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AO 2011-19 Corporation May Establish Program to Transmit its Customers’ Funds to Political Committees

A corporation may establish a program in which it will transmit contributions from its customers to political committees when directed to do so by its customers. The corporation may also create a searchable database of political committees for its customers’ use, provide its customers with additional information about the political committees, sell advertising space to political committees on its website and permit political committees to post a “badge” on their websites. These proposed activities would not require the corporation to file reports with the Federal Election Commission.

Background
GivingSphere is a California corporation that offers Internet- and mobile-based platforms to help individuals make donations to charitable, civic, faith-based and educational organizations (“groups other than political committees”). GivingSphere would like to include federal political committees — including candidates’ authorized committees, political party committees, nonconnected committees and leadership PACs — as organizations that customers can choose to support financially.

GivingSphere’s customers can obtain funds to use as donations and contributions in two ways: (1) by making purchases from affiliated merchants who agree to rebate a portion of the purchase price; and (2) by transferring the customer’s own funds to the customer’s GivingSphere account. Customers accumulate these rebates by purchasing goods from merchants participating in the GivingSphere affiliates program. A customer can accumulate rebates by shopping directly at a participating merchant’s website or through the GivingSphere e-Retail Virtual Shopping Mall. After a customer makes a purchase from a participating merchant, the merchant will transfer a portion of the customer’s payment back to GivingSphere. GivingSphere will in turn place all of these rebated funds under the customer’s control.

GivingSphere will segregate funds under its control from the funds controlled by its customers. The customer-owned account, from which a customer may make a contribution to a political committee, will contain:

  • Rebated funds (but only after the customer has agreed to treat the rebate as income for tax purposes); and
  • Personal funds that the customer has transferred to GivingSphere for the purpose of making contributions or donations.

GivingSphere's customers may use the GivingSphere search capabilities to find political committees to which they might wish to contribute.  GivingSphere will include in its database all active political committees registered with the Commission. 

Once a customer selects causes to support, GivingSphere will allocate the customer's rebates among those causes, as directed by the customer.  Before GivingSphere processes a customer's contribution to a political committee, the customer must provide his or her name, address, occupation and the name of the customer’s employer. Each customer will also be required to certify that the customer is an individual who is a United States citizen or a permanent resident;  the customer is not a government contractor; and any money (including any sums from a rebate) used to make a contribution has been earned from payments made from the customer's own personal funds. GivingSphere will transfer customer-designated contributions to political committees within ten days, with the contributor’s identifying information and acknowledgment of certification.

In addition to transmitting funds to political committees, GivingSphere will also establish an "affiliates program," in which third party entities agree to place a GivingSphere "badge" on a relevant portion of their websites that encourages viewers to join GivingSphere.  The third parties, including political committees, will post the badge on their websites without paying an up-front fee. If a viewer clicks on the badge and joins GivingSphere, GivingSphere will pay, from its corporate account, the entity that posted the badge a small percentage of future transactions that result from the customer joining GivingSphere. GivingSphere proposes to modify its payments under its affiliates program for political committees that post a badge. GivingSphere will not make a payment to a political committee, but, instead, will allocate the sum to the customer.

Analysis
GivingSphere first asked whether it could follow a customer’s instruction to transmit the customer’s rebates to political committees. The Commission determined that GivingSphere may follow its customers’ instructions to transfer some or all of the customers’ rebates to federal political committees. Neither the rebates provided to the customer, nor GivingSphere’s services in transmitting its customers’ contributions to political committees, would constitute impermissible corporate contributions by GivingSphere.

To reach this conclusion, the Commission first focused on whether the funds transmitted to political committees would be GivingSphere’s funds or the funds of GivingSphere’s customers. GivingSphere will only transfer those funds from the customer-owned account, and only when directed to do so by the customer. Moreover, GivingSphere’s customers will be able to direct their funds to any political committee or group other than a political committee. Therefore, the Commission concluded that the rebates that GivingSphere will transmit to political committees will be the property of GivingSphere's customers, and not the property of GivingSphere. The Commission next determined that GivingSphere's services in transmitting its customers' contributions to political committees would not constitute a corporate in-kind contribution by GivingSphere, because GivingSphere will provide a service only to its individual customers, and not to the recipient political committees. Merchants participating in GivingSphere’s affiliate program will rebate the same amounts to all GivingSphere customers, regardless of whether the customers use the rebates as political contributions. GivingSphere intends to charge a commercially reasonable fee when its customers make purchases from affiliated merchants regardless of how the customers ultimately dispose of their rebates. Therefore, the Commission concludes that the rebates will be offered to customers in the ordinary course of GivingSphere’s business.         

