Volume 7, Number 11

THE FEDERAL ELECTION

COMMISSION

1325 KStreet NW., Washington, D.C. 20463

November 19B1

ADVISORY OPINIONS: SUMMARIES

An Advisory Opinion (AD) issued by the Commission

provides guidance with regard to the specific situation

described in the AOR. Under the 1979 amendments to the

Act, any person may request an AO on a specific activity

which the person intends to undertake. The requester

will not be subject to any sanctions under the Act if he/she

acts in accordance with the opinion. Other persons may

rely on the opinion if they are involved in a specific activity

which is indistinguishable in all material aspects from the

activity discussed in the AO. Those seeking guidance for

their own activity, however, should consult the full text of

an AD and not rely only on the summary given here.

AD 1981-32: Testing-the-Waters Activities

by Potential Presidential Candidate

Fourteen activities proposed by former Florida Governor

Reubin Askew to test the waters for a potential Presidential

candidacy in 1984 would be exempted by Commission

Regulations from the definitions of "contribution" and

"expenditure," so long as the purpose of the activities was

to decide whether he should become a candidate rather

than to affirm a decision he had already made to be a

candidate. If Governor Askew decided to become a candidate, any monetary or in-kind donations he received to help

him test the waters would become "contributions" subject

to the provisions of the Act. Records of all donations (i.e.,

funds, goods or services) should therefore be kept during

the testing-the-waters period: Moreover, any donations of

funds or in-kind donations collected for testing-the-waters

activities could be transferred to Governor Askew's principal campaign committee during the first reporting period

after he became a candidate. 11 C FR 101.2 and 101.3.

These funds would also be treated as "contributions" to

Governor Askew's campaign.

Under Commission Regulations, Governor Askew could finance a variety of activities (listed below) to test the feasibility of a potential candidacy for federal office. 11 CFR

100.7(bj(1) and (B)(b)(1). As long as these activities did

not entail public political advertising or represent the

establishment of a campaign organization, they would

not constitute campaign contributions or expenditu res and

would not cause Governor Askew to become a candidate

under the Act.

This means, for example, that statements by the Governor

and the name selected for the testing-the-waters effort

would have to avoid referring to Governor Askew as a

Presidential candidate. Moreover, if circumstances indicated

that Governor Askew had moved beyond the process of

deciding whether or not to become a candidate and into the

process of planning activities to heighten his political

appeal, he would become a candidate. In this regard, the

timing of the activities would be relevant. Activities conducted over a protracted period of time would suggest, for

example, campaign activity rather than testing-the-waters

activity. These considerations would be particularly retecontinued

SPECIAL ELECTION IN CONNECTICUT

Connecticut will hold special conventions and a special

general election in its First Congressional District to fill the

seat formerly held by the late Congressman William A.

Cotter. The Republican and Democratic nominating conventions are scheduled for November 23, 19B1. If a special

primary election is necessary, it will be held on December

15, 1981. The special general election will take place on

January 12, 19B2. The principal campaign committees of

candidates participating in the special conventions or running in the special primary or general election must file the

appropriate pre- and post-election reports in addition to

their year-end report. All other political committees which

support candidates in the special conventions or in the

special election(s) (and which do not report on a monthly

basis) must also follow this reporting schedule.

The FEC has sent notices on reporting requirements and

filing dates to individuals known to be actively pursuing

their party's nomination. All other committees supporting

candidates in the Connecticut special conventions or election(s) should contact the Commission for more information on required reports. Call 202/523-4068 or toll-free

800/424-9530_
vent with regard to items 12, 13 and 14 (listed below)

because each of these activities would involve substantial

contact with the public and thus have the potential for

promoting Governor Askew as a qualified candidate rather

than merely ascertaining whether he would be so perceived

by the public.

Permissible Testing-the-Waters Activities

1. Travel for the purpose of speaking to groups on public

issues and determining, through meetings with opinionmakers, whether support exists for his candidacy.

2. Employment of political consultants to advise him on

establishing a national campaign organization.

3. Rental of office space.

4. Rental and purchase of office equipment to help compile names and addresses of individuals interested in

organizing a national campaign.

5. Supplemental salary for a personal secretary who

would assist with testing-the-waters activities.

6. Reimbursement of Governor Askew's law firm for

assistance provided by an associate of the firm.

7. Reimbursement of the firm for incidental expenses

incurred for testing-the-waters activities.

8. Travel by Governor Askew for the purpose of being

briefed on public issues, including travel reimbursement for those who brief Governor Askew on issues.

