Federal Election Commission Main Page
September 24, 1999
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
ADVISORY OPINION 1999-22
J. Blair Richardson, Jr.
1725 Larkmeade Drive
Vienna, VA 22182
Dear Mr. Richardson:
This refers to your letters dated August 16 and
August 9, 1999, which request an advisory opinion on
behalf of Aristotle Publishing, Inc. ("Aristotle" or
"the company") concerning the application of the
Federal Election Campaign Act of 1971, as amended ("the
Act"), the Presidential Primary Matching Payment
Account Act ("the Matching Act"), 26 U.S.C. 9031-
9042, and Commission regulations to its proposed
methods to assist various political committee and
candidate clients in fundraising through the Internet.
FACTUAL BACKGROUND
Aristotle publishes software and offers related
services allowing Federal candidates to receive
contributions by credit card through the Internet. You
state that an increasing number of campaign clients
(presidential and non-presidential) utilize such software
and services. The company has been providing political
products and services to thousands of candidates nationwide
since 1983. In addition, you state that the company's FEC
reporting software has been tested and approved by the FEC
for electronic filing by Federal campaigns. You affirm that
Aristotle currently has Internet contribution clients who
will be seeking matching funds under the Matching Act. Your
request describes the procedures its clients would use.
Screening contributions
A candidate utilizing Aristotle's Internet
contributions service will download the software from
Aristotle's web site and install it at his or her own
campaign web site, all at the candidate's own expense.
Internet contributions are then screened for impermissible
or nonmatchable contributions through a series of sequential
measures.
First, through the candidate's web site, contributors
view the contribution solicitation form. The form may
contain a customized introductory message from the
candidate. You state that the form would contain
attestation language, derived from the Commission's guidance
in Advisory Opinion 1995-9, informing prospective donors of
the Act's contribution limits and source restrictions. The
candidate has the option of including an attestation
concerning contributions from minors, which language also is
derived from Advisory Opinion 1995-9. If the candidate does
not wish to accept contributions from minors, the form will
note this and will include an appropriate attestation that
the contributor is at least 18 years old.
Second, a prospective donor, will be required to
provided detailed information, including at least the same
information identified as "required" in Advisory Opinion
1999-9:
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
card
ú The card number
ú The expiration date
ú The contributor's mailing address; and
ú The amount of the contribution
Third, you affirm that consistent with the Commission's
guidance in Advisory Opinion 1999-9, if a prospective donor
fails to provide any of the required information or fails to
check any of the attestation boxes, the contribution will be
rejected. The contributor will be prompted either to
correct any omission or inaccurate information, or cancel
the transaction.
Fourth, any contribution to a candidate in excess of
$1,000 will be rejected at the web site.
Fifth, all contributor names are matched against a
nationwide file of public voter registration records.1
Processing contributions
When the online form has been successfully completed,
the donor transmits it for "real time" processing. The
credit card data is sent directly to the credit processing
company, which will cross check the submitted information
with the processing company's own records on the
contributor's name, billing address, account number and card
expiration date.
If the processing company rejects the contribution, the
contributor will be informed of this fact. All approved
contributions are deposited into a bank account established
by Aristotle exclusively for political committee proceeds.
This account is not only separate from Aristotle's other
corporate accounts, but is also maintained at an entirely
different financial institution.2
You explain that Aristotle will inform the committees
of the identity of the depository bank so that each
committee may disclose the depository on an amended
statement of organization, in accordance with the
Commission's guidance in Advisory Opinion 1995-34.3
Further, to facilitate any audit process and to avoid
commingling of committee proceeds and Aristotle's corporate
funds, Aristotle also will maintain separate book accounts
for each political customer. All Internet contributions,
you state, are forwarded to the campaigns (less any agreed
processing fee) in accordance with the time requirements of
2 U.S.C. 432(b)(1) and (2), and 11 CFR 102.8.
You assert that the information provided to a committee
treasurer is sufficient for the treasurer to fulfill all
record-keeping duties under 11 CFR 102.9 and other
provisions of the Act and the regulations. The information
provided by Aristotle to the committee includes, at a
minimum
ú The committee's account number
ú The contributor's name and address
ú The contributor's employer and occupation
ú Date and total amount of contribution
ú Unique contribution confirmation number
ú Address verification used (billing address and zip
code; also voter
record matches if applicable.)
