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2001-8: Legal Services Provided by a Not-For-Profit Advocacy Organization to Candidates May Be Considered Contributions

Wednesday, July 11, 2001

Re: Administrative Code §§3-702(8), 3-703(1)(f); City Charter §1052(12)(a); Campaign Finance Board Rules 1-02, 1-04(g)(2), (3); Advisory Opinions Nos. 1989-8, 1993-9, 1993-10;
Op. No. 2001-8.

The New York City Campaign Finance Board (the "Board") has received two requests for advisory opinions asking whether legal services rendered by incorporated law firms or by a not-for-profit advocacy organization to candidates participating in the New York City Campaign Finance Program (the "Program") constitute in-kind contributions and therefore must be reported in disclosure statements filed with the Board.1 For purposes of this Advisory Opinion, the Board will treat the request about the not-for-profit organization as a request concerning the Brennan Center for Justice at New York University School of Law (the "Brennan Center"), which represented six candidates and three other individuals who filed a civil action seeking to invalidate a Kings County Democratic County Committee regulation which required primary election petition witnesses to reside in the political subdivision for the office sought by the candidate.2

The Brooklyn Democratic Party's questions can be summarized as follows:

1. If a participant retains an incorporated law firm on a contingent fee basis, would the legal services be considered an "in-kind contribution"? 2. If a participant retains an incorporated law firm at an hourly rate, with the condition that an application for an award of reasonable attorney fees would be sought, and the fees are awarded, would that compensation constitute an "in-kind contribution"

3. If the participant retains an incorporated not-for-profit public interest law firm which is not permitted to charge fees for its representation of clients but is eligible to recover reasonable attorney fees, does that constitute an "in-kind contribution"?

The New York City Campaign Finance Act defines "contribution" as:

(a) any gift, subscription, advance, or deposit of money or any thing of value, made in connection with the nomination for election, or election, of any candidate... (c) any payment, by any person other than a candidate or a political committee authorized by the candidate, made in connection with the nomination for election, or election, of any candidate including but not limited to compensation for the personal services of any individual which are rendered in connection with a candidate's election or nomination without charge... (Emphasis added.)

New York City Administrative Code ("Administrative Code") §3-702(8). Thus, the Board concluded in Advisory Opinion No. 1989-8 (January 25, 1989) that the provision of legal services relating to compliance with the Campaign Finance Act and New York Election Law to a candidate free of charge by a paid associate attorney at a law firm would constitute an in-kind contribution to the candidate by the firm. See also Rules 1-02 (defining "in-kind contribution") and 1-04(g)(2), (3) (providing that the amount of an in-kind contribution is the difference between the fair market value of the services and the amount charged to the participant).The Board is unable to respond to Questions 1 and 2 of the Brooklyn Democratic Party's request in the absence of specific facts regarding the legal services hypothetically provided and the law firm's usual fee arrangements for those types of services.3 As a general proposition, of course, under Administrative Code §3-702(8) and Rules 1-04(g)(2), (3), the provision of legal services to a candidate in connection with his or her nomination or election for which the candidate is charged less than the fair market value represents an in-kind contribution. If the law firm is incorporated, the in-kind contribution of the legal representation may be a prohibited contribution under Charter §1052(a)(12).With respect to Question 3, the Brennan Center's tax-exempt status is an important, although not dispositive, factor. Because the Brennan Center is a 501(c)(3) tax-exempt charitable organization, it may not "participate in, or intervene in... any political campaign on behalf of (or in opposition to) any candidate for public office." 26 U.S.C. §501(c)(3). The Board assumes, for the purposes of this advisory opinion, that the Brennan Center operates within these constraints, and that the Internal Revenue Service of the United States Department of Treasury (the "IRS") would so find if the question were posed to it.4 If the IRS determined that the Brennan Center had participated or intervened in any political campaign on behalf of the candidates it represented, the Board would examine the relevant fee arrangements to determine whether in-kind contributions had been made.Turning to the legal services at issue here, it does not appear that they were provided in order to promote the candidates' particular nomination or election. The Brennan Center represented candidates in the Yassky action who were opposing each other for the same public office; this supports the conclusion that it was not acting to promote the candidates' nomination or election. Also, the Brennan Center's challenge to the ballot access rule affected all candidates in the Democratic primary election equally. It appears that the Brennan Center represented the candidates in the Yassky action in accordance with its stated mission of "strengthening our democracy by promoting... fair ballot access rules." Further, there is no evidence that in the course of its legal representation the Brennan Center expressly advocated the nomination or election of any of the candidates it represented. See Advisory Opinions Nos. 1993-9 (September 9, 1993) (promotional materials and advertising provided by private sources in support of a public service campaign found not to be "in connection with the nomination for election, or election of the participant"); and 1993-10 (September 23, 1993) (outlining the standard for determining whether expenditures made by one candidate may support a second candidate's nomination or election). Accordingly, the Board concludes that the legal services provided by the Brennan Center in this circumstance do not constitute in-kind contributions within the definition of the Act.The Board is aware of no legal authority holding that legal services provided by a not-for-profit advocacy organization to a candidate for public policy reasons constitutes an in-kind contribution to the candidate. Indeed, the view that such legal representation is not an in-kind contribution is consistent with Federal Election Commission Advisory Opinions Nos. 1982-35 (funds raised by a prospective primary election candidate to bring a legal challenge to a rule of a political party that might prevent him from obtaining a position on the primary election ballot would not constitute a contribution because the funds were not raised by the candidate "for the purpose of influencing any election for Federal office") and 1983-30 (funds raised for a legal challenge to the "resign-to-run" provision in the Arizona State Constitution were not contributions).Because the Brennan Center's legal representation does not constitute a "contribution" for the purposes of the Campaign Finance Program, the candidates are not required to report the services as in-kind contributions in their disclosure statements submitted to the Board. Further, the services are not counted toward the contribution limits in Administrative Code §3-703(1)(f) and do not implicate the prohibition on contributions by corporations in New York City Charter §1052(12)(a). Any award of attorney's fees to the Brennan Center by the court in the Yassky action will not change this determination.

