Purpose of Political Action Committees:

Generally the purpose behind forming political action committees is to give employee associations political clout needed to promote their interests and ideas to whatever legislative body controls their employee wages and benefits.

Second, with association member’s right to dispute, challenge, and demand refund of the portion of their dues paid by the association for political activities they disagree with, forming a separate political action committee, with voluntary contributions, avoids such disputes between members. Under the First Amendment union members have the right to object to the use of their money for political or ideological purposes which they oppose.  (San Jose Teacher’s Association v. Superior Court 38 Cal.3d 839.)

Third, under state and federal tax law, candidate related expenditures made directly by an employee association triggers potential tax liability to the association depending on their assets and expenditures.  Directing money into a separate political action committee account avoids this tax liability.

The bottom line is a PAC fund creates power for the association in the community.  When a city council, county board of supervisors, or school board knows the association has thousands of dollars to spend on the next election, they think twice before making decisions which detrimentally impact the association.

Formation of the PAC:

Obtain association approval. Depending upon your association’s bylaws, forming a PAC may require a full membership vote or merely a majority of the board.  It is likely your bylaws will have to be amended to include a provision allowing for a political action committee.  (See attached sample bylaw article to add to current Association Bylaws.)

Selecting Committee Members.  A political action committee requires a treasurer and at least one other principle officer, usually the association president (the committee can be, and usually is the association board members).  Selecting the treasurer is very important.  The treasurer must be a person who works well with numbers and forms and is very astute and timely.  The reporting requirements for which the treasurer is responsible are very detailed and require much attention.  Because of this, most associations pay a small fee to an outside vendor to act as the PAC Treasurer and file the necessary reporting forms.

Filing an Organizational Statement.  The Secretary of State requires the PAC to file a form FPPC-410 within ten days of receiving or spending $1,000 or more in member contributions.  Once this form is filed the Secretary of State will assign an identification number for all reports which will be submitted by that political action committee.  This firm, and all reporting forms can be obtained from the fair political practices commission’s web site at www.FPPC.CA.GOV.

Opening a Political Action Committee Bank Account.  It is imperative that the PAC open a separate bank account and not commingle funds with the association.  If the PAC intends to participate in both ballot measures and supporting or opposing candidates for elected office, it is recommended that the association open two separate bank accounts for those separate purposes.

Consult With Legal Advisors.  The area of the law in regard to political action committees is very tenuous.  Statutes are modified yearly and courts seem to find certain ones unconstitutional on a monthly basis.  It is important that you contact competent legal counsel when considering starting a PAC to make sure that you are up to date on all of the requirements and reporting guidelines.

Contributions:

Contributions to and from PACS have been subject to numerous changes in the law over the past decade.  The most significant change to affect contributions to and from PACs  was Proposition 208, which limited contributions by PACs to candidates for office quite drastically.  Since then, Proposition 34 was passed by the voters, taking effect January 1, 2001.  The significant portions of Proposition 208 were repealed with the passage of Proposition 34.  Below is a summary of contributions to and from PACs which are authorized currently under the law. 

Contributions to Political Action Committees

Contributions to PACs from association members may be made in one of two ways, by either earmarking a certain amount of member’s dues to be put into the political action committee fund (requiring member approval and notification) (Keep in mind under San Jose Teacher’s Association v. Superior Court (38 Cal.3d 839) association members have the right to complain about where their dues are being sent for political activities and demand refund on those amounts.)  The second and more preferable manner for collecting funds for PACs is setting up voluntary contributions by association members from association dues and having those deducted through payroll.

There is currently no limit on the amounts given to PACs involved in both local and statewide elections.  However, under Proposition 34, a PAC may not accept any contribution totaling more than $5,600.00 per calendar year from a single source “for the purpose of making contributions to candidates for elective state office”

Contributions to Local Candidates by PAC.  Proposition 34 only limits contributions in state elections.  As such, Contributions by political action committees to local candidates are almost unlimited.  As in contributions to PACs no contributions may be made by PACs of $100 or more in cash.  (Govt. Code 84300(b)).

Local Rules.  It is normal for counties and cities to pass ordinances and resolutions limiting contributions to and from political action committees.  Please consult legal counsel or these ordinances prior to managing a PAC.

Contributions by PACs to State Candidates.

STATE CANDIDATES CAMPAIGN CONTRIBUTION LIMITS PER ELECTION

CONTRIBUTOR

LEGISLATURE

STATEWIDE
OTHER THAN
GOVERNOR (a)

Individuals, Committees, Businesses or Unions

$3,300

$5,600

Small Contributor Committee *

$6,600

$11,200

Lobbyist **

Prohibited

Prohibited

Political Party

No Limit

No Limit

* Defined as a committee in existence for at least six months with 100 or more members, none of whom contribute more than $200 to the committee in a year, and which contributes to five or more candidates.