GivingSphere also asked if it could provide its customers with a search engine and database identifying federal candidates, national political parties and other federal political committees using information obtained from reports filed with the Commission. Political committees must file certain reports with the Commission, which the Commission makes public. Information obtained from FEC reports generally may not be used or sold for commercial purposes. 2 U.S.C. §438(a)(4); 11 CFR 104.15(a).  The Commission has previously concluded in a number of advisory opinions that this prohibition serves to prevent information about individual contributors from being sold or used for commercial purposes.  The Commission, however, has allowed the sale or use of the name and address of political committees for commercial purposes. See AOs 2004-24 (NPG Software), 1989-19 (Johnson) and 1980-101 (Weinberger).  The information that GivingSphere seeks to use concerns political committees, rather than individual contributors, and therefore GivingSphere may use the information for its proposed database.

GivingSphere additionally proposed to supplement the names of candidates and committees in its database with basic factual information, such as the office being sought; the election cycle; party affiliation, age, occupation or incumbency status; and a website link. GivingSphere does not intend to provide content that advocates for the election or defeat of any candidate, or that promotes, attacks, supports or opposes any candidate, political party or political committee. The Federal Election Campaign Act (the Act) and Commission regulations do not address whether a commercial entity may provide to its customers in the regular course of business the type of information that GivingSphere proposes to provide to its customers. But, as noted above, the Commission found that GivingSphere may forward contributions to candidates and political committees as a service to its customers and provide its customers with a database that identifies the candidates and political committees to which they may choose to make contributions. The Commission found that GivingSphere’s proposal to include basic factual information about candidates and political committees appears to be a corollary of this activity.

GivingSphere asked if it must file reports with the Commission. GivingSphere is not a political committee, and therefore is not subject to the reporting requirements for political committees. GivingSphere indicates that it will not make express advocacy communications or electioneering communications, and, therefore, its proposal would not implicate the reporting requirements for persons making such communications. 11 CFR 100.16; 100.29. Thus, GivingSphere’s proposed activities would not subject it to any reporting requirements under the Act or Commission regulations.     

GivingSphere also asked if it could sell political committees ad space on its website. The Commission determined that GivingSphere could sell ad space because it plans to charge the “usual and normal charge,” as determined by the market value of comparable online advertising. So long as GivingSphere makes ad space available to political candidates and committees on the same terms and conditions as other advertisers, the sale of ad space would not constitute a contribution to the political committee advertisers.

Finally, GivingSphere asked if it could permit political committees to post a GivingSphere “badge” on their websites. The Commission concluded that GivingSphere may undertake this activity because GivingSphere’s proposal represents a commercially reasonable transaction made in the ordinary course of business, and because any contributions made from funds rebated by GivingSphere to its customers will be those of GivingSphere’s customers.

The Act and Commission regulations permit corporations to offer affinity programs, where (1) the corporations and political committees enter into commercially reasonable transactions in which the political committees pay the usual and normal charge for any services provided by the corporations; and (2) the amounts contributed to the political committees via rebates, rewards or remittances are from the customers’ funds and not from the corporation’s funds.

GivingSphere will allow political committees to use its badge without paying GivingSphere an up-front fee. In return, any political committee that posts a GivingSphere badge on its website will provide marketing services to GivingSphere, which may increase GivingSphere's revenue. Therefore, as in AO 2010-06 (Famos), GivingSphere’s proposal represents a commercially reasonable transaction made in the ordinary course of business. In addition, the Commission found that any revenues from the badges program that GivingSphere’s customers may direct GivingSphere to transmit to political committees will be offered to GivingSphere’s customers in the ordinary course of business and will be the property of GivingSphere’s customers, rather than GivingSphere.

Date Issued: November 18, 2011; Length: 13 pages.

(Posted: December 1, 2011; 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