July 14, 2005

FEC Permits Trade Associations to Use Payroll Deductions for Their PACs

3 min

On July 14, 2005, the Federal Election Commission reversed a nearly 30-year-old rule that prohibited corporate members of trade associations from using a payroll deduction to facilitate voluntary contributions to the trade association’s political action committee.  America’s Community Bankers petitioned the FEC almost two years ago to make this 180-degree change that will place trade association PACs on the same playing field as corporations and unions, which have long been allowed to use payroll deductions for their PACs.

The FEC’s old rule allowed members of trade associations to use any method to facilitate contributions from their executive personnel, but specifically prohibited the use of a payroll deduction.  ACB pointed out to the FEC that electronic payments and payroll deduction are now widely used and accepted and that there was simply no policy justification for the old rule.

The final rules will become effective 30 days after they are published in the Federal Register, which should happen within the next week.  Thus, the new rules should be in place by Labor Day.  Under the new rules, corporate members of trade associations will have to obtain signed consent from executive employees who wish to contribute via payroll deduction and retain this consent for the duration of the employees’ contributions.  The contributions will have to be forwarded to the trade association’s PAC, along with the name, address and occupation of the employees who contribute, so that the trade association can include this information in its reports to the FEC.  Of course, trade associations still must annually obtain written permission from their corporate members in order to solicit executive employees at all.  As always, the contributions must be voluntary and may not be reimbursed in any way. 

Finally, if a corporate member allows the use of payroll deduction for contributions to the trade association’s PAC, it must allow any unions that represent employees of the corporation (or its subsidiaries, branches or affiliates) to use a payroll deduction for contributions to the union’s PAC.  The union must reimburse the corporation for the cost of using payroll deduction.  This rule only applies if the corporation uses payroll deduction, and only if the union asks.

This change removes an anachronistic roadblock in the FEC’s rules that greatly restricted trade associations.  With this change, the FEC’s rules enter the 21st century and now allow trade associations to raise contributions more effectively for their PACs.  Contributors can now make relatively painless contributions to the trade association PAC through their paychecks and spread their contributions out over time – both features that corporate and union PACs have enjoyed for decades.

Ronald M. Jacobs, an attorney with Venable LLP in Washington, D.C., represented America’s Community Bankers before the Federal Election Commission.  Details: rmjacobs@venable.com. Venable publications are not intended to provide legal advice or opinion. Such advice may only be given when related to specific fact situations.