9. Employment of a specialist to conduct polls.

10. Employment of an assistant to coordinate travel arrangements and travel with Governor Askew.

11. Solicitation of donations for testing-the-waters activities. (These funds would not be raised for a future

campaiqn.}

12. Employment of a public relations consultant to arrange

and coordinate speaking engagements for Governor

Askew, disseminate copies of his speeches and arrange

for the publication of articles by him in newspapers

and periodicals.

13. Preparation and use of letterhead stationery for correspondence with persons who have indicated an interest

in Governor Askew's campaign.

14. Preparation and printing of a biographical brochure

and photographs of Governor Askew to be used in

connection with his speaking engagements.

Note: None of the materials prepared for these testingthe-waters activities would be distributed to the general

public.

Since the testinq- the-waters exemption does not cover

activities designed to promote a candidacy, any funds

amassed by Governor Askew or his aides for a future

candidacy or any funds used for general public political

advertising would be considered contributions or expenditures subject to the provisions of the Act. Accordingly,

these funds would count toward Governor Askew's $5,000

threshold for candidate status, unless they were returned to

the donors within 15 days of their receipt. 11 CFR 100.3

and 101.1. Moreover, once Governor Askew became

a candidate, all donations and payments made to test the

waters would have to be reported as contributions and t

expenditures subject to the provisions of the Act and

Commission Regulations. 11 CFR 100.7(b)(1) and (8)(1);

101.3. (Date issued: October 2,1981; Length: 8 pages)

AD 1981-33: Fundraising Items Donated to Political Clubs

by Savings and Loan Association

The Astoria Federal Savings and Loan Association (Astoria)

may not donate table favors or raffle prizes to, or pay for

ads in the journals of, local political clubs affiliated with

the Democratic and Republican parties. These donations

and expenditures would constitute in-kind contributions

prohibited by 2 U.S.C. §441b(a).

Although Astoria's donations would be used primarily

for local political activities rather than federal campaigns,

the transactions would still be impermissible because the

Act specifically prohibits federally chartered corporations

from making contributions in connection with any election

or nominating procedure for any political office. 2 U.S.C.

§441b(a); 11 CFR 114.2(a). Astoria could, however,

donate favors to political party clubs and purchase ads in

their journals if the items and proceeds were not used

in connection with any election or nominating procedure

for any political office. (Date issued: September 21, 1981;

Length: 3 pages)

AD 1981·35: Committee Formed by Congressmen

to Influence Reapportionment

A committee formed by several Republican Congressmen

to "finance activities related solely to the Congressional

reapportionment process in California" (the Committee)

is not considered a "political committee" subject to the

Act's registration and reporting requirements or to the

Act's ban on corporate contributions. Contributors to the

Committee are not subject to the contribution limitations

and reporting requirements of the Act.

The Committee's efforts to influence reapportionment

decisions made by the California state legislature are

not subject to the requirements of the Act because they

are not considered election-influencing activity. Since each

state that loses or gains Congressional seats must make the

necessary decisions with regard to reapportionment, the

reapportionment process is a state activity separate and

distinct from the election process by which individuals are

selected for federal office. Similarly, litigation participated

in by the Committee as a result of the state legislature's

reapportionment decisions would not be considered election-influencing activity subject to the Act's prohibition on

The RECORD is published by the Federal Election Commission, 1325 K Street, N.W., Washington, D.C. 20463. Commissioners are: John Warren McGarry, Chairman; Frank P. Reiche, Vice Chairman; Joan D. Aikens, Thomas E. Harris;

Vernon W. Thomson; Robert O. Tiernan; William F: Hildenbrand, Secretary of the Senate, Ex Officio; Edmund L.

Henshaw, Jr., Clerk of the House of Representatives, Ex Officio. For more information, call 202/523-4068 or toll-free

8001424·9530.

2
corporate or labor organization contributions or other

requirements.

The Commission noted that the Committee would be

subject to the requirements of the Act and F EC Regulations if it engaged in activities that could be construed as

election advocacy. For example, the Committee would have

to register and report if it donated services or computer

data to a federal candidate or a political committee. Moreover, funds donated to the Committee by corporations and

other impermissible sources could not be transferred to a

political committee account or otherwise be used in connection with a federal election. Commissioner Robert O.

