Guide for Federal Political Action Committee Operation1
for the
National Mobility Equipment Dealers Association
by
Heidi K. Abegg,
Webster Chamberlain and Bean, LLP
Legal background
Corporations, including incorporated membership organizations, are prohibited
from making contributions in connection with federal elections. Membership
organizations may, however, form a Separate Segregated Fund (SSF, also known as a
political action committee or PAC) composed of contributions from individual members
of the organization. This PAC may make contributions to federal candidates, make
independent expenditures, or conduct otherwise regulated political activity.
Registration
The first step in forming a PAC is filing a registration form (“Form 1”) with the
Federal Election Commission (FEC). Information required on this form includes:
name and address (including web site address) of the PAC and of the connected
membership organization;
designation of a treasurer and custodian of records (may be the same person);
designation of a campaign depository (bank).
The form must be updated within 10 days whenever any of this information changes.
The PAC must file a Form 1 within 10 days of paying initial operating expenses
(discussed below).
Name
The official name of the PAC must include the full name of the connected
organization. The PAC may also use a short form including a clearly recognizable
acronym of the parent organization’s name on its checks and letterhead. Both the full
and abbreviated name must be included in the registration statement and other reports
filed with the FEC and on any required disclaimer notices.
Importance of the Treasurer
The Treasurer is personally responsible for the filing and accuracy of PAC
reports, depositing PAC receipts, authorizing expenditures, monitoring contributions for
compliance with the law, and keeping required records for three years after reports are
1
This memorandum provides an overview of administrative requirements for operation of a federal
political committee by an incorporated membership organization. It does not address regulation of political
activity in state or local elections.
NMEDA PAC Guide
filed. This does not mean that the Treasurer must personally accomplish each of these
tasks: the Treasurer may designate one or more Assistant Treasurers or delegate duties
formally or informally, but the Treasurer is personally responsible for ensuring these
tasks are accomplished properly. If the FEC brings an enforcement action against the
PAC, the Treasurer is named as a “respondent” along with the PAC. The FEC normally
names the Treasurer in an “official” capacity only (no personal liability), but if the
Treasurer knowingly violates the act or recklessly fails to fulfill his or her duties, the FEC
may take action against the Treasurer in a personal capacity.
The PAC may not accept contributions or make expenditures if the Treasurer’s
office is vacant and there is no Assistant Treasurer, so any vacancy must be filled
quickly.
Start-up and Administrative Expenses
The parent organization of a connected PAC may pay the start-up, administrative
and fundraising expenses of the PAC. Permissible expenses include office space, phones,
salaries, professional fees, utilities, supplies, transportation to meetings and fundraisers,
bank charges, postage, web hosting fees, and fundraising expenses. There are no dollar
limits on these payments, they are not reported to the FEC, and no FEC recordkeeping or
administrative requirements apply.
NMEDA may even establish a separate administrative account for these purposes.
An administrative account may be a separate bank account or it may be simply be a
separate set of bookkeeping entries for funds in the organization’s general account.
NMEDA may solicit its members for funds for an administrative account. Donations to
an administrative account are not considered contributions to the PAC, and are not
reported to the FEC.2
The PAC may also pay these expenses directly, or pay certain expenses (for
instance, bank fees deducted directly from a checking account), but not others. If the
PAC pays for these expenditures it must report them to the FEC, and it must retain
receipts and other records substantiating the purpose of those expenditures for three
years. If the PAC pays administrative expenses, the parent organization may reimburse
the PAC, so long as the reimbursement is made within 30 days. The PAC’s initial
payment and the reimbursement must be reported to the FEC.
The absence of administrative, recordkeeping, and reporting requirements make it
highly advantageous for the parent organization to pay PAC administrative expenses
directly or through an administrative account rather than from the PAC’s account.
Further, by having the connected organization pay the PAC administrative expenses, it
frees up more PAC funds to be used for election-related activities.
It may be helpful to think in terms of what NMEDA CANNOT do. NMEDA
cannot:
2
Advisory Opinion 1992-20
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-- make contributions to campaigns or other political committees;
-- pay for coordinated communications to the general public expressly advocating the
election or defeat of candidates at any time in any media.
Separation of Funds
Though NMEDA may pay PAC administrative expenses directly or though an
administrative account, NMEDA may not commingle its general treasury or
administrative account funds with PAC funds. The PAC must have its own separate bank
account. There are conditions under which transfers between NMEDA’s bank accounts
and the PAC account are permitted, but those conditions are limited, and transfers must
be reported to the FEC.
