PRESENTED BY: Jan Witold Baran November 14, 2012 Political Committees and Corporate PACs The National Association of Business Political Action Committees 2012 NABPAC POST-ELECTION CONFERENCE

FECA REGULATES PERSONS A “person” includes an individual, partnership, committee, association, corporation, labor organization, or any other organization or group of persons but not the Federal Government. §431(11) November 14,

DIFFERENT PERSONS ARE REGULATED DIFFERENTLY -Individual -Candidate -Labor organization -Corporation -Partnership -Limited liability corporation -Political party -Political committee November 14,

PERSONS ARE SUBJECT TO SPECIAL RULES IF THEY ARE: -Foreign national -Federal contractor -Federally chartered institution -Media entity November 14,

POLITICAL COMMITTEE (A)Any committee, club, association, or other group of persons which receives contributions aggregating in excess of $1000 during a calendar year or which makes expenditures aggregating in excess of $1000 during a calendar year; or (B)Any separate segregated fund; or (C )any local committee of a political party that raises or spends over either $5000 or $1000 for specified activities §431(4) November 14,

TYPES OF POLITICAL COMMITTEES -Candidate committee 1.Principal campaign committee 2.Authorized committee, e.g. joint fundraising committee -Non-connected committee. These are self-financed committees not sponsored (“connected”) by any corporation or union -Independent Expenditure Only Committee a/k/a Super PAC -Registers and reports to FEC -Accepts unlimited donations -Hybrid PAC a/k/a Super Dooper PAC 1.Maintains IEOC account 2.Maintains separate account as though a non-connected committee to make contribution -Separate segregated funds November 14,

SUPER PACS &HYBRID PACs -May accept unlimited donations unless donor is a foreign national, federal government contractor or an entity chartered by the federal government -Such funds may only be used for independent expenditures and not for contributions to candidates. November 14,

SEPARATE SEGREGATED FUNDS THE STATUTE 2 U.S.C. §441b Scope of prohibition Exceptions Separate Segregated Fund (SSF) SSF v. Political Committee November 14,

2 U.S.C. § 441b §441b. Contributions or expenditures by national banks, corporations, or labor organizations (a) It is unlawful for any national bank, or any corporation organized by authority of any law of Congress, to make a contribution or expenditure in connection with any election to any political office, or in connection with any primary election or political convention or caucus held to select candidates for any political office, or for any corporation whatever, or any labor organization, to make a contribution or expenditure in connection with any election at which presidential and vice presidential electors or a Senator or Representative in, or a Delegate or Resident Commissioner to, Congress are to be voted for, or in connection with any primary election or political convention or caucus held to select candidates for any of the foregoing offices, or for any candidate, political committee, or other person knowingly to accept or receive any contribution prohibited by this section, or any officer or any director of any corporation or any national bank or any officer of any labor organization to consent to any contribution or expenditure by the corporation, national bank, or labor organization, as the case may be, prohibited by this section. November 14,

§ 441b Continued (b) (1) For the purposes of this section the term “labor organization’ means any organization of any kind, or any agency or employee representation committee or plan, in which employees participate and which exists for the purpose, in whole or in part, of dealing with employers concerning grievances, labor disputes, wages, rates of pay, hours of employment, or conditions of work. November 14,

§ 441b Continued (2) For purposes of this section and section 791(h) of title 15, the term “contribution or expenditure” includes a contribution or expenditure, as those terms are defined in section 301 (2 U.S.C. § 431), and also includes any direct or indirect payment, distribution, loan, advance, deposit, or gift of money, or any services, or anything of value (except a loan of money by a national or State bank made in accordance with the applicable banking laws and regulations and in the ordinary course of business) to any candidate, campaign committee, or political party or organization, in connection with any election to any of the offices referred to in this section or for any applicable electioneering communication. November 14,

