[EL] query on 501c4 IEs and the FEC PAC rules

Fri Mar 16 16:36:01 PDT 2012

Perhaps so, although I don't think that c4s are often pushed into 527 status, especially ones that are dissolved shortly after they are established.   I was only making the point that existing campaign finance rules appear adequate to address the disclosure concerns about this kind of conduit transaction.

Larry

lAWRENCE H. NORTON
Womble Carlyle Sandridge & Rice, LLP
1200 Nineteenth Street, N.W.
Suite 500
Washington, DC 20036
Direct Dial: 202.857.4429 | Mobile: 240.994.2444
E-mail: lnorton at wcsr.com<mailto:jkahl at wcsr.com> | Fax: 202.261.0097

From: Steve Hoersting [mailto:hoersting at gmail.com]
Sent: Friday, March 16, 2012 7:26 PM
To: Norton, Lawrence
Cc: Rick Hasen; law-election at uci.edu
Subject: Re: [EL] query on 501c4 IEs and the FEC PAC rules

Interesting.

If the c4 were "itself a Super PAC," as you put it, Larry, wouldn't that push the c4 into 527 status (even if we cannot be sure a perfect enforcement or self-reporting mechanism exists to push the c4 into 527 status), or am I missing something?

Steve
On Fri, Mar 16, 2012 at 7:20 PM, Norton, Lawrence <LNorton at wcsr.com<mailto:LNorton at wcsr.com>> wrote:

There has been a lot of discussion about how the existing disclosure rules allow an individual to create a c4 merely as a conduit for contributing to a Super PAC.  It strikes me that the political committee test is relevant to this situation, too.  If the only thing a c4 does is make a large contribution to a Super PAC, then the c4 has met the two tests for political committee status: it has made over $1,000 in "contributions" and its major purpose is influencing federal elections.

Then you have the question of whether the c4 itself is a Super PAC, subject to federal reporting requirements but not limits and source restrictions.  I think the answer is that it would be, so long as it doesn't contribute to any federal political committees that are subject to contribution limits.

lAWRENCE H. NORTON
Womble Carlyle Sandridge & Rice, LLP
1200 Nineteenth Street, N.W.
Suite 500
Washington, DC 20036
Direct Dial: 202.857.4429<tel:202.857.4429> | Mobile: 240.994.2444<tel:240.994.2444>
E-mail: lnorton at wcsr.com<mailto:jkahl at wcsr.com> | Fax: 202.261.0097<tel:202.261.0097>

From: law-election-bounces at department-lists.uci.edu<mailto:law-election-bounces at department-lists.uci.edu> [mailto:law-election-bounces at department-lists.uci.edu<mailto:law-election-bounces at department-lists.uci.edu>] On Behalf Of Rick Hasen
Sent: Friday, March 16, 2012 6:50 PM
To: Steve Hoersting
Cc: law-election at uci.edu<mailto:law-election at uci.edu>
Subject: Re: [EL] query on 501c4 IEs and the FEC PAC rules

Of course each such claim will have to be investigated individually.

I am making two predictions

1. there will be (or already are) 501c4 groups which will engage in enough electioneering that under a fair reading of the "major purpose" test the group should have (but didn't) register as PACs; and
2. if complaints are filed, and the composition of the FEC is as it is now, the FEC will deadlock on party lines as to whether such groups should have registered as PACs under the major purpose test.

I will be happy if I am wrong on either or both.

Rick

On 3/16/12 3:45 PM, Steve Hoersting wrote:
Respectfully, it seems the following statement puts the penalizing cart before the investigative horse:
and lawsuits against the FEC if it does not take action against such groups for violating the PAC rules.

Best,

Steve
On Fri, Mar 16, 2012 at 6:38 PM, Rick Hasen <rhasen at law.uci.edu<mailto:rhasen at law.uci.edu>> wrote:
It seems to me that there will likely be excesses in this election by
c4s which are acting as shadow super PACs, which will lead to
complaints, potential investigations, and lawsuits against the FEC if it
does not take action against such groups for violating the PAC rules.

