[Federal Register Volume 60, Number 27 (Thursday, February 9, 1995)]
[Rules and Regulations]
[Pages 7862-7875]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-3162]
[[Page 7861]]
_______________________________________________________________________
Part III
Federal Election Commission
_______________________________________________________________________
11 CFR Parts 100, 104, and 113
Contribution and Expenditure Limitations and Prohibitions: Personal Use
of Campaign Funds; Final Rule
Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 /
Rules and Regulations
[[Page 7862]]
FEDERAL ELECTION COMMISSION
[Notice 1995-5]
11 CFR Parts 100, 104 and 113
Expenditures; Reports by Political Committees; Personal Use of
Campaign Funds
AGENCY: Federal Election Commission.
ACTION: Final rules; transmittal of regulations to Congress.
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SUMMARY: The Federal Election Commission has revised its regulations
governing the personal use of campaign funds. These regulations
implement portions of the Federal Election Campaign Act of 1971, as
amended. The new rules insert a definition of personal use into the
Commission's regulations. The rules also amend the definition of
expenditure and the reporting requirements for authorized committees in
the current regulations.
EFFECTIVE DATES: Further action, including the announcement of an
effective date, will be taken after these regulations have been before
Congress for 30 legislative days pursuant to 2 U.S.C. 438(d). A
document announcing the effective date will be published in the Federal
Register.
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: The Commission is today publishing the final
text of revisions to its regulations at 11 CFR parts 100, 104 and 113.
These revisions implement section 439a of the Federal Election Campaign
Act of 1971, as amended, 2 U.S.C. Sec. 431 et seq. [``FECA'' or ``the
Act'']. Section 439a states 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 and ordinary and necessary expenses incurred in
connection with his or her duties as a holder of Federal office. The
new rules insert a definition of personal use into Part 113 of the
current regulations. The rules also amend the reporting requirements
for authorized committees at 11 CFR 104.3, and the definition of
expenditure at 11 CFR 100.8.
The final rules published today are the result of an extended
rulemaking process. In August of 1993, the Commission published a
Notice of Proposed Rulemaking [``NPRM''] seeking comment on proposed
rules governing the conversion of campaign funds to personal use. 58 FR
45463 (August 30, 1993). The NPRM contained a proposed general
definition of personal use, several enumerated examples, and other
provisions for the administration of the personal use prohibition. The
Commission subsequently granted a request for a 45 day extension of the
comment period. 58 FR 52040 (Oct. 6, 1993). The Commission received 32
comments from 31 commenters in response to the NPRM. The Commission
also held a public hearing on January 12, 1994, at which it heard
testimony from five witnesses on the proposed rules.
After reviewing the comments received and the testimony given,
Commission staff prepared draft final rules, which were considered at
an open meeting held on May 19, 1994. The Commission also considered at
that time several requests it had received for an additional
opportunity to comment on the rules before they were finally
promulgated. The Commission decided to seek additional comment on the
rules, and published a Request for Additional Comments on August 17,
1994 [``RAC'']. 59 FR 42183 (August 17, 1994). The RAC contained a
revised set of draft rules, including a revised definition of personal
use that differed significantly from the general definition set out in
the 1993 NPRM. The Commission received 31 comments from 34 commenters
in response to the Request.
The comments received provided valuable information that serves as
the basis for the final rules published today. Elements of both sets of
draft rules have been incorporated into the final rules.
Section 438(d) of Title 2, United States Code requires that any
rules or regulations prescribed by the Commission to carry out the
provisions of Title 2 of the United States Code be transmitted to the
Speaker of the House of Representatives and the President of the Senate
30 legislative days before they are finally promulgated. These
regulations were transmitted to Congress on February 3, 1995.
Explanation and Justification
The 1979 amendments to the Federal Election Campaign Act, Pub. L.
No. 96-187, 93 Stat. 1339, 1366-67, amended 2 U.S.C. Sec. 439a to
prohibit the use of campaign funds by any person for personal use,
other than an individual serving as a Member of Congress on January 8,
1980. Under this provision, the Commission must determine whether a
disbursement of campaign funds is a campaign expenditure, a permissible
expense connected to the duties of a holder of Federal office, or a
conversion to personal use. The Commission undertook this rulemaking in
an effort to provide additional guidance on these issues to the
regulated community.
