AO 2016-11: Members may collect and forward contributions to membership organization's SSF

Plains Cotton Growers (PCG) and its cotton gin members may collect and transmit voluntary contributions from individual members to the separate segregated fund (SSF) of PCG. Since PCG is a membership organization collecting contributions solely from its members, the Commission concluded that PCG is not limited in the methods that it may use to solicit and forward such contributions to its own SSF.

Background
PCG is an incorporated non-profit, non-stock corporation in Texas that is exempted from federal income tax under section 501(c)(6) of the Internal Revenue Code. PCG is organized to promote and protect the interests of cotton producers in the Texas high plains. PCG offers three specific classes of membership including 1) cotton gins, 2) cotton producers, and 3) cotton businesses. Cotton gins are organized as agricultural cooperatives under Texas law, while cotton producers and cotton businesses may be individuals, partnerships or corporations. Currently, the cotton gins collect membership dues from the cotton producers and cotton business on behalf of PCG.

PCG maintains a federal separate segregated fund, Plains Cotton Growers Political Action Committee (PCGPAC). PCG and PCGPAC intend to solicit voluntary contributions to the PAC (which are separate from the membership dues) from individual cotton producers by establishing an automatic voluntary deduction program that would be administered by the cotton gins, to whom producers deliver cotton for processing. PCG proposes to recommend a fixed deduction amount based on each bale of processed cotton that is produced. Such contributions would be charged against the producers' individual cotton proceeds. PCG would authorize the cotton gins to collect contributions on PCG's behalf and then transmit them to PCGPAC. PCG would pay for any costs incurred by the cotton gins for administering this contribution collection plan.

Any individual producers wishing to contribute to PCGPAC via this method would sign automatic deduction forms that authorize PCG to collect funds from them and transfer the proceeds to PCGPAC. Contributors would be informed that their contribution is voluntary and would be for the purpose of supporting federal candidates. They would also be informed that they would be free to contribute more or less than the recommended amount (or not at all) and that they may revoke their authorization at any time without penalty or adverse action.

Analysis
The Federal Election Campaign Act (the Act) and Commission regulations permit incorporated membership organizations to establish and solicit voluntary contributions on behalf of an SSF from its individual members. 52 U.S.C. § 30118(b)(3)(C); 11 CFR 114.1(j), 114.7(a). A membership organization itself may also act as the "collecting agent" on behalf of its own SSF. A collecting agent is defined as "an organization or committee that collects and transmits contributions to one or more separate segregated funds to which the collecting agent is related." 11 CFR 102.6(b)(1).

PCG qualifies as a membership organization under Commission regulations because it is composed of members who have the power and authority to operate and administer the organization. See 11 CFR 114.1(e)(1)(i)-(vi). Members are generally defined as persons who 1) satisfy the requirements for membership in a membership organization, 2) affirmatively accept the organization's invitation to become a member, and 3) have a significant financial or organizational attachment to the organization or pay membership dues on at least an annual basis. 11 CFR 114.1(e)(2)(i)-(iii).

Under PCG's membership rules, cotton gins and producers qualify as members because they must pay membership dues and be located within a required geographical location. Therefore, PCG and PCGPAC may solicit contributions from individual cotton producers. As the connected organization for PCGPAC, PCG may serve as the collecting agent for the PAC and may collect and transmit contributions from its individual cotton producer members to PCGPAC. 11 CFR 102.6(b)(1)(ii).

PCG's proposal to enter into contracts with cotton gin members to collect and transmit contributions to PCGPAC is permissible under the Act and Commission regulations because the Commission has held previously that "[t]here is no limitation...on the method of...facilitating the making of voluntary contributions [to its SSF] which may be used" by a membership organization. 11 CFR 114.7(f). See AO 2012-15 (American Physical Therapy Association).

The Commission also held that PCG's proposal of calculating a recommended contribution amount from individual cotton producers to PCGPAC based on a per-bale of cotton basis is also permissible, because PCG will notify potential contributors that the recommended amounts are merely suggestions and that a person is free to contribute more or less than the suggested amount without reprisal. Furthermore, PCG will inform all potential contributors of the political purpose of PCGPAC and that the organization will not favor or disadvantage a member by reason of the amount of any person's contribution or decision not to contribute. 11 CFR 114.5(a). See also AO 2011-22 (Virginia Poultry Growers Cooperative).

(Date Issued: October 27, 2016; 6 pages)

Resources:

• AO 2016-11 [PDF]
• Commission consideration of AO 2016-11 [mp3]