CONTRIBUTIONS
A contribution is a gift of money, goods, or services to or from the PAC. Loans,
loan guarantees, endorsements and advances count as contributions. Gifts of goods and
services are called “in-kind” contributions: the normal price or commercial value of the
gift is the contribution amount.
Contributions of money exceeding $100 must be made by check or other written
instrument (including an electronic transfer or credit card payment).
The entire ticket price of a fundraising event or purchase price of a fundraising
item is a contribution. The cost of the event or item, if paid for by the PAC, is an
operating expense. NMEDA may also pay for fundraising costs and items directly,
subject to the “one-third rule” described below.
Contribution Limit: to the PAC (generally, $5,000)
A PAC may accept up to $5,000 per year from any one contributor. A married
couple may make a joint contribution of up to $10,000 per year, provided the contribution
is properly attributed (as described below). Contributions may be from individuals and,
subject to certain recordkeeping and procedural requirements, from partnerships and
certain LLCs. Contributions from corporations and foreign nationals are prohibited.
Only members of NMEDA may be solicited to contribution to the PAC. NMEDA
executives and administrative personnel and their families and noncorporate members
and their families may be solicited at any time to contribution to NMEDA. With prior
approval, NMEDA may solicit corporate members’ executive and administrative
personnel, stockholders and families of both. Solicitation of NMEDA’s corporate
members is a two-step process. First, NMEDA must obtain the corporate members’
written approval for solicitation; second NMEDA may conduct the solicitation. The
written approval for solicitation requires specific information; therefore, it is advisable to
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have counsel review it prior to distribution. Member corporations may not approve
solicitations by another association for the same calendar year.
The limit on contributions TO the PAC is an annual limit: $5,000 per contributor.
There is no need to distinguish primary and general election contributions TO the PAC.
A contribution is made when the contributor relinquishes control of the funds.
For mailed contributions, this is the date of the postmark. Thus, a contribution
postmarked 12/30/11 but received 1/6/12 counts towards the contributor’s 2011 limit.
Contribution Limit: From the PAC (initially $2,500; $5,000 once the PAC is “qualified”)
Initially the PAC may give federal candidates up to $2,500 per election. Once the
PAC has been registered for six months, has more than 50 contributors, and has made
contributions to five or more candidates, the PAC may contribute up to $5,000 per
election to candidates.3 The primary, general, and any run-off elections are separate
elections with separate contribution limits. The PAC also may give up to $5,000 per year
to another federal political committee and larger, though still limited, amounts to political
party committees.
Designation of Contributions by the PAC
Because contributions can be made to the same candidate for different elections, it
is sometimes necessary to “designate” a contribution for a specific election. When the
PAC makes contributions to candidates, it should designate whether they are for the
primary or general election. The best practice is for the PAC to designate each candidate
contribution it makes by identifying the election in the memo line of the contribution
check. (E.g., primary, general, run-off, special, etc.) If the PAC does not designate a
contribution, it will be counted towards the next election occurring (the recipient
campaign will apply FEC regulations to make a designation for the PAC). Designations
are required in order to make a contribution to a future election (that is, to the general
election before the primary) or to contribute to debt retirement after an election is over.
When the PAC registers it will be assigned an FEC ID number. It is a good
practice to have the FEC ID number imprinted on the PAC’s checks to assist recipients in
their FEC reporting.
Bundling
NMEDA may ask (solicit) its members to make contributions to particular federal
candidates in either of two ways:
asking members to send contributions directly to the candidate’s
campaign; or,
3
Once the PAC achieves multi-candidate status, it must file FEC Form 1M. At this point, it is
recommended that the PAC note its multi-candidate status on its letterhead and checks.
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asking members to send contributions to the PAC to be forwarded to the
campaign.
Direct contributions. If NMEDA asks members to send funds directly to a
campaign, NMEDA may itself pay for the cost of the solicitation. The solicitation may
include the address (including a web address) of the campaign, but may not include an
envelope addressed to the campaign or postage. If NMEDA pays for such a solicitation,
and the costs of all solicitations and communications exceed $2,000 per election, the
costs are reported on FEC Form 7 (see discussion on communications). The PAC may
also pay for such a solicitation and report it as an “other disbursement.”