** Prohibition applies to lobbyists who are registered to lobby the governmental agency to which the candidate is seeking election or re-election. Note: Broader ban that prohibited "arranging" of contributions under Proposition 208 is repealed by Proposition 34.

Reporting Requirements:

Maintaining a PAC requires meticulous record keeping and timely reports to be filed with the appropriate governmental agencies.  Your association’s legal advisors should be able to provide you with guidance in this area.

Activities Requiring Reporting

Monitory Contributions to PACs.  All money contributions made to PACs are reportable in one form or another and it is imperative that PACs keep accurate records as to where, when and whom from monies were received.  Contributions of under $100 received by a PAC from a single source during a calendar year may be reported as a lump sum total and does not need to be itemized.  However, the PAC must keep records on names and addresses of people who contribute $25 or more at any one time.

Contributions of $100 or more received by a PAC from a single source during a calendar year must be listed on the campaign reporting form by name, address, occupation and employer of the individual contributor.  (For association members it is permissible to use their business address rather than home address).

Expenses.  Expenses under $100 may be reported as part of a lump sum total of non-itemized expenses.  Expenses of $100 or more must be itemized by name, and address of person paid and the description of the expense incurred.

Monitory Contributions.  Any amount of monitory contributions made to any political candidate or other committee must be reported.

In Kind Contributions.  In kind contributions are providing goods or services at the behest of a political candidate or other committee.  All contributions in kind made by the PAC must be reported. 

Independent Expenditures. Independent expenditures are communications such as newsletters and flyers which are distributed by the PAC and expressly advocates the election or defeat of a candidate or ballot measure.  To qualify as an independent expenditure it must not be made at the behest of a candidate or other committee.  If it is made at the behest of a candidate or other committee it is treated as an in kind contribution.  Independent expenditures must be reported on the PACs campaign report.  Additionally, if the PAC independent expenditures are $500 or more in regard to one candidate or measure, a supplemental independent expenditure report (Form 465) must be filed.  If an independent expenditure of $1,000 or more made within 90 days of the election by a PAC primarily formed to support state candidates it must report the expenditure within 24 hours.

Support for or against a candidate or measure placed inside a regularly published association newsletter does not qualify as an independent expenditure and does not need to be reported.  It is imperative, however, that this be a “regularly” published association newsletter and not a one time or rare event.

Where to File.  The place you file your reporting documents depends upon what type of committee you are.  Most association PACs are general purpose committees which is a committee that supports or opposes one or more candidate or measure and is involved in more than one election campaign.  A general purpose committee cannot be controlled by a candidate or office holder. 

• A state wide general purpose committee is a committee who will be involved with state wide elections or ballot measures and must report to the Secretary of State. 

• County general purpose committees file its reporting documents with the County Clerk.

• City general purpose committees file their reports with the City Clerk.

Sanctions For Violating The Reporting Laws           

Criminal Penalties.  A knowing and willful violation of any of the reporting provisions is punishable as a misdemeanor.  (California Government Code Section 91000(a)) 

Civil Damages and Penalties.  A person who intentionally or negligently violates any of the reporting requirements is liable in a civil action for an amount not more than the amount or value not properly reported.  (California Government Code Section 91004).

Association Activities That Do Not Require Reporting

Association Fund Raising Events.  An association may host a fundraiser as long as the total cost to the association is $500 or less and contributions to the fund raising event are made to the candidate and not to the association.  If the cost is more than $500 all costs must be reported as in kind contributions.

Newsletter Endorsement.  An association may put out in its regularly published newsletter the associations recommendation for or against candidates or measures along with interviews of candidates and any other endorsement for candidates.  It is important that the newsletter be one which is regularly published for association members and it is not distributed to other than to the people it is usually distributed.

Letterhead Endorsement.   An association may use its letterhead to mail out its endorsement of a candidate as long as all the postage and printing costs are borne by the candidate directly. 

Association Employee Services.  An association may donate up to 10% of an association employee’s time to work for a campaign.  If the time put in by the employee is 10% or more it will be treated as an in kind contribution.  Volunteers for the association may donate however much time they wish to a candidate or a committee and these are not reportable contributions.

Debates Hosted By Associations.  An association may host a debate as long as all candidates are invited and given an equal opportunity to participate.  This is not considered an in kind contribution nor an independent expenditure.