[Federal Register Volume 59, Number 158 (Wednesday, August 17, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-20193]
[[Page Unknown]]
[Federal Register: August 17, 1994]
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FEDERAL ELECTION COMMISSION
[Notice 1994-11]
11 CFR Parts 100 and 113
Expenditures; Personal Use of Campaign Funds
AGENCY: Federal Election Commission.
ACTION: Proposed rule; request for additional comments.
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SUMMARY: The Federal Election Commission is seeking additional comments
on new rules governing the conversion of campaign funds to personal
use. The Federal Election Campaign Act, as amended, prohibits any
person from converting campaign funds to his or her personal use. The
Commission is considering inserting a definition of personal use into
its regulations. Further information is provided in the supplementary
information which follows.
DATES: Comments must be received on or before October 3, 1994.
ADDRESSES: Comments must be in writing and addressed to: Ms. Susan E.
Propper, Assistant General Counsel, 999 E Street, N.W., Washington, DC
20463.
FOR FURTHER INFORMATION CONTACT: Ms. Susan E. Propper, Assistant
General Counsel, 999 E Street, NW., Washington, DC 20463, (202) 219-
3690 or (800) 424-9530.
SUPPLEMENTARY INFORMATION: In August of 1993, the Commission published
a Notice of Proposed Rulemaking [``the 1993 NPRM''] seeking comment on
proposed rules governing the conversion of campaign funds to personal
use [``the proposed rules'']. 58 FR 45463 (August 30, 1993). The
proposed rules were drafted to implement section 439a of the Federal
Election Campaign Act, 2 U.S.C. 431 et seq [``FECA'']. Section 439a
says that no amounts received by a candidate as contributions that are
in excess of any amount necessary to defray his or her expenditures may
be converted by any person to any personal use, other than to defray
any ordinary and necessary expenses incurred in connection with his or
her duties as a holder of Federal office. Those who wished to comment
on the proposed rules were invited to do so by September 29, 1993.
The Commission subsequently granted a request for a 45 day
extension of the comment period, giving the regulated community until
November 13, 1993 to submit their views on the proposed rules. 58 FR
52040 (Oct. 6, 1993). The Commission received 32 comments from 31
commenters in response to the 1993 NPRM. The Commission also held a
public hearing on January 12, 1994, at which it heard testimony from
five witnesses on the proposed rules.
On May 19, 1994, the Commission held an open meeting at which it
considered draft final rules on the conversion of campaign funds to
personal use. The Commission also discussed several letters it had
received at the time of the meeting requesting an additional
opportunity to comment on the rules before they are finally
promulgated. These requests correctly noted that, in an effort to
address the concerns of the commenters, the draft final rules adopted a
different approach to defining personal use than the proposed rules.
The Commission notes that the 1993 NPRM sought comments on all of
the areas addressed by the draft final rules. Thus, under the
Administrative Procedure Act, 5 U.S.C. 551 et seq., it would be
appropriate for the Commission to proceed to adopt final rules.
Nevertheless, the Commission has decided to provide an additional
opportunity to comment on the rules before they are finally
promulgated. The Commission has revised the rules and is publishing the
revised version [referred to as ``the revised rules''] in this NPRM in
order to invite comments from the regulated community. Although this
additional comment period will delay completion of the personal use
rules, the Commission still intends to finalize rules this year. The
Commission will maintan a schedule that will allow the rules to go into
effect early in the next election cycle.
The Revised Rules
The revised rules would include a general definition of personal
use and several enumerated examples. Section 113.1(g)(1) would indicate
that, generally, personal use would be any use of funds that confers a
benefit on a candidate or a member of the candidate's family that is
not related to the campaign or the ordinary and necessary duties of a
holder of Federal office. Section 113.1(g)(1)(i) contains examples of
uses that would be personal use if they confer the kind of benefit
described in the general definition. The list of examples includes
mortgage, rent and utility payments, certain vehicle expenses,
household food items, clothing, tuition, and funeral expenses. The list
also includes salary payments to family members in excess of fair
market value, legal expenses, certain travel and meal expenses, country
club dues and entertainment. In addition, the revised rules would
specifically indicate that the use of funds to pay the candidate a
salary would be personal use.