Bundled contributions: triple attribution. If NMEDA asks members to send
contributions “earmarked” for particular candidates to the PAC, the PAC may then
bundle those contributions and forward them to the designated campaign(s). Because
NMEDA PAC is a separate segregated fund, its bundling activity is subject to a special
rule requiring triple attribution. This rule applies whether the members’ checks are made
out to NMEDA PAC and designated for a particular candidate or whether they are made
out to the particular campaigns and merely collected by the PAC. Any bundled
contribution counts as a contribution (1) from the contributor to the PAC, (2) from the
contributor to the campaign, and (3) from the PAC to the campaign. The contributions
count against all three limits involved (the member’s limits to the campaign and to the
PAC and the PAC’s limit to the campaign). As a result, the PAC may “bundle” no more
than $5,000 per candidate per election, and that much only if it makes no direct
contributions to the same candidate.
This “triple attribution” rule for bundling by SSFs discourages most membership
PACs from bundling. This rule is significantly different from the rules for non-connected
PACs (such as Emily’s List or Susan B. Anthony List). Contributions bundled by nonconnected PACs are attributed only from the individual contributor to the campaign in
most cases. Contributions intended for candidates (authorized committees) must be
forwarded within 10 days of receipt.
Candidate Fundraisers
NMEDA may host a fundraising event attended by its own members for a
particular candidate. NMEDA may pay for the costs of such an event and report them (if
required) as a communication cost. No one other than NMEDA’s own members may be
invited to such an event. The only non-members who may be present are the candidate
and staff and a limited number of persons necessary to run the event or who are
participating in other parts of the program. NMEDA leaders may urge members to
contribute to the campaign. NMEDA members may write or give checks to the candidate
or campaign staff at such an event. NMEDA leaders should not, however, handle
contributions: if they do, the funds are subject to the triple attribution rules described
above.
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Neither NMEDA nor the PAC may host a fundraiser and invite non-members or
ideologically friendly PACs. This, again, is a different rule than that applying to nonconnected PACs.
NMEDA PAC may co-sponsor or pay the costs of a candidate’s own fundraiser,
subject to its $5,000 contribution limit, and may provide in-kind assistance, such as use
of a fundraising list, staff time, or meeting space, for such an event. In-kind assistance is
reported as a contribution at fair market value (e.g. commercial rental value for a list). If
NMEDA staff (not on the PAC payroll) spend time assisting a candidate with a
fundraiser, the PAC must pay NMEDA in advance for the value of the staff time.
Non-campaign events. NMEDA may host a meeting for an incumbent or nonincumbent candidate for non-campaign purposes, i.e. for a discussion of issues in
Congress or in a state legislature. Neither the candidate nor any representative of
NMEDA may solicit funds at such an event, and the state of the candidate’s campaign
should not be a focus of the meeting. Because this is not a campaign event, NMEDA
may invite non-members, such as representatives of other organizations, to such an event.
If NMEDA wishes to host an event for a candidate (and most incumbent members
qualify as candidates year-round), the event must be advertised and conducted as an
issues or policy discussion. The standard is the same for non-incumbents: NMEDA may
host a policy-oriented non-campaign meeting or event. The phrase “meet and greet”
should be avoided because of its association with campaign events. Events honoring
particular Members of Congress are limited under the Lobbying Disclosure Act if
NMEDA employs or retains a federally registered lobbyist.
Other Candidate Support (in-kind contributions)
A PAC may also make contributions to a candidate by providing goods or
services to or paying bills for a campaign. (E.g. polling, printing, mailing lists,
fundraising events, and advertising “coordinated” with the campaign.) In-kind
contributions are subject to the same limits and reporting requirements as contributions of
money.
FUNDRAISING
Who may be solicited?
A membership organization (or its PAC) may request (solicit) PAC funds only
from its members and its executive and administrative employees. Persons who accept
an organization’s invitation to join and who pay annual dues or have direct participatory
rights in the organization qualify as members for PAC solicitation.4 The FEC
determines, on a case by case basis, whether the membership status of others who do not
meet these requirements qualify as members (e.g., students, lifetime members and
retirees).
4
There are additional methods of qualifying for membership which are not discussed here.
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Only members of NMEDA may be solicited to contribution to the PAC. NMEDA
executives and administrative personnel and their families and noncorporate members
and their families may be solicited at any time to contribute to NMEDA. With prior
approval, NMEDA may solicit corporate members’ executive and administrative
personnel, stockholders and families of both. Solicitation of NMEDA’s corporate
members is a two-step process. First, NMEDA must obtain the corporate members’
written approval for solicitation; second, NMEDA may conduct the solicitation. The
written approval for solicitation requires specific information; therefore, it is advisable to
have counsel review it prior to distribution. Member corporations may not approve
solicitations by another association for the same calendar year.
