. 9039(c).
This response constitutes an advisory opinion
concerning application of the Matching Act, the FECA and
Commission regulations to the specific transaction or
activity set forth in your request. 2 U.S.C. 437f.
Sincerely,
(signed)
Scott E. Thomas
Chairman
Enclosures (AOs 1999-3, 1997-25, 1995-35, 1995-9, 1994-40,
1993-4, 1984-27 and
1979-17)
_______________________________
1 For the reasons discussed in footnote seven below, the
Commission advises the Committee that it should not submit
card expiration dates to the Commission.
2 The Committee will also request the donor's name of
employer and occupation. If the amount to be contributed
exceeds $200 and such information is not provided, the
Committee's web site will reject the form and prompt the
donor to provide the missing information. In addition, if
an amount over $1,000 is entered, the web site will reject
the form.
3 Advisory Opinion 1995-35 concerned the use of the
Internet by Alexander for President Committee to solicit
contributions for the presidential nomination campaign of
Lamar Alexander. However, in that opinion the committee
stated that it would not accept contributions made by credit
card and this issue was therefore explicitly reserved by the
Commission. In Advisory Opinion 1995-9, the Commission did
not address the application of the Matching Act to
contributions made over Internet either by credit cards or
other means.
4 As noted above, in Advisory Opinion 1995-9, the
Commission permitted a committee, that used its web site to
solicit contributions, to accept contributions using
electronic means. This arrangement was permissible so long
as complete and reliable records for recordkeeping,
disclosure and audit purposes were maintained and
contributor data in a computer file were backed up in a way
that permitted the committee to maintain either machine
readable or paper copies for three years after the date on
which it reported the contributions. In Advisory Opinion
1994-40, the Commission permitted a political committee to
maintain its records on microfilm, rather than paper, so
long as the necessary documentation of committee
transactions was preserved and the microfilm records were
legible and retrievable. In Advisory Opinion 1993-4, the
Commission permitted a committee to pay its bills
electronically through a computer driven billpayer service
so long as adequate documentation, including receipts and
invoices, was preserved.
5 See Federal Election Commission v. National Education
Association, 457 F.Supp. 1102 (D.D.C. 1978) and Advisory
Opinion 1997-25.
6 There was no regulatory or statutory bar to the proposal
reviewed in Advisory Opinion 1999-3, while in this
situation, current Commission regulations expressly address
the matching of credit card contributions. See discussion
below.
7 The Commission notes its concern with respect to the
security of the credit card information that the Committee
proposes to submit to the Commission in connection with the
matching payment review and certification process. See 11
CFR 9036.1 and 9036.2. In order to avert the risk of such
information becoming accessible to unauthorized persons, the
Commission emphasizes that the Committee should delete all
credit card expiration dates from any matching fund
submission documents (electronic or paper) that are provided
to the Commission.
8 The Commission notes that these screening procedures
would provide a "safe harbor" for other presidential
committees that also wish to obtain matchable credit card
contributions. Any such presidential campaign committee
would be required to adopt appropriate screening procedures,
but this opinion does not mandate the use of safeguards that
are identical to those described herein.
9 By comparison to other areas of law and despite the
absence of any tangible, physical product in the sale and
transmission of types of software via the Internet, courts
have been willing to apply the provisions of the Uniform
Commercial Code even where those provisions would require
the presence of physical goods. See Micro Data Base Sys.,
Inc. v. Dharma Sys., Inc. 148 F.3d 649, 654 (7th Cir.
1998). Courts have also applied contract law, despite the
absence of a written agreement, to software licensing
agreements. See Advent Sys. Ltd. v. Unisys Corp., 925 F.2d
670, 675-76 (3rd Cir. 1991) and ProCD, Inc. v. Zeidenberg,
86 F.3d 1447, 1451-52 (7th Cir. 1996).
10 In 1983, when revising the regulations interpreting the
Matching Act, the Commission declined to amend 11 CFR 9034.3
to permit the matching of credit card contributions. The
Commission noted then that these contributions, if made by
phone, "would lack the contributor's signature." It also
noted the problem addressed in your proposal of identifying
credit cards that are personal accounts paid by an
incorporated business. See 48 Fed.Reg. 5228 (February 4,
1983). Several advisory opinions have restated the
regulatory prohibition regarding the matching of credit card
contributions. See Advisory Opinions 1979-17 and 1984-27.
In Advisory Opinion 1984-27, the Commission permitted a
presidential campaign committee to request contributors, who
had made credit card contributions by phone, to accept a
refund of those contributions and remake them by check so
they could be matched.
11 Under 26 U.S.C 9032(6), the matching payment period for
contributions begins on January 1 of the calendar year in
which a presidential general election will be held.
However, under 26 U.S.C. 9034(a), a matchable contribution
can also be made during the year preceding the presidential
election year.