OPINION NUMBER - 138

ADOPTED - 1992/05/29

SUBJECT - Campaign Financing/Reporting Requirements

REQUESTED BY: Mary Rose Jennison, Treasurer, National Rifle Association Political Victory Fund, Institute for Legislative Action.

QUESTION: Is the NRA subject to the provisions of section 49-1469 requiring it to file corporate reports of political contributions or, if soliciting funds for the purpose of making contributions, establishing a separate segregated political fund pursuant to Nebraska law?

CONCLUSION

Yes.

FACTS

The National Rifle Association (NRA) is a not-for-profit national membership corporation organized under the laws of the State of New York, with its principal office in Washington, D.C. and is recognized by the Internal Revenue Service as a 501(c)(4) organization. It has no offices in Nebraska. Individuals who are not members are solicited for membership in every state. The National Rifle Association Political Victory Fund (NRA-PVF) is a political action committee established by the NRA and registered with the Federal Election Commission. It solicits contributions from NRA members nationwide and contributes to candidates at the federal level as well as candidates at the state and local levels in virtually all states.

Section 49-1469(1) provides "{a}ny corporation, labor organization, or industry, trade, or professional association, whether organized under the laws of this state or country and doing business in this state, without being a committee as defined in section 49-1413, may make expenditures or provide personal services". The section goes on to provide a method of reporting these expenditures.

Section 49-1469(2)(a) provides that a corporation, labor organization, or industry trade, or professional association may not receive contributions unless it establishes and administers a separate segregated political fund. Separate segregated political funds are normally referred to as a political action committee or PACs.

The NRA wishes to know how the provisions of section 49-1469 apply to it. The NRA has filed a variety of reports with the Commission as to its political activities, but takes the position that it is not doing business within the State of Nebraska. The legal effect of this position is that its reports on contributions to candidates or in connection with ballot questions are voluntary and not required by law.

ANALYSIS

In reviewing section 49-1469, it is apparent that a corporation, labor organization, industry trade, or professional association making expenditures to support or oppose candidates or ballot questions has reporting obligations only if the entity is organized under Nebraska law or is doing business in Nebraska. If it is neither doing business in Nebraska nor organized under Nebraska law, the Nebraska Political Accountability and Disclosure Act is silent as to any reporting requirements. Clearly, the NRA is not organized under Nebraska law. Therefore, the question becomes, is it doing business in Nebraska?

The term doing business is not defined by the statutes of this state. Section 21-20,105 of the Nebraska Statutes applies to for profit corporations and section 21-1962 applies to nonprofit corporations. These provisions establish certain obligations for foreign corporations doing business in Nebraska. Each statute goes on to describe what does not constitute doing business in the State of Nebraska, but neither provide any guidance as to what does constitute doing business.

Generally, doing business in the state requires: (a) a transaction in the state; (b) some continuity of presence in this state rather than an isolated transaction; and (c) that the transaction be something which is substantially part of the ordinary business of the corporation. 19 C.J.S. Corporations section 908, 909; 17A Fletcher Cyclopedia Corporations section 8466.

The Nebraska Supreme Court appears to have adopted this general rule. In Tomson v. Iowa State Traveling Mens Association 88 NEB 399, 129 N.W. 529 (1911), it stated that a transaction in the state "where such transaction is a part of the ordinary business of the corporation, and indicates a purpose to carry on a substantial part of its dealings here". In Village of Axtell v. Nebraska Hardware Mutual Insurance Company 142 NEB 657, 7 N.W. 2d 471 (1943) the Nebraska Supreme Court made specific reference to the general definition of doing business found in Fletcher Cyclopedia Corporations and C.J.S. It went on to state that the term doing business means "the doing of some of the business that is ordinarily and customarily done by the corporation in carrying out the purpose for which it was created, as distinguished from acts which are within the power of the corporation".

Having determined the criteria, we apply them to the specific situation before us.

Business Transacted in the State. The National Rifle Association has transacted business in the State of Nebraska. The records of the Commission show that the National Rifle Association had a lobbyist registered with the Clerk of the Nebraska Legislature since at least 1985. From 1985 through 1990 the lobbyist appeared to have been an actual employee of the NRA sent from its national headquarters in Washington, D.C. to engage in lobbying activity in Nebraska. In addition to the employee/lobbyist, in 1991 the NRA engaged in services of a local individual for the sum of $10,000 per legislative session to engage in lobbying activities on behalf of the NRA. These activities are transactions within the State of Nebraska.

The Substance of the Transactions. The substance of the transactions was part of the ordinary business of the NRA. The matters upon which the lobbyists acted or were authorized to act included firearms, ammunition, hunting, and wildlife management.