NEW YORK CITY CAMPAIGN FINANCE BOARD

1The first request was made by Jeffrey C. Feldman, the Executive Director of the Brooklyn Democratic Party in a letter dated June 13, 2001. The request did not refer to any actual legal services rendered, but instead posed fourteen hypothetical questions relating to the provision of legal services to candidates in a variety of factual contexts. The second request was made by Nancy Northrup, the Director of the Democracy Program at the Brennan Center for Justice at New York University School of Law in a letter dated June 26, 2001.

2Yassky v. Kings County Democratic County Committee, 01 Cv. 3372 (E.D.N.Y. filed May 24, 2001). The witness residency requirement was mandated by New York State Election Law § 6-132(2) until November 2000, when the requirement was invalidated by the United States Court of Appeals for the Second Circuit in a civil action brought by another set of plaintiffs represented by the Brennan Center. Lerman v. Board of Election in the City of New York, 232 F.3d 135, 153 (2nd Cir. November 9, 2000). Following the invalidation of the requirement in the State Election Law, the Kings County Democratic County Committee issued the regulation that was challenged in the Yassky action. On May 30, 2001, after plaintiffs commenced the Yassky litigation, the Kings County Democratic County Committee repealed the regulation. The Yassky plaintiffs have applied for an award of attorneys fees, but the court has not ruled on the application. 

In an earlier action that was dismissed on May 8, 2001, the Brennan Center represented a large number of 2001 candidates who intervened in an action commenced by the City of New York against the Board which challenged the Program's 4-to-1 matching rate for public funds. City of New York v. New York City Campaign Finance Board, No. 400550/01 (Sup. Ct., N.Y. County May 8, 2001). Collectively, the plaintiff-candidates represented by the Brennan Center will be referred to in this advisory opinion as "the candidates."

3See Advisory Opinion No. 1989-36 (July 19, 1989). Advisory opinions are intended to provide guidance to candidates and Board staff in following and administering Program requirements. The Board conducts fact-finding through its audit and complaint process to investigate the actual circumstances of a campaign's compliance. See Advisory Opinion No. 1997-6 (June 24, 1997).

4According to the Brennan Center, "no governmental authority, federal, state, or local, has ever deemed any of its activity to be a contribution to a candidate, or even raised the question." Letter of Nancy Northrup, at p. 4.