Thursday, October 6, 2011

Hybrid PACs: Super PACs And Traditional PACs Can Merge

Following its defeat in Carey v. FEC, the Federal Election Commission has announced new rules that allow traditional PACs to open a separate bank account to create a Super PAC.
The Commission is providing the following guidance to the public on how it intends to proceed consistent with the stipulated order and consent judgment in Carey: The Commission will no longer enforce 2 U.S.C. §§441a(a)(1)(C) and 441a(a)(3), as well as any implementing regulations, against any nonconnected political committee with regard to contributions from individuals, political committees, corporations, and labor organizations, as long as (1) the committee deposits the contributions into a separate bank account for the purpose of financing independent expenditures, other advertisements that refer to a Federal candidate, and generic voter drives (the “Non-Contribution Account”), (2) the Non-Contribution Account remains segregated from any accounts that receive source-restricted and amount-limited contributions for the purpose of making contributions to candidates, and (3) each account pays a percentage of administrative expenses that closely corresponds to the percentage of activity for that account. Until such time as the Commission adopts a new regulation, nonconnected political committees that wish to establish a separate Non-Contribution Account consistent with the stipulated judgment in Carey should: Notify the Commission of their intent to do so. In the case of political committees already registered with the FEC, the committee should notify their Reports Analysis Division analyst(s) by letter or electronic submission(3) of their intent to establish a separate Non-Contribution Account. In the case of newly registering political committees, include the notification letter with their Form 1 (Statement of Organization). The notification letter may state the following: “Consistent with the stipulated judgment in Carey v. FEC, this committee intends to establish a separate bank account to deposit and withdraw funds raised in unlimited amounts from individuals, corporations, labor organizations, and/or other political committees. The funds maintained in this separate account will not be used to make contributions, whether direct, in-kind, or via coordinated communications, or coordinated expenditures, to federal candidates or committees.”
This is a huge deal.  It means any non-connected PAC can start a Super PAC with the same name and accept unlimited contributions just by filing a paper with the FEC.  It means the Super PAC explosion is going to get a whole lot bigger.  Obviously, there are still many unanswered legal questions, and any PAC considering doing this should consult an attorney.  But this could be a game changer for many PACs.  It is also going to be a reporting nightmare until the FEC updates its forms.  


Related Articles: 
Roll Call: The Federal Election Commission said today that it is changing its rules for a new type of political action committee that is a hybrid of a super PAC and a traditional hard money committee.The agency released a legal guidance saying that it would no longer enforce previous prohibitions on how much corporations and labor unions may give to hybrid PACs as long as funds given to the super PAC component are kept in a separate bank account than the funds for the traditionally regulated PAC.
Huff Post: “This is a fantastic opportunity for grassroots & citizens PACs ... to significantly enhance their electoral & political advocacy, and they’d be nuts not to hire a campaign finance lawyer to help them navigate through this," Dan Backer, National Defense PAC's counsel and the principal attorney for DB Capitol Strategies, said by email. “I think folks have so far radically underestimated the profound changes that Carey v FEC will have on the entire PAC landscape.”The new FEC rules give guidance on how to register and disclose contributions for a hybrid PAC. This guidance includes a new form letter to be appended to PAC registrations announcing the intention of forming a PAC and super PAC under the same umbrella and new directions on how to use the current disclosure forms to differentiate unlimited contributions from limited contributions.
 Holtzman Vogel: FEC Provides Guidance To PACs On How To Set Up Unlimited IE Accounts. The FEC issued this statement yesterday, explaining that nonconnected PACs may now established separate accounts that are not subject to the normal contribution limits for the purpose of funding independent expenditures.
And since today is apparently Super PAC Day, here are some general Super PAC articles:


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