AO 2023-02: Corporations and their separate segregated funds are no longer affiliated
After a spinoff, Humana Inc. (Humana) and KAH Hospice Company Inc. (KAH Hospice), and their respective separate segregated funds (SSFs), are no longer affiliated.
In August 2021, Humana acquired Kindred at Home, a home health and hospice company. At that time, Gentiva Health Services, Inc. (Gentiva), a Humana subsidiary, was the principal holding company within Humana for both the home health business and the hospice business, operating through a number of subsidiaries and serving as the connected organization for what was then Gentiva Health Services Inc. PAC (Gentiva PAC). Both Humana and Gentiva amended the Statement of Organization for their respective SSFs to list each other as affiliated entities.
In August 2022, Humana restructured Kindred at Home, separating its home health and hospice businesses. Humana then sold a 60% controlling interest in KAH Hospice. No KAH Hospice personnel have an employment relationship with Kindred at Home or Humana post-spinoff. Since the spin-off, KAH Hospice has become the connected organization for the former Gentiva PAC, now KAH Hospice PAC, which is managed and operated by its treasurers and leaders within the restricted class of KAH Hospice. Humana PAC is run by a board elected by Humana’s restricted class. Neither Humana’s nor KAH Hospice’s PAC operations, either overall or on a day-by-day basis, include any involvement by the other corporation or the other PAC.
Neither Humana nor KAH Hospice owns a controlling interest in the voting stock or securities of the other. Humana’s shareholder base will not overlap with that of KAH Hospice other than to the extent that Humana itself is the minority owner of KAH Hospice. Humana and KAH Hospice will not share any officers or employees other than the two Humana executives who are appointed to the seven-member Board of KAH Hospice.
Humana asked the Commission, in light of the spin-off of KAH Hospice by Humana, if Humana PAC and KAH Hospice PAC are now disaffiliated. The request contained a letter from the treasurer of KAH Hospice PAC stating that both KAH Hospice and KAH Hospice PAC “concur in the facts and analysis presented” in Humana’s request and asked the Commission to conclude the PACs are no longer affiliated.
Under the Federal Election Campaign Act (the Act) and Commission regulations, political committees (including SSFs) are affiliated if they are established, financed, maintained, or controlled by the same corporation, labor organization, person, or group of persons, including any parent, subsidiary, branch, division, department or local unit thereof.
Commission regulations identify certain committees that are per se affiliated, such as those established, financed, maintained, or controlled by a single corporation and its subsidiaries. The Commission has previously found that a parent-subsidiary relationship, and thus per se affiliation, is created when a parent owns a majority interest in another organization. Consistent with this precedent, the Commission found there is no per se affiliation because Humana does not own a majority interest in KAH Hospice.
Absent per se affiliation, the Commission examines the relationship between the organizations that sponsor committees, between the committees themselves, and between one sponsoring organization and a committee established by another organization to determine whether the respective entities are affiliated. Commission regulations provide a non-exhaustive list of ten circumstantial factors to be considered in the context of the overall relationship to determine whether the respective entities are affiliated:
- Controlling interest
- Hiring authority
- Common membership
- Common officers or employees
- Former officers or employees
- Providing funds or goods and arranging for the provision of funds or goods
- Contribution patterns
- Context of the overall relationship between the entities
The Commission considered each of these circumstantial factors and concluded that Humana and KAH Hospice, and their SSFs, are no longer affiliated.
Date Issued: March 30, 2023; Length: 11 pages
52 U.S.C. 30116(a)(5)
Contribution limits and affiliated committees
11 CFR 100.5(g)(4)
Political committee; Determination of affiliation
11 CFR 110.3(a)(3)
Contribution limitations for affiliated committees; Factors indicating affiliation