Section 113.1(g)(1)(iii) of the revised rules would indicate that
the Commission will use the general definition to determine, on a case
by case basis, whether other uses of campaign funds are personal use.
The revised rules would also indicate that the Commission may determine
that a use of funds that confers a benefit on someone other than the
candidate or the candidate's family members is personal use if the
benefit is not campaign or officeholder related.
Revised Sec. 113.1(g)(2) would indicate that charitable donations
are not personal use unless the candidate making the donation receives
compensation from the recipient organization before the organization
has used the funds donated for other purposes. Under revised
Sec. 113.1(g)(3), transfers of campaign committee assets to the
candidate would not be personal use so long as the committee receives
adequate consideration. Revised Sec. 113.1(g)(3) also contains
provisions that would ensure that the cost of the asset being
transferred is properly allocated between the committee and the
candidate.
Under Sec. 113.1(g)(4) of the revised rules, the use of funds for
an expense that would be considered a political expense under House
rules or an officially connected expense under Senate rules would not
be personal use to the extent that the expense qualifies as an
expenditure under 11 CFR 100.8 or is an ordinary and necessary expense
incurred in connection with the duties of a Federal officeholder. The
Commission anticipates that, in most circumstances, political and
officially connected expenses will be ordinary and necessary expenses
of a Federal officeholder for purposes of the FECA, rather than
conversions to personal use. However, section 439a of the FECA uses
different standards than House and Senate rules for determining whether
a particular use of campaign funds is permissible. Specifically, the
Commission would not consider any use of funds that would be personal
use under Sec. 113.1(g)(1) to be an ordinary and necessary expense
incurred in connection with the duties of a Federal officeholder under
the FECA. Thus, the Commission will have to determine whether political
of officially connected expenses are personal use on a case-by-case
basis.
Proposed section 113.1(g)(5) of the revised rules would indicate
that payments for expenses that would be personal use under paragraph
(g)(1) of this section will generally be considered contributions to
the candidate if made by a third party. Consequently, the amount
donated or expended will count towards the third party's contribution
limits. However, no contribution would result if the payment is a
donation to a legal expense trust fund, if the funds used were the
candidate's personal funds, if the payment was made by a member of the
candidate's family from an account jointly held with the candidate, or
if the payment would have been made irrespective of the candidacy and
such payments were made before the candidate became a candidate.
Section 113.1(g)(6) would list the members of the candidate's family
for the purposes of Sec. 113.1(g).
The Commission is also proposing an amendment to the list of
permissible uses of excess campaign funds contained in 11 CFR 113.2.
The amendment would specifically indicate that certain travel costs and
certain office operating expenditures would be considered ordinary and
necessary expenses incurred in connection with the duties of a Federal
officeholder under the FECA. It would also specifically indicate that
any use of funds that would be personal use under 11 CFR 113.1(g)(1) is
not an ordinary and necessary expense incurred in connection with the
duties of a Federal officer.
The notice also contains a proposed conforming amendment to the
definition of expenditure contained in section 100.8(b)(22). Consistent
with revised Sec. 113.1(g)(5), this amendment would clarify that
payment of the candidate's personal living expenses by a member of the
candidate's family will not be considered expenditures if they are made
from an account jointly held with the candidate or were paid by the
family member before the candidate became a candidate.
In addition to the comments on the proposed rules set out below,
the Commission is interested in receiving comments on whether
additional recordkeeping and reporting requirements would be useful in
administering section 439a. Several of the commenters that responded to
the 1993 NPRM expressed the view that additional reporting requirements
would be helpful in this area. However, it is difficult to craft a rule
that would be both useful in enforcing the personal use ban and not
overly burdensome on the reporting committees. The Commission invites
commenters to suggest ways in which the reporting requirements could be
amended to achieve this goal. Comments are also welcome on the
alternative of requiring committees to keep additional records to serve
this purpose, without requiring additional reporting. Commenters are
encouraged to focus on how these amendments could be crafted to be both
useful and not overly burdensome.
