Risk & Compliance

Political Paycheck Deductions Get Easier

The Federal Election Commission lightens recordkeeping rules for corporate political action committees that automatically deduct contributions from...
Helen ShawJuly 28, 2006

As the fall election season approaches, a recent policy change by the Federal Election Commission (FEC) could ease the recordkeeping burden for payroll departments, as well as for the finance executives who are often responsible for managing their company’s political action committee (PAC).

As of July 7, the commission accepts a variety of electronic records as proof that employees have authorized the company’s PAC to automatically deduct contributions from their paychecks. Previously the FEC accepted only copies of original signed payroll deduction authorization forms.

The change is significant for finance departments: not only is the finance department responsible for payroll, but a 2004 CFO magazine survey of 285 finance executives revealed that 56 percent said someone in the finance department managed or served as treasurer for the company PAC.

Automatic contributions to a company’s PAC are typically limited to those from white-collar employees — that is, those with certain professional qualifications or those in a decision-making role. A CFO analysis two years ago showed that among CFOs and other top finance executives at large public companies, regular payroll deductions often were calculated to result in the maximum allowable contribution for the year.

PACs must maintain records that would allow the FEC to confirm the source and amount of contributions they receive. Under the new policy, the FEC will accept records of the transmission of funds from employers or collecting agents, including spreadsheets or other computerized records, wire transfer records, or other written or electronic records as evidence that the committee has met the recordkeeping requirements.

“I think the change eases the administrative burden that a PAC could have,” says Wesley Bizzell, an attorney at Winston & Strawn, who added that the likelihood that most companies are able to retain original payroll deduction authorization forms for long-term employees is questionable. “It is beneficial in situations where the PAC has operated legally but maybe cannot prove it under the old rule,” says Bizzell.

The commission nonetheless also noted that the practice of keeping original payroll deduction forms is a sound recordkeeping practice and that such forms still may serve as the best documentation. The FEC’s policy change does not affect a PAC’s recordkeeping requirements under any state law.