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The U.S. House Committee on Appropriations is considering a major change to the way trade associations are allowed to raise money into their political action committees (PACs).  Currently, if a trade association wants to solicit money from its member companies’ employees, it must first get advance approval from the company, and each company can authorize only one trade association to solicit its employees for any calendar year.  The current draft of the Financial Services and General Government Appropriations bill, which provides funding for the Federal Election Commission (FEC), includes a rider that would prohibit the FEC from using any of the appropriated funds to enforce these trade association PAC fundraising rules.  In another piece of welcome news for trade associations, the bill would also prohibit the Securities and Exchange Commission (SEC) from requiring public disclosure of companies’ trade association dues payments, a provision which was also successfully included in last year’s appropriations bill by agreement with the White House.

The practical effect of this provision would be that the FEC could not enforce the existing restrictions on trade association PAC fundraising at all during fiscal year 2018 (October 1, 2017 through September 30, 2018).  If this provision were not enforced, this could have a major impact on trade association PAC fundraising.  The dual restrictions of 30118(b)(4)(D) can severely limit a trade association’s ability to raise money for its PAC.  Currently, if a trade association wants to solicit a member company’s employees, it must first convince the company to allow the solicitation, but the FEC’s rules severely limit what the trade association can say when making the request.  Most companies are members of more than one trade association, but can currently only approve one of those associations’ PAC solicitations.  Thus, companies must choose between supporting the PAC of a large business-wide trade association (like the Chamber of Commerce or National Association of Manufacturers), or a more industry-specific trade association.  With these burdens lifted, trade associations will be able to solicit funds freely from the executives, administrative staff, and stockholders of all of their member companies, plus those individuals’ families.  This should come as welcome news to trade associations, but will be less exciting to member company executives who could face an onslaught of new solicitations.

However, this all comes with two major caveats.  First, the bill does not eliminate the solicitation rule.  Instead, it essentially prohibits enforcement of the rule for FY2018.  If the FY2019 appropriations bill does not contain the same restriction as this FY2018 bill, then the FEC presumably could resume enforcement of violations, including violations that occurred in FY2018.  Second, even if the FEC is barred from enforcing this prohibition, the Department of Justice might theoretically be able to, acting independently, bring criminal charges for knowing and willful violations.

Therefore, even if this provision remains in the final bill, it would be prudent to seek advice of counsel before making a solicitation that violates the fundraising restrictions.  The bill passed through subcommittee markup on Thursday with no changes.The same bill also includes other political and election law provisions, including elimination of the Election Assistance Commission, which provides guidance on election best practices; restrictions on the IRS’ ability to enforce the rule against religious organization political activity; a prohibition on any IRS rulemaking that would regulate the political activity of 501(c)(4) social welfare organizations; and a prohibition on any SEC requirement that companies disclose their political contributions or trade association dues.

 
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Photo of Andrew Garrahan Andrew Garrahan

Andrew Garrahan represents and counsels clients at the intersection of law and politics. He guides them through both regulatory compliance issues and government investigations on matters including state and federal campaign finance, ethics, lobbying, and corruption, as well as in congressional investigations.

Andrew’s…

Andrew Garrahan represents and counsels clients at the intersection of law and politics. He guides them through both regulatory compliance issues and government investigations on matters including state and federal campaign finance, ethics, lobbying, and corruption, as well as in congressional investigations.

Andrew’s prior career in political fundraising gives him a unique perspective on the challenges faced by his clients, which include corporations, candidates, government officials, political and nonprofit organizations, and private individuals.

Andrew’s counseling and advisory practice includes:

guiding clients on structuring of and compliance for their state and federal lobbying and grassroots advocacy campaigns;
representing campaigns, Super PACs, corporations, trade associations, and individuals on the applicability of the Federal Election Campaign Act (FECA) and state campaign finance law;
counseling on Foreign Agents Registration Act (FARA) registration and disclosure, and its interaction with the Lobbying Disclosure Act (LDA);
helping companies comply with state and federal ethics laws, particularly on gifts and conflicts of interests, and domestic anticorruption; and
auditing corporate political law compliance practices.

Andrew’s investigations and defense work includes:

representing clients in Congressional investigations, including responding to letter requests and subpoenas;
preparing company officers and other individuals for testimony in Congressional investigative hearings;
defending clients in Department of Justice matters related to campaign finance, lobbying, ethics, and public corruption; and
representing clients before the FEC and state campaign finance, lobbying, and ethics regulators.

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Photo of Matthew Shapanka Matthew Shapanka

Matthew Shapanka practices at the intersection of law, policy, and politics, developing strategies to guide businesses facing complex legislative, regulatory, and investigative matters. Matt draws on more than 15 years of experience across Capitol Hill, private practice, state government, and political campaigns to…

Matthew Shapanka practices at the intersection of law, policy, and politics, developing strategies to guide businesses facing complex legislative, regulatory, and investigative matters. Matt draws on more than 15 years of experience across Capitol Hill, private practice, state government, and political campaigns to advise clients on leading-edge policy issues involving artificial intelligence, semiconductors, connected and autonomous vehicles, and other critical and emerging technologies.

Matt works with clients to develop and execute complex public policy initiatives that involve legal, political, and reputational risks. He regularly assists clients to:

Develop public policy strategies
Draft federal and state legislation and regulations
Analyze legislation, regulations, and other government initiatives
Craft testimony, regulatory comments, fact sheets, letters and other advocacy materials
Prepare company executives and other witnesses to testify before Congress, state legislatures, and regulatory bodies
Represent clients before Congress, the White House, federal agencies, state legislatures, and state regulatory agencies
Build and manage policy advocacy coalitions

He advises clients across multiple policy areas, including matters involving regulation of critical and emerging technologies like artificial intelligence, connected and autonomous vehicles, and semiconductors; national security; intellectual property; antitrust; financial services technologies (“fintech”); food and beverage regulation; COVID-19 pandemic response and recovery; and election administration and campaign finance.

Matt rejoined Covington after serving as Chief Counsel for the U.S. Senate Committee on Rules and Administration, where he advised Chairwoman Amy Klobuchar (D-MN) on all legal, policy, and oversight matters before the Committee. Most significantly, Matt staffed the Committee in passing the Electoral Count Reform Act – a landmark bipartisan law that updates the procedures for certifying and counting votes in presidential elections—and the Committee’s bipartisan joint investigation (with the Homeland Security Committee) into the security planning and response to the January 6, 2021 attack on the Capitol.

Both in Congress and at Covington, Matt has prepared dozens of corporate and nonprofit executives, academics, government officials, and presidential nominees for testimony at congressional committee hearings and depositions. He is a skilled legislative drafter who has composed dozens of bills and amendments introduced in Congress and state legislatures, including several that have been enacted into law across multiple policy areas. Matt also leads the firm’s state policy practice, advising clients on complex multistate legislative and regulatory matters and managing state-level advocacy efforts.

In addition to his policy work, as a member of Covington’s nationally recognized (Chambers Band 1) Election and Political Law Practice Group, Matt advises and represents clients on the full range of political law compliance and enforcement matters, including:

Federal election, campaign finance, lobbying, and government ethics laws
The Securities and Exchange Commission’s “Pay-to-Play” rule
Election and political laws of states and municipalities across the country

Before law school, Matt served in the administration of former Governor Deval Patrick (D-MA), where he worked on policy, communications, and compliance matters for federal economic recovery funding awarded to the state. He has also staffed federal, state, and local political candidates in Massachusetts and New Hampshire.

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