AO 2006-34: Political committee sponsored affinity program

Working Assets may offer an affinity wireless telecommunication program to sponsoring political committees that would allow customers to direct a 10 percent rebate from their monthly charges as a contribution to the political committee sponsor (the sponsor). Customers would also have the option to “round-up” their bills and apply the excess amount as a contribution to the sponsor.

The proposed program would not result in any impermissible corporate contributions under the Federal Election Campaign Act (the Act) because (i) the sponsors would pay the usual and normal charge for the solicitation services and other services provided by Working Assets as part of a commercial transaction and (ii) the contributions to the sponsors resulting from rebates and round-ups would be made by the individual customers and not by Working Assets.

Background

Working Assets, a for-profit corporation specializing in donation-linked telecommunications and credit card services, has offered affinity programs to non-profit organizations for over 20 years. Under the programs, Working Assets donates a portion of each credit cardholder’s purchases or long distance or wireless charges to nonprofit organizations. The company also offers a program called “Citizen Action” in which bills sent to customers would contain “alerts” encouraging the customers to express their views on legislative and policy issues to elected and appointed officials.

Working Assets proposes to expand its affinity sponsor programs to political party committees, nonconnected political committees and qualified non-profit corporations (QNCs). The proposed affinity program would be made available without regard to political party affiliation or ideological orientation. However, the program for each particular sponsor would have to be commercially viable as determined by common commercial principles, such as size of membership and potential for longterm customer commitments.

The proposed program would allow Working Assets to use the sponsoring political committee’s name, trademark and supporter list in marketing Working Assets’ mobile phones and wireless services to the sponsor’s members and supporters, via direct mail and/or online communications. The marketing would include messages from the sponsor soliciting support. Some messages might refer to past elections or electoral results, but they would not refer to current or future elections or federal candidates. Working Assets would pay the cost of the marketing.

Working Assets would offer an automatic 10 percent rebate from monthly charges to their customers. When customers enrolled they could choose one of two options: (1) receive the rebate in the form of a credit on their next bill or (2) direct the rebate amount as a contribution to the sponsoring political committee.

Customers would also be given the option to “round up” their monthly billed amount and specify the rounded up portion as a contribution to the sponsor. In addition, Working Assets plans to expand its Citizen Action Alerts to political committee sponsors and to include advertising space with content created by the sponsors in customers’ bills.

Working Assets’ proposal details how contributions from customers would be made and forwarded. First, customers would be able to switch their option for use of the rebate at any time. Second, when customers authorize the forwarding of rebates as contributions, and when those opting to contribute pay their bills, they would be asked to provide their name, address, occupation and employer. All contributor information would be forwarded to the sponsor in time to meet the Act’s recordkeeping and reporting requirements. Rebates directed to the sponsors would be forwarded through an automated clearinghouse within 24 hours of Working Assets’ receipt. Donation forms in the bills would have all disclaimers as required by 11 CFR 110.11.

Working Assets’ proposal also details how the program would be financed. The arrangement would be based on the sponsor giving Working Assets access to its member and supporter list in exchange for Working Assets’ solicitation of the individuals on the list to participate in the program. The full cost of marketing the program would exceed the fair market rental value of the list, but Working Assets asserts that only a portion of the marketing costs should be attributable to the sponsor based on the division of the wireless charges. Since individuals would receive a 10 percent rebate on their monthly charges that they may direct to the sponsoring political committee and Working Assets would retain 90 percent of the proceeds, the company proposed to allocate 10 percent of the marketing costs to the committee sponsor and 90 percent to itself. Working Assets would ensure that the portion of the marketing costs attributable to the sponsor would not exceed the fair market rental value of the sponsor’s list.

In addition, the sponsor would pay Working Assets directly for any costs associated with processing the rebates or round-ups, transmitting contributions and forwarding contributor information. The sponsor would also pay for all space in the bills associated with the Citizen Action Alerts, all expenses related to customers’ Citizen Action phone calls to officials, and for sponsor advertising space in the customers’ bills.

Analysis

The Act and Commission regulations prohibit corporations from making contributions in connection with any federal election and prohibit federal candidates and committees from accepting such contributions. 2 U.S.C. 441b(a). In several past advisory opinions, the Commission has permitted corporations to offer affinity programs, or programs similar to affinity programs, as long as the corporation and the political committee:

• Enter into a commercially reasonable transaction in which the committee pays the usual and normal charge for services rendered (AOs 2003-16, 2002-7 and 1995-34); and
• Ensure that amounts contributed to committees are from the individual customer’s funds and not from corporate funds (AOs 2003-16 and 1994-33).

