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  • FEC Record: Advisory opinions

AO 2008-18: drug discount card program would result in prohibited corporate contributions

February 1, 2009

A proposed affinity program involving payments to political party committees for the provision of prescription drug discount cards to their supporters (or other interested persons) would result in prohibited corporate contributions being made to national political party committees or to the federal accounts of state or local party committees.

Background

Mid-Atlantic Benefits (MAB) is a limited liability company (LLC) that elects to be treated as a partnership, rather than a corporation, for income tax purposes. MAB takes part in a program that involves recruitment of entities such as banks, religious organizations, unions, charities and local government sponsors to create, promote and distribute prescription drug discount cards. MAB partners with Agelity, Inc., a Delaware-based corporation that maintains the program and has contractual relationships with pharmacy networks that honor the cards. MAB wished to make Agelity, Inc.'s prescription drug discount program available to Democratic and Republican political party committee sponsors. The party committee sponsors would, in turn, offer the program to supporters or other interested persons without charge.

Under the planned program, the party committee sponsor would agree to manufacture the cards and pay for their promotion and distribution. The party committee sponsor would develop its own promotion materials, which would be approved by Agelity, Inc. and MAB before the party committee sponsor could disseminate them. MAB and Agelity, Inc. would scrutinize the proposed materials to make sure they focused on promoting the drug cards themselves and that the materials did not solicit political contributions or otherwise promote the party committee sponsor.

Cardholders would use the cards they received from the party committee sponsors to obtain discounts on drugs at participating pharmacies. The participating pharmacy networks would pay Agelity, Inc. a negotiated fee for each purchase of a single medication with the card. For each purchase, Agelity, Inc. would pay a transaction fee of $.70 to MAB, a fee that is derived from the fee that the pharmacy networks would pay to Agelity, Inc. MAB, in turn, would pay a transaction fee, out of what it received from Agelity, Inc., of $.25 to the party committee sponsor. Thus, the payments to the party committee sponsor would flow from Agelity, Inc.'s revenues. MAB’s profit would be the difference between the fee it receives and the fee it disburses, while the party committee sponsors would receive a $.25 fee per transaction.

Analysis

The Federal Election Campaign Act (the Act) and Commission regulations prohibit corporations from making contributions in connection with a federal election. U.S.C. §441b(a) and 11 CFR 114.2(b)(1). A contribution includes "any gift, subscription, loan, advance, or deposit of money or anything of value made by any person for the purpose of influencing any election for Federal office." 2 U.S.C. §431(8)(A)(i) and 11 CFR 100.52(a). "Anything of value" includes in-kind contributions, including the provision of goods or services without charge or at a charge that is less than the normal charge. 11 CFR 100.52(d)(1).

The Commission concluded that MAB's proposal would amount to prohibited corporate contributions from Agelity, Inc. to the federal account of the participating political party committee sponsor. The proposed program is impermissible because the transaction fees the political committees would receive are from Agelity, Inc.'s corporate funds, and not from individual funds. While MAB is not a corporation, all the funds it would provide to the party committee sponsors would consist of Agelity, Inc.'s general treasury funds. Therefore, the political party committees participating in the program would receive corporate contributions.

MAB's proposal is almost identical to a plan from Leading Edge Communications, which the Commission found impermissible in AO 1992-40. In that case, the corporation planned to recruit political party committees to market and distribute long-distance telephone discount cards to party members. In exchange for these services, the corporation proposed to pay the parties a percentage of the revenue it collected from long-distance telephone charges. The plan, therefore, involved a corporation's use of a political committee's assets to generate income through an ongoing business venture.

In this situation, MAB and Agelity, Inc. furnish access to Agelity, Inc.'s discount card program by recruiting sponsors to perform marketing and distribution services on Agelity, Inc.'s behalf in exchange for a portion of the revenues Agelity, Inc. generates from the participating pharmacy networks. As was the case in AO 1992-40, in this proposal party committee sponsors would lend their resources in promoting and distributing the cards. That distribution would, in turn, generate revenue for Agelity, Inc., for MAB and the party committee sponsors. Thus, MAB and Agelity, Inc.'s program, by contracting with national committees of political parties, or with state or local committees of political parties using their federal accounts, would result in prohibited corporate contributions.

The Commission noted that nothing would preclude MAB and Agelity, Inc. from implementing their proposal with respect to the nonfederal accounts of state or local committees provided that the transaction fees received by state or local committees are placed into nonfederal accounts and that the party committees' participation in the program is permitted under state and local law.

AO 2008-18: Date Issued: January 16, 2009; length: 6 pages.

  • Author 
    • Isaac Baker
    • Communications Specialist
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