A nonconnected committee may be sponsored by a partnership or another type of unincorporated organization. However, most forms of support received by a committee from such an organization are contributions, subject to the limitations, prohibitions and reporting requirements of the Federal Election Campaign Act (the Act).
Regardless of whether the committee uses the sponsoring organization’s contributions to pay for its operating expenses or to support candidates, monetary and in-kind contributions from the sponsoring organization are subject to an aggregate limit of $5,000 per calendar year.
Gifts of money
Subject to the PAC’s contribution limits, the sponsoring organization may contribute permissible funds directly to a nonconnected committee for any lawful purpose.
A sponsoring organization makes an in-kind contribution to a nonconnected committee when it:
- Pays a vendor for the committee’s supplies, rent, telephone bills, postage, printing, etc.;
- Provides goods or services to the committee at its own expense (such as a payroll deduction system to collect contributions); or
- Pays the salary of an individual when he or she is working on committee business.
In-kind contributions from the sponsoring organization must be paid for with permissible funds and are subject to the same $5,000 annual limit as the committee’s direct gifts of money.
A sponsoring organization may loan money to a nonconnected committee. Loans from the sponsoring organization are contributions to the extent that they remain outstanding, and the outstanding balance on the principal amount is subject to the $5,000 calendar year limit. A loan exceeding that amount is illegal even if repaid in full. The committee must itemize a loan on Schedule C on the first report filed after the loan is made and continue to report the outstanding balance and any payments until the debt is extinguished.
Legal and accounting services
A sponsoring organization may provide free legal and accounting services to a nonconnected committee if the services are provided solely to help the committee comply with federal campaign finance laws and if the individuals performing the services are regular employees of the organization. Unlike other services rendered to a committee, the cost of providing such services is not a contribution and does not count against the $5,000 limit. However, the committee must report the receipt of the services.
Sponsors affiliated with corporations
Because contributions from corporations are prohibited, a partnership or an LLC with corporate members may not attribute any portion of a contribution to the corporate partners.
When a political committee is sponsored by a non-corporate entity that is entirely owned by one or more corporations (such as a joint venture partnership) and is affiliated with at least one of the corporate owners, the rules generally applicable to nonconnected committees do not apply. Instead, the committee would operate under the rules governing separate segregated funds (SSFs). Such a committee should consult the FEC’s Campaign Guide for Corporations and Labor Organizations for more information.
Exempt administrative and fundraising payments
A corporation may use its treasury funds to pay the costs of establishing, administering and soliciting contributions to its SSF, without making a prohibited corporate contribution. In several advisory opinions, the Commission has applied this provision to permit a corporation that is affiliated with an unincorporated entity to pay the administrative and solicitation expenses of the affiliate’s PAC. In these cases, the affiliated corporation functions as the connected organization of the committee and the committee is the corporation’s SSF (with the appropriate solicitation restrictions). Moreover, when the unincorporated entity is wholly owned by corporations and affiliated with at least one of them, the unincorporated entity may also pay administration and solicitation costs of its own PAC without the payments resulting in a contribution to the sponsored committee. (Note that the owner/affiliated corporation would be listed as the connected organization of the PAC.) For more information regarding affiliation among corporations and committees, see the Campaign Guide for Corporations and Labor Organizations.
It is important to note that the fact that a sponsoring noncorporate entity is owned by one or more corporations does not necessarily result in affiliation with one or more of those corporations. For instance, the Commission concluded that a nonconnected political committee sponsored by a limited liability company was not affiliated with any of the five corporations that jointly owned the LLC. As a result, neither the sponsoring LLC nor any of its corporate owners could pay the committee’s administrative and solicitation expenses. Instead, the committee had to cover these expenses using the contributions it received.
Under the Act and FEC regulations, SSFs may solicit contributions from only a restricted class of individuals. In several advisory opinions, the Commission has applied this restriction to political committees sponsored by unincorporated entities that are affiliated with corporate SSFs. As a result, this type of committee cannot solicit contributions from the general public; it may only solicit the restricted class of its sponsoring organization and affiliated corporation(s).
Corporate personnel and nonconnected PACs
Individuals associated with an incorporated entity (including an incorporated trade association or nonprofit organization) may establish a nonconnected PAC. To do so, the individuals must demonstrate that their PAC is financially and organizationally independent of the incorporated entity by:
- Reimbursing the corporation for any use of office facilities within a commercially reasonable time and at the usual and normal charge;
- Paying in advance for any use of corporate staff, customer/mailing lists, catering services and any other goods and services that the corporation does not supply in the ordinary course of business; and
- Having a diversified leadership which, for example, ensures that individuals affiliated with a particular incorporated entity will not form the majority of the committee’s board.
Note, however, that even if a nonconnected committee demonstrates financial and organizational independence, it may nevertheless become affiliated with the SSF of the incorporated entity. If this were to occur, the nonconnected PAC would become an SSF. For information on SSFs, see the FEC’s Campaign Guide for Corporations and Labor Organizations.