August 22, 2005 Effective Date for Payroll Deduction for Federal Trade Association PACs

On July 21, 2005, the Federal Election Commission published its new regulations allowing corporations to use payroll deduction and check-off systems to collect contributions from its restricted-class employees to a federal PAC of a trade association. The effective date of the new rule is August 22, 2005.

Under the FEC's old rule, a corporation was permitted to offer inter-office mail service or postage expenses to facilitate contributions to the federal PAC of a trade association. However, a corporation was not permitted to offer a payroll deduction or check-off system to enable restricted-class employees to divert money from their paychecks into the trade association's federal PAC.

Under the new rule, a corporation will be permitted - but not required - to provide the "incidental services" needed to enable employee-to-trade association contributions, upon the written request of a trade association of which the corporation is a member. In clarifying what this change means, the FEC has explicitly included payroll deductions and check-off systems as examples of "incidental services" now permitted under the new rule. If a corporation belongs to more than one trade association, however, it must still comply with the requirement to designate only one trade association per calendar year for which it can solicit federal PAC contributions.

The new FEC rule also requires that any corporation offering such "incidental services" for contributions to a trade association's federal PAC to also provide those same services to any labor organization that represents employees of the corporation. A corporation may bill the labor organization for doing so, but at no cost above the actual cost of the "incidental services."

As always, please let us know if you questions or need any additional information on this topic. The FEC has posted materials on this new regulation at: http://www.fec.gov/law/law_rulemakings.shtml#payroll_deduction_assn.