Federal Election Commission Main Page
January 28, 2000
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
ADVISORY OPINION 1999-32
William C. Oldaker
Oldaker & Harris, LLP
818 Connecticut Avenue N.W.
Suite 1100
Washington, DC 20008
Dear Mr. Oldaker:
This refers to your letters dated September 4, 1999
and the most recent being January 6, 2000,1 concerning
the application of the Federal Election Campaign Act of
1971 ("the Act"), as amended, and Commission
regulations to the status of the Tohono O'odham Nation
("the Nation"), a Federally recognized Indian tribe in
southern Arizona, as a Federal contractor.
FACTS
Relationship of Nation to its utility authority
You explain that the Nation is a non-corporate entity
and is organized pursuant to Section 16 of the Indian
Reorganization Act of 1934, 25 U.S.C. 476. The Tohono
O'odham Nation has formed a Utility Authority ("TOUA"), a
tribally chartered unincorporated entity, which operates as
a subordinate commercial enterprise of the Nation. Your
request documents indicate that TOUA was established as a
legal entity by a resolution of the Tohono O'odham
Legislative Counsel on May 22, 1991.2
You further explain that among TOUA's purposes, as
detailed in its Plan of Operation, are the provision of
utility services (such as electric, gas and telephone) to
all areas and persons within the Nation, provision of
utility services to the Nation's members at the lowest
possible cost, and the improvement of the health and welfare
of Nation residents. See TOUA Plan, Section 4, part A1 and
A2.3 While TOUA is not incorporated and would not normally
be considered as having a separate legal identity from
Nation, the control and operation of TOUA is "patterned as
closely as is feasible on the lines of a chartered public
service corporation of similar magnitude with a Management
Board comparable to a Board of Directors of such
corporation." TOUA Plan, Section 6.
You state that all members of TOUA's management board
are appointed by the Chairman of the Nation and approved by
the Tohono O'odham Legislative Council. TOUA is also
required to make a formal, annual report to the Council,
including a presentation of its budget. TOUA Plan Section
7A(9). Notwithstanding these provisions, the request
indicates that TOUA enjoys a degree of autonomy in its
functions and operations. Funds from this enterprise are
kept separately from other tribal funds. You explain that
TOUA has its own bank account, hires its own employees,
establishes its own personnel policies and employee
benefits, purchases and sells its own property and hires and
directs its own legal counsel. TOUA Plan, Section 7. Also,
no member of the Tohono O'odham Council can be member of the
TOUA management board. TOUA Plan, Section 9B.
Utility services to Federal agencies
Currently, TOUA is the only provider of utility
services on the Nation's territories ("the Reservation").
TOUA's standard practice is to provide utility services for
which all customers are billed on a monthly basis, using a
formula of kilowatt-hours multiplied by a certain dollar
amount. Among TOUA's many customers are several Federal
agencies with offices and facilities on the Reservation.
The Federal agencies receiving utility services from TOUA
are the Bureau of Indian Affairs ("BIA") and the Indian
Health Service ("IHS"). In addition to contract
administration and implementation of various Department of
Interior programs, the BIA maintains three schools for the
Nation's children. IHS runs a hospital and affiliated
programs such as housing for the hospital's physicians. The
BIA and IHS facilities are on the Reservation and administer
programs only to the Nation's residents. These services do
not extend beyond the Reservation.
As part of its mandate, TOUA provides services to these
agencies in the same manner as the rest of its customers.
TOUA has no written contract for the provision of utility
services to the Federal agencies conducting business on the
Reservation, just as TOUA has no written contract to provide
utility services to any of its residential or commercial
customers. Like all residential and business customers,
these Federal agencies are billed monthly by TOUA based on
actual utility usage. You explain that the billing of
Federal agencies by TOUA constitutes approximately 10% of
its total billing of all customers. Your request includes a
sample billing form that TOUA submits to BIA.
Given these facts, the Tohono O'odham Nation requests
an advisory opinion that the regular and customary provision
of utility services to these Federal agencies does not cause
the Nation to become a Federal contractor thereby
prohibiting it, under 2 U.S.C. 441c and 11 CFR 115.2(a),
from making Federal election campaign contributions.
ACT AND COMMISSION REGULATIONS
The term "person" as defined in the Act includes an
individual, partnership, committee, association,
corporation, labor organization, or any other organization
or group of persons, but such term does not include the
Federal Government or any authority of the Federal
Government. 2 U.S.C. 431(11). Under 2 U.S.C. 441c, it is
unlawful for any person who is a Federal contractor to
directly or indirectly "make any contribution of money or
other things of value, or to promise expressly or impliedly
to make any such contribution to any political party,
committee, or candidate for public office..."
