FEDERAL ELECTION COMMISSION WASHINGTON, D.C. 20463

 

 

MEMORANDUM

TO: Patricia C. Orrock

 Chief Compliance Officer

 Thomas E. Hintermister

 Assistant Staff Director

 Audit Division

FROM: Neven F. Stipanovic 

Acting Associate General Counsel

Policy Division

 Lorenzo Holloway 

 Assistant General Counsel

 Compliance Advice 

Margaret J. Forman

Attorney 

SUBJECT: Proposed Interim Audit Report on Ambulatory Surgery Center Association PAC 

(LRA 1072) 

I. INTRODUCTION 

 The Office of the General Counsel has reviewed the proposed Interim Audit Report 

(“proposed IAR”) on Ambulatory Surgery Center Association PAC (“ASCAPAC” or 

“Committee”). The proposed IAR contains five findings: (1) Misstatement of Financial 

Activity, (2) Receipt of Prohibited Contributions, (3) Recordkeeping for Receipts, (4) Disclosure 

of Receipts, and (5) Untimely Deposit of Receipts.1

 We generally concur with the findings and 

 1 We recommend that the Commission consider this document in Executive Session because the 

Commission may eventually decide to pursue an investigation of matters contained in the proposed IAR. 

11 C.F.R. §§ 2.4(a) and (b)(6).

October 3, 2018
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comment on findings 2, 3, and 5. If you have any questions, please contact Margaret J. Forman, 

the attorney assigned to this audit.

II. FINDING 2 – CONTRIBUTIONS FROM PROFESSIONAL LIMITED 

LIABILITY COMPANIES ARE SUBJECT TO 11 C.F.R. § 110.1(g); CONTRIBTUIONS 

FROM LIMITED PARTNERSHIPS ARE SUBJECT TO 11 C.F.R. § 110.1(e)

The proposed IAR states that the Committee received $2,014 in contributions from 

“limited partnerships” and “professional limited liability companies” and the proposed IAR then 

categorizes them as prohibited contributions under the Federal Election Campaign Act of 1971, 

as amended (the “Act”). The Audit Division asks whether these contributions are properly 

treated as prohibited contributions. The Audit Division notes that the 2016 Unauthorized 

Committee Error Definitions refer to contributions from limited liability companies (“LLCs”)

and limited liability partnerships (“LLPs,”) but mention no other business organizations (such as 

limited partnerships or professional limited liability companies). The Committee argues that it 

was not responsible for determining the legality of the LLC contributions. We address the Audit 

Division’s question and the Committee’s argument below.

With respect to the Committee’s contributions received from limited partnerships

(“LP’s”), we conclude that the Audit Division should analyze these contributions in the same 

manner as contributions from any other partnership. See 11 C.F.R. § 110.1(e); see also

Treatment of Limited Liability Companies Under the Federal Election Campaign Act, 64 Fed. 

Reg. 37,397-37,398 (July 12, 1999). Neither the Act nor Commission regulations draw a 

distinction between general partnerships and limited partnerships. Thus, we look to the law in 

each respective LP’s State of organization to determine whether the LP should be treated as a 

corporation. Advisory Opinion 2008-05 (Holland & Knight). 

The LPs in this case are organized in the states of California, Delaware, and Wisconsin. 

In each of these states, a limited partnership, similar to a limited liability partnership, is a type of 

partnership under state law. See California Uniform Limited Partnership Act of 2008, Cal. Corp. 

Code 4.5 [15,900-15,912.07]; Delaware Limited Partnerships, Del. Code Title 6, § 17-101(9); 

Wisconsin Uniform Limited Partnership Act, Wis. Stat. § 179.01(7). Because each of these LPs 

was organized and operates as an LP — and not as a corporation — under the respective state

laws, each LP is treated as a partnership under the Act and Commission regulations. See 

Advisory Opinion 2008-05 (Holland & Knight). We, therefore, conclude that a contribution 

from one of these limited partnerships is governed by the attribution requirements for a 

partnership, 11 C.F.R. § 110.1(e), and should not be treated as a prohibited corporate 

contribution. 

With respect to the Committee’s contributions received from professional limited liability 

companies (“professional LLCs”), we conclude that the Audit Division should analyze these 

contributions in the same manner as contributions from any other LLC. Nothing in the 
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Commission’s regulations distinguishes professional LLCs from any other type of LLC.

2

 An 

LLC “is a business entity that is recognized as a limited liability company under the laws of the 

State in which it is established.” 11 C.F.R. § 110.1(g)(1). We conclude, therefore, that the Audit 

Division should examine the legality of the contribution based on how the professional LLC 

elected to be treated by the Internal Revenue Service. Id.

Finally, the Committee maintains that it was not responsible for determining the status of 

the LLCs, and it asserts that it sought full compliance with the ‘best efforts’ obligations in the 

Commission’s regulations. Committee Response to Exit Conference. According to the Audit 

Division, the Committee made at least one attempt to ascertain the status of the LLCs. 