The Commission notes that Internal Revenue Service regulations
under 26 U.S.C. 527 contain a definition of personal use by political
organizations. 26 CFR 1.527-5(a)(1). However, the IRS definition is not
controlling in this situation, and is not necessarily coextensive with
the proposed rule. The Commission welcomes comments on the revised
rules, and on any other issues raised by this rulemaking.
Certification of No Effect Pursuant to 5 U.S.C. 605(b) (Regulatory
Flexibility Act)
I certify that the attached proposed rule will not have a
significant economic impact on a substantial number of small entities.
The basis of this certification is that the proposed rule is directed
at individuals rather than small entities within the meaning of the
Regulatory Flexibility Act. Therefore, no small entities will be
significantly impacted.
List of Subjects
11 CFR Part 100
Elections.
11 CFR Part 113
Campaign funds, Political candidates, Elections.
For the reasons set out in the preamble, it is proposed to amend
Subchapter A, chapter I of Title 11 of the Code of Federal Regulations
as follows:
PART 100--SCOPE AND DEFINITIONS (2 U.S.C. 431)
1. The authority citation for Part 100 would continue to read as
follows:
Authority: 2 U.S.C. 431, 438(a)(8).
2. Section 100.8 would be amended by revising paragraph (b)(22) to
read as follows:
Sec. 100.8 Expenditure (2 U.S.C. 431(9)).
* * * * *
(b) * * *
(22) Payments by a candidate from his or her personal funds, as
defined at 11 CFR 110.10(b), for the candidate's routine living
expenses which would have been incurred without candidacy, including
the cost of food and residence, are not expenditures. Payments for such
expenses by a member of the candidate's family as defined in 11 CFR
113.1(g)(6), are not expenditures if the payments are made from an
account jointly held with the candidate, or if the expenses were paid
by the family member before the candidate became a candidate.
* * * * *
PART 113--EXCESS CAMPAIGN FUNDS AND FUNDS DONATED TO SUPPORT
FEDERAL OFFICEHOLDER ACTIVITIES (2 U.S.C. 439a)
5. The authority citation for Part 113 would continue to read as
follows:
Authority: 2 U.S.C. 432(h), 438(a)(8), 439a, 441a.
6. Section 113.1 would be amended by adding paragraph (g), to read
as follows:
Sec. 113.1 Definitions (2 U.S.C. 439a).
* * * * *
(g) Personal use.
(1) Personal use is any use of funds that confers a benefit on a
present or former candidate or a member of such a candidate's family
that is not primarily related to the candidate's campaign or the
ordinary and necessary duties of a holder of Federal office.
(i) Examples of personal use include the use of funds for any of
the expenses listed in paragraph (g)(1)(i)(A) through (L) of this
section if the use confers the type of benefit described in paragraph
(g)(1).
(A) Mortgage, rent or utility payments--
(1) For real property that is used concurrently by the candidate or
a member of the candidate's family as a personal residence; or
(2) For real or personal property that is owned by the candidate or
a member of the candidate's family, to the extent the payments exceed
the fair market value of the property usage;
(B) Expenses incurred in using a vehicle at campaign expense, to
the extent that such expenses exceed a de minimus amount. Persons who
use a vehicle for personal purposes at campaign expense shall reimburse
the campaign within thirty days for that portion of the actual cost of
the personal use that exceeds a de minimus amount;
(C) Household food items or supplies;
(D) Clothing;
(E) Tuition;
(F) Funeral, cremation or burial expenses;
(G) Salary payments for a member of the candidate's family, to the
extent that such payments exceed the fair market value of the services
provided;
(H) Legal expenses;
(I) Transportation and subsistence expenses incurred during travel.
Persons who combine personal activities with travel that is campaign or
officeholder related shall reimburse the campaign within thirty days
for any incremental expenses resulting from the personal activities,
such as additional airfare, hotel and meal expenses;
(J) Meal expenses;
(K) Dues, fees or gratuities paid to a country club, health club,
recreational facility or social organization; and
(L) Admission to a sporting event, concert, theater or other form
of entertainment.
(ii) The use of funds to pay the candidate a salary is personal
use.
(iii) The Commission will determine, on a case by case basis,
whether other uses of campaign funds confer a benefit on a candidate or
a member of a candidate's family that is not primarily related to the
candidate's campaign or the ordinary and necessary duties of a holder
of Federal office, and therefore are personal use.