Commission regulations indicate that the prohibition
bans contributions to Federal candidates and Federal
political committees, but does not prohibit contributions in
State and local elections. 11 CFR 115.2(a). This
prohibition extends from the commencement of the contract
negotiations until the completion of the contract
performance or the termination of negotiations. 11 CFR
115.1(b), 115.2(b). Commission regulations at 11 CFR
115.1(a) define the term "Federal contractor" to mean, in
part, a person who:
(1) Enters into any contract with the United States or
any department or agency thereof either for-- (i) The
rendition of personal services; or (ii) Furnishing any
material, supplies, or equipment; or (iii) Selling any
land or buildings;
(2) If the payment for the performance of the contract
or payment for the material, supplies, equipment, land,
or building is to be made in whole
or in part from funds appropriated by the Congress.
Under 11 CFR 115.1(c) of the regulations, the term
"contract" includes:
(1) A sole source, negotiated, or advertised
procurement conducted by the United States or any of
its agencies;
(2) A written (except as otherwise authorized)
contract, between any person and the United States or
any of its departments or agencies, for the furnishing
of personal property, real property, or personal
services; and
(3) Any modification of a contract.
APPLICATION TO NATION
Existence of Federal Contract
As "any other organization or group of persons," the
Nation would meet the definition of "person" under section
431(11). See Advisory Opinion 1993-12. The Nation is
therefore subject to the provisions of 2 U.S.C 441c and
would be prohibited from making contributions if the type of
agreement presented in this request is within the definition
of contract under the quoted Commission regulations.
One element of the regulatory definition of "contract"
is the furnishing of personal property, real property, or
personal services. See 11 CFR 115.1(c)(2) and (a)(1). This
element is met by TOUA's agreement with various Federal
agencies to provide utility services. You claim that TOUA's
arrangement to provide utility services with various Federal
offices is not a written agreement. The Commission notes
that the billing statements could themselves be construed to
serve as a written agreement to provide services. However,
even if the agreement is not a written contract, it may
still meet the requirements of the regulations since 11 CFR
115.1(c)(2) recognizes that a non-written agreement may be a
covered contract if that agreement is "otherwise
authorized."
Assuming the TOUA utility service agreement qualifies
as contract under the regulations, the circumstances
presented here require additional analysis. As a
preliminary matter, the request cites the possible
application of Advisory Opinion 1993-12. The Commission
examined various agreements entered into by a Native
American tribal entity and the Federal Government. The
Commission noted that several types of agreements would not
be considered contracts for the purposes of 2 U.S.C. 441c,
despite the contractual form of the agreements, since these
agreements were grants and special "self-determination"
contracts by which the Federal Government gave various
tribal instrumentalities the obligations to carry out
functions which the Federal Government itself had previously
assumed, pursuant to its obligations to provide for the
welfare of the tribal populations. This portion of Advisory
Opinion 1993-12, is not, however, relevant to TOUA's
situation since the utility services contract at issue here
is neither a grant nor a self-determination contract.
Therefore, absent other circumstances, the prohibitions of
section 441c would apply, as they did to the other
commercial agreements considered in the 1993 opinion.
Status of TOUA
Your request presents the question of whether, for
purposes of section 441c, the Nation and TOUA can be treated
as separate entities thereby permitting a distinction
between the political contributions of the Nation and the
possible Federal contractor status of TOUA. The Commission
notes that the general relationships between tribal
governments and their commercial ventures are unique and
differ from usual relationships considered in past advisory
opinions regarding entities that may be affiliated with each
other. For jurisdictional purposes and in certain
commercial situations, the Federal courts have maintained
that a tribal enterprise may be treated as a separate and
distinct entity from the tribe itself. See, for example,
Navajo Tribe v. Bank of New Mexico, 700 F.2d. 1285 (10th
Cir. 1982) (right of set off did not attach to tribe for
activities of Navajo housing authority) and Navajo Tribal
Utility Authority v. Arizona Department of Revenue, 608 F.
2d 1228 (9th Cir. 1979) (tribal housing authority did not
enjoy same status as tribe for extending jurisdiction to
Federal court).4
The Commission notes that TOUA is not a corporation and
thus is not formally separate from the Nation; corporate
status was an option available under section 17 of the
Indian Reorganization Act, 25 U.S.C. 477, and under the
Nation's constitution.5 However, this fact is not
necessarily dispositive of the question. Case law suggests
that to determine whether a tribe is acting in its business
or in some other capacity, courts must look beyond whether
the tribe or one of its units has incorporated itself. The
courts instead look to the conduct in question and the
powers actually granted to the tribe, or the enterprise,
under their governing documents. See Mescalero Apache Tribe
v. Jones 411 U.S. 145, 157-58, n. 13 (1973); see also White
Apache Tribe v. Williams, 810 F.2d 844, 866 (9th Cir.
1987)(Fletcher C.J., dissenting).
The Commission notes, as indicated in the request, that
TOUA enjoys similar autonomous attributes considered
significant by the Ninth Circuit in Navajo Tribal Utility
and the Tenth Circuit in Bank of New Mexico.6 Further, as
noted above, TOUA has its own bank account, employees,
personnel policies, employee benefits and legal counsel.
