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  • FEC Record: Advisory opinions

AO 2018-02: State PAC may convert to federal SSF

May 3, 2018

Alabama Academy of Radiology’s (Academy) state PAC may convert to a federal SSF. It may use the cash-on-hand in its existing bank account, but must divest any federally impermissible funds remaining in the account prior to registration. The Academy must notify past donors that their unspent donations will now be used in connection with federal elections and provide an opportunity for them to seek a refund. The Academy may also solicit members using its proposed payroll deduction program as long as it pays participating corporations the fair market value for their services in advance and its solicitations conform to the requirements of the Federal Election Campaign Act (the Act) and Commission regulations.

Background

The Academy is a 501(c)(6), non-profit, non-stock corporation that engages in political activities at the state level through ALRAD PAC. The Academy’s membership is composed of individuals who fall into nine separate classes of membership.

Currently, the Academy accepts donations from its members to ALRAD PAC by check, bank draft or through a payroll deduction plan. For payroll deductions, the member’s employer collects the PAC donation from the member’s paycheck and credits it to a dedicated account on the employer’s books. The employer is then required to promptly mail a check to ALRAD PAC’s treasurer. Employers may request reimbursement for the costs of administering the payroll deduction program to ALRAD PAC, though ALRAD PAC has never received a request nor made such reimbursement.

The Academy asks if it qualifies as a membership organization under Commission regulations, and if it may register ALRAD PAC as a federal political committee. The Academy also asks if the planned federal PAC may retain the remaining funds in its account if the Academy transfers out the fair market value of the corporate payroll deduction services before registering with the FEC. Finally, the Academy asks if it may solicit future contributions using its proposed payroll deduction program.

Analysis

Status as membership organization

The Act and Commission regulations permit incorporated membership organizations to establish and solicit voluntary contributions on behalf of an SSF from its members. Commission regulations provide six criteria to qualify as a membership organization. The Commission determined that the Academy meets all six criteria and is a membership organization. First, the Academy is composed of “members,” some of whom have the power and authority to operate and administer the organization. Individuals in seven of its nine membership classes meet the regulatory definition of “member” because they 1) satisfy the Academy’s professional criteria, 2) affirmatively accept the Academy’s invitation to become a member, and 3) pay annual membership dues. Those in the remaining classes qualify as members based upon their relatively enduring and independently significant financial or organizational attachment to the Academy.

The Commission concluded that the Academy satisfied the five remaining criteria to qualify as a membership organization by analyzing its bylaws and practices: the Academy’s bylaws expressly state the requirements for membership; the Academy makes its bylaws available to its members upon request; the Academy solicits individuals to become members and expressly acknowledges the acceptance of membership; and the Academy is not organized primarily for the purpose of influencing the nomination or election of any individual to federal office.

Converting state PAC to federal PAC

Next, the Commission determined that the Academy may register ALRAD PAC as a federal SSF. ALRAD PAC may use its existing bank account as a single political committee that would finance activities in connection with federal as well as state and local elections as long as it transfers out any amounts that are not federally permissible before registering with the Commission. These impermissible amounts would include nonfederal donations that exceed the $5,000 aggregate limit or that were received from a prohibited source. In addition, ALRAD PAC’s cash-on-hand balance at time of registration must exclude all funds that failed to comply with the Act’s solicitation restrictions, and must exclude the fair market value of any corporate payroll deduction services. The Academy also must notify previous ALRAD PAC donors that the PAC will convert to a federal political committee and offer the donors an opportunity to obtain a refund. The cash-on-hand balance must exclude any refunds sought by the donors.

Payroll deduction

Finally, the Commission concluded that the Academy may use its proposed payroll deduction program to receive future member contributions as long as the Academy pays the participating corporate employers the fair market value for those services in advance, and the Academy’s solicitations conform to the requirements of the Act and Commission regulations.

Date issued: April 30, 2018; Length: 15 pages

Citations

Regulations

11 CFR 102.5
Organizations financing political activity in connection with federal and nonfederal elections, other than through transfers and joint fundraisers: Accounts and accounting

11 CFR 114.1
Corporate and labor organization activity; Definitions

11 CFR 114.2
Prohibitions on contributions, expenditures and electioneering communications

Resources