NMEDA may solicit its individual members and the executive and administrative
personnel of corporate members who have given prior written approval for contributions
to the PAC. Twice a year, NMEDA may solicit its nonexecutive and nonadministrative
personnel (if any. There is no distinction between members of NMEDA and members of
NMEDA PAC. The organization(s) may work hand in glove. The PAC is simply a
separate fund belonging to NMEDA that may be used for campaign purposes.
If NMEDA or its PAC accidentally solicits a non-member, no violation will occur
if the organization (1) makes its best efforts to comply with the solicitation restrictions
and (2) corrects the method of solicitation immediately.
What is a solicitation?
A direct request for funds is a solicitation. In addition, an article encouraging
support for the PAC, providing information on how to contribute to the PAC or
publicizing the PAC’s right to accept unsolicited contributions may constitute a
solicitation. Thus, articles of this nature should not be included in publications available
to non-members or on areas of a web site that are available to the general public.
Information merely describing the PAC, announcing its existence, noting its
affiliation with NMEDA, or indicating the amount raised, number of contributors, and
candidates supported is not a solicitation.
How may funds be solicited?
Orally. At a meeting, speech, or over the telephone.
By mail.
In internal publications restricted to members.
On the Internet through a web site restricted to members (as by a password).
By e-mail.
Because e-mail might easily be forwarded to non-members, it is advisable (though
not legally mandatory) to include a statement that the message is intended for members of
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NMEDA (who have given prior authorization to solicit) only, and that it should not be
forwarded.
Notices are required on written solicitations (mail, e-mail, Internet)
FEC regulations require that solicitations by a membership organization include
notices:
of the PAC’s political purpose;
of the right to refuse to contribute without reprisal;
that any suggested contribution amount is only a suggestion;
that more or less than the suggested amount may be given; and,
that the amount given or the refusal to give will not benefit or disadvantage the
member.
In addition, IRS regulations require a statement that contributions are not
deductible as charitable contributions for federal income tax purposes.
Information about contributors
Federal law requires “best efforts” to obtain and report the name, address,
occupation, and employer of each contributor who gives more than $200 in a calendar
year. To satisfy “best efforts,” solicitations must request this information and inform
contributors that the PAC is required by law to make its best efforts to obtain and report
it. If contributors do not report all of this information, the PAC is required to send at
least one follow-up communication, which does not solicit additional funds, within 30
days requesting the missing information.
Fundraising events, premiums and promotions; one-third rule
NMEDA may pay for fundraising costs, such as: dinners and receptions;
premiums such as T-shirts, coffee mugs, or other items; and, raffle items such as trips or
free attendance at events. If the cost of the fundraising event is more than one-third of
the total amount raised, the PAC must reimburse the parent organization to bring the ratio
to 1:3. For instance:
NMEDA incurs $10,000 in costs for a dinner that raises $27,000 for the PAC.
The PAC must reimburse NMEDA $1,000 to restore a 1:3 (9:27) ratio.
NMEDA pays for T-shirts costing $8 each that are given to contributors donating
$25 or more to the PAC. No reimbursement is necessary since the ratio is less
than 1:3.
NMEDA offers lodging and free attendance at an event worth $500 to be given at
random to one of the contributors who responds to a particular appeal (or during a
specific time period). If the appeal raises less than $1,500, the PAC must
reimburse NMEDA an appropriate amount.
Whether NMEDA or the PAC pays for fundraising events or premiums, the total
amount received from the contributor is the contribution amount.
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No reimbursement is required for normal solicitation costs (such as postage,
printing and design for direct mail).
Form in which contributions may be accepted
Contributions may be accepted by check, including electronic funds transfer,
credit or debit card, or cash. Cash contributions are limited to a maximum of $100.
Special procedures for cash contributions. If the PAC collects more than $100 in
cash at a single event, or deposits more than $100 in cash in a single deposit, it must keep
a record of the event and source of funds (e.g. “3/10/13 fundraising breakfast: $20 per
person admission fees”).
Automatic recurring contributions. The PAC may solicit and accept contributions
through recurring transfers or charges (e.g., $10 per month from a contributor’s checking
account or credit card). Such recurring transfers must be authorized in writing (an
electronic record and signature is acceptable). The PAC must keep a copy of the
authorization or other records such as spreadsheets or wire transfer records sufficient to
show the source and amount of individual contributions.