These additional factors highlight further the status of
TOUA within the Nation. Considering all these elements
together, particularly the specialized and unique treatment
afforded to tribal commercial entities in other areas of
law, the Commission believes, in
the specific circumstances of this request, that TOUA
can be treated as a separate entity from the Nation and that
the commercial activity of TOUA as a Federal contractor can
be separated from the Nation and its political activities.
Accordingly, section 441c prohibits TOUA, as a Federal
contractor, from making contributions to a Federal candidate
or political committee during the period it provides utility
services to the Federal agencies located on the reservation.7
However, the Nation may make contributions as a "person"
under the Act with one condition.8 The Commission notes
your statement that there is no current distribution of TOUA
revenues to the Nation. Should this situation change, given
the prohibitions of 2 U.S.C. 441c, the Nation may not use
such revenues to make contributions to Federal candidates or
political committees.9
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)
Darryl R. Wold
Chairman
Enclosures (AO, 1998-11, 1993-12, 1990-1, 1990-20, 1995-32,
1995-31, 1981-61,
1981-49 and 1980-7)
_______________________________
1 These letters are dated September 4 and 29, October 29,
December 8, and 16, 1999 and January 6, 2000.
2 TOUA was created to be the successor in interest to an
earlier tribal utility company, the Papago Tribal Utility
authority, which was established in 1970, prior to a change
in the Nation's name and adoption of a new constitution in
1986. See Resolution of the Tohono O'odham Legislative
Council No. 91-175 (May 22, 1991).
3 Regarding the use of TOUA revenue, you explain that in
accordance with section 4(A)(6) of the Plan, distribution is
made "in the order of priority of use." The last enumerated
authorized use is "to provide a fair return to the Nation on
its investment." You explain that, as demonstrated in
TOUA's 1997 annual report (which, you state, is the most
recent), revenue from the operations is used to pay
operating expenses and repay loans and debts. The current
general manager of TOUA has stated that he is unaware of any
distribution of revenue to the Nation because TOUA has used
its revenues to fund operations and pay debts.
4 The court noted in Bank of New Mexico that "where
sovereignty is not an issue, courts have consistently held
that tribal enterprises are separate and therefore,
independent of the Tribe." Bank of New Mexico at 1288.
5 Section 17 of the IRA authorizes Indians to request the
Secretary of the Interior to issue charters of incorporation
to their tribes once the tribes have adopted constitutions
and bylaws and organized tribal governments under section 16
of the IRA, 25 U.S.C. 476. See White Apache Tribe at 866
for a discussion of section 17.
6 Both the Navajo Tribal Utility Authority and TOUA, though
not incorporated, are "patterned to operate as closely as
feasible on the lines of chartered public service
corporation with a management board comparable to a Board of
Directors of such a corporation." Both entities permit non-
tribal members to serve on the Management Board. As you
indicate in your request, in the case of TOUA, a majority of
the Management Board may be from outside the Nation, and no
member of the Nation's Council may be a member of the Board.
TOUA Plan, Section 9B. Further, like the Navajo Housing and
Development Enterprise in Bank of New Mexico, TOUA (which
earns its own revenues) does not have the power to
appropriate the general funds of the Nation for its own use.
7 The Commission further notes, however, that 11 CFR 115.6
permits the employees, officers, or individual members of an
unincorporated association, or other group or organization
which is a Federal contractor, to make otherwise lawful
contributions from their own personal assets, or to form a
non-connected political committee. See Advisory Opinions
1998-11, 1991-1, and 1990-20.
8 The Commission notes that the analysis used here differs
from that of Advisory Opinion 1993-12. In that opinion,
while the Commission determined that the grants and self
determination contracts entered into by a tribe did not
cause the tribe to become a Federal contractor, it
determined that the procurement contracts entered into by
the tribe with the Bureau of Indian Affairs fell within the
parameters of section 441c and made the tribal authority a
Federal contractor for purposes of the Act. These
procurement contracts were entered into by unincorporated
tribal commercial enterprises. The approach taken herein
would require further analysis of the relationship of the
tribal enterprises considered in the 1993 opinion before the
application of section 441c could be determined. Therefore,
the Commission concludes that the portion of Advisory
Opinion 1993-12 concerning the analysis of procurement
contracts between tribal enterprises and the Federal
Government is superseded by this opinion.
9 The Commission notes that this approach is consistent
with past opinions regarding contributions made by holding
companies owning subsidiaries that are disqualified by the
Act from making contributions. See Advisory Opinions 1998-
11, 1995-32, 1995-31, 1981-61, 1981-49 and 1980-7. Advisory
Opinion 1998-11 is of particular relevance. In that
opinion, a limited liability holding company wholly owned
two other limited liability companies which were Federal
contractors. The Commission determined that the holding
company was legally distinct from its subsidiaries and could
make Federal contributions whereas the two Federal
contractor companies could not. However, the holding
company had to use revenues other than those provided by its
subsidiary Federal contractor companies to make its
contributions.