AO 2009-14: LLC affiliated with domestic subsidiary of a foreign corporation may administer an SSF

A domestic subsidiary of a foreign corporation may serve as the connected organization of a separate segregated fund (SSF). An affiliated limited liability company (LLC) that is treated as a partnership but owned entirely by corporations, and which shares the same foreign parent as the domestic subsidiary, may administer and pay the associated costs of running the SSF. The abbreviated name of that SSF may reflect the foreign parent's name.

Background

Mercedes-Benz USA LLC (MBUSA LLC) is a LLC organized under the laws of the State of Delaware and headquartered in New Jersey; its sole member is Daimler North America Corporation (DNAC). DNAC is the wholly owned subsidiary of Daimler AG, a German company that is the ultimate parent of the Daimler-related companies. Sterling Truck Corporation (Sterling Corp.) is a Delaware corporation that is headquartered in Oregon; it is the wholly owned subsidiary of Daimler Trucks North America LLC (DTNA LLC), the sole member of which is DNAC.

Sterling Corp. intends to establish an SSF and MBUSA LLC would like to use its personnel and resources to administer that SSF, including paying the administrative and solicitation expenses of the SSF out of its External Affairs and Public Policy-Americas (EAPP) cost center. EAPP expenses are paid from MBUSA LLC’s general treasury, which consists of U.S.-generated funds, or using its short-term credit line with Daimler North America Finance Corporation, which MBUSA LLC repays from domestic revenues.

MBUSA LLC would invoice Daimler AG for EAPP expenses per the terms of an agreement between MBUSA and Daimler AG for the provision of and payment for such services (the "Service Level Agreement"). Rather than reimburse MBUSA LLC directly for EAPP expenses, Daimler AG permits MBUSA LLC to credit those expenses against the amount it owes Daimler AG for vehicles and products.

Under the Service Level Agreement, Daimler AG authorizes annual spending levels for the EAPP cost center and "approve[s] the [EAPP] services to be provided by [MBUSA LLC] via the Budgeting and Planning procedures of the Daimler Group." Daimler AG does not otherwise guide or prioritize how MBUSA LLC must spend EAPP funds. All decision-making regarding the proposed SSF would be made exclusively by executive or administrative personnel of MBUSA LLC or Sterling Corp. who are U.S. citizens or legal permanent residents. Contributions to the SSF would not be solicited or accepted from persons who are foreign nationals.

Additionally, MBUSA LLC and Sterling Corp. propose a number of potential official names for the SSF, but would like to abbreviate the name of the SSF to "Daimler PAC."

Analysis

Connected organization. The Federal Election Campaign Act (the Act) defines a connected organization as any organization that is not a political committee and that directly or indirectly establishes, administers or financially supports a political committee. 2 U.S.C. §431(7) and 11 CFR 100.6(a). Corporations, labor organizations, membership organizations, cooperatives and trade associations may serve as connected organizations of their SSFs. Payments by a connected organization for the establishment, administration or solicitation of contributions to its SSF are exempt from the definition of contribution and expenditure. 2 U.S.C. §441b(b)(2)(C) and 11 CFR 114.1(a)(2)(iii).

The Commission has held previously that foreign nationals(1) may not serve as an SSF's connected organization. See AOs 1977-53 and 1982-34. However, domestic subsidiaries of foreign corporations may establish and administer SSFs if they are discrete entities whose principal place of business is the United States, and if those exercising decision-making authority over the SSF are not foreign nationals. See AOs 1980-100 and 1980-111.

The Bipartisan Campaign Reform Act of 2002 (BCRA) amended the Act to expand the prohibition on campaign contributions and donations by foreign nationals. The BCRA extended the ban to prohibit foreign national contributions that were made "directly or indirectly." See 2 U.S.C. §441e.

In this situation, Sterling Corp.'s ultimate parent is Daimler AG, a German company. However, Sterling Corp. is a U.S. corporation that is organized under the laws of Delaware and is headquartered in Oregon. As such, and given that foreign nationals will not have decision-making authority regarding the proposed SSF, Sterling Corp. may serve as the SSF's connected organization.