Internet contributions. In advisory opinions approving acceptance of
contributions on the Internet, the FEC has discussed and approved additional notices such
as warnings and donor certifications concerning corporate and foreign national
contribution prohibitions. The PAC should obtain specific advice about appropriate
notices and procedures before soliciting and collecting funds via the Internet.
Solicitations by the parent organization (collecting organization rules).
NMEDA may make solicitations on behalf of the PAC directly (as well as paying
for solicitation expenses). Thus, there is no need to distinguish for PAC solicitation
purposes between individuals as officers of NMEDA and these same individuals as
officers of NMEDA PAC. Nor is there a requirement to use special PAC letterhead for
PAC solicitations.
When NMEDA solicits and collects PAC funds it is acting as a “collecting agent”
for the PAC. When acting on behalf of the PAC, the collecting agent must provide the
same notices and best efforts requests (discussed above) and observe the same
fundraising restrictions as the PAC would acting directly.
Professional fundraising firms and member volunteers are not collecting agents,
but they are also responsible for observing solicitation and forwarding rules.
Transmitting funds to the PAC. Checks made out to the PAC must be sent to the
PAC for deposit into the PAC account. Other funds may be deposited temporarily in the
collecting agent’s account. The collecting agent must keep separate records of receipts
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and deposits representing contributions to the PAC. Contributions of $50 or less must be
forwarded within 30 days. Contributions above $50 must be forwarded within 10 days.
The name, address, occupation, and employer information for donors of over $50 must
also be forwarded to the PAC.
Collecting Agent Recordkeeping and Reporting. The collecting agent must
maintain records for all PAC contribution deposits and transmittals for three years and
make the records available to the FEC on request. Funds collected through the collecting
agent are reported by the PAC as contributions from the original donors, not as a transfer
from the collecting agent. The date the collecting agent receives the funds is the date the
PAC uses for reporting purposes.
Screening Contributions
If the PAC receives a contribution that appears to be excessive or prohibited, the
Treasurer must either return the contribution to the donor or deposit it within 10 days. If
a questionable check is deposited, the Treasurer must keep a written record of the reason
the contribution is suspect and either: (1) confirm its legality, (2) seek a reattribution, or
(3) return it. Suspect contributions may not be used until their legality is resolved. If a
report is due during this process suspect contributions must be included in the report (and
itemized if otherwise necessary).
Corporate checks. If the check is drawn on a corporate account (including a
“PC”) the PAC may not accept it. The check could be returned with a request that a
donation be made to NMEDA instead.
Partnerships. Partnerships may make contributions subject to “dual attribution” to
the partnership and to one or more individual partners. The PAC should send a follow up
letter seeking clarification of the partner(s) to whom the contribution is to be attributed
(for instance, the partner who signed the check) and explaining that the contributing
partner’s account must be charged with the contribution on the partnership books.
LLCs. Most LLCs are taxed as partnerships, in which case the partnership rules
apply. Some LLCs are taxed as corporations, in which case the corporate ban applies.
The PAC should send a letter to an LLC contributor confirming its tax status and seeking
information about to which member(s) of the LLC the contribution is to be attributed.
Excessive contributions. Contributions which exceed $5,000 on their face or in
aggregation with previous contributions from the same contributor in the same year are
excessive. If the contribution is by a check or written instrument that includes more than
one name, but only one signature, the PAC may presumptively reattribute the excessive
portion to the other individual whose name is imprinted on the check. The PAC must
notify the contributors within 60 days and offer to make a refund instead.
If only one name is printed on the check, the Treasurer may request a reattribution
by asking whether the contribution was intended to be a joint contribution from more
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than one person. In this situation, a statement signed by all contributors indicating the
amount attributable to each is required to reattribute the excessive portion of a
contribution. If no statement is received within 60 days, the Treasurer must refund the
excessive portion of the contribution.
COMMUNICATIONS
Rules governing communications mentioning political candidates, including most
incumbent officeholders, can be complex and are not always obvious in application.
Additionally, what may be permissible under federal election law may not be permissible
or advisable under the Internal Revenue Code. It is advisable to seek specific legal
review of planned communications, especially by the parent organization. In general, the
PAC may make communications in all categories discussed below, subject to disclaimer
and reporting requirements.
