Nonprofits May Not Be Able to Increase Dues for a PAC

Paul F. Bohn, Esq.

Recently, the Michigan Secretary of State Elections Division responded to the question of whether a nonprofit could specify a portion of a dues increase for members to be dedicated for a “separate segregated fund” (i.e. a PAC), without violating the Michigan Campaign Finance Act (MCFA).

The preliminary response from the state issued last week suggested that any portion of a dues increase specifically dedicated for a nonprofit’s PAC could violate Michigan law, if the dues increase was paid to the nonprofit first.

That could sound a bit confusing – what does it matter whether the dues increase go to the nonprofit general treasury fund first, or to the separate segregated fund first?

Nonprofit corporations – or any corporation – setting up a separate segregated fund can only use their general treasury funds to pay for the establishment, administration, and soliciting of contributions for that separate segregated fund. Therefore, if a nonprofit transferred money from its general fund directly to their PAC for any other purpose, it would violate the MCFA prohibition against treasury funds being used for campaign activity.

In its response, the state said that this prohibition applies even if it is made clear that member’s contributions from the dues increase to the PAC are voluntary.

To clarify, members of nonprofits can donate directly to the separate segregated fund of the nonprofit, as long as it is voluntary and not a condition of membership. In addition to members, a nonprofit may also solicit and accept funds for its PAC from stockholders, employees with non-clerical responsibilities, officers and directors of the corporation, and other separate segregated funds.

For all of the above, contributions must also be voluntary, and not a condition of employment. A separate segregated fund can be a great vehicle for individuals and businesses to advocate for their political preferences in an election – but the key is staying in compliance.

Nonprofits and other corporations need to keep pace with the changing landscape of campaign finance. If you are in need of legal counsel or want to set-up a separate segregated fund or other political committee, contact Fausone Bohn, LLP today and we can help you accomplish your goals and advise you on best-practices to stay in compliance with the law. Contact Jim Fausone or Paul Bohn today at (248) 468-4536, or visit us online at www.fb-firm.com.