Article II of the bylaws of the NRA provides:

The purposes and objectives of the National Rifle Association of America are: (1) To protect and defend the Constitution of the United States, especially with reference to the inalienable right of individual American citizen guaranteed by such Constitution to acquire, possess, transport, carry, transfer ownership of, and enjoy the right to use arms, in order that the people may always be in a position to exercise their legitimate individual rights of self preservation and defense of family, person, and property, as well as to serve effectively in the appropriate militia for the common defense of the Republic and the individual liberty of its citizens; (2) To promote public safety, law and order, and the national defense; (3) To train members of law enforcement agencies, the armed forces, the militia, and people of good repute in marksmanship and in the safe handling and efficient use of small arms; (4) To foster and promote the shooting sports, including the advancement of amateur competitions and marksmanship at the local, state, regional, national, and international levels; (5) To promote hunter safety, and to promote and defend hunting as a shooting sport and as a viable and necessary method of fostering the propagation, growth, conservation, and wise use of our renewable wildlife resources. The Association may take all actions necessary and proper in furtherance of these purposes and objectives.

The areas in which the NRA's lobbyists were authorized to act appear consistent with the purposes set forth in Article II. "Being organized for the support of charitable, benevolent, educational or religious undertakings, it will be deemed to be doing business within this state when it {the nonprofit corporation} engages in the exercise of its corporate functions in a nonprofit undertaking". 17A Fletcher Cyclopedia Corporations section 8467. Bracketed phrase added.

In addition to Article II, the bylaws of the NRA seem to contemplate precisely the type of activity in which the NRA's lobbyists are engaged. Article X of the NRA's bylaws states the National Rifle Association Institute of Legislative Action shall have the sole responsibility to administer the legislative, legal, informational and fundraising activities of the association relating to the defense or futherance of the right to keep and bear arms, in accordance with the objectives and policies established by the board of directors. Section 3 of Article X calls for the board of directors to approve a detailed plan of action in the following areas: (a) Federal legislative activity; (b) legislative action organization development and operation in the political subdivisions of the United States; (c) legal action; (d) legislative information gathering and dissemination; (e) such other legislative activity as may be advisable; (f) fundraising for the above activities.

Continuance Presence v. Isolated Transaction. The activity of the NRA in the State of Nebraska is continuous. As stated, the NRA has had a lobbying presence in the State of Nebraska since at least 1985. During 1991 the NRA expended the sum of $126,145 in connection with this lobbying activity. During the first three months of 1992 it expended $12,945 in Nebraska for lobbying activity. During 1987 and 1988 the NRA, through its Political Victory Fund, provided cash or in-kind contributions totaling $22,733 in connection with Initiative 403, a state constitutional amendment pertaining to the right to keep and bear arms. The records of the Commission further reflect that the NRA has been making contributions to candidates in Nebraska for the office of Governor and the State Legislature since at least 1986.

In its request for this opinion, the NRA takes the position that its activities do not constitute doing business in the State of Nebraska. It cites section 21-20,105(6) of the Nebraska Business Corporation Act. Section 21-20,105 reads as follows:

Without excluding activities which do not constitute transacting business in this state, a foreign corporation shall not be considered to be transacting business in this state, for the purpose of being required to secure a certificate of authority pursuant to this section, by reason of carrying on in this state any one or more of the following activities: . . . (6) Soliciting or procuring orders, whether by mail or through employees or agents or otherwise, where such orders require acceptance without this state before becoming binding contracts.

The NRA states that its membership solicitation activities in Nebraska are analogous to the activity described in section 21-20,105(6).

We note that the Nebraska Business Corporation Act appears to apply to for profit corporations. The NRA is a nonprofit corporation and presumably governed by the Nebraska Nonprofit Corporation Act. However, assuming that the provisions of section 21-20,105(6) are applicable, we do not believe that it would provide an exemption to the NRA. As we read the statute, a corporation which limits its activity to those set forth in section 21-20,105 may be deemed not to be doing business in the State of Nebraska. However, if a corporation is engaged in other activity which constitutes doing business in the State of Nebraska, the statute does not provide that it can change this status to one of not doing business in the state by simply engaging in one of the activities in the statute. We also note that subparagraph (10) of section 21-20,105 shows as one of the exempt activities "conducting an isolated transaction to be completed within a period of thirty days and not in the course of a number of repeated transactions of like nature". The National Rifle Association's reliance on section 21-20,105 is misplaced.

The NRA is regularly present in the State of Nebraska pursuing the purposes for which it was formed and engaged in activity which is its normal and ordinary activity. Whenever there is a matter before the State Legislature or a matter to be submitted to the Nebraska voters relating to the keeping and bearing of arms, the NRA is an active participant.

For the purposes of section 49-1469, the National Rifle Association is doing business in the State of Nebraska. If the organization makes contributions to Nebraska candidates out of its general fund, it is required to file reports set forth in section 49-1469(1). It may not solicit funds for the purpose of supporting or opposing a candidate or ballot questions unless it establishes a separate segregated political fund. Pursuant to section 49-1469, this separate segregated political fund would be an independent committee as defined in section 49-1427 and subject to all of the provisions of the Nebraska Political Accountability and Disclosure Act. Any committee, including an independent committee, is formed as a matter of law when it raises, receives or expends more than $2,000 in a calendar year. See section 49-1413.

Our position that the National Rifle Association is doing business in Nebraska is for the limited purpose of determining how the Nebraska Political Accountability and Disclosure Act applies to it. This opinion should not be construed as subjecting the NRA to any provision of state law outside of the Act. Such a determination would be beyond the jurisdiction of this Commission.