Independent Expenditures
An Independent Expenditure is a communication that (1) expressly advocates the
election or defeat of a clearly identified candidate, and (2) is not made in cooperation
with or at the request or suggestion of a candidate, campaign or political party. FEC
regulations set out two tests for express advocacy:
express words such as “vote for,” “elect,” “defeat,” “support,” or “oppose.” This
includes appeals to “vote pro-life” if accompanied by an identification of pro-life
candidates. This category also includes candidate’s campaign slogans, such as
“Barack Obama, Change we can believe in.”
Only reasonable interpretation: a communication that, taken as a whole, can
only be interpreted as advocating the election or defeat of one or more clearly
identified candidates.
Independent expenditures by the PAC. The PAC may make Independent
Expenditures supporting or opposing federal candidates. The communication must
include appropriate disclaimers. There are no limits on the amount or cost of
Independent Expenditures. Independent Expenditures must be reported on Schedule E of
the PAC’s normal FEC report, and may be subject to additional reporting requirements
(see below). Many Independent Expenditures are required to be reported twice, on
separate FEC forms.
Additional reporting requirements for Independent Expenditures. Independent
Expenditures aggregating in excess of $10,000 for any one candidate must be separately
reported to the FEC within 48 hours of the expenditure. In addition, during the last 20
days before an election, Independent Expenditures aggregating $1,000 or more must be
reported to the FEC within 24 hours
Electioneering Communications
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An Electioneering Communication is a broadcast (TV, radio, cable or satellite)
communication that:
(1) refers to a clearly identified candidate;
(2) within 30 days of a primary or 60 days of a general election; and,
(3) can be received by 50,000 or more persons in the candidate’s state or district.
For Presidential candidates, the 30-day pre-primary period includes the 30 days prior to a
national party convention.
The PAC may make an electioneering communication and treat it as an ordinary
PAC communication, subject to normal disclaimer and reporting rules.
NMEDA may make an electioneering communication or independent
expenditure. If it does so, it must include a disclaimer and file a report, and may need to
report its funding sources, with the FEC. If NMEDA contemplates making
electioneering communications or independent expenditures, it should seek further
guidance as to specific requirements.
Coordinated Expenditures: avoiding discussions with candidates, campaigns and parties
An Independent Expenditure, Electioneering Communication, or certain other
communications, made at the request or suggestion or in consultation with candidates,
campaigns or political parties is a coordinated expenditure. Coordinated expenditures are
treated as contributions to the candidate or party involved, and are subject to the limits
and reporting requirements for contributions and to special disclaimer requirements.
PACs may make coordinated expenditures, but rarely have a reason to do so given
the associated contribution limits, disclaimer and reporting requirements. While
discussions must be “substantial” to trigger coordinated status, any request or suggestion
will make a resulting communication “coordinated”. The simplest and safest practice is
simply to avoid discussions with candidates, campaigns and parties about planned
communications.
Vendors and contractors. Coordination may occur through common vendors and
contractors (such as mail houses, advertising consultants, pollsters, and media buyers). If
a vendor uses information derived from a campaign or party in doing work for a PAC, the
resulting PAC spending may be deemed to be “coordinated.” Thus, the PAC and the
parent organization should ask vendors, consultants and contractors working on
candidate-specific communications efforts whether they are also working for the
candidates involved (or the candidate’s political party). Vendors working for candidates
or parties must have a screening procedure designed to prevent use of candidate or party
information in work for other clients.
Disclaimer Requirements
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All communications by the PAC to the general public (including a web site
available to the public) must include a disclaimer. If the communication is not authorized
by a candidate (normally the case), the disclaimer must:
identify the PAC that paid for the communication;
provide a permanent street address, telephone number or web address for the
PAC; and,
state that it was not authorized by any candidate or candidate’s committee.
EXAMPLE: “Paid for by Widget Association, Inc. PAC (www.widgetassociationpac.org)
and not authorized by any candidate or candidate’s committee.”
Additional disclaimer requirements also apply depending on the communications
medium.
In printed communications, the disclaimer must be in a printed box set apart
from the contents of the communication, in reasonable type size and contrast. (Black on
white is always satisfactory.) The PAC should include this boxed disclaimer on its
stationery and on any brochures of publications prepared for distribution to the public.
Only one page in a multi-page communication need contain the disclaimer. If a mailing
includes items that could be distributed separately (for instance, a letter and a brochure),
each item must have a disclaimer.
Radio and television communications have additional disclaimer requirements,
and the PAC should obtain guidance before making such communications.
