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AO 2011-22 Membership Organization Solicitations

The Virginia Poultry Growers Cooperative, Inc. (VPGC) qualifies as a membership organization under the Federal Election Campaign Act (the Act). As a membership organization, it may establish a separate segregated fund (SSF) and collect contributions to the fund from its unincorporated members through deductions from settlement payments owed to those members. However, VPGC may not solicit executive or administrative personnel of incorporated members of the organization for contributions to the SSF.

Background
VPGC is incorporated in the Commonwealth of Virginia as an agricultural cooperative whose purpose is to grow and process turkeys and engage in other lawful activity under Virginia law. VPGC sets several requirements for membership in the cooperative, including entering into a production contract with VPGC, consenting to membership in writing and acquiring one share of Class A common stock of VPGC. The VPGC Board of Directors votes to approve membership in the cooperative. Members of VPGC have the power to operate and administer the organization.

VPGC wishes to establish and administer an SSF and to solicit contributions to the SSF from its own executive and administrative personnel and their families and from its unincorporated members. Additionally, VPGC asks whether it may collect contributions to the SSF from unincorporated members through deductions from settlement payments owed to the members by VPGC pursuant to their poultry production contracts.  VPGC also asks whether it may solicit contributions to the SSF from executive or administrative personnel of incorporated members of the cooperative.

Analysis

Qualification as a Membership Organization. The Act and Commission regulations define a membership organization as a trade association, cooperative, or corporation without capital stock, or a local, national or international labor organization that 1) is composed of members, some or all of whom are vested with the power and authority to operate or administer the organization; 2) expressly states the qualifications and requirements for membership, 3) makes its articles, bylaws or other organizational documents available to its members upon request; 4) expressly solicits persons to become members; 5) expressly acknowledges the acceptance of membership such as by sending a membership card or including the member’s name on a membership list; and 6) is not organized primarily for the purpose of influencing a federal election. 11 CFR 114.1(e)(1); 11 CFR 100.134(e).

VPGC meets each of the above criteria because it is composed of members that have the power and authority to operate and administer the organization. Commission regulations define “members” as persons who satisfy the requirements for membership in a membership organization, affirmatively accept the membership organization’s invitation to become a member, and either: 1) have a significant financial attachment to the organization, such as a significant investment or ownership stake; 2) pay membership dues on at least an annual basis; or 3) have a significant organizational attachment to the membership organization which includes affirmation of membership on at least an annual basis and direct participatory rights in the governance of the organization. 11 CFR 114.1(e)(2)(i) –(iii) and 100.134(f)(1)-(3).  Voting rights in VPGC are vested in Class A common stockholders equally. Holders of Class A stock qualify as members because they satisfy VPGC’s requirements for membership, they affirmatively accept VPGC’s invitation to become members by entering production contracts and they have significant financial attachments to VPGC (in the form of stock they are issued upon joining the organization).

Additionally, VPGC expressly states the qualification and requirements for membership in its Articles of Incorporation and Bylaws and makes them available upon request to members of the organization. VPGC expressly solicits poultry producers to become members and expressly acknowledges acceptance of membership. Finally, VPGC is not organized primarily for the purpose of influencing a federal election.

Since VPGC meets the above criteria, it qualifies as a membership organization under the Act and Commission regulations and may thus establish an SSF.

Collection of Contributions from Unincorporated Members. VPGC may collect contributions to the SSF from unincorporated members of the organization by means of deductions from settlement payments owed to those members. The Commission has previously concluded that a cooperative may collect contributions to its SSF from its unincorporated members by means of deductions from regular payments owed by the cooperative to the members. See AO 1986-07 (Crystal Sugar Co.).

Additionally, the Commission has previously concluded that where an SSF’s solicitable class includes unincorporated entities, the SSF or its connected organization may solicit contributions from such entities by addressing solicitations to the one or two individuals who normally represent the entity in its dealings with the SSF or the connected organization. See AO 2005-14 (AKFCF).

Solicitations of Incorporated Members. VPGC may not, however, solicit contributions from the executive and administrative personnel of members of the organization that are incorporated. The Act and Commission regulations do not permit a membership organization to solicit for its SSF other than from its members and its executive or administrative personnel and their families. The Act does contain a provision that allows trade associations to solicit contributions from “the stockholder and executive or administrative personnel of the member corporations of such trade association and families of such stockholders or personnel.” 2 U.S.C. §441b(b)(4)(D); see also 11 CFR 114.8(c). Commission regulations define a trade association as a “membership organization of persons engaging in a similar or related line of commerce, organized to promote and improve business conditions in that line of commerce and not to engage in a regular business of a kind ordinarily carried on for profit, and no part of the net earnings of which inures to the benefit of any member.” 11 CFR 114.8(a). Since VPGC is a membership organization of persons engaged in a similar line of commerce, but is organized for the purpose of growing and processing turkeys, a business ordinarily carried on for profit, and because its net earnings inure to the benefit of its members, it does not fall within the statutory provision pertaining to trade associations. Accordingly, VPGC may not solicit the executive and administrative personnel of incorporated members for contributions to the SSF.  See also AOs 1990-18 (Oahu FCU) and 1990-22 (Blue Cross/Blue Shield).

(Posted 12/21/11; By: Isaac Baker)

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The FEC Record is produced by the Information Division, Office of Communications. Toll free 800-424-9530; Local 202-694-1100; E-mail info@fec.gov. Greg Scott, Director; Amy Kort, Asst. Director; Dorothy Yeager, Editor