We disagree with the Committee. Commission regulations require a committee treasurer 

to exercise best efforts to determine the legality of the contribution received, and if the legality 

cannot be determined, the treasurer must refund the contribution to the contributor within 30 

days of receipt. 11 C.F.R. § 103.3(b)(1). Under 11 C.F.R. § 110.1(g)(5), the LLC “shall, at the 

time it makes the contribution, provide information to the recipient committee as to how the 

contribution is to be attributed and affirm to the recipient committee that it is eligible to make the 

contribution.” This provision was intended to assist the Committee in determining the legality of 

the contribution. See Treatment of Limited Liability Companies Under the Federal Election 

Campaign Act, 64 Fed. Reg. 37,397, 37,399 (July 12, 1999) (purpose or requirement that LLC 

provide information on corporate status to help committee avoid inadvertently accepting an 

illegal contribution — noting that committee has no other way of determining legality other than 

by obtaining this information); Advisory Opinion 1995-19 (Indian-American Leadership 

Investment Fund) (“Commission regulations prescribe the obligations of a committee treasurer 

upon receipt of a contribution that appears unlawful or presents genuine questions of illegality 

when received, or upon discovery of the contribution’s unlawful nature at a later date”). Here, 

while the Committee made an attempt to ascertain the status of the LLCs, the Committee 

ultimately was unable to determine the legality of these contributions, and therefore was required 

to refund them within 30 days of receipt. 11 C.F.R. § 103.3(b)(1). 

 2 Furthermore, when the Commission first promulgated its regulations regarding the treatment of LLCs 

under the Act, it considered the potential distinction of professional corporations due to a reference in the legislative 

history to professional corporations. The Commission noted that Congress directed “the Commission to look to 

State law to determine the status of professional corporations, but is silent as to all other types of corporations.” 

64 Fed. Reg. at 37,399; citing H.R. Rept. 1438 (Conf.). 93d Cong., 2d Sess. 68-69 (1974). 

Ultimately, the Commission reasoned that, because the legislative history only references professional 

corporations, but was silent as to all other types of corporations, as well as LLCs, “Congress did not ‘directly 

address the precise question at issue’ – whether the definition of corporation includes LLCs.” Id. 64 Fed. Reg. at 

37,399 (emphasis included in original); citing H.R. Rept. 1438 (Conf.). 93d Cong., 2d Sess. 68-69 (1974). 

Therefore, “the Commission is free to refer to the IRS rules, as long as its interpretation is not ‘manifestly contrary 

to the statute.’” Id.; citing Chevron U.S.A., Inc. v. National Resources Defense Council, Inc., 837 U.S. 837, 842-44 

(1984)). Under the same reasoning, we see nothing manifestly contrary to the Act in applying the provisions of 

11 C.F.R. § 110.1(g) to professional LLCs. 
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III. FINDING 3 – BECAUSE OF THE DUAL ATTRIBUTION RULE, THE 

COMMITTEE IS REQUIRED TO KEEP RECORDS OF THE AMOUNT OF 

CONTRIBUTIONS FROM THE INDIVIDUAL PARTNERS, IN ADDITION TO THE 

PARTNERSHIP CONTRIBUTION

The proposed IAR states that the Committee failed to maintain information about the 

attribution of $60,730 in contributions received from partnerships. The Audit Division asks how 

the proposed IAR should address the Committee’s failure to maintain these partnership 

contribution attribution records. 

There are two regulatory provisions at issue here: 11 C.F.R. §§ 102.9 and 104.14(b)(1). 

Section 102.9 requires the Committee to maintain an account of contributions received, which 

includes the names and addresses of contributors, the date of receipt and the amount of such 

contribution, for contributions greater than $50. 11 C.F.R. § 102.9(a)(1). Under the dual 

attribution rule for partnerships, the contribution is attributable to the partnership, and to each 

individual partner as specified. 11 C.F.R. § 110.1(e); see also Contribution and Expenditure 

Limitations and Prohibitions, Contributions by Partnerships, 52 Fed. Reg. 760, 764-765 (Jan. 9, 

1987) (Commission clarifying that the contributions are attributable to both the partnership and 

the individual partners, noting that the rule “ensures that members of a partnership do not receive 

the benefit of an additional contribution ceiling that is not available to others who do not belong 

to a partnership,” and retaining the partnership contribution limitation as required under the Act). 

Because the contribution is attributable both to the partnership as a contributor, and to the 

individual partners as individual contributors, the Committee must keep an account of the 

contributor information of the partnership as well as the individual partners who are 

contributors.3

 11 C.F.R. § 102.9(a)(1); see 11 C.F.R. § 110.1(e); 52 Fed. Reg. at 764-765. 

Specifically, the Committee must keep an account of the name and address of each contributor, 

the date of receipt, and the amount of the contribution from each contributor. 

11 C.F.R. § 102.9(a)(1); see 11 C.F.R. § 110.1(e). Although the Committee has kept an account 

of some of the required contributor information, the Committee does not have a record of the 

amount of the contribution from each individual partner. Because of the attribution rule, the 

Committee is required to keep records of the amount of contributions from the individual 

partners, in addition to the partnership contribution. 11 C.F.R. § 102.9(a)(1); see 

11 C.F.R. § 110.1(e). Thus, we conclude that the Committee failed to comply with 

11 C.F.R. § 102.9, because it did not maintain the required information about the attribution of 

$60,730 in contributions received from partners within the partnerships. 