Disclaimers are not required on small items (buttons, bumper stickers), where
impractical (on wearing apparel), on administrative items (checks and receipts), or on
communications to members.
Communications to Members
In determining what communications must be paid for by NMEDA and which
must be paid for by the PAC, you should determine to whom it will be sent. If the
communication will be sent only to FEC-defined members, NMEDA may send any type
of communication, including express advocacy. These communications can be paid for
exclusively with NMEDA funds and are not reported by the PAC. Examples of the types
of communications that can be sent to members are: endorsements, get-out-the-vote,
voter registration, and candidate appearances. Communications to members by the PAC
or NMEDA do not require disclaimers. Once the payment for these communications
exceeds $2,000 for an election, NMEDA must report the costs on FEC Form 7.
Communications devoted primarily to non-campaign topics are exempt from this
reporting requirement. For instance, a four page member newsletter containing a single
page of endorsements is not subject to any reporting requirement. Should the PAC
decide to pay for these expenses, they are reported as "other disbursements" and not as
contributions or expenditures.
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Communications that can be received by the general public (e.g., website
communications not requiring a member password, independent expenditures, candidate
appearances before the general public) must be paid for entirely by the PAC.
RECORDKEEPING
Records must be retained for three years
The PAC must maintain copies of all statements, notice and reports filed with the
FEC along with original back-up records relating to the reports for three years after the
relevant report is filed. Back-up records include bank statements, invoices and other
records needed to substantiate the amount and purpose of receipts and disbursements.
Checks
The PAC must maintain a full sized photocopy or digital image of each check or
written instrument by which a contribution exceeding $50 is received, and a receipt,
invoice or cancelled check documenting each disbursement in excess of $200. If a
contribution check is received and deposited by the collecting agent, the collecting agent
or the PAC must maintain a copy.
The PAC may rely on its bank to maintain digital copies of checks. While banks
routinely maintain digital images of checks written from an account (disbursements),
customers normally must made special arrangements for a bank to maintain copies of
deposited items (contributions coming into the account).
For credit card charges, the PAC should retain a copy of the authorization form.
This may be an electronic record of a transaction on the Internet containing the required
information. The PAC may be able to make arrangements with its credit card processor
to keep these records or to provide them in an accessible format.
Receipts
For every receipt, the PAC must keep records of the:
amount received;
date of receipt; and,
the source.
For contributions of $50 or less the “source” may be listed as “unitemized receipts” along
with the identification of the fundraising program (direct mail, Internet, or a specific
event) and the amount received each day. Alternatively, the PAC may record the name
and address of every individual donor.
For contributions in excess of $50, the donor’s name and address must be
recorded. For contributions aggregating in excess of $200, records must include the
donor’s occupation and employer.
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Some membership PACs have no receipts other than contributions. If the PAC
does have receipts other than contributions (interest, refunds, returns of deposits) receipt
records including the first three items above (amount, date, and source) must be
maintained for those “other receipts”.
Disbursements
All PAC disbursements must be made by check drawn on an account at the PAC’s
designated campaign depository.
A PAC may maintain a petty cash fund for expenses of $100 or less as long as the
treasurer keeps a written journal including the name and address of any person to whom a
disbursement is made along with the date, amount and purpose of the disbursement. If
administrative expenses are paid directly by NMEDA, it may be unnecessary to maintain
a petty cash fund (or to write checks for small amounts), and NMEDA’s disbursements
are not subject to these recordkeeping requirements.
All disbursements must be identified by:
date;
amount;
name and address of payee; and
purpose of disbursement.
For contributions to candidates, records must also indicate the:
office sought by the candidate (state and district), and
election for which the contribution was made.
Copies of checks must be maintained as noted above. For credit card
transactions, a monthly billing statement or customer receipt for each transaction must be
retained, as well as the cancelled check used to pay the account.
Treasurer’s best efforts. Treasurers and PACs must use their best efforts to obtain
and report the information indicated above. When reporting information is incomplete,
the Treasurer and the PAC will still be in compliance with the law if they demonstrate
they used their best efforts to obtain the required information.
For contributions, the best efforts standard is described in the section on
“Information about contributors” above.
For disbursements, the Treasurer must make at least one written effort per
transaction to obtain a missing receipt, invoice or cancelled check.
For contributions, the Treasurer must make at least one request for evidence of
legality. If the contribution cannot be determined to be legal, the Treasurer must refund
the contribution within 30 days of receiving it.
