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AO 2012-17 Political Committees May Accept Contributions Made Via Text Message

A vendor may provide political committees the option to accept individual contributions via text message because its business practices are consistent with the recordkeeping, reporting and other requirements of the Federal Election Campaign Act (the Act).

Background

Red Blue T and ArmourMedia, Inc. are political and media consulting firms that advise political committees, including candidate committees; m-Qube is a “corporate aggregator of business-to-consumer messaging and merchant billing for public wireless service providers.” m-Qube proposes to enter into agreements with political committees, under which it would provide its services in order to process political contributions made to those political committees via text messaging.

m-Qube proposes two scenarios for making contributions via text message. The first scenario would involve a wireless user texting a pre-determined message to a political committee using a common short code consisting of a five- or six-digit number. m-Qube, as the connection aggregator, would respond via text message and require the user to confirm his or her intent to make contributions and eligibility to do so under the Act.

The second scenario would require a wireless user to enter his or her mobile phone number on a political committee’s website in lieu of a credit card number. Before submitting the phone number, the user would be required to certify his or her eligibility to make a contribution under the Act. After the user certifies the information, m-Qube would transmit a text message to the user’s mobile phone that includes a personal identification number (PIN). The user would then enter the PIN on the political committee’s website to confirm the transaction.

Both methods of making contributions would require a wireless user to confirm that they intend to engage in the transaction and to certify that they are eligible to make a contribution under the Act. Once a user has completed this “opt-in” process, a charge is placed on the account of the user’s wireless mobile phone number. Since common short codes are country-specific, only users that obtain service through U.S.-based wireless service providers will be able to use a short code to complete the opt-in process.

m-Qube proposes to enter into service orders with political committees under similar terms as it would offer to non-political customers in the ordinary course of business. In addition, several special terms would be added to political committee customers’ service orders, which include that the committee be registered and “in good standing” with the Commission; that no mobile phone may be billed more than $50 per month for contributions to any one political committee customer; each political committee customer must obtain certifications from wireless users that the users are eligible to make contributions under the Act; and that each political committee customer must use m-Qube’s “factoring” service, whereby m-Qube calculates the net amount of funds that will eventually be collected from service providers and transmits a portion of that amount to political committees on a weekly basis.

Under the proposed activity, m-Qube plans to transmit these “factored” payments to participating political committees on a weekly basis. m-Qube will not provide contributor names and addresses to political committee customers, but will provide the ten-digit phone number associated with each contribution. In addition, m-Qube will provide the amount and date of the contribution, and will confirm that the contributor opted to have the contribution charged to their wireless bill and that the contributor affirmatively answered the questions indicating their eligibility to contribute. m-Qube may also keep a running tally of the $50 cap placed on contributions made via text message each month from the same mobile number and will provide political committees with “real-time secure access to the m-Qube gateway where the tally of contributions will be maintained…”

Additionally, consistent with m-Qube’s current practice for non-political customers, it does not propose to establish a segregated account for either the factored payments that it makes to political committees or the payments that it receives from service providers and forwards on to political committees as trailing payments. Instead, payments to political committees would be made directly from its general corporate treasury funds. However, the payments will be linked to short codes associated with particular political committees, which would ensure that contributions are segregated from corporate treasury funds.

The requestors (Red Blue T, AmourMedia and m-Qube) ask if the proposed scenario is consistent with the Act’s forwarding, recordkeeping and reporting requirements. They also asked if the proposed commercial transactions are permissible in the ordinary course of business and satisfy the segregation requirements that the Commission has placed on commercial vendors that process political contributions.

Analysis

Recordkeeping and Reporting. The Act and Commission regulations require that treasurer of a political committee maintain the name and address of any person who makes a contribution in excess of $50, along with the date and amount received. 2 U.S.C. §432(c)(1)-(3). Treasurers must also examine all contributions for evidence of illegality and ensure that those contributions, when aggregated with others received from the same contributor, do not exceed the Act’s contribution limits. 11 CFR 103.3(b).