Some of the comments received contained general observations on the
Commission's effort to promulgate personal use rules. Many commenters
expressed general support for the Commission's efforts, but other
commenters objected to Commission action in this area. One commenter
expressed doubt that the Commission would be able to regulate personal
use with these kinds of rules. A number of commenters argued that this
entire area should be left to Congress. Two of these commenters
objected to the rulemaking on the grounds that it is an expansion of
Commission authority that is not mandated by Congressional action, one
saying Congressional inaction does not confer jurisdiction on the
Commission to take action.
However, this rulemaking is clearly within the Commission's
jurisdiction and authority. Section 438(a)(8) of Title 2 states that
``[t]he Commission shall prescribe rules, regulations and forms to
carry out the provisions of [the Federal Election Campaign Act] * *
*.'' This rulemaking is an effort by the Commission to carry out the
provisions of section 439a by more clearly defining personal use. Thus,
it is precisely the kind of rulemaking contemplated by Congress when it
enacted section 438(a)(8).
In addition, this rulemaking is prompted, in large part, by more
recent Congressional action, specifically, the Ethics Reform Act of
1989, Pub. L. No. 101-194, 103 Stat. 1716. Section 504 of the Ethics
Reform Act repealed a ``grandfather'' provision that Congress included
in section 439a when it enacted the personal use prohibition in 1979.
This grandfather provision exempted any person who was a ``Senator or
Representative in, or Delegate or Resident Commissioner to, the
Congress'' on January 8, 1980 from the personal use prohibition. By
repealing the grandfather provision, Section 504 of the Ethics Reform
Act limited conversions to personal use by grandfathered Members and
former Members to the unobligated balance in their campaign accounts on
November 30, 1989. It also completely prohibited conversions of
campaign funds by anyone serving in the 103rd or any later Congress.
Thus, any grandfathered Members who returned to Congress in January,
1993 gave up the right to convert funds to personal use.
Many of the enforcement actions and advisory opinions the
Commission [[Page 7863]] addressed before the start of the 103rd
Congress involved persons who, because they were Members of Congress on
January 8, 1980, were eligible to convert campaign funds to personal
use. Consequently, the question of whether a particular disbursement
was a legitimate campaign expenditure or a conversion of campaign funds
to personal use may not have been fully explored during that period. A
few former Members of Congress may still be covered by the grandfather
provision and so continue to be eligible to convert campaign funds to
personal use. These former Members are not affected by the new rules
published today.
However, the Commission expects that, in the future, most of the
situations it will address will involve persons who are not eligible to
convert funds to personal use. This increases the need for a clear
distinction between permissible uses of campaign funds and
impermissible conversions to personal use. In an effort to address this
need, the Commission initiated this rulemaking. The Commission is
hopeful that the promulgation of these rules will provide much needed
guidance to the regulated community.
This Explanation and Justification departs from the Commission's
usual practice of discussing the provisions of the final rules in
numerical order. The amendments to Parts 100 and 104 are an outgrowth
of the new rules inserted in part 113. Consequently, part 113 will be
discussed first, in order to place the amendments to parts 100 and 104
in the proper context.
Part 113--Excess Campaign Funds and Funds Donated to Support Federal
Officeholder Activities (2 U.S.C. 439a)
Section 113.1 Definitions (2 U.S.C. 439a)
The final rules insert a definition of personal use into
Sec. 113.1, which contains the definitions that apply to Part 113. Part
113 lists the permissible uses of excess campaign funds and states that
excess funds cannot be converted to personal use. Under Sec. 113.1(e),
candidates can determine that a portion of their campaign funds are
excess campaign funds. The final rules treat the use of campaign funds
for personal use as a determination by the candidate that the funds
used are excess campaign funds. The personal use definition is inserted
as section 113.1(g).
Section 113.1(g) contains a general definition of personal use.
Section 113.1(g)(1) expands on this general definition. Paragraph
(g)(1)(i) contains a list of expenses that are per se personal use.
Paragraph (g)(1)(ii) explains how the Commission will analyze
situations not covered by the list of expenses in paragraph (g)(1)(i).
The remaining provisions of Sec. 113.1(g) set out specific exclusions
from the definition of personal use, explain how the definition
interacts with certain House and Senate rules, and describe the
circumstances under which payments for personal use expenses by third
parties will be considered contributions.
Section 113.1(g) General Definition
The general definition of personal use is set out in new paragraph
113.1(g). Personal use is any use of funds in a campaign account of a
present or former candidate to fulfill a commitment, obligation or
expense of any person that would exist irrespective of the candidate's
campaign or responsibilities as a Federal officeholder.