Personnel and resources. The Commission has interpreted the Act and Commission regulations to permit a partnership (or an LLC electing partnership status) to pay the administrative and solicitation costs of an SSF established by the partnership’s (or LLC's) corporate owner, but only when the partnership is wholly owned by corporations and affiliated with at least one of the corporations. In that case, the administrative and solicitation support provided by a partnership may be construed as coming from the affiliated corporation(s). See, for example, AOs 2004-42, 2001-18 and 1992-17.

MBUSA is treated as a partnership under Commission regulations because it is a non-publicly traded LLC that has not affirmatively elected treatment as a corporation for tax purposes. In addition, since MBUSA is wholly owned by DNAC, MBUSA would be able to perform the functions of a connected organization for an SSF connected to DNAC, including paying the SSF's administrative and solicitation costs. For internal business reasons, however, DNAC has chosen not to serve as the connected organization for the proposed SSF; Sterling Corp. will instead serve as the connected organization.

Through DNAC, MBUSA is also affiliated with Sterling Corp., which is DNAC’s wholly owned subsidiary. Although previous Commission advisory opinions have not addressed an arrangement whereby an LLC that is wholly owned by and affiliated with one corporation pays the administrative and solicitation costs of another affiliated corporation's SSF, the Commission finds no material differences in the proposed arrangement that would affect the ability of MBUSA LLC to use its resources and personnel to administer Sterling Corp.'s SSF. As a result of this affiliation, MBUSA may pay the administrative and solicitation costs of Sterling Corp.'s SSF. The SSF must identify Sterling Corp. as its connected organization on its Statement of Organization (FEC Form 1). 2. U.S.C. §433b(2) and 11 CFR 102.2(a)(1)(ii).

Administrative costs. The Commission considered the question of whether the payment of administrative costs of the proposed SSF could come from MBUSA LLC's EAPP cost center, but could not approve a response by the required four votes.

Name of SSF. The Act and Commission regulations require the name of an SSF to include the full name of its connected organization. 2 U.S.C. §432(e)(5) and 11 CFR 102.14(c). An SSF established by a subsidiary may, but need not, include in its name the name of the subsidiary's parent or another subsidiary of its parent. In limited circumstances, however, the Commission has allowed an SSF to be named after an LLC that is wholly owned a corporation that serves as the SSF's connected organization. See AOs 2004-42, 2003-28, and 1997-13.

In this proposal, Sterling Corp. will serve as the connected organization for the proposed SSF and the funding for the administration of and solicitation for the SSF will come from MBUSA LLC. The SSF may not be named after MBUSA LLC, though, because MBUSA LLC is not in virtually the same position as a corporate subsidiary as was the case with other SSFs named after LLCs. Accordingly, the name of the SSF must include Sterling Corp. and may, but need not, include the names of Sterling Corp.'s parent—DNAC— and a subsidiary of its parent, including MBUSA.

Commission regulations permit an SSF to use a "clearly recognized abbreviation or acronym by which the connected organization is commonly known." 11 CFR 102.14(c). In determining whether specific terms or names meet this requirement, the Commission has examined whether they give the public adequate notice to the public as to the identity and sponsorship of the SSF.

The Commission concludes that the proposal to abbreviate the name of the SSF as "Daimler PAC" would be sufficient to provide the public with adequate notice as to the identity and sponsorship of the SSF and is therefore permissible. Although the SSF will be connected to Sterling Corp. and funded by MBUSA LLC, it will operate on behalf of all the Daimler-related companies.

The SSF must use both the abbreviation and the full name on the Statement of Organization (FEC Form 1), on all reports filed with the Commission and on all disclaimer notices required by Commission regulations. In addition, Sterling Corp. will be disclosed as the SSF's connected organization on the Statement of Organization with the Commission.

AO 2009-14: Date Issued: August 28, 2009; Length: 7 pages.