The Commission concluded that m-Qube’s proposed factoring arrangement is similar to credit card contribution processing. Contributions would be received at the time that a wireless user “opts-in.” The Commission further determined that its concerns as to screening for prohibited foreign national contributions are satisfied by the proposal since m-Qube will only allow users that obtain service through U.S.-based providers to use a short code to complete the opt-in.

Commercial Transactions. The Act and Commission regulations prohibit corporations from making a contribution in connection with a federal election. 2 U.S.C. §441b(a) and 11 CFR 114.2(b)(1). The definition of contribution includes “any gift, subscription, loan, advance, or deposit of money or anything of value made by any person for the purpose of influencing any election for Federal office.” 2 U.S.C. §431(8)(A)(i) and 11 CFR 100.52(a). “Anything of value” includes all in-kind contributions, including the provision of goods or services without charge or at a charge that is less than the usual and normal charge. 11 CFR 100.52(d)(1).

After wireless users complete their opt-in pledge to make a contribution to committee, but prior to the receipt of any contribution, m-Qube will transmit funds from its corporate treasury to the political committee. m-Qube proposes that it will recoup its funds once subscribers have paid their bill and the wireless service providers have transmitted those payments, net of any fees, to m-Qube. m-Qube’s proposal is not exclusive to political committee customers; it offers the same service on the same terms to non-political customers, except that “factoring” is mandatory for political committee customers, but not for non-political customers.

Under m-Qube’s proposal, it will calculate and transmit a “conservative factor” to political committees and will reevaluate the potential risks of making the factored payments on a weekly basis. m-Qube may terminate or suspend factored payments at any time and may require customers to provide a security deposit to guard against overpayments; additionally, m-Qube may require any overpayments to be reimbursed by the customer.

The Commission determined that m-Qube’s factoring proposal is a permissible extension of credit by m-Qube in the ordinary course of business. Under the Act and Commission regulations, an incorporated commercial vendor may extend credit to a political committee in the ordinary course of business under substantially similar terms to those that the vendor offers to non-political customers. 11 CFR 116.3(b) and (c). The Commission has previously approved similar arrangements in earlier advisory opinions. See, for example, AO 1990-14 (AT&T) and AO 1979-36 (Fauntroy).

Forwarding Requirements. The Act sets time frames on when a person who receives a contribution on behalf of a political committee must forward that contribution to the committee’s treasurer. 2  U.S.C. §432(b) and 11 CFR 102.8. However, in this instance the Commission concluded that the forwarding requirements of the Act are not triggered by the factored payments because the factored payments are not contributions that m-Qube has received and forwarded; the payments are considered extensions of credit by m-Qube. The subsequent trailing payments, too, are a part of the same transaction. Thus, the payments do not implicate the forwarding requirements of the Act.

Segregated Accounts. In several previous advisory opinions, the Commission has required vendors to maintain separate accounts for political contributions that are to be transmitted to candidates. This is primarily to prevent commingling of corporate funds and campaign funds. See, for example, AO 2010-23 (CTIA- The Wireless Association) and AO 1999-22 (Aristotle Publishing).

However, the Commission concluded that m-Qube’s proposal ensures that corporate funds will not be transmitted to political committees. Since the factored payments are extensions of credit in the ordinary course of business by m-Qube rather than contributions that m-Qube has received and forwarded, the factored payments do not trigger the requirement that vendors maintain separate accounts for political contributions that are to be transmitted to candidates.

Additionally, the payments that m-Qube will receive from the service providers and forward to political committees will be linked to a common short code that is unique to each committee. This will ensure that political contributions are properly accounted for and that m-Qube’s treasury funds will not be transmitted to any political committee.

Date Issued: June 11, 2012; Length: 12 pages.

(Posted 6/20/12: By: Myles Martin)

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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; Alex Knott, Senior Writer/Editor; Myles Martin, Editor