Sir Elton, the FEC, and you

When Elton John performed at a Radio City fundraiser for Sen. Hillary Rodham Clinton’s (D-N.Y.) candidacy last month, neither the entertainer nor the campaign likely foresaw the legal implications. But for the author of the hit “Goodbye Yellow Brick Road,” the ensuing hue and cry brought to mind another theme from “The Wizard of Oz”: When it comes to federal campaign finance law, “we’re not in Kansas anymore.”

Because Sir Elton is not an American citizen or green card holder, he was prohibited from making contributions to federal campaigns. Luckily for everyone involved, a Federal Election Commission (FEC) spokesman quickly confirmed that foreign nationals may volunteer their personal time and services. Still, the incident reminds us of the many restrictions that lobbyists and their clients face when volunteering for federal candidates — the extent to which they may use corporate or partnership resources and the paperwork they must file when raising money.

Before considering each of these issues, one must first understand the difference between contributions, which are extensively regulated, and volunteering, which is generally unrestricted. Federal law imposes various limits on how much individuals, partnerships (including some limited liability corporations, or LLCs) and political action committees (PACs) may contribute to federal candidates and parties. And it outright prohibits contributions from certain other sources (such as corporations, labor unions and foreign nationals). Those limitations apply to non-monetary, “in-kind” contributions as well.

Accordingly, if Sir Elton were to give away a thousand copies of his greatest hits CD to induce donations to the Clinton campaign, he would be making an illegal “in-kind” contribution as a foreign national. Moreover, the CDs’ fair market value likely would exceed his individual contribution limit. On the other hand, if he were to voluntarily write a song honoring the campaign (“My gift is my song, and this one’s for you”), that would be fine by the FEC, even if that song goes platinum and earns a small fortune. If readers feel confused at where volunteering ends and where “in-kind” contributions begin, just re-read the last sentence of the first paragraph.

Even clear-cut volunteering is not unrestricted, however, and this is where lobbyists and their clients should take heed of the commonly overlooked restrictions on the use of company time and resources. While individuals may use resources such as work computers and phones for political volunteering, they must do so sparingly so as not to increase the company’s overhead expenses. Moreover, companies must not allow salaried employees to undertake political volunteer work during their normal work hours unless they do so using vacation time, or if they make up their normal work within a reasonable period.

In both cases, if these restrictions are not followed, a contribution would result, and if the company is a corporation, such a contribution would be illegal. Even in the case of a partnership or an LLC taxed as a partnership, one would have to valuate the resources or time used, and then attribute the contribution amongst the partners or LLC members, subject to their individual limits. Alternatively, the individual would have to reimburse the company and then report the reimbursement as an individual, in-kind contribution.

Another commonly overlooked regulation when individuals volunteer to raise money is the conduit reporting requirement. Under this rule, anyone who is unaffiliated with a campaign but collects contributions is required to send a letter to both the campaign and the FEC listing the contributions as well as certain donor information.

Conduit reports are especially important when fundraisers aggregate others’ contributions and then write a single check. They also are technically required even if one simply comes into physical contact with contribution checks and passes them along, regardless of any threshold amount. On the other hand, conduit reports are not required from volunteer fundraisers who are expressly authorized by and occupy “a significant position” within a campaign. Thus, campaign “co-chairs,” Bush “Rangers” and “Pioneers” and the like are exempt.

Conduit reports are not to be confused with the new bundling reports required by the Honest Leadership and Open Government Act, whose implementation has been stymied by the political deadlock over FEC commissioner nominations. The HLOGA bundling rule would require only the recipients of contributions raised by registered lobbyists totaling $15,000 or more during a semiannual period to specially flag such contributions in a new report.

The foregoing discussion covers only a portion of the myriad federal regulations and exceptions on political volunteer activity. But if lobbyists and their clients consult counsel or the FEC’s fabulously helpful compliance hotline and literature, they can rightfully volunteer for campaigns without feeling overwhelmed like a “Candle in the Wind.”

Eric Wang is an attorney at Blank Rome LLP. He can be reached at wang@blankrome.com.