Thanks to both of you and to others who weighed in on this issue in
private messages.

On 3/16/12 3:34 PM, Trevor Potter wrote:
> Presumably John's comments that c4s claim " validly" that they do not have as their "major purpose" the influencing of federal elections do not apply universally to all entities that chose to claim c4 status. Rather, that is a factual question to be answered by each entity that expends more than a significant portion of their resources on federal election activity.
> Trevor Potter
>
> Sent from my iPad
>
> On Mar 16, 2012, at 6:25 PM, "John Pomeranz"<jpomeranz at harmoncurran.com<mailto:jpomeranz at harmoncurran.com>>  wrote:
>
>> Correct.  501(c)(4)s argue (validly, I think) that their "major purpose" is not efforts to influence federal elections.  Significant support for that argument comes from the tax law's requirements for 501(c)(4) status.  To qualify for its exemption from federal income tax, a 501(c)(4) must have a primary "social welfare" purpose, which does not include efforts to intervene in any political campaign.
>>
>> There was some interesting debate on these issues, including the intersection of FECA's (or, really, the Supreme Court's) "major purpose" and the tax law's "primary purpose," during the FEC's efforts to craft a political committee rule in 2004.   Yet what constitutes major purpose and primary purpose remain, as you know, a hot topic of debate.
>>
>>
>> John Pomeranz
>> Harmon, Curran, Spielberg&  Eisenberg, LLP
>> 1726 M Street, NW, Suite 600
>> Washington, DC  20036
>> office: 202.328.3500<tel:202.328.3500>
>> mobile: 703.597.7663<tel:703.597.7663>
>> fax: 202.328.6918<tel:202.328.6918>
>> e: jpomeranz at harmoncurran.com<mailto:jpomeranz at harmoncurran.com>
>>
>>
>>
>> -----Original Message-----
>> From: law-election-bounces at department-lists.uci.edu<mailto:law-election-bounces at department-lists.uci.edu> [mailto:law-election-bounces at department-lists.uci.edu<mailto:law-election-bounces at department-lists.uci.edu>] On Behalf Of Rick Hasen
>> Sent: Friday, March 16, 2012 6:07 PM
>> To: law-election at uci.edu<mailto:law-election at uci.edu>
>> Subject: [EL] query on 501c4 IEs and the FEC PAC rules
>>
>> I understand that in this election cycle and the last (since CU) 501c4 organizations (which did not qualify as MCFL/QNC corporations) have been running not just electioneering communications ads, but also making independent expenditures (including express advocacy).
>> How do 501c4s which are making IEs argue that they need not register with the FEC as a political action committee?  Are they arguing that electioneering is not their major purpose (along the lines of how they argue to the IRS that election related activity is not the "primary activity" for tax purposes)?
>>
>> Thanks.
>> Rick
>> --
>> Rick Hasen
>> Chancellor's Professor of Law and Political Science UC Irvine School of Law
>> 401 E. Peltason Dr., Suite 1000
>> Irvine, CA 92697-8000
>> 949.824.3072<tel:949.824.3072> - office
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>> rhasen at law.uci.edu<mailto:rhasen at law.uci.edu>
>> http://law.uci.edu/faculty/page1_r_hasen.html
>> http://electionlawblog.org
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Stephen M. Hoersting

--
Rick Hasen
Chancellor's Professor of Law and Political Science
UC Irvine School of Law
401 E. Peltason Dr., Suite 1000
Irvine, CA 92697-8000
949.824.3072<tel:949.824.3072> - office
949.824.0495<tel:949.824.0495> - fax
rhasen at law.uci.edu<mailto:rhasen at law.uci.edu>
http://law.uci.edu/faculty/page1_r_hasen.html
http://electionlawblog.org

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