AO 2005-20: Payroll deduction for LLP PAC

Partners at Pillsbury Winthrop Shaw Pittman LLP (PWSP) may use an automated electronic payroll system to make voluntary contributions to PWSP’s PAC, provided that the PAC pays PWSP in advance for the costs associated with the use of the system.

Background

PWSP is a limited liability partnership consisting of over 900 attorneys, more than 300 of whom are partners. PWSP qualifies as a federal contractor because it occasionally provides legal services to federal government agencies. As a partnership, PWSP cannot act as the connected organization for a separate segregated fund (SSF); instead it sponsors a nonconnected political action committee (PAC). Any support PWSP might provide to the PAC would be a partnership contribution.

In 2006, the PAC wants to allow PWSP partners to contribute voluntarily to the PAC by means of PWSP’s automated electronic payroll system. Currently, partners wishing to contribute to PWSP PAC must do so by personal check. The PAC would pay all costs associated with the use of the payroll system.

Analysis

The Federal Election Campaign Act (the Act) and Commission regulations prohibit federal contractors — including partnerships — from making contributions or expenditures in connection with any federal election. 2 U.S.C. 441c(a); 11 CFR115.4(a). However, individuals who work for a federal contractor may contribute in their own name from their own personal assets. 11 CFR 115.4(b). PWSP partners using PWSP’s automated electronic payroll system exercise complete control over the funds that represent their net compensation by making their individual account designations, and the partners may modify or revoke those designations at any time.

Significantly, PWSP has no control over the partners’ choice of the recipient of any disbursement from the firm’s payroll account and at the moment a disbursement takes place from PWSP’s payroll account, the funds being disbursed are the personal assets of the partner. This is the functional equivalent of the partner writing a personal check.

In past advisory opinions, the Commission has stated that the federal contractor prohibition extends to the use of any partnership funds to pay for the PAC’s establishment, administration and solicitation costs. As a result, PWSP may not pay any of the costs associated with a partner’s use of PWSP’s automated electronic payroll system to make voluntary contributions to the PAC without PWSP making a prohibited contribution. However, the Commission has allowed a partnership to pay for its PAC’s use of goods and/or services that the partnership offers in the usual course of its business, so long as the political committee provides reimbursement within a “commercially reasonable time.” AO 2001-7. This allowance does not extend to goods and services that are not offered by the partnership in the ordinary course of its business. Since use of its automated electronic payroll system is not offered to PWSP’s clients in its normal course of business, the PAC must pay in advance all costs associated with using the system in order to avoid an impermissible contribution by federal contractor PWSP to the PAC.¹

Date issued: January 23, 2006; Length: 4 pages

¹ The Commission considered, but could not reach a consensus on, whether the PAC may reimburse PWSP within a commercially reasonable time, rather than pre-pay for these costs.