AO 2007-19: Renaissance Health Service Corporation

A non-profit 501(c)(4) corporation qualifies as a membership organization and individuals selected to be members of that organization qualify as "members" for purposes of the Federal Election Campaign Act (the Act). Accordingly, the organization may solicit those individuals for contributions to a separate segregated fund (SSF) established by the organization.

Background

Renaissance Health Service Corporation is a non-profit corporation that is exempt from taxation under section 501(c)(4) of the Internal Revenue Code. Renaissance primarily serves as a holding company for Delta Dental Plan of Michigan (DDPMI) and Delta Dental of Tennessee (DDTN) and other companies it directly or indirectly owns or controls. It also supports programs to promote dental science and access to dental care. Currently, Renaissance has 75 members, all of whom are individuals.

Renaissance is the sole corporate member of both DDPMI and DDTN and therefore "controls" them. Renaissance has entered into an "Affiliation Agreement" with both companies, whereby DDPMI would select no more than 68 of the 75 members of Renaissance and DDTN would select no fewer than seven members. The members serve three-year terms and may be re-appointed to further terms. Under the Bylaws of Renaissance, these 75 individuals elect the organization's board of directors at the annual membership meetings. The board of directors exercises Renaissance's corporate powers. The term of a director is three years, and directors may be reelected twice. Individuals who were not Renaissance members become members of Renaissance upon their election to the board.

The Bylaws permit a member to be removed during his or her membership appointment if the member refuses to comply with the conditions of the voting agreement, which requires members to vote so that no more than 17 of the 19 directors represent DDPMI and no fewer than two represent DDTN.

Legal Analysis

As an exception to the prohibition on corporate contributions and expenditures, the Act and Commission regulations provide that an incorporated membership organization, cooperative or corporation without capital stock, or an SSF established by such an entity, may solicit at any time voluntary contributions to that SSF from the entity's members and their families, as well as the entity's executive and administrative personnel and their families. 11 CFR 114.1(a)(2)(iii) and 114.7(a).

Application of Criteria for Membership Organization. Under the Act and Commission regulations, a "membership organization" is defined as a trade association, cooperative or corporation without capital stock that meets the criteria listed below. To be considered a membership organization, an entity must satisfy all six of the criteria. A membership organization:

• Is composed of members, some or all of whom are vested with the power and authority to operate or administer the organization;
• Expressly states the qualifications and requirements for membership in its articles, bylaws or constitution;
• Makes its articles, bylaws or constitution available to its members upon request;
• Expressly solicits persons to become members;
• Expressly acknowledges the acceptance of membership; and
• Is not organized primarily for the purpose of influencing the nomination for election, or election, of any individual to federal office. 11 CFR 114.1(e)(1)(i)-(vi) and 100.134(e)(1)-(6).

As to the first criterion, the 75 members elect the board of directors and the directors are a subset of the Renaissance members. Thus it can be argued that at least some of the individual members are vested with the power and authority to operate or administer Renaissance through their board membership, or all 75 members of Renaissance are vested with such authority by their ability to elect members of the board. The fact that a member can be removed during his or her membership appointment for refusing to comply with the voting agreement, and that DDPMI and DDTN can decide not to re-appoint members to additional terms, indicates some limits on the discretion exercised by directors and other members. However, the directors exercise Renaissance's corporate powers, and even if DDPMI and DDTN do not want to re-select a director as a Renaissance director, the member can serve out his or her term. Hence, at least some of the members are vested with the power and authority to operate or administer Renaissance during their three-year terms as director.

Renaissance also meets each of the second through fifth criteria listed above. Renaissance's Articles of Incorporation and Bylaws are made available to any member upon request, Renaissance expressly invites individuals to be members upon their selection by DDPMI or DDTN, and Renaissance expressly acknowledges the acceptance of membership.

Additionally, Renaissance was not organized for the purpose of influencing any nomination for election, or election, of any individual for federal office, and has not changed its purpose. The membership consists of retired employees of DDPMI, dentists participating in DDPMI and DDTN networks, subscribers to those plans, retired dentists and others. Thus, the membership is made up of a small group of individuals intended to represent constituencies of providers and users of dental services and has historically served Renaissance's purposes of promoting access to dental care and the advancement of dentistry, and not the purpose of influencing federal elections.

Application of criteria for "Member."

Commission regulations provide that the term "member" includes all persons who 1) currently satisfy the requirements for membership, 2) affirmatively accept the membership organization's invitation to become a member and 3) have a significant financial attachment to the organization, pay membership dues at least annually or have a significant organizational attachment to the membership organization which includes affirmation of membership on at least an annual basis and direct participatory rights in the governance of the organization. 11 CFR 114.1(e)(2)(i)-(iii) and 100.134(f)(1)-(3).

The 75 individuals satisfy the requirements for membership as described by Renaissance's Bylaws, affirmatively accept Renaissance's invitation to be a member and affirm membership on an annual basis. With respect to the exercise of participatory rights, the members vote in the election of board members and have other voting powers that are not subject to the voting agreement. Despite the voting agreement and the selection powers exercised by DDPMI and DDTN, the 75 individuals have some limited discretion in the important function of electing directors and greater discretion in voting on other specific matters. Thus the directors have sufficient direct participatory rights during their three-year member terms to meet Commission regulations' definition of member.

AO 2007-19: Date Issued: November 16, 2007; length: 7 pages