Under this definition, expenses that would be incurred even if the
candidate was not a candidate or officeholder are treated as personal
rather than campaign or officeholder related. This approach is based on
Advisory Opinions 1980-138 and 1981-2, in which the Commission said
that ``expenses which would exist regardless of an individual's
election to Federal office are not `incidental' and may not be paid
from campaign funds.'' Advisory Opinion 1981-2. Since not all cases
that raise personal use questions can be specifically addressed in a
rule, this standard provides a guideline for the Commission and the
regulated community to use in determining whether a particular expense
is permissible or prohibited.
The final rules supersede Advisory Opinion 1976-17, in which the
Commission said that ``any disbursements made and reported by the
campaign as expenditures will be deemed to be for the purpose of
influencing the candidate's election.'' A disbursement for campaign
funds will not be deemed to be for the purpose of influencing an
election if the disbursement is for an expense that is considered a
personal use under these rules.
The rules supersede Advisory Opinion 1980-49, in which the
Commission indicated that section 439a allows a campaign to pay the
``personal living expenses'' of the candidate. The use of campaign
funds to pay the personal living expenses of the candidate is a
prohibited personal use under these rules. Similarly, the rules
supersede Advisory Opinions 1982-64 and 1976-53, to the extent that
they allowed the use of campaign funds for living expenses incurred
during the campaign. However, the rules do not prohibit the use of
campaign funds for campaign or officeholder related meal expenses or
subsistence expenses incurred during campaign or officeholder related
travel. Generally, these uses are permissible under
Secs. 113.1(g)(1)(ii) (B) and (C). These sections will be discussed in
detail below.
In approving the irrespective definition for inclusion in the final
rules, the Commission returned to the definition set out in the 1993
NPRM. The Commission had proposed an alternative definition in the
August 1994 Request for Additional Comments. Under the alternative
definition, personal use would have been any use of funds that confers
a benefit on a present or former candidate or a member of the
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. The Commission received numerous comments on both of these
definitions.
Many commenters expressed strong support for the irrespective
definition contained in the final rules. These commenters said the
alternative definition is vague and would force the Commission to
engage in piecemeal decisionmaking. Thus, the commenters said, the
alternative definition would be difficult to enforce, and would not
curtail any of the abuses taking place under current law. Consequently,
the alternative version would not be an improvement over the current
situation.
In contrast, the commenters who preferred the alternative version
argued that it uses more established and well understood principles,
and thus would reduce the likelihood of conflicts with other laws. They
also said it more closely tracts the statute and more closely serves
the purposes of the Ethics Reform Act of 1989, Pub. L. No. 101-194, 103
Stat. 1716 (1989). Two commenters criticized the irrespective
definition, saying it does not provide enough guidance and leaves too
much room for regulatory interpretation. These commenters said the
alternative version would be flexible enough to accommodate a wide
range of political and campaign activity, and would preserve the
discretion recognized in the Commission's previous advisory opinions.
The irrespective definition is preferable to the alternative
version because determining whether an expense would exist irrespective
of candidacy can be done more objectively than determining whether an
expense is primarily related to the candidacy. If campaign funds are
used for a financial obligation that is caused by campaign activity or
the activities of an [[Page 7864]] officeholder, that use is not
personal use. However, if the obligation would exist even in the
absence of the candidacy or even if the officeholder were not in
office, then the use of funds for that obligation generally would be
personal use.
In contrast, determining whether an expense is primarily related to
a campaign or the duties of an officeholder, or instead is primarily
related to some other activity, would force the Commission to draw
conclusions as to which relationship is more direct or significant. The
Commission has been reluctant to make these kinds of subjective
determinations in the past. Moreover, any rule that requires these
kinds of determinations can result in more ad hoc decisionmaking. The
Commission initiated this rulemaking in order to reduce piecemeal
resolution of personal use issues, and to provide more prospective
guidance to the regulated community as to the kinds of uses that will
be considered personal use. The Commission has concluded that the
irrespective definition will more successfully achieve these goals.
The general definition of personal use originally proposed by the
Commission in the 1993 NPRM applied to any use of campaign funds,
regardless of whether the use benefited the candidate, a family member,
a campaign employee or an unrelated party. However, under the revised
draft rules set out in the RAC, the general definition would have been
more limited. This definition would have covered only those uses of
campaign funds that benefit the candidate or members of the candidate's
family.
The final rules return to the original approach because this
approach is more consistent with the FECA. Section 439a states that no
campaign funds ``may be converted by any person to any personal use.''