Usual and normal charge

In order to determine if the proposed program would be commercially reasonable, the Commission considered whether the sponsors provided sufficient compensation, i.e., the usual and normal charge (including a reasonable profit) to Working Assets for the services that Working Assets would provide to them. See AOs 2004-19, 2002-7 and 1994-33. The Commission noted that, in contrast to solicitation services usually provided by commercial vendors to political committees, the marketing services provided by Working Assets would serve two distinct purposes: (i) the primary purpose of generating customers for Working Assets’ wireless service and (ii) the secondary purpose (which would be contingent on individuals subscribing to the wireless service) of generating contributions to the sponsor. Under such circumstances, the Commission concluded that the proposed allocation to the sponsors of 10 percent of the marketing costs reflects the usual and normal charge for the services being provided to the sponsors under the facts presented, and that Working Assets’ provision of such services in exchange for the use of the sponsor’s mailing list would not be a contribution to the political committee.

The Commission also approved of the proposal that the sponsor pay Working Assets directly for the expenses related to processing and transmitting contributor information and contributions and to the Citizen Action Alerts, and for advertising space in customers’ bills. The Commission concluded that the sponsor need not pay in advance for these services but must pay the usual and normal charge within a commercially reasonable period of time in the ordinary course of business.

The Commission concluded that Working Assets would act as a commercial vendor in providing its services, and would not make or facilitate a corporate contribution to the sponsor. 11 CFR 114.2(b), (f)(1) and (f)(2)(i).

Customer contributions

The Commission concluded that the provision of rebated and rounded-up amounts to sponsors would be contributions by the customers, rather than impermissible contributions by Working Assets through its customers. See 2 U.S.C. 441f (prohibiting contributions in the name of another). First, the rebates and round-ups would occur in the ordinary course of Working Assets’ business as is evidenced by Working Assets agreements with other non-political sponsoring organizations. Second, the customers, not Working Assets, would control the disposition of rebates and roundups. See AO 2003-16. The Commission noted that Working Assets must ensure that it does not forward any funds to sponsors until Working Assets receives and deposits the customer’s bill payment, so a prohibited corporate advance does not result. 2 U.S.C. 441(b)(a) and (b)(2); 11 CFR 114.(a)(1).

Collection and transmittal of contributions

Working Assets proposes to forward contributions to the sponsors within 24 hours of Working Assets’ receipt of the bill payment. In addition, Working Assets must place the contributed amounts from rebates and round-ups in an account separate from its other accounts (i.e., a separate bank account for payments by check, or merchant account for credit card transactions) before transmittal to the sponsor, in order to avoid the commingling of corporate funds with contributions. Working Assets may set up one separate merchant account and one bank account for check payments for all of the sponsors, as long as the company maintains separate records for contributions to each sponsor. See AOs 2004-19, 2002-7, 1999-22 and 1991-20. Contributions and contributor information must be forwarded to the sponsors within 10 days of receipt if the contribution is over $50. 2 U.S.C. 432(b)(2)(B); 11 CFR 102.8(b)(2).

Solicitations and other communications

Working Assets’ proposal states that the solicitations sent to prospective customers would not mention current or future elections or current federal candidates; this is consistent with AO 2003-16. In addition, the proposal explains that bills would include disclaimers. The appropriate disclaimer would be the disclaimer required for communications by political committees that are not authorized committees. See 11 CFR 110.11(b)(3). Such disclaimers must also be included on all initial and follow-up solicitations.

Impact of proposal on QNCs

Working Assets proposes to offer its affinity program to QNCs. QNCs¹ are non-profit 501(c)(4) corporations that may make independent expenditures and electioneering communications so long as they meet certain specified criteria at 11 CFR 114.10(c). One of the criteria is that the corporation has no persons who are offered or receive a benefit, such as a credit card or a training program, which would provide a disincentive to disassociate from the corporation based on the corporation’s position on a political issue. 11 CFR 114.10(c)(3)(ii). The Commission assumed that the services and rebates offered by Working Assets would not be dependent on an individual’s association with a QNC, and that an individual could continue to participate in the Working Assets program even if he discontinues his membership with the QNC. Therefore, the Commission concluded that a QNC would not lose its QNC status by becoming a sponsor.

Date Issued: February 9, 2007 Length: 9 pages.

¹ A QNC must also (1) have as its only express purpose the promotion of political ideas, (2) not engage in business activities, (3) have no shareholders or persons (other than employees and creditors) who are affiliated in such a way that they could have a claim on the corporation’s assets or earnings, and (4) not be established by a business corporation or labor organization, nor accept donations from such sources. See 11 CFR 114.10(c).