Advisory Opinion 2006-33: association may compensate state affiliate collecting agents

The National Association of Realtors ("NAR"), may make payments from its corporate treasury fund to its state affiliates to increase their fundraising for the Realtors' Political Action Committee ("RPAC"), the SSF established and controlled by NAR. The Commission split on a rationale, with two commissioners concluding that the payments would be a permissible use of corporate treasury funds for the establishment, administration and solicitation costs of NAR's PAC, and with two other commissioners concluding that the payments would not be subject to the Act or Commission regulations. The payments would not be subject to the "one-third rule."

Background

NAR is an incorporated trade association engaged in activities intended to improve business conditions in the real estate industry. RPAC is its SSF. NAR has affiliated state associations in each state, and approximately 1,500 local affiliates. Together, NAR and its affiliates comprise a federation of trade associations. 11 CFR 114.8(g).

Each state association operates its own nonfederal political committee, and simultaneously solicits funds for both its nonfederal PAC and RPAC. By agreement, the state PAC receives 70% of the fundraising proceeds and RPAC receives 30%. As an incentive to increase the percentage of funds given to RPAC, NAR proposes to pay the state associations NAR corporate treasury funds in amounts comparable to the increased contributions to RPAC. The funds given to the state associations by NAR would be used in connection with state and local elections or other activities as permitted by state law. Individual contributors would not receive any portion of the funds from NAR, nor would they receive any benefit as a result of the payments. Solicitations would inform the contributors of the new percentage of funds to be sent to RPAC.

Analysis

As an exception to the general ban on corporate contributions and expenditures, the Act and Commission regulations permit a corporation, including an incorporated trade association, to pay for the establishment, solicitation and administrative costs of its separate segregated fund. 11 CFR 114.1(b). As part of that exception, a corporation may use its treasury funds to pay for "a raffle or other fundraising device which involves a prize" to raise funds for the corporation's separate segregated fund, so long as State law permits and the prize is not disproportionately valuable. When using raffles or entertainment to raise funds, a reasonable practice to follow is for the separate segregated fund to reimburse the corporation for costs that exceed one third of the money contributed to the separate segregated fund. 11 CFR 114.5(b)(2).

The Commission concluded that NAR's incentive payments to its state associations would not be subject to the one-third rule, because the payments would not be for a raffle or other fundraising device that involves a prize, or for entertainment.

AO 2006-33: Date: December 19, 2006; length: 5 pages