Thus, under the final rules, any use of campaign funds that would exist
irrespective of the campaign or the duties of a Federal officeholder is
personal use, regardless of whether the beneficiary is the candidate, a
family member of the candidate, or some other person.
Paragraph (g)(1)(i)
Paragraph (g)(1)(i) of the final rules contains a list of expenses
that are considered personal use. The list includes household food
items, funeral expenses, clothing, tuition payments, mortgage, rent and
utility payments, entertainment expenses, club dues, and salary
payments to family members. The rule assumes that, in the indicated
circumstances, these expenses would exist irrespective of the
candidate's campaign or duties as a Federal officerholder. Therefore,
the rule treats the use of campaign funds for these expenses as per se
personal use.
In adopting a per se list, the Commission rejected the alternative
approach set out in the RAC. Under the alternative approach, the
expenses on the list were not presumed to fall within the general
definition of personal use. Instead, they were merely examples of
expenses to which the ``primarily related'' standard would then be
applied on a case by case basis.
Most of the commenters that addressed this issue preferred the list
of per se personal uses that has been incorporated into the final
rules. These commenters characterized the alternative version as a
return to case by case review that would not provide any useful
guidance to the regulated community and would not make it any easier to
enforce the personal use prohibition. These commenters urged the
Commission to use the per se approach and write whatever exceptions are
necessary into the specific provisions of the list. The Commission used
this approach in drafting the final rules.
However, two commenters went a step further. They urged the
Commission to limit the rule to a list of specific uses that would be
personal use, and eliminate the general definition of personal use that
would apply to other situations. However, the Commission decided not to
adopt this approach. It is doubtful that the agency could draft a
complete list of the kinds of uses that raise personal use issues under
section 439a. In addition, the Commission has identified some
situations that warrant allocation between permissible and personal
expenses. See section 5 of the discussion of paragraph (g)(1)(ii),
below. Therefore, the rules would be incomplete without a general
definition that could be applied to other situations.
One commenter argued that the per se list will reduce candidate
flexibility in determining how to use campaign resources, and urged the
Commission to adopt the alternative proposal because it strikes what
the commenter believes is the appropriate balance.
However, a list of per se personal uses is preferable to a list of
examples to which a ``primarily related'' test would be applied. By
listing those uses that will be considered personal use and setting out
the exceptions that apply, the per se list draws a clearer line and
reduces the need or case by case review. A committee or a candidate can
examine the rules and be much more certain about what constitutes
personal use.
In contrast, the alternative approach undercuts the Commission's
efforts to provide clearer guidance. Under the alternative approach,
the Commission would have to examine the facts and circumstances of
each situation in order to determine whether a particular use is
personal use. Thus, the alternative approach would require more
Commission involvement in the resolution of personal use issues.
1. Household Food Items and Supplies. Under paragraph (g)(1)(i)(A)
of the final rules, the use of campaign funds for household food items
and supplies is personal use. This provision covers any food purchased
for day to day consumption in the home, and any supplies purchased for
use in maintaining the household. The need for these items would exist
irrespective of the candidate's campaign or duties as a Federal
officeholder. Therefore, the Commission regards them as inherently
personal and subject to the personal use ban.
However, this provision would not prohibit the purchase of food or
supplies for use in fundraising activities, even if the fundraising
activities take place in the candidate's home. Items obtained for
fundraising activities are not household items within the meaning of
this provision. Similarly, refreshments for a campaign meeting would
not be covered by this paragraph.
In addition, this provision does not apply to the use of campaign
funds for meal expenses incurred outside the home. The use of campaign
funds for these expenses is governed by section 113.1(g)(1)(ii)(B),
which will be discussed further below. Similarly, this provision does
not apply to the use of campaign funds for subsistence expenses, that
is, food and shelter, incurred during travel. Section
113.1(g)(1)(ii)(C) specifically addressed this situation, and will be
discussed in greater detail below.
2. Funeral, Cremation and Burial Expenses. Paragraph (g)(1)(i)(B)
of the final rules indicates that the use of campaign funds to pay
funeral, cremation or burial expenses is personal use. Campaign funds
have been used for these expenses in the past by the estates of former
Members of Congress who were covered by the grandfather provision and
therefore could convert campaign funds to personal use. The Commission
believes that these expenses are inherently personal in nature, and,
under the current state of the law, should be covered by the personal
use ban. The Commission [[Page 7865]] received no comments on this
provision.
