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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.

Mr. Garrahan’s prior career in political fundraising…

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.

Mr. Garrahan’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.

Mr. Garrahan is a member of the Virginia and District of Columbia bars.

Photo of Matthew Shapanka Matthew Shapanka

Matthew Shapanka draws on more than 15 years of experience from Capitol Hill, private practice, state government, and political campaigns to counsel clients significant legislative, regulatory, and enforcement matters. He develops and executes complex, multifaceted public policy initiatives for clients seeking actions by…

Matthew Shapanka draws on more than 15 years of experience from Capitol Hill, private practice, state government, and political campaigns to counsel clients significant legislative, regulatory, and enforcement matters. He develops and executes complex, multifaceted public policy initiatives for clients seeking actions by Congress, state legislatures, and federal and state government agencies, many with significant legal and political opportunities and risks. Matt also leads the firm’s state policy practice, advising clients on complex multistate legislative and regulatory policy matters and managing state advocacy efforts.

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, including federal election and campaign finance law, Federal Election Commission nominations, and oversight of legislative branch agencies, U.S. Capitol security, and Senate rules and regulations. Most significantly, Matt led the Committee’s staff work on the Electoral Count Reform Act – a landmark bipartisan law enacted in 2022 to update the procedures for certifying and counting votes in presidential elections —and the Committee’s joint (with the Homeland Security Committee) bipartisan investigation 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 also an experienced legislative drafter who has composed dozens of bills introduced in Congress and state legislatures, including several that have been enacted into law across multiple policy areas.

In addition to his policy work, Matt advises and represents clients on the full range of political law compliance and enforcement matters involving federal election, campaign finance, lobbying, and government ethics laws, the Securities and Exchange Commission’s “Pay-to-Play” rule, and the election and political laws of states and municipalities across the country.

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