Posted April 18, 2007 by Paul S. Ryan

FEC Web-based Fundraising Decision Could Have Broad Repercussions

Visit virtually any candidate’s Web site, and you have the option of making a contribution by clicking on a Web-link on the homepage.  Who pays a candidate’s administrative costs for fundraising via the candidate’s Web site?  The candidate, of course.  Federal candidates and committees have long been required to use limited, hard money contributions to pay for all of their campaign-related expenses.  When someone other than the candidate or the committee pays such campaign-related bills, it has long been considered to be an in-kind contribution to the candidate.  But all of this could change tomorrow.

The FEC is scheduled to consider at its meeting tomorrow the question of whether a political committee that contracts its Web-based fundraising operations to an outside vendor must pay for the services itself or, instead, is permitted to off-load the costs to its contributors without the contributor’s payment of these costs being considered an in-kind contribution to the committee.  Despite the seemingly narrow scope of this question, the FEC’s answer could have far-reaching and negative implications for the future of political fundraising—so it is important that the Commission gets it right.

This question arises in the context of an Advisory Opinion Request from a company named Atlatl (AOR 2007-4).  Atlatl proposes to offer a fundraising service to federal political committees for the processing of contributions to such committees.  Specifically, a committee using Atlatl’s services would negotiate a price with the company and place a link on its Web site to Atlatl’s contribution-processing Web site.  Visitors to the committee’s Web site could then make a contribution to the committee via the Web-link and would be charged a percentage-based “convenience fee” (e.g., a $57.50 “convenience fee” for a $2,300 contribution).  Atlatl asks in AOR 2007-4 whether the dollar amount of the “convenience fee” charged to a contributor would be considered part of the contribution to the committee.

The Commission’s Office of General Counsel has produced two alternative draft opinions for the Commission’s consideration at its meeting tomorrow.  “Draft A” concludes that contributor payment of the “convenience fee” would be a contribution to the recipient committee, while “Draft B” concludes that contributor payment of the “convenience fee” would not be a contribution to the recipient committee.

The Campaign Legal Center, together with Democracy 21, filed comments with the FEC yesterday in response to the draft opinions—supporting “Draft A.”  “Draft A” recognizes that Atlatl “proposes to enter into agreements to provide services to political committees (i.e. processing contributions made to political committees) for a ‘convenience fee.’”  “Draft A” further recognizes that the amount of the “convenience fee” will be negotiated between Atlatl and the political committees, and that the “convenience fee” will “cover the costs that political committees, like other organizations that accept credit card payments, would have to pay for the processing services they receive.”  Most importantly, “Draft A” acknowledges that “by paying the ‘convenience fee,’ contributors would relieve recipient political committees of a financial obligation that political committees would otherwise have to pay for themselves, thereby providing something of value to these committees.”  Such a provision of “something of value” to a federal political committee clearly falls within the federal law definition of “contribution.”

“Draft A” also includes a long list of Advisory Opinions establishing that fundraising services provided to political committees, such as the processing of credit card contributions, must be paid for by such political committees.  See “Draft A” at 6-7 (citing Ad. Ops. 1999-8 (Specter), 1995-34 (Politechs), 1995-9 (NewtWatch), 1994-33 (VITEL), and 1991-1 (Deloitte & Touche)).

If the Commission reverses course this week and approves “Draft B”—concluding that contributor payment of the Atlatl’s “convenience fee” would not be a contribution to the recipient committee—the Commission would, simply put, be facilitating the evasion of federal contribution limits.  And the logic of such a move would seem to have broad and harmful applications to future political committee fundraising efforts.

Under the logic of “Draft B,” for instance, a political committee’s vendor costs for a fundraising event, such as a dinner, golf tournament or deep-sea fishing charter, could be shifted to the donors, and the payment of the vendor costs by the donors would not be treated as a contribution.  But just as the “entire amount paid to attend a fundraising or other political event … is a contribution,” 11 C.F.R. § 100.53, so too is the entire amount paid to make a contribution via a Web-based vendor hired by a committee to facilitate the making of such contributions.  In both situations, the political committee contracts with a vendor for a fundraising service and receives something of value.

For these reasons, the Campaign Legal Center is urging the Commission to approve “Draft A” of the alternative draft Advisory Opinions 2007-04.