Section 113.1(g)(4) of the final rules contains an exception to the
personal use definition that is relevant here. Section 113.1(g)(4),
which will be discussed further below, states that gifts and donations
of nominal value made on special occasions are not personal use, unless
they are made to a member of the candidate's family. Under this
provision, campaign funds can be used to send flowers to a
constituent's funeral as an expression of sympathy without violating
section 439a. However, if campaign funds are used to pay for costs of
the funeral, that use is personal use under paragraph (g)(1)(i)(B).
3. Clothing. Under paragraph (g)(1)(i)(C) of the final rules, the
use of campaign funds to purchase clothing is generally personal use.
However, the rule contains an exception for clothing items of de
minimis value that are used in the campaign. Thus, if a campaign
committee uses campaign funds to purchase campaign T-shirts and caps
with campaign slogans, the purchase is not personal use. One commenter
expressed support for this provision.
This rule supersedes Advisory Opinion 1985-22 to the extent that
opinion can be read to allow the use of campaign funds for these
purposes. In that opinion, the requester sought to use campaign funds
to purchase ``specialized attire'' to wear at ``politically related
functions which [were] both social and official business.'' The
Commission concluded that the requester's committee could use the funds
for these purposes because the requester was grandfathered. However,
the language of the opinion suggests that the use of campaign funds for
these purposes would also have been permissible if the clothing was to
be used in connection with the campaign. Under paragraph (g)(1)(i)(C),
the use of campaign funds for these purposes is personal use.
4. Tuition Payments. Under paragraph (g)(1)(i)(D) of the final
rules, the use of campaign funds for tuition payments is personal use.
However, this provision contains an exception that allows a committee
to pay the costs of training campaign staff members, including
candidates and officeholders, to perform the tasks involved in
conducting a campaign. The Commission received no comments on this
provision.
The Commission has concluded that only those tuition payments that
fall within the narrow exception set out in the rule are campaign
related and should be payable with campaign funds. Other tuition costs,
whether for members of the campaign staff or other persons, are subject
to the personal use prohibition.
5. Mortgage, Rent and Utility Payments. Paragraph (g)(1)(i)(E) of
the final rules addresses the use of campaign funds for mortgage, rent
or utility payments on real or personal property owned by the candidate
or a member of the candidate's family. In the past, the Commission has
generally allowed campaigns to rent property owned by the candidate or
a family member for use in the campaign, so long as the campaign did
not pay rent in excess of the usual and normal charge for the kind of
property being rented. See Advisory Opinions 1993-1, 1988-13, 1985-42,
1983-1, 1978-80, 1977-12, and 1976-53.
The new rule changes the Commission's policy with regard to rental
of all or part of a candidate or family member's personal residence.
Under paragraph (g)(1)(i)(E)(1), the use of campaign funds for
mortgage, rent or utility payments on any part of a personal residence
of the candidate or a member of the candidate's family is personal use,
even if part of the personal residence is being used in the campaign.
This paragraph supersedes Advisory Opinions 1988-13, 1985-42, 1983-1
and 1976-53, since they allow the use of campaign funds for these
purposes.
In contrast, paragraph (g)(1)(i)(E)(2) continues the Commission's
current policy in situations where the property being rented is not
part of a personal residence of the candidate or a member of the
candidate's family. Thus, a campaign committee can continue to rent
part of an office building owned by the candidate for use in the
campaign, so long as the committee pays no more than fair market value
for the property usage.
Paragraph (g)(1)(i)(E)(2) is consistent with Advisory Opinions
1977-12 and 1978-80. It is also consistent with the result reached in
Advisory Opinion 1993-1, in which the Commission allowed a candidate to
rent a storage shed that was not part of his or her personal residence
for use in the campaign. However, Advisory Opinion 1993-1 cites
Advisory Opinions 1988-13, 1985-42, and 1983-1 as authority for this
conclusion. As indicated above, these opinions are superseded by
paragraph (1). Consequently, they should no longer be regarded as
authority for the result reached in AO 1993-1.
The use of campaign funds to make mortgage, rent or utility
payments on real or personal property that is not used in the campaign
would be reviewed under the general definition of personal use. These
expenses presumably would exist irrespective of the candidacy, so the
use of campaign funds to pay these expenses would be personal use.
