Credit Card Fees: Should they be considered a campaign expenditure?

When you give $100 to a campaign, the campaign pays a small fee - let's call it $3 - to the credit card processing company. Under current law, that's an expenditure - made from hard dollars.

Just today, I had a client to me, "But why would I want to drive my high dollar donors to our website? I don't want to pay those fees!"

Instead, imagine a world where the donor was asked to pay the fee themselves. In practice, the full $100 would arrive at the campaign - and the donor would pay $3 to the credit card processing company (or, say, ActBlue.) Under current law, that's considered an in-kind contribution to the campaign by the credit card company -- which gets maxed out (and can't come from a corporation.)

Tomorrow, the FEC will re-examine this question. After all, if the donor pays the $3 directly to the credit card processing company - does that really benefit the campaign? It's a transaction that happens entirely outside of their purview.

Here's the scoop from the Campaign Legal Center:

The FEC is scheduled to consider at its meeting tomorrow the question of whether a political committee that contracts its Web-based fundraising operations to an outside vendor must pay for the services itself or, instead, is permitted to off-load the costs to its contributors without the contributor’s payment of these costs being considered an in-kind contribution to the committee. Despite the seemingly narrow scope of this question, the FEC’s answer could have far-reaching and negative implications for the future of political fundraising—so it is important that the Commission gets it right. ...

The CLC opposes this reform, arguing it would boost campaign finance limits - and allow campaigns to shift all kinds of expenses to their donors.

The Commission’s Office of General Counsel has produced two alternative draft opinions for the Commission’s consideration at its meeting tomorrow. “Draft A” concludes that contributor payment of the “convenience fee” would be a contribution to the recipient committee, while “Draft B” concludes that contributor payment of the “convenience fee” would not be a contribution to the recipient committee.

The Campaign Legal Center, together with Democracy 21, filed comments with the FEC yesterday in response to the draft opinions—supporting “Draft A.” “Draft A” recognizes that [the vendor] “proposes to enter into agreements to provide services to political committees (i.e. processing contributions made to political committees) for a ‘convenience fee.’” “Draft A” further recognizes that the amount of the “convenience fee” will be negotiated between [the vendor] and the political committees, and that the “convenience fee” will “cover the costs that political committees, like other organizations that accept credit card payments, would have to pay for the processing services they receive.” Most importantly, “Draft A” acknowledges that “by paying the ‘convenience fee,’ contributors would relieve recipient political committees of a financial obligation that political committees would otherwise have to pay for themselves, thereby providing something of value to these committees.” Such a provision of “something of value” to a federal political committee clearly falls within the federal law definition of “contribution.” ...

If the Commission reverses course this week and approves “Draft B” ... the Commission would, simply put, be facilitating the evasion of federal contribution limits.

Under the logic of “Draft B,” for instance, a political committee’s vendor costs for a fundraising event, such as a dinner, golf tournament or deep-sea fishing charter, could be shifted to the donors, and the payment of the vendor costs by the donors would not be treated as a contribution. But just as the “entire amount paid to attend a fundraising or other political event … is a contribution,” 11 C.F.R. § 100.53, so too is the entire amount paid to make a contribution via a Web-based vendor hired by a committee to facilitate the making of such contributions. In both situations, the political committee contracts with a vendor for a fundraising service and receives something of value.

Yup, this proposed new rule could mean that you could set up fundraising "events" that way exceed the $2300 maximum donation -- say a trip to Hawaii, where the pricetag included a $2300 donation plus the full cost the event. Fascinating stuff.

(Hat tip to fundraiser extraordinaire Vince Currao, for bringing it to our attention.)