Aristotle will retain all contributor-supplied
information, all records of each
deposit into each political committee account, and
all records of transfers to each political committee.
Aristotle affirms that it will make such records
available at the Commission's request or as otherwise
required by law. 4
Use of Aristotle's merchant ID number
An important part of the described transactions is
that Aristotle will use its own "merchant ID number" for
clients for whom it is collecting and forwarding the credit
card contributions. Aristotle currently offers a candidate
the immediate ability to take contributions through American
Express, Visa, MasterCard, and shortly, Discover. Each of
these credit card companies has its own application forms,
rules, time frames, and credit worthiness requirements that
a campaign would have to meet individually to have the same
access. Each contributor is notified in the "real time"
confirmation of the contribution that the credit card bill
will reflect a contribution processed through
"campaigncontribution.com" not the name of the committee.
You explain that Aristotle does not offer a service to
assist campaigns with the process of obtaining their own
merchant ID's for each credit card they will be using.5
Cost of service
The company will receive, as its fee, a
negotiated percentage of the contributions. Depending on
the terms of the contract, the company or the campaign will
pay the credit card processing fee. The company will pay
other transaction-based fees associated with collecting and
forwarding the funds. The amount of such fees will
necessarily be directly related to the volume of
contributions received by a campaign.
Such costs along with costs associated with
account servicing, record-keeping, accounting, billing
review, and legal review, would normally be accounted for in
overhead, you explain, and are intended and projected to be
covered by the fees deducted by Aristotle from actual
contributions received. The pricing for each committee will
include allowance for an adequate profit. You ask whether
the above procedures are permissible under the Act and
Commission regulations.
ACT AND COMMISSION REGULATIONS
The Act prohibits contributions and expenditures by a
corporation in connection with a Federal election. 2 U.S.C.
441b(a); 11 CFR 114.2(b). The term "contribution" is
defined to include "any direct or indirect payment,
distribution, loan, advance, deposit, or gift of money, or
any services, or anything of value ... to any candidate,
campaign committee, or political party or organization," in
connection with any Federal election.
2 U.S.C. 441b(b)(2); 11 CFR 114.1(a)(1). See 2 U.S.C.
431(8)(A)(i) and 11 CFR 100.7(a)(1). The phrase "anything
of value" includes goods or services provided without
charge, or at less than the usual and normal charge. 11 CFR
100.7(a) (1)(iii)(A) and 100.8(a)(1)(iv)(A).
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.
With regards to a contribution made by credit card or
debit card, the Commission regulations define "written
instrument" to mean either a transaction slip or other
writing signed by the cardholder, or in the case of such a
contribution made over the Internet, an electronic record of
the transaction created and transmitted by the cardholder,
and
including the name of the cardholder and the card number,
which can be
maintained electronically and reproduced in a written form
by the recipient candidate or candidate's committee. 11 CFR
9034.2(b).6
The written instrument shall be: Payable on demand;
and to the order of, or specifically endorsed without
qualification to, the Presidential candidate, or his or her
authorized committee. The written instrument shall contain:
The full name and signature of the contributor(s); the
amount and date of the contribution; and the mailing
address of the contributor(s). For purposes of this
section, the term signature means, in the case of a
contribution by a credit card or debit card, either an
actual signature by the cardholder who is the donor on a
transaction slip or other writing, or in the case of such a
contribution made over the Internet, the full name and card
number of the cardholder who is the donor, entered and
transmitted by the cardholder. 11 CFR 9034.2(b) and (c).
Contributions by credit or debit card are matchable
contributions provided that evidence is submitted by the
committee that the contributor has affirmed that the
contribution is from personal funds and not from funds
otherwise prohibited by law.