§ 441b Continued But shall not include (A) communications by a corporation to its stockholders and executive or administrative personnel and their families or by a labor organization to its members and their families on any subject; (B) nonpartisan registration and get-out-the-vote campaigns by a corporation aimed at its stockholders and executive or administrative personnel and their families, or by a labor organization aimed at its members and their families; and (C) the establishment, administration, and solicitation of contributions to a separate segregated fund to be utilized for political purposes by a corporation, labor organization, membership organization, cooperative, or corporation without capital stock. November 14,

POST-CITIZENS UNITED v. FEC § 441b ban on independent expenditures by corporations and unions violates First Amendment §441b ban on electioneering communications violates First Amendment §441b ban on contributions to candidates and national political party committees still applies Super PACs now permitted but ban on corporate contributions does not apply SSF still only legal way for a corporation to contribute to candidates, leadership PACs, and national party committees November 14,

SEPARATE SEGREGATED FUNDS Corporation may pay costs to: – establish – administer – solicit voluntary contributions to SSF November 14,

WHO MAY HAVE SSF Corporation, union, incorporated association, LLC taxed as corporation, cooperative November 14,

WHO MAY NOT HAVE SSF Partnership, LLC taxed as partnership, individual, sole proprietorship (unincorporated) November 14,

ESTABLISHING A PAC/SSF Organization: treasurer, depository, name, assistant treasurer Bylaws Registration – FEC Form 1; within 10 days (lobbyist/registrant PAC?) Amendments to Form 1: within 10 days of any change Federal PAC v. State PAC November 14,

ADMINISTERING A PAC/SSF Administrative costs include – PAC fundraising expenses – expenses to attend other fund raisers (Freddie Mac MUR) – personnel, offices and facilities to run PAC – insurance, legal and accounting Administrative cost does not include – PAC income tax November 14,

CHARITABLE MATCHING PROGRAM Corporation may match a PAC donation with a gift to a charity designated by the PAC contributor, if the contributor does not receive any financial, tax or other benefit AO (Anheuser-Busch) Only maximum of 1:1 PAC match Gift to charity not deductible to company November 14,

ONE-THIRD RULE Corporation may not “swap” corporate money for individual contribution. However, a corporation may provide gifts or prizes if it observes the one- third rule, i.e., value of gifts or prizes does not exceed one-third the amount of the contribution(s). Advisory Opinion (Oshkosh) Fundraising costs and charitable matching not subject to one-third rule November 14,

OTHER ADMINISTRATIVE CHORES Keep records File reports with FEC Comply with contribution limits No contributions from corporations, foreign nationals or state PACs No loans from prohibited sources November 14,

SOLICITING CONTRIBUTIONS TO PAC/SSF The Restricted Class – Executive or administrative Personnel – Stockholders November 14,

EXECUTIVE OR ADMINISTRATIVE PERSONNEL Salaried employees who have, Policymaking, managerial, professional or supervisory responsibilities but are NOT foremen or line supervisors Executives of affiliated entities are in restricted class FLSA may be used as guidance November 14,

STOCKHOLDERS Definition of stockholder is a person who has: – Vested beneficial interest – Power to direct voting stock – Right to receive dividends Non-executive employees who are stockholders are in the restricted class. Anyone not in the restricted class, including other PACs, may not be solicited. November 14,

SOLICITATION REQUIREMENTS Voluntariness: no threats or job reprisals Solicitation notices must be given in writing or orally – FEC: voluntary, political purposes, right to refuse to contribute and guideline notices – IRS: contributions not deductible as charitable contributions – IRS wants its notice first or to stand alone November 14,

WHAT IS A SOLICITATION? Request for funds Description of PAC fundraising activity Commending those who participate Fundraising booth General PAC info OK 3% of audience not in restricted class is incidental solicitation November 14,

METHODS OF SOLICITING Personal or written Payroll deduction ACH & account withdrawals Dues statements for associations Reciprocal union rights Twice-yearly solicitation of non-executive employees November 14,

AFFILIATION Affiliated entities expand scope of solicitable class Affiliated PACs must abide by unified contribution limits Affiliation per se v. criteria Ambiguous relationships, among partnerships, corporations, LLCs, joint ventures even cooperatives and trade associations Mergers and spin-offs November 14,

QUESTIONS? November 14,