Interpretative Opinion No. 2021-02
September 30, 2021
Thorn Pozen, Esq.
Goldblatt Martin Pozen LLP
1432 K Street NW, Suite 400
Washington, DC 20005
Dear Mr. Pozen,
This responds to your request for an opinion regarding whether, under the hypothetical facts you set forth, the Office of Campaign Finance (OCF) would consider the 501(c)(4) to be a D.C. Independent expenditure committee (IEC), as defined in D.C. Code Section 1-1161.01(28B).
You indicated the following in your hypothetical facts:
The IEC is properly organized and operated pursuant to D.C. Code Section 1-1163.07-17, including timely submitting required reports and receipts and expenditures to OCF as required by D.C. Code Section 1-1163.09.
The 501(c)(4) is properly established and operated pursuant to federal and District law, including being not organized for profit and operating exclusively for the promotion of social welfare, pursuant to 26 U.S.C. Section 501 (c)(4).
Please also assume that the referenced entities are wholly independent of one-another and do not have overlapping board members, officers, or employees.
Additionally, assume that neither the IEC nor the 501(c)(4) is controlled by or coordinated with any public official or agent of a public official, including a political committee.
Further, the majority of contributions to the IEC may be from the 501(c)(4), with the remainder, if any, would come from individuals and other appropriate sources. The IEC’s expenditures will consist solely of independent expenditures, as defined in D.C. Code Section1-1161.01(28A).
All contributions to the 501(c)(4) will be made for the purpose of promoting social welfare. No more than forty percent of the 501(c)(4)’s expenditures would be contributions to the IEC. The remaining (majority) of the 501(c)(4)’s expenditures are for non-political campaign activity that promotes social welfare by furthering the common good and general welfare of the people of the community (and otherwise in full accord with IRS rules).
In your analysis, you stated the following:
“Pursuant to D.C. Code Section 1-1161.01(28B), an “Independent expenditure committee” means any committee, club, association, organization, or other group of individuals that: (A) Is organized for the purpose of making independent expenditures; (B) Is not controlled by or coordinated with: (i) Any public official; or (ii) An agent of a public official, including a political committee; and (C) Does not transfer or contribute to: (i) Political committees; (ii) (Political action committees; or (iii) Candidates.”
Based upon the statute, infra, it appears that the 501(c)(4) does not meet the definition, and therefore, should not characteristically be viewed as an IEC since it is not organized for the purpose of making independent expenditures; it operates exclusively for the promotion of social welfare, dedicating at least 60% of its expenditures to non-political campaign activity that promotes social welfare; is not controlled by or coordinated with any public official or an agent of a public official, including a political committee, (which does not include an independent expenditure committee).”
the proposed 501(c) (4) may not legally or technically be viewed as an IEC, it has the distinct ability and practical effect of being utilized to fund the IEC and possibly obscure or fail to disclose the identity of contributors to whose funds were transferred to the IEC. In view of the fact that 40% of 501(c) (4) organizations expenditures will be for political campaign activity, (even if they are entirely contributions to the IEC, as opposed to being utilized for the purpose of promoting or opposing the nomination or election of a candidate) the process would not be consistent with the standards of transparency that should govern campaign contributions. Under the scenario proposed in your inquiry transparency of campaign contributions will not be forthcoming.
Consequently, while the 501(c)(4) may not be viewed as an independent expenditure committee pursuant to D.C. Code Section 1-1161.01(28B), the establishment and operation of an independent expenditure committee (IEC) and a District of Columbia non-profit corporation with tax-exempt status under 15 USC Section 501(c) (4), allowing 40% of its contributions to the IEC, without identifying the particulars, i.e. name, employer, and address of the contributors is problematic for the OCF and has the potential of running afoul of the disclosure required under D.C. Official Section 1-1163.13. The vehicle proposed for using contributions from the non-profit to fund independent expenditures by the IEC may circumvent the intent of 1-1163.13 (b) (3) (B), which requires organizations that make independent expenditures in excess of $1,000.00 to file reports disclosing the identity of any person making contributions
in excess of $500.00. Further, the disclosure requirements pertaining to bundling of contributions in excess of $5,000.00 under D.C. Code Section 1-1163.09 may also apply.
Therefore, it is the opinion of the Office of Campaign Finance that the scenario described in the hypothetical you submitted, would indeed raise legal concerns regarding the potential reporting responsibilities under the Campaign Finance Act of the 501 (c) (4), and its purposes and functions,
In view of the fact that 40% of its contributions will be dedicated to the IEC, and the IEC will rely on the 501 (c)(4) for the majority of its funding. Accordingly, the Office of Campaign Finance would not recommend such an undertaking.
The foregoing is an Interpretive Opinion of the Director of the Office of Campaign Finance. Pursuant to D.C. Official Code Section 1-1103.05, you are entitled to request an Advisory Opinion from the Board of Elections and Ethics on this transaction or activity.
Should you have any additional questions, please contact William O. San Ford, General Counsel, at (202) 671-0550.