Tiernan fi led a statement explaining reconsideration of his

original vote. Vice Chairman Frank P. Reiche filed a concurring opinion and supplement. (Date issued: September

28, 1981; Length: 11 pages, including statement of reconsideration and concurring opinion)

AO 1981-39: Unions' Payments to Corporation

for Administrative Costs of Payroll

Deduction Plan

Unions representing employees of the Square 0 Company

(the Company) may enter into an agreement with the

Company through collective bargaining that would, in

effect, represent advance payment for costs the Company

will incur in administering a payroll deduction plan for the

unions. The payroll deduction plan will be used to collect

contributions to the unions' separate segregated funds from

employees who are members of the unions. The estimated

cost of the plan will be included in the settlement the

unions are currently negotiating with the Company.

Under the Act and Commission Regulations, a corporation

must permit a labor organization to use whatever plan

the corporation uses for collecting contributions to its

own separate segregated fund. The labor organization

would then reimburse the corporation for administrative

costs of the plan. 2 U.S.C. §441 b (b) (6), 11 CF R 114.5(k).

In this instance, the arrangement is permissible because

both the Company and the unions agree that the unions

will bear the administrative costs. (Date issued: October 5,

1981; Length: 3 pages)

AD 1981-40: Mementos Offered by a Corporation to

PAC Contributors

Bache Halsey Stuart Shields, Inc. (Bache) may use corporate treasury fu nds to purchase mementos for executive

employees who contribute to its separate segregated fund.

Under Commission Regulations, a corporation or labor

organization may offer such prizes to raise funds, provided

the prizes are not disproportionately valuable to the contributions generated. The Regulations provide that a "reasonable practice to follow is for the separate segregated fund to

reimburse the corporation or labor organization for costs

which exceed one-third of the money contributed." 11

CFR 114.5(b)(2}. See also AOs 1979-72 and 1981·7.

Bache's plan for distributing mementos complies with

this regulation because the value of the prizes is not disproportional to the amount of money contributed by an

employee. A memento costing $50, for example, is given

for a $1,000 contribution. (Date issued: October 6, 1981;

Length: 2 pages)

3

ADVISORY OPINION REQUESTS

Advisory Opinion Requests (AORs) pose questions on

the application of the Act or Commission Regulations to

specific factual situations described in the AO R. The following chart lists recent AORs with a brief description of

the subject matter, the date the requests were made public

and the number of pages of each request. The full text of

each AOR is available to the public in the Commission's

Office of Public Records.

Date Made No. of

AOR Subject Public Pages

1981-44 Multicandidate 9/16/81 16

committee's expenditures advocating candidate's defeat.

1981·45 Proposed methods for 9/22/81 8

transferring joint fundraising proceeds.

1981-46 Exchangeof mail ing lists 9/28/81 14

between political committee and other organization.

1981-47 Union payroll deduction 10/1/81 2

plan facilitating earmarked cnntributions.

1981·48 Local party orqaniza- 10/8/81 2

tion's recordkeepingand

reporting requirements

for bingo fundraisers.

ALTE RNATE DISPOSITION

OF ADVISORY OPINION REQUEST

AOR 1981-45 (see above) was withdrawn by its requester on September 22, 1981.

FEC v, NRWC; NRWC v, FEC

On September 4, 1981, the U.S. Court of Appeals for the

District of Columbia Circuit issued an opinion reversing an

earlier decision by the U.S. District Court for the District of

Columbia in the consolidated cases of National Right to

Work Committee, Inc. (NRWC) v. FEC and FEC v. NRWC

(Civil Action Nos. 78-0315 and 77-2175). The appeals

court found that the term "member" as used in Section

441 b(b) (4)(C) embraced " ... at least those individuals

whom NRWC describes as its active and supporting members... .rr i.e., " ...those individuals solicited by NRWC for

contributions to its separate segregated fund."
Complaints

In November 1977, the FEC filed suit against NRWC,

a nonprofit corporation without capltal stock, which

advocates voluntary unionism through disseminating

information to its members and the general public. (FEC

v. NRWC/ In its suit, the FEC claimed that, since both

NRWC's bylaws and the articles of incorporation it had

filed with Virginia stated that NRWC had no members,

NRWC had violated Section 441b(b)(4)(C) of the Act by

soliciting funds to its separate segregated fund from persons

other than members. (Under this provision, corporations

without capital stock may pay the costs of soliciting

contributions from their members to their separate segregated funds.) NRWC contended, on the other hand, that

its solicitations were permissible since those persons solicited were "members" of NRWC, within the meaning of

the Act and FEC Regulations." After receiving notice of

the FEC's intent to file a civil action, NRWC had filed su it

in October 1977 (NRWC v, FECl, seeking injunctive and

declaratory relief and challenging the constitutionality of

Sections 441 b(b)(4)(A) and (C) of the Act, Which, together, prohibit nonstock corporations from soliciting persons

other than their "members." Among its constitutional

claims, NRWC asserted that Section 441 bib) (4)(C) was

unconstitutionally vague and infringed on the First Amendment rights of free speech and association of those persons

solicited by NRWC. In February 1978, the cases were

consolidated for argument before the U.S. District Court

for the District of Columbia.

