Formation of PACs For Individuals, Breweries, Associations and Guilds

Formation of PACs For Individuals, Breweries, Associations and Guilds August 18, 2019

Now that you know what Political Action Committees (PACs) can do and have been doing, are you curious as to how to start one?

The FEC Says

According to the Federal Election Committee (FEC) website “An individual or group can set up a "nonconnected committee" when it wants to set up a political action committee (PAC), and that PAC is not one of the following:

  • A political party committee
  • A candidate’s authorized committee
  • A separate segregated fund (SSF) established by a corporation or labor organization”

What Is a Nonconnected Committee?

The dictionary defines nonconnected as this:  Adjective (not comparable) (of a political action committee) Not connected with any other organization. (mathematics) Not connected: having more than one connected component.

For FEC purposes if a group of people gets together to pool their money and it exceeds $1,000 for either contributions or expenditures for a candidate, they have 10 days to register to become a PAC by filing a statement of organization with the FEC.

What Are the First Steps?

A separate bank account must be established for the PAC that is only used for PAC business. The bank account will be used to deposit receipts and make disbursements. The account must be at a National bank, a State bank or an FDIC- or NCUA-insured institution.

The name of the bank must be listed on the PAC’s Statement of Organization. This is a five-page document that asks a lot of questions about the organization.  The same form can be used to register committees set up to support or oppose candidates.

You’ll need to have a Treasurer to sign. You only need to fill out Section F on Page Two.

On Line Six, you’ll provide the names of any affiliated committees.

On Line Seven, you’ll provide the name and address of the Custodian of the PACs records.  You may also need an agent to act in place of the Treasurer.

Provide the name and mailing address of the bank where the federal funds are deposited.

 

Establish a Tax Id Number

In order to open a bank account, you must have a taxpayer identification number that you’ve obtained from the Internal Revenue Service (IRS). 

Political committees may obtain an Employer Identification Number (EIN) online or by completing IRS Form SS-4.  For questions about obtaining an EIN, contact the IRS at 1-800-829-3676.

Never, Ever Use Your Own Personal Social Security Number.

Treasurers Are Key to The Pac

Treasurers are very important to keep PACs out of trouble and you can’t raise money until a Treasurer is designated. The Treasurers ensure committee reports and statements are complete, accurate and timely. If the FEC decides to pursue any type of enforcement action against a committee by the FEC because of irregularities, the treasurer is usually the named respondent. Treasurers can be found officially and in some instances, personally liable for the actions they take.

According to the FEC, Treasurers perform these functions:

  • Sign and file all committee reports and statements.
  • Deposit receipts in the committee’s designated bank within 10 days of receipt.
  • Authorize expenditures or appoint someone else (orally or in writing) to authorize expenditures.
  • Monitor contributions, ensuring they comply with legal limits and prohibitions.
  • Keep records of receipts and disbursements for three years from the filing date of the report to which they relate.

However, a candidate can choose to act as his or her own committee treasurer. PACs must report a change in treasurer within 10 days of the change and can do this by filing an amended Statement of Organization.

Leadership PACS

Members of congress and other political leaders often establish “nonconnected” committees, usually called leadership PACs. Leadership PACs typically support candidates for various federal or nonfederal offices.

Super PACs

Super PACs are another type of nonconnected committee.

Hybrid PACS

A hybrid PACs is another type of nonconnected committee.

Contributions to A Nonconnected PAC

An individual may make up to a $5,000 contribution to a PAC per calendar year.

Individuals under the age of 18 are permitted to make contributions if they make the contribution knowingly and of their own volition.  The money, good or services must be owned or controlled by them. Funds given to the minor as a gift to make the contribution are not permitted contributions.

Partnerships and limited liability companies (LLCs) are permitted to make contributions but are subject to special rules.  If an LLC is taxed as a partnership, they are also subject to the contribution limits for partnership.

Who Can’t Contribute?

Corporations and labor organizations are prohibited from making contributions and expenditures in connection with federal elections.  This prohibition applies to all types of incorporated organizations, except political committees that incorporate only for liability purposes.

Prohibited Contributions

According to the FEC, “These transactions described below result in prohibited corporate or labor contributions and should be avoided:

  • Corporations and labor organizations may not use their general treasury funds to make contributions to political committees or candidates.
  • National banks and federally chartered corporations may not make contributions in connection with any U.S. election—federal, state or local.

A corporation or labor organization may not reimburse individuals who make contributions to a political committee.

A corporate vendor may not extend credit to a political committee for a longer period of time than is normally practiced in the creditor’s trade. (Credit is permissible only if it is extended in the ordinary course of business.)

When a political committee fails to pay a debt owed to a corporate vendor within the time specified by the vendor, a prohibited contribution by the vendor may result if:

  • The vendor fails to make a commercially reasonable attempt to collect a debt from the committee; or
  • The terms of the credit were not substantially similar to similar extensions of credit by the vendor to nonpolitical clients.

Any settlement of a debt between a creditor and a political committee for less than the full amount owed must comply with the debt settlement procedures prescribed by FEC rules.

If a corporation or labor organization sells goods or services to a political committee at a price below the usual and normal charge, a prohibited contribution results in the amount of the discount. A reduced price is not considered a contribution, however, if it is offered by the vendor in the ordinary course of business and at the same amount charged to nonpolitical clients.

If a corporation or labor organization pays for services rendered to a nonconnected committee, a prohibited contribution results. There is an exception, however, for legal and accounting services.”

Federal Government Contractors

The FEC also says that “Political committees and candidates are prohibited from accepting contributions from federal government contractors.  The prohibition applies to contributions from:

  • A partnership with a government contract;
  • The personal or business funds of an individual under contract with the federal government; and
  • Sole proprietors with government contracts.

Stockholders, officers, members or employees of an entity that is a federal contractor may, however, make contributions from their personal funds.”

Foreign Nationals

A lot has been in the news recently about foreign nationals and our elections.  To be clear, foreign nationals are prohibited from making contributions, donations or expenditures in connection with any election—federal, state or local.

According to the FEC, foreign nationals may not donate to any party committee building fund or fund electioneering communications.

“The Act prohibits knowingly soliciting, accepting or receiving contributions or donations from foreign nationals. In this context, “knowingly” means that a person:

  • Has actual knowledge that the funds solicited, accepted or received are from a foreign national;
  • Is aware of facts that would lead a reasonable person to conclude that there is a substantial probability that the funds solicited, accepted or received are likely to be from a foreign national; or
  • Is aware of facts that would lead a reasonable person to inquire whether the source of the funds solicited accepted or received is a foreign national, but the person failed to conduct a reasonable inquiry.

Examples of facts which may be pertinent include, but are not limited to, the use of a foreign passport or passport number for identification purposes, the contributor providing a foreign address, the contributor making a contribution by means of a check or other written instrument drawn on a foreign bank (or by wire transfer from a foreign bank) or the contributor or donor residing abroad.

It is also unlawful to knowingly provide substantial assistance to foreign nationals making contributions or donations in connection with any U.S. election. “Substantial assistance” refers to active involvement in the solicitation, making, receipt or acceptance of a foreign national contribution or donation with the intent of completing the transaction successfully. This prohibition includes, but is not limited to, individuals who act as conduits or intermediaries.”[1]

 

 

 

[1] https://www.fec.gov/help-candidates-and-committees/taking-receipts-pac/who-can-and-cant-contribute-nonconnected-pac/

 

Tags: government relations, political action committee