United States: Congress Considers Changes To Trade Association Prior Approval Rules

Douglas Dziak is a Senior Counsel in our Washington DC office.

The House of Representatives is considering including several political law changes in Section 630 of the fiscal year (FY) 2018 Appropriations Omnibus Spending Bill. Included in those changes are restrictions in the Federal Election Commission's (FEC) ability to enforce the prior approval requirement that applies to trade association PACs solicitation of its corporate members.

Under the Federal Election Campaign Act of 1971 (FECA), the FEC requires that a trade association, before soliciting the executive or administrative staff and stockholders of a corporate member, must request and receive the member corporation's permission to do so. Moreover, a corporation may only provide prior approval to one trade association per year. This legal obligation does not apply to non-corporate entities or individual members of a trade association.

In April 2017, Rep. Mark Amodei (R-NV) introduced H.R.2101 of the Prior Approval Reform Act. This act would amend FECA and eliminate the statutory requirement for trade associations to obtain prior approval before soliciting a corporation's restricted class, who are eligible for solicitation under FECA.

While H.R. 2101 would make a permanent change to FECA, H.R.3280 of the Financial Services and General Government Appropriations Act, 2018, Section 630 would prohibit the FEC from using appropriated funds during the FY18 period from enforcing those FECA provisions. This would restrict the FEC's enforcement during the FY18 period but appropriations legislation does not make the same underlying and permanent change to FECA that Rep. Amodei has proposed with H.R. 2101. Instead, once Fiscal Year 2018 concludes, the legal restrictions would snap back. As a result, FEC could reinstitute enforcement of the prior approval provisions. Moreover, because there were no changes to the underlying FECA provisions, it is possible that the FEC could retroactively investigate trade association solicitations during the FY18 or later periods.

Of course, Congress could continue the same funding restrictions — against enforcing the prior approval provisions — in each subsequent fiscal year. However, the same legal uncertainty will remain unless the underlying prior approval provisions in FECA are changed.

So what does this difference mean for your trade association's PAC solicitation and your corporate members? Before your trade association begins direct solicitations of corporate member employees, you should consult your PAC's counsel and assess the risks in such a solicitation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.