District Court Ruling

Referring to NRWC's articles of incorporation and

bylaws, the district court found that NRWC was organized

without members. The court held that NRWC had violated

Section 441 b(bJ(4l(C) by soliciting contributions to its

separate segregated fund from persons who were not

members of NRWC. The court found that the legislative

history of the Section 441 b membership exception required

a limited definition of "members." The court defined

"members" as those rr•••persons who have interests and

rights in an organization sim ilar to those of a shareholder in

a corporation and a union member in a labor organization.

To read the exception more broadly would be to upset the

symmetry of the statutory scheme." [501 F. Supp, 422,

432 (D.D.C. 1980)] The court noted that no class of

persons solicited by NRWC had been given any such participation rights in NRWC.

Appeals Court Ruling

Reversing the district court's ruling, the appeals court

held that the term "member" set forth at Section 441 bib)

(4)(C) fl •• • necessarily includes those individuals solicited

by NRWC...." The appeals court concluded that the

district court's definition of "member" was"...so narrow

that it infringes on associational rights." The court noted

that two identifiable public interests served by the Act (i.e.,

to eliminate the appearance or actuality of corruption

in federal elections and to prevent coercive contributions)

were not n . • •served by restricting the solicitation activities

• As defined by 11 CFR 114.1 (e], '''Members' mean all persons who

are currently satisfying the requirements for membership ....A

person is not considered a member...if the only requirement for

membership is a contribution to a separate segregated fund."

4

of a nonstock corporation organized solely for political

purposes." The court found that, "as to the first interest,

we believe that solicitation [alonel will neither corrupt

officials nor distort elections," As to the second interest,

the court found that " ...the individuals from whom

NRWC solicits contributions, unlike employees of a corporation or members of a labor union, clearly are not subject

to coercion." In the court's opinion, "the NRWC operation...ensures that NRWC accurately identifies and

solicits only those individuals who share a similar political

philosophy and who have evidenced a willingness to promote that philosophy through support of the Committee."

On October 19, 1981, the Commission filed a petition

with the appeals court for a rehearing of the case and a suggestion for an en bene rehearing.

JON EPSTEIN v. FEe

On September 23, 1981, the U.S. District Court for the

District of Columbia issued an order in Jon Epstein v, FEC

(Civil Action No. 81-0336) upholding the Commission's

determination in an administrative complaint that plaintiff

had brought against the Reader's Digest Assoc., Inc. in

March 1981.

Plaintiff's Claim

Plaintiff's suit sought review of the F EC's dismissal

of his complaint (Matter Under Review [MUR] 1283),

pursuant to 2 U.S.C. §437g. In the complaint, he alleged

that an ad Reader's Digest had placed in the August 27,

1980, edition of the Washington Post constituted illegal

corporate contributions to the campaigns of the Democratic and Republican Congressmen whose excerpted

articles had appeared in the ad (in violation of 2 U.S.C.

§441 b). Introductory and concluding copy in the ad had

also promoted Reader's Digest as a "forum for ideas."

Plaintiff claimed the FEC's dismissal of his complaint was

contrary to law.

The court found that the standard used by the FEC in

disrn issinq the complaint was not arbitrary or otherwise

contrary to law. The court held that the .t• • • Commission

may reasonably determine that expenditures on publicity

that have a purpose other than assistance of political candidates ... were not intended by Congress to be" regulated

by the Act. This is particularly true, the court said, when

the "major purpose" of the publicity is "not to advocate

the election of candidates, but to promote the organization

paying for the publicity." The court further noted that,

in making this determination, the FEC had "relied upon

a growing body of decisions ... that remove advertisements and other forms of publicity from the Act's prohibition" on corporate expenditures, even though the advertisements "may have political aspects."

Moreover, the court found no merit in plaintiff's argument

that the General Counsel's Report did not explain the

Commission's decision to dismiss the complaint. "The

General Counsel's Memorandum alone, if it is complete

enough to have provided a basis for the Commission decision to accept the General Counsel's recommendation, will

be adequate for judicial review under section 437g(a)(8)."