(iv) The Commission may also determine that a use of campaign funds
that confers a benefit on someone other than the candidate or a member
of the candidate's family is personal use, if the benefit is not
primarily related to a candidate's campaign or the ordinary and
necessary duties of a holder of Federal office.
(2) Charitable donations. Donations of campaign funds or assets to
an organization described in section 170(c) of Title 26 of the United
States Code are not conversions to personal use, unless the candidate
receives compensation from the organization before the organization has
expended the entire amount donated for purposes unrelated to his or her
personal benefit.
(3) Transfers of campaign assets. Transfers of campaign committee
assets to the candidate or a member of the candidate's family for
adequate consideration are not conversions to personal use. In order to
be adequate, the consideration must be for fair market value, and any
depreciation that takes place before the transfer must be allocated
between the committee and the purchaser based on the useful life of the
asset.
(4) Political or officially connected expenses. The use of campaign
funds for an expense that would be a political expense under the rules
of the United States House of Representatives or an officially
connected expense under the rules of the United States Senate is not
personal use to the extent that the expense is an expenditure under 11
CFR 100.8 or an ordinary and necessary expense incurred in connection
with the duties of a holder of Federal office. Any use of funds that
would be personal use under 11 CFR 113.1(g)(1) will not be considered
an expenditure under 11 CFR 100.8 or an ordinary and necessary expense
incurred in connection with the duties of a holder of Federal office.
(5) Third party payments. Notwithstanding that the use of funds for
a particular expense would be a personal use under paragraph (g)(1) of
this section, payment of that expense by any person other than the
candidate or the campaign committee shall be a contribution to the
candidate unless--
(i) The payment is a donation to a legal expense trust fund
established in accordance with the rules of the United States Senate or
the United States House of Representatives;
(ii) The payment is made from funds that are the candidate's
personal funds as defined in 11 CFR 110.10(b), including an account
jointly held by the candidate and a member of the candidate's family;
(iii) The payment would have been made irrespective of the
candidacy and payments for that expense were made by the person making
the payment before the candidate became a candidate. Payments that are
compensation shall be considered contributions unless--
(A) The compensation results from bona fide employment that is
genuinely independent of the candidacy;
(B) The compensation is exclusively in consideration of services
provided by the employee as part of this bona fide independent
employment; and
(C) The compensation does not exceed the amount of compensation
which would be paid to any other similarly qualified person for the
same work over the same period of time.
(6) Members of the candidate's family. For the purposes of
Sec. 113.1(g), the candidate's family includes:
(i) The spouse of the candidate;
(ii) Any child, parent, grandparent, sibling, half-sibling or step-
sibling of the candidate or the candidate's spouse;
(iii) The spouse of any child, parent, grandparent, sibling, half-
sibling or step-sibling of the candidate; and
(iv) A person who has a committed relationship with the candidate,
such as sharing a household and having mutual responsibility for each
other's personal welfare or living expenses.
7. In Section 113.2, the introductory text is republished and
paragraph (a) is revised to read as follows:
Sec. 113.2 Use of funds (2 U.S.C. 439a).
Excess campaign funds and funds donated:
(a) May be used to defray any ordinary and necessary expenses
incurred in connection with the recipient's duties as a holder of
Federal office, if applicable.
(1) Examples of uses that defray ordinary and necessary expenses
incurred in connection with the duties of a holder of Federal office
include:
(i) The use of funds for the expenses of a Federal officeholder and
an accompanying spouse for travel that is part of the ordinary and
necessary duties of a holder of Federal office, such as a fact-finding
meeting or an event at which the officeholder's services are provided
through a speech or appearance in an official capacity; and
(ii) The use of funds for the costs of winding down the office of a
former Federal officeholder for a period not to exceed 6 months after
he or she leaves office.
(2) Any use of funds that would be personal use under 11 CFR
113.1(g)(1) is not an ordinary and necessary expense incurred in
connection with the duties of a holder of Federal office; or
* * * * *
Dated: August 11, 1994.
Trevor Potter,
Chairman.
[FR Doc. 94-20193 Filed 8-16-94; 8:45 am]
BILLING CODE 6715-01-M