Bolder Advocacy

While corporations may generally make independent expenditures without organizing and registering a PAC (so long as these activities are not the corporation’s major purpose), they are required to report aggregate independent expenditures over $250 relating to a specific federal race on FEC Form 5 (“Report of Independent Expenditures Made and Contributions Received”). The report, filed quarterly, must list every individual and entity that was paid more than $200 in the aggregate during a calendar year in connection with independent expenditures, the amount paid and the purpose of the disbursement.In addition, the quarterly report must disclose certain contributor information:

• each contributor (other than an FEC-registered political committee) since January 1 of more than $200 overall that was earmarked for political purposes in support of or opposition to federal candidates, together with the date and amount of any such contribution(s); and
• of these contributors, the report must specify which contributed over $200 overall for the purpose of furthering any IE. Electronic filers should use a memo text entry to provide this information. Paper filers may add this information next to the applicable transaction on Schedule 5-A.

A “contribution” includes any gift, subscription, loan, advance, or deposit of money or anything of value made by any person for the purpose of influencing any election for federal office. So, the group does not have to report all of the donations it has received, but it will have to determine which receipts meet this description. Without further FEC or judicial guidance, a group should consider, at a minimum, as to each receipt (i) the language and context of its solicitation, (ii) the donor’s expressed intent, and (iii) any other factors that may bear on identifying the purposes of the donation.

Footnotes 36 and 37:

The FEC issued guidance on disclosure of contributors and the standards for quarterly reports due from all groups that are not FEC-registered political committees when they make federal independent expenditures aggregating over $250 during the quarterly reporting period. This FEC guidance describes what information about donors is expected in order to comply with the U.S. District Court’s August 3, 2018 ruling in CREW v. FEC, which invalidated the longstanding FEC regulation that required groups to report only contributions they received whose purpose was to support their particular reported independent expenditures. On August 21, 2020, the United States Court of Appeals for the District of Columbia affirmed the lower court’s decision.

In a non-precedential “private letter ruling,” PLR 202005020 here, the IRS concluded that a public charity would violate its 501(c)(3) status if it were the sole shareholder of a for-profit subsidiary that establishes and operates a 527 political committee and uses the public charity’s resources, including employees and offices, for that purpose, even where the PAC pays fair market value to the public charity for those resources.  This ruling raises unanswered questions and appears inconsistent with IRS’ prior guidance and well-established law based on the principles set out in judicial precedents including Regan v. Taxation with Representation, 461 U.S. 540, 545 (1983), and Moline Properties, Inc. v. Commissioner, 319 U.S. 436 (1943); as always, AFJ recommends consulting legal counsel.Of course, we will keep you informed of further developments in this area.