11 CFR 9034.2(c)(8)(ii).7
APPLICATION TO COMMITTEE PROPOSAL
Screening and processing of contributions
The Commission notes that the screening procedures in
your proposal for credit card contributions raised over the
Internet are well within the "safe harbor" discussed in
Advisory Opinion 1999-9 for matching contributions. See
Advisory Opinion 1999-9 and the Explanation and
Justification for the Commission's revised regulations
permitting credit card contributions at 64 Fed. Reg. 32394
(June 17, 1999). They would permit the committee, relying
on Aristotle's services, to submit evidence that "the
contributor has affirmed that the contribution is from
personal funds and not from funds otherwise prohibited by
law." 11 CFR 9034.2(c)(8)(ii).8
The general contractual arrangements Aristotle proposes
for its political committee and candidate clients also meet
the requirements of sections 100.7(a) (1)(iii)(A) and
100.8(a)(1)(iv)(A). Aristotle's proposal would provide for
adequate compensation and its procedures would seem to be in
the normal course of business for a vendor within its
industry dealing with a similarly situated non-political
client. These arrangements avoid creating a situation where
the vendor provides services to a political committee either
without charge, or at less than the usual and normal charge,
and thereby makes a corporate contribution prohibited by 2
U.S.C. 441b(b)(2).9
Use of Aristotle's merchant ID number
Your inquiry regarding the use of Aristotle own
merchant ID number, however, requires poses a more complex
issue that must be examined from the perspective of the Act
and the Matching Act.
With regard to contributions that are not submitted for
Federal matching payments under the Matching Act, the
Commission notes that the manner in which a credit card bill
or invoice records the transaction is less important than
the treatment of the contributions raised through
fundraising with vendor participation. The greater concern
arises where the funds are deposited prior to their
transmittal to the committee. The Commission concludes that
placing such funds in the same corporate account where it
places its other funds would lead to a commingling of
corporate funds and campaign funds prohibited by section
441b. See Advisory Opinions 1990-1 and 1991-20.10
Your proposal to place these funds in a separate
banking account and to maintain separate book accounts for
each political customer addresses concerns raised by the
Commission in these previous opinions. The Commission also
notes Aristotle's intention to use FDIC insured depository
institutions for these accounts and to provide the
treasurers of its political committee clients with the
identity of the depository bank who, in turn, would disclose
the required bank information to the Commission. See 2
U.S.C. 432(h)(1) and 11 CFR 102.3. In light of these
precautions, the Commission concludes that for contributions
that are not submitted under the Matching Act, the use of
Aristotle's own merchant ID to collect contributions for
multiple clients would be permissible under the Act; that
is, 2 U.S.C. 431 et seq.
However, even with the above precautions, the
Commission concludes that Aristotle may not use a single
merchant account number for contributions to Presidential
campaigns that are to be submitted for Federal matching
payments. The Commission notes that the regulations for
matchable contributions place much value on the
identification of the committee receiving the contribution.
The regulations implementing the Matching Act require that
the instrument conveying the contribution be "payable on
demand; and to the order of, or specifically endorsed
without qualification to the Presidential candidate, or his
or her authorized committee." 11 CFR 9034.2(b). The
Commission also notes that when Aristotle uses its own
merchant ID, the name of the committee receiving the
contribution will not be itemized on the monthly credit card
bill received by the contributor. While Aristotle may be
able to produce other records to indicate the campaign
purpose and nature of the contribution, the requirement that
the contribution be made payable to or endorsed to the
Presidential campaign is only satisfied if the committee's
name appears on the contributor's credit card bill. This
requirement is necessary as a means of assuring not only
that the contributor intended to make a campaign
contribution, but also that the contributor intended his or
her money to go to the specific candidate named on the
credit card bill, as opposed to a different candidate who
may also be doing business with the same vendor. 11 Such a
disclosure on the bill also enables the contributor to
review his or her contribution to verify the amount, date
and other information regarding the use of a particular card
(or its use by an authorized account owner) to make the
contribution.
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)
Scott E. Thomas
Chairman
Enclosures (AOs 1999-9, 1996-2, 1995-34, 1994-33, 1991-
26, 1991-20,
and 1990-1)
_______________________________
1 You explain that, by Aristotle's analysis, almost 9 out
of 10 online contributors are registered voters (and thus
necessarily, U.S. citizens). This match provides an
additional basis to verify identity, to screen for
contributions by minors and for potentially prohibited
contributions by non-citizens, and assist the campaigns in
meeting their "best efforts" reporting obligations. You
explain that a contribution is not declined if the
contributor does not appear in the voter file match.