Nor did the court find merit in plaintiff's contention that

continued
the ad was partisan because it offered commentary only by

representatives of the two major parties. The court held

that the issue was not "the narrowness, or diversity, of the

political views" represented in the ad but rather whether

the ad served a "partisan purpose."

FEC v. HALL-TYNER ELECTION

CAMPAIGN COMMITTEE

On september 22, 1981, the U.S. District Court for the

Southern District of New York issued an order in FEC v.

Hell-Tyner Election Campaign Committee (the Committee)

granting the defendant's motion for summary judgment in

the suit (Civil Action No. 78 Civ, 3508). The Committee

was the principal campaign committee for the 1976 Presi"

dential nominees" of the Communist Party, U.S.A. The

district court ruled that the recordkeeping and disclosure

requirements of the Act, as applied to the Committee,

would abridge First Amendment rights of the Committee's

supporters.

FEC's Claim

The FEC's suit arose from the Committee's failure to

disclose on its reports the names and addresses of 424

contributors who had each made contributions of $100 or

more. Instead, the Committee listed the contributors as

"anonymous" (in violation of 2 U.S.C. §434(b)(2)).

Moreover, the Committee's treasurer failed to keep records

of contributions exceeding $50 from individuals who had

elected to remain anonymous (in violation of 2 U.S.C.

§432Icll. After attempting to resolve this matter through

informal methods of conciliation, the Commission filed suit

with the district court on August 1, 1978.

District Court's Ruling

In ruling that the Committee did not have to comply

with the Act's disclosure requirements, the district court

noted that the Supreme Court had not created a blanket

exemption for minor parties from the Act's disclosu re

requirements in its Buckley v, Valeo decision. The Supreme

Court did conclude, however, that minor parties might not

have to comply with the disclosure provisions when they

had a chilling effect on contributors' rights of free association. Buckley v.vsteo, 424 U.S. at 72·74.

In order to exempt contributors from the disclosu re reo

quirements, the Court said that a minor party would have

to demonstrate a "reasonable probability" that compelled

disclosure of the names of contributors would "subject

them to threats, harassment, or reprisals from either Government officials or private parties." Id. at 74. Under these

circumstances, disclosure could" ...instill sufficient fear

in potential supporters of the organization to deter them

from engaging in protected associational activity." Id at

71. On examining the evidence presented by the Committee, the district court found that "the record plainly

reflects an extensive history of governmental harassment

and public hostility directed at the Party and its members

and supporters." The district court concluded that "the

• In 1976, Gus Hall and Jarvisiyner were, respectively, the Presidential and Vice Presidential candidates of the Communist Party,

U.S.A.

5

substantial infringement of First Amendment rights demonstrated in the record cannot be justified by the governmental interests furthered by applying the FECA disclosure

requ irements to the defendants:' Moreover, the court

noted that "the governmental interest served in disclosing

the source and amount of contributions is less substantial"

in the case of a minor party. The district court cited the

Supreme Court's holding in Buckley that "the undue

influence of large contributions on officeholders" is reo

duced in the case of minor parties since their candidates are

less likely to win an election. Id. at 70.

Similarly, the district court found that the Act's recordkeeping requirements also infringed on the contributors'

free association rights, even though information recorded

would not be publicly disclosed. The court cited an ongoing

governmental investigation as evidence that records of contributors' names would SUbject them to undue harassment.

The district court cited 12 affidavits submitted by anonymous individuals providing evidence of harassment. The

district court found that the main governmental interest

served by the recordkeepi ng requirements (t.e, effective

monitoring and enforcement of the contribution limits] did

not justify infringement of the contributors' First Amendment rights.

The list below identifies all FEC documents that appeared in the Federal Register between September 30 and October 2, 1981. Copies of these notices are not available from

the FEC.

Federal Register

Notice Title Publication Date Citation

1981-9 11 CFR, Part 102 9/30/81 46 Fed. Reg.

Transfers, Collect- 48074

ingAgents and

Joint Fundraising

(Notice of Proposed Aulemaking)

1981-10 11 CFR, Part 114 9/30/81 46 Fed. Reg.

Communications 47800

by Corporations

and LaborOrganizations (Announcernent of Public Hearingon October 26,

1980

1981-11 Filing Datesfor 10/2/81 46 Fed. Reg.

Connecticut 48759

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