AO 2007-04: Credit card processing services provided to political committees

Atlatl, Inc., may offer its Simply Easier Payments credit card processing services to political committees without making impermissible corporate contributions because it would be acting as a commercial vendor in providing these services in the ordinary course of business and at the usual and normal charge. Any processing fees paid by contributors would constitute contributions to the respective political committees and must comply with the limits of the Federal Election Campaign Act (the Act).

Background

Atlatl, Inc. and Simply Easier Payments (collectively “the Corporation”) is a corporation that sells processing services for online credit card transactions, but is not itself a financial service provider or a credit card company. The Corporation plans to offer its services to political committees to process online credit card contributions. Under its plan, participating political committees’ web sites would contain links to the Corporation’s web site, where individuals could contribute online. A page on the Corporation’s site would show the amount that the individual intended to contribute to the political committee, along with a separate “convenience fee” to be paid by the individual to the Corporation. The individual would have to agree to pay the “convenience fee” to make the contribution. This fee would cover the costs of the financial institutions involved in the credit card transaction and provide a profit to the Corporation. The contributor would also be required to provide information that must be reported by political committees and to attest to various facts to show compliance with the limits and prohibitions of the Act.

Corporate contributions

The Act and Commission regulations prohibit corporations from making contributions in connection with a federal election. 2 U.S.C. §441b(a) and 11 CFR 114.2(b)(1). A contribution includes, among other things, providing goods or services without charge or at less than the usual and normal charge.¹ 11 CFR 100.52(d)(1) and (2). Commission regulations permit a commercial vendor to provide goods or services to political committees in the ordinary course of business and at the usual and normal charge. 11 CFR 114.2(f)(1). A “commercial vendor” is any person “providing goods or services to a candidate or political committee whose usual and normal business involves the sale, rental, lease, or provision of those goods or services.” 11 CFR 116.1(c).

In past advisory opinions, the Commission determined that corporations could collect and forward online contributions to candidates as commercial vendors. See AOs 2004- 19 and 2002-7. The Commission determined that these corporations qualified as “commercial vendors” because:

• Their services were rendered in the ordinary course of business for the usual and normal charge;
• They forwarded earmarked contributions to candidates through separate merchant accounts; and
• Their web sites incorporated adequate screening procedures to ensure that they were not forwarding illegal contributions.

In this case, the Corporation will also be acting permissibly as a commercial vendor. First, the agreements between the Corporation and the political committees would be commercially reasonable because the Corporation would be acting in the ordinary course of its business by providing secure credit card processing services. The “convenience fee” would constitute the usual and normal charge because it would compensate the Corporation for its costs and provide a reasonable profit. Second, the funds intended for the political committees would transfer from the issuing bank to an account held by the card processor for the sole purpose of holding funds intended for political contributions. The funds would then transfer from the card processor account to the designated political committees. Thus, funds received by the political committees would be from individual contributors and not the Corporation’s funds. Finally, the Corporation’s planned screening and verification procedures for online payments meet the standards approved in previous advisory opinions. Thus, the Corporation’s plan to process online credit card contributions for political committees would not result in impermissible corporate contributions by the Corporation.

Processing fees

Typically, a financial service provider that processes credit card contributions for a political committee deducts the processing fees from the amount of the contribution authorized by the contributor and thus transmits to the committee an amount smaller than the one authorized by the contributor. In past advisory opinions, the Commission has determined that, for purposes of the Act’s limits and reporting requirements, the contribution includes the entire amount authorized by the contributor, including any processing fees deducted by the financial service provider. AOs 1999-8, 1995- 34, 1995-9, 1994-33 and 1991-1.

Here, the Corporation proposes processing contributions made to political committees for a “convenience fee,” which will be negotiated between the Corporation and the political committees. The “convenience fee” will cover the costs that a political committee, like any other organization that accept credit card payments, would have to pay for processing services. However, instead of deducting the processing fees from the amount of the contribution, the Corporation would transmit to the political committee the entire amount authorized by the contributor and have the contributor pay the processing fees directly to the Corporation in a separate transaction.

For the purposes of the Act, there is no distinction between a contributor paying processing fees as a portion of the contribution amount and paying such fees in a separate transaction. Both are contributions because contributors assume a cost that would otherwise be paid by the political committee, thereby providing something of value to the committee.² Thus, these fees would be contributions under the Act and subject to the contributor’s limits.³

Date Issued: April 20, 2007; Length: 6 pages.

¹ In addition to this general prohibition on corporate contributions, corporations are prohibited from facilitating the making of contributions to candidates or political committees. Facilitation means using corporate resources to engage in fundraising activities in connection with any federal election. 11 CFR 114.2(f)(1).

² The situation presented here differs materially from that in AO 2006-8, where the corporation planned to provide services to contributors that went well beyond the mere processing of contributions. These services were to be provided at the request and for the benefit of the contributors, not of the recipient political committees. By paying for these services, the contributors would not, as they would here, relieve the recipient political committees of a financial burden they would otherwise have had to pay.

³ The Commission further determined that recipient political committees would have to report contributors’ payments of “convenience fees” as operating expenditures. AOs 1999-8, 1995-34 and 1991-1.