AO 2011-06: Vendor may collect and forward contributions without making impermissible contribution

A vendor may collect contributions from a group of subscribers and forward them to recipient political committees. The vendor’s services in collecting and forwarding these contributions do not amount to impermissible corporate contributions from the vendor. A convenience fee paid by the contributor to the vendor does not constitute a contribution by the contributor to any of the recipient political committees.

Background

Democracy Engine, LLC (the vendor) is the sole stockholder of Democracy Engine, Inc. Democracy Engine, Inc. is the connected organization of the separate segregated fund (SSF) Democracy Engine, Inc., PAC (the PAC). Mr. Jonathan Zucker and Mr. Erik Pennebaker are United States citizens who qualify as part of the restricted class of Democracy Engine, Inc., and therefore may be solicited by and contribute to the PAC. The vendor is a for-profit limited liability company offering a web-based payment service that provides “subscribers” with the opportunity to make contributions to federal political committees and donations to non-political entities. Mr. Zucker and Mr. Pennebaker plan to become subscribers and use the vendor’s services. 

A subscriber wishing to make a contribution using the vendor’s service must first go to the vendor’s website and choose the intended recipient political committee and the amount of the contribution. If the recipient political committee is not already included in the vendor’s directory of potential recipients, the vendor will add that recipient political committee to its directory. If the recipient political committee is an SSF, the vendor ensures that the subscriber is a member of the restricted class of the SSF’s connected organization. The vendor does not solicit contributions for any political committee or other entity, nor does the vendor exercise any direction or control over any subscriber’s choice of recipient political committees. If a subscriber designates a political committee as a recipient, the vendor informs the subscriber of the contribution limits established by 11 CFR 110.1. The vendor will not process contributions that the vendor determines or believes will exceed hose limits.

The subscriber is required to provide information to the vendor that the recipient political committee must maintain or report, including the subscriber’s name, mailing address, employer and occupation. 11 CFR 104.8(a). The vendor will forward this information to the recipient political committee. 

The vendor deducts a convenience fee from the subscriber’s payment before transmitting the remaining amount to the recipient political committee. The convenience fee covers all of the costs of the financial institutions involved in the credit card transaction and the vendor’s costs, and provides a reasonable profit to the vendor. The vendor, and not the recipient political committee, pays the fees and costs to those financial institutions. 

The vendor indicates that it will set the convenience fee in a commercially reasonable manner in accordance with market conditions with respect to all recipients, regardless of whether the recipient is a political committee or a non-political entity. This amount will reflect a complete payment of the vendor’s costs plus an amount as profit. After the subscriber provides the vendor with the required information, attests to his or her ability to make the contribution and agrees to the terms of service, the vendor accepts the subscriber’s payment by means of credit card, debit card or electronic check. The vendor then deposits the subscriber’s contribution, via a vendor merchant account, into a vendor bank account that is completely separate from the vendor’s corporate operating funds. 

The vendor will transfer the subscriber’s funds from its transfer account to the recipient political committee no later than ten days after the subscriber authorizes the contribution to the recipient political committee. The vendor will also forward all the necessary contributor information required for the recipient committees’ reports.

Analysis

The Federal Election Campaign Act (the Act) and Commission regulations prohibit corporations from making a contribution in connection with federal elections. 2 U.S.C. §441b(a); 11 CFR 114.2(b)(1). A “contribution” includes, among other things, the provision of goods or services without charge or at a charge that is less than the usual and normal charge. 

In this case, the vendor’s services in processing subscribers’ contributions to the committee and other recipient political committees would not result in impermissible corporate contributions by the vendor to those political committees because the vendor is not providing services or anything else of value to any recipient political committee. 

The payment of the convenience fee will not relieve the PAC or any other recipient political committee of a financial burden that it would otherwise have had to pay for itself. Therefore, a subscriber’s payment of the convenience fee would not constitute a contribution by the subscribers to the PAC or any other recipient political committee.

Because the subscriber’s payment of the convenience fee is not a contribution or any other form of receipt, the convenience fee does not need to be reported to the Commission.

AO 2011-06: Date issued: May 26, 2011; Length: 7 pages.