United States: Change In Regulation May Facilitate Fundraising By Trade Association PACS

Originally published August 17, 2005

Fundraising for trade association political action committees ("PACs") has become easier. A new rule adopted by the Federal Election Commission ("FEC") enables corporate members of trade associations to allow their employees to use payroll deductions, or "check-off systems," to make automatic contributions to trade association PACs. The rule also enables trade associations to save resources by allowing corporate trade association members to pay for the incidental expenses for payroll deductions by their employees. The new regulations become effective on August 22, 2005.

Prior to the rule change, trade associations had broad authorization to solicit contributions from their corporate members’ restricted classes (stockholders, executives, administrative personnel, and employees’ family members); however, FEC regulations made it cumbersome to collect them. Now, corporations are now free to establish automatic payroll deductions for employees who choose to support trade associations’ political activities.

Some important rules apply. First, a corporation may establish a check-off system only after the trade association submits a written request to the business. The corporation must "separately and specifically approve" the fundraising solicitation, and it cannot allow check-off systems for more than one trade association. Second, each employee who participates in the program must authorize the payroll deduction in writing and in advance of the initial contribution. Employers should maintain the authorization records for three years after the date of the employee’s final contribution. Finally, if the corporation establishes the payroll deduction service for a trade association, it must make the same service available upon request and at cost to any labor organization that represents the corporation’s employees.

What does this mean for trade association fundraising?

By enabling employees to deduct contributions and spread payments over time, trade associations may be able to increase fundraising support.

Check-off systems are widely used by businesses, and have proven to be dependable, low-cost alternatives to check payments. Therefore, corporations can save time and overhead by establishing programs for PAC contributions, rather than engaging in the burdensome effort of collecting checks.

Corporations and labor organizations are already authorized to use check-off systems for PAC fundraising. The FEC’s ruling equips trade associations with equivalent fundraising tools.

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