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FILING REPORTS
The Treasurer is responsible for filing accurate and timely reports. Membership
PACs may file on alternate schedules (quarterly or monthly). PACs may be fined for
failing to file or filing late reports. Please note that in addition to quarterly or monthly
reports, a PAC that makes contributions just before an election must file a pre-election
and/or post-general report.
Electronic filing.
A PAC that expects to raise or spend more than $50,000 in a calendar year must
file reports electronically. Smaller PACs may also file electronically, and many find it
easier than paper filing. If the PAC expects to raise $50,000 or more in a year in the
foreseeable future, electronic filing is advisable from the start because it can be difficult
to transition from paper to electronic filing.
Reports may be completed and filed electronically using the FEC’s free FECfile
software or a commercial program. While the commercial programs are not inexpensive,
they have added features, such as solicitation management, and may be easier to use.
Most electronic filers file over the Internet. Webster, Chamberlain & Bean, LLP can help
you with your reporting.
Obtaining a password. To file reports electronically, the Treasurer (and/or
Assistant Treasurer) must obtain a password from the FEC by mailing or faxing a request
to the password office (202-219-0674), http://www.fec.gov/elecfil/passwords.shtml. The
Committee must have filed a Form 1 (see “Registration” on page 1 above) designating
the requestor as Treasurer of Assistant Treasurer in order for that individual to obtain a
filing password.
Whether on paper or electronically the FEC form 3X is the basic reporting form
for PACs. The form includes:
The Summary Page
The Detailed Summary Page
Schedule A: Itemized Receipts
Schedule B: Itemized Disbursements
Schedule C: Loans
Schedule C-1: Loans and Lines of Credit from Lending Institutions
Schedule D: Debts and Obligations
Schedule E: Itemized Independent Expenditures
Schedules H1–H6: Allocation of Federal and Nonfederal Expenses
A membership PAC that receives contributions from members and makes
contributions and Independent Expenditures may have information for Schedules A, B,
and (possibly) E only. The schedules are normally filled out first because information on
the Summary and Detailed Summary Pages is based on information from the schedules.
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NMEDA PAC Guide
The information described in the section on “RECORDKEEPING” immediately
above should be sufficient to complete these forms. Detailed instructions for completing
the forms are included with paper copies of the forms, with electronic filing programs, or
in the “Campaign Guide for Corporations and Labor Organizations.”
The number of errors on FEC reports appears to have increased since the advent
of electronic filing. If the PAC files electronically, the Treasurer or another responsible
person should print out a copy of the completed electronic report and review it on paper
before it is submitted. This step along with regular reconciliation of bank statements,
accounting records and FEC reports (item #2 under internal controls just below) will
eliminate the vast majority of errors on FEC reports.
INTERNAL CONTROLS
Good recordkeeping and adequate internal controls are the foundation for
compliance with campaign finance laws and reporting requirements. The FEC has issued
a statement of policy providing protections for PACs that maintain only five internal
control mechanisms:
All bank accounts are opened in the name of the PAC, not an individual.
Bank statements are reviewed monthly for unauthorized transactions and
reconciled to accounting records each month. Bank records are reconciled to
disclosure reports prior to filing. Reconciliations must be done by someone other
than a check signer or regular bookkeeper.
Checks in excess of $1,000 and all wire transfers require two signatures or
written authorization.
A person other than the bookkeeper or check signer(s) monitors and makes a list
of incoming receipts and places a restrictive endorsement (“for deposit only to
account of NMEDA PAC”) on all checks
Any petty cash fund operates with written records as described above and with a
balance of no more than $500.
While these safeguards are specifically designed to protect the PAC against loss or
misappropriation of funds, they will also be of great help in complying with the
substantive and reporting requirements of federal campaign finance law.
TAX ISSUES
A PAC is classified as a political organization subject to Section 527 of the
Internal Revenue Code. A Federal PAC registered with and reporting to the FEC does
not, however, have to file a registration statement, a Form 990, or report finances to the
IRS. Qualification for tax exemption under Section 527 is automatic on registration with
the FEC.
Investment income. If the PAC earns investment income (as from an interestearning deposit account), it must pay federal and state tax on that income. Many PACs
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that expect to earn minimal investment income prefer to keep funds in non-interestbearing accounts to avoid the administrative burden of calculating and paying this tax.
Even if the PAC has no investment income it may file a form 1120-POL (indicating no
investment income) to start the statute of limitations period running.
As noted above, a statement advising donors that political contributions are not
tax deductible is required on all PAC solicitations.
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