Instead that fact is forwarded to the client committee in
order to assist the campaign. The result of the match is
also retained for the benefit of the Commission for use in
any audit of contributions.
2 This separate account for political committee
contributions is established at the Wachovia Bank, an FDIC-
insured depository institution.
3 The Commission's guidance was based upon both 2 U.S.C.
432(h)(1) and 11 CFR 103.3(a) which requires that all
receipts of a political committee be deposited in a
qualified bank or credit union depository.
4 For security reasons, you explain that the contributor's
credit card number and expiration date are not forwarded to
the political customer, so that such information is not
included in the committee's database. The Commission notes,
however, that further directions will be provided to
Presidential campaigns seeking matching funds which will
specify the required credit card information.
5 You explain that it is Aristotle's business decision
that the process of assisting each campaign in obtaining its
own merchant ID for each credit card will be too expensive,
too labor intensive, too inefficient and would only add
layers of complication to the process.
6 The Commission, as your request notes, has recently
revised its regulations at 11 CFR 9034.2 to permit
contributions through the Internet made by credit card. See
64 Fed.Reg. 32394 (June 17, 1999). The new regulations will
be promulgated in the next 10 to 15 days and will apply
retroactively to contributions made on or after January 1,
1999. The Commission has also revised the regulations at 11
CFR 9036.1(b)(7) and 9036.2(b)(1)(vii) to give guidance as
to the further documentation requirements for matchable
contributions made by credit card (or debit card) through
the Internet. See 64 Fed.Reg. 42584 (August 5, 1999). The
official promulgation date for these regulations will be
published in a notice in the Federal Register.
7 There are other requirements for matching contributions
by credit or debit card, including that they meet the
conditions found at section 9034.2(b) and (c) concerning a
written instrument and signature. Further, contributions by
credit card or debit card are not matchable where the
cardholder's name and card number are given to the recipient
candidate or candidate's committee only orally. 11 CFR
9034.2(c)(8)(i).
8 The Commission stated in its Explanation and
Justification that:
A committee should take steps to insure that controls
and
procedures are in place to minimize the possibility of
contributions by foreign
nationals, by Federal Government contractors, and by
labor organizations,
or by an individual using corporate or other business
entity credit accounts.
Such controls and procedures should also help the
recipient committee
identify contributions made by the same individual
using different or multiple
credit card accounts; and contributions by two or more
individuals who are
each authorized to use the same account, but where the
legal obligation
to pay the account only extends to one (or more) of the
card holders, and not
to all of them. 64 Fed. Reg. 32396.
9 The Commission agrees with your observation that the
procedures Aristotle proposes are consistent with the
financial vendor arrangements approved in prior opinions
cited in your request. See Advisory Opinions 1991-20 and
1991-26 (900-number calls), Advisory Opinions 1994-33 (pre-
paid calling cards) and 1995-34 (credit card contributions
through 900-number).
10 These prior advisory opinions concerning vendors who
provided 900 line telephone services to campaigns are
relevant to your situation. The Commission concluded that
permitting a corporate vendor to place the funds raised
through these services in its regular corporate account
before transmitting them to its campaign clients would lead
to a commingling of corporate and campaign funds prohibited
by section 441b. The Commission determined that separate
accounts were needed for a vendor's political committee
clients. The Commission noted in Advisory Opinion 1991-20
that, in certain circumstances, a vendor may establish one
separate account to process all funds raised for political
committees. In Advisory Opinion 1991-20, the Commission
noted that the requester providing 900 line services had
"potentially large numbers of political customers" and that
it maintained separate book accounts for each political
committee customer. The proceeds passing through the one
account for political committee customers was forwarded to
each political committee within ten days or thirty days of
its receipt by the 900 line provider, depending upon the
type of committee. See U.S.C. 432(b)(1) and (2); 11 CFR
102.8(a) and (b).
11 In its Explanation and Justification for revisions to
the regulations providing the documentation requirements for
credit card contributions made through the Internet, the
Commission noted it "has always held contributions submitted
for matching to a higher documentation standard because the
matching fund program involves the disbursement of millions
of dollars in taxpayer funds." See 64 Fed. Reg. 42584.