Additionally, the Audit Division asked whether the recordkeeping requirements of 

11 C.F.R. § 104.14(b)(1) apply to the partnership contributions. We conclude that it does. The 

proposed IAR notes that the Audit Division lacks partner attribution information. See proposed 

 3 The Committee must also maintain a full-size photocopy of each check or written instrument, or a digital 

image of each check or written instrument, which digital image must be accessible at no cost to the Commission. 

11 C.F.R. § 102.9(a)(4). This requirement is in addition to the accounting of contributor information required in 

section 102.9(a)(1). From the information provided by the Audit Division, the Committee has maintained the 

information required under section 102.9(a)(4). 
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IAR at 10. Without this attribution information, the Audit Division cannot verify whether the 

Committee attributed the contributions appropriately in the proposed IAR. Id.

Section 104.14(b)(1) requires a political committee to keep records of necessary 

information and data in sufficient detail so that the filed reports and statements may be verified, 

explained, clarified, and checked for accuracy and completeness. Because the Committee 

reported partnership contributions, it must maintain detailed records regarding those 

contributions, including, but not limited to, vouchers, worksheets, receipts, bills and accounts. 

11 C.F.R. § 104.14(b)(1). The attribution information is necessary to ensure that the Committee 

reported the correct amount of contributions from each individual partner.

IV. FINDING 5 – CREDIT CARD CONTRIBUTIONS TRANSFERRED TO 

COMMITTEE ACCOUNT AFTER TEN DAYS ARE UNTIMELY DEPOSITED

The proposed IAR states that the Committee failed to deposit 104 contributions totaling 

$81,480 within 10 days of receipt, as required by 11 C.F.R. § 103.3(a). The Committee 

maintains that two of these contributions — totaling $2,852.12 — were deposited in error and 

therefore the 10 day rule should not apply to them. Committee Response to Exit Conference. 

The Committee also maintains that ten of these contributions — aggregating $7,732.12 — were 

received and processed through a credit card holding account by the Committee’s FEC 

compliance consultant. Id. The Committee listed this credit card holding account as a cash 

account on its ledger. Id. These funds subsequently were transferred to the Committee’s bank 

account. Id. The Committee maintains that these items should not be included on the list of late 

deposits. Id. 

We disagree with the Committee on both counts. First, we note that depositing the funds 

in error does not excuse the Committee’s failure to comply with the ten day rule. Section 

103.3(a) is clear: all deposits must be made within ten days of the Committee’s receipt. 

11 C.F.R. § 103.3. Second, a credit card contribution is considered received on the date that the 

credit card holder authorizes his or her card to be charged with the contribution. See Advisory 

Opinions 2012-35 (Global Transaction Services Group), 2012-17 (Red Blue T et al.), 1995-34 

(Politechs) and 1990-04 (American Veterinary Medical Association). According to the Audit 

Division, all of the funds in the credit card holding account were from credit card contributions, 

with no cash contributions included, and were not accessible to the Committee’s staff until the 

funds were deposited into the Committee’s bank account, which we understand was more than

ten days after the date in which these funds were required to be deposited. Proposed IAR; see 

11 C.F.R. § 103.3(a); Final Audit Report on the Democratic Party of Orange County FED PAC, 

at 7-9 (Sept. 29, 2011). Therefore, any credit card contribution deposited into the Committee’s 

bank account more than ten days from the date the credit card holder authorized the credit card to 

be charged is untimely deposited for the purpose of 11 C.F.R. § 103.3(a). See Advisory 

Opinions 2012-35 (Global Transaction Services Group), 2012-17 (Red Blue T et al.), 1995-34 

(Politechs) and 1990-04 (American Veterinary Medical Association); Final Audit Report on the 

Democratic Party of Orange County FED PAC, at 7-9 (Sept. 29, 2011). 
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Although we concur with the proposed IAR, we believe that the Committee should have 

an opportunity to provide information that could have an impact on the finding. We recommend 

that the Audit Division seek additional information from the Committee about whether the credit 

card holding account was a depository of the Committee. This credit card holding account was 

maintained by Aristotle, the Committee’s compliance consultant. Advisory Opinion 1999-22 

(Aristotle) references a statement that participating committees will designate the vendor’s joint 

merchant account as a depository in its Statement of Organization. See Advisory Opinion 1999-

22 (Aristotle), at 3, 7. The Commission, however, has recognized the concept of holding a 

vendor’s merchant account as a committee depository in Advisory Opinion 1995-34 (Politechs), 

and relied upon provisions of the Act and Commission regulations mandating that all receipts of 

a political committee be deposited in a qualified bank or credit union depository. See Advisory 

Opinion 1999-22 (Aristotle), at 3. It is our understanding that the Committee did not designate 

the vendor’s merchant account as a depository in this matter. But see NPRM on Technological 

Modernization, 81 Fed. Reg. 76,416, 76,427-28 (Nov. 2, 2016) (Commission considers whether 

to abolish the Aristotle Advisory Opinion disclosure requirement).