The Commission received a number of comments on its proposed rules
in this area. Four commenters urged the Commission to prohibit all
transactions between the campaign committee and the candidate, saying
that the rules should require the committee to enter into arms length
transactions with unrelated third parties. Two of these commenters said
the prohibition should be extended to transactions with any member of
the candidate's family unit. In contrast, four other commenters urged
the Commission to continue to allow these transactions so long as they
involve bona fide rentals at fair market value.
The Commission has adopted what is essentially a middle ground. The
rule prohibits payments for use of a personal residence because the
expenses of maintaining a personal residence would exist irrespective
of the candidacy or the Federal officeholder's duties. Thus, the rule
draws a clear line, and avoids the need to allocate expenses associated
with the residence between campaign and personal use.
At the same time, the Commission believes it is unnecessary to
change its current policy regarding payments for the use of other
property. These arrangements more closely resemble arms length
transactions in that the property in question is available on the open
market. Also, these arrangements generally do not raise the same kinds
of allocation issues. Consequently, so long as the campaign pays fair
market value, these payments will not be considered personal use.
It is important to note that paragraph (g)(1)(i)(E)(1) does not
prohibit the campaign from using a portion of the candidate's personal
residence for campaign purposes. It merely limits the committee's
ability to pay rent for such a use. The candidate retains the option of
using his or her personal residence in the campaign, so long as it is
done at no cost to the committee. The Commission specifically allowed
such an arrangement in Advisory Opinion 1986-28. That opinion is not
affected by the new rules.
Nor should this rule be read to prohibit a campaign committee from
paying the cost of long distance telephone calls associated with the
campaign, even if those calls are made on a telephone located in a
personal residence of the candidate or a member of the candidate's
family. Since these calls are separately itemized on the residential
telephone bill, they can [[Page 7866]] easily be attributed to the
campaign without raising allocation issues.
6. Entertainment. Paragraph (g)(1)(i)(F) states that the use of
campaign funds to pay for admission to a sporting event, concert,
theater or other form of entertainment is personal use, unless the
admission is part of a specific campaign or officeholder activity.
Several commenters urged the Commission to impose limits on the use
of campaign funds for admission to these kinds of events. One suggested
that these uses be prohibited unless they are part of a bona fide
fundraising event, and said the Commission should require explicit
solicitation of contributions in order to ensure that fundraising takes
place. Another commenter recommended that the rule only allow the use
of campaign funds if guests are present, and then only for the guests'
admissions. A third commenter would require the candidate to show that
the event was overwhelmingly campaign related in order to eliminate
borderline cases. A fourth argued that these uses should only be
allowed when the event is integral to campaign activity, and not when
it is merely an event at which those present occasionally discuss
campaign related subjects.
Other commenters took a different view. One commenter argued that
meeting and mingling with supporters is a legitimate campaign activity,
and that the expenses associated with that activity are a legitimate
campaign expense. This commenter urged the Commission to allow the use
of campaign funds for these purposes so long as the event takes place
within the candidate's district. Another commenter said that the rules
should allow committees to buy tickets for these events and give them
to campaign workers, volunteers, and constituents.
The final rules require that the purchase of tickets be part of a
particular campaign event or officeholder activity and not a leisure
outing at which the discussion occasionally focuses on the campaign or
official functions. This is not intended to include traditional
campaign activity, such as attendance at county picnics, organizational
conventions, or other community or civic occasions. This approach
recognizes that these activities can be campaign or officeholder
related. Moreover, the rules do not require an explicit solicitation of
contributions or make distinctions based on who participates in the
activity, since this would be a significant intrusion into how
candidates and officeholders conduct campaign business.
7. Dues, Fees and Gratuities. Paragraph (g)(1)(i)(G) of the final
rules provides that using campaign funds to pay dues, fees or
gratuities to a country club, health club, recreational facility or
other nonpolitical organization is personal use. Under this rule,
membership dues, greens fees, court fees or other payments for access
to these clubs are personal use, as are payments to caddies or
professionals who provide services at the club, regardless of whether
they are club employees or independent contractors. However, this rule
contains an exception that allows a candidate holding a fundraising
event on club premises to use campaign funds to pay the cost of the
event. In this situation, the payments would be expenditures rather
than personal use.
The Commission received a mix of comments on this provision. One
commenter supported the rule, but urged the Commission to make it
stronger by narrowing the exception for fundraising events. Another
commenter took a different view, saying that a candidate's greens fees
for golf with supporters or potential supporters is a legitimate
campaign expense and should be allowed.
Once again, the rule charts a middle course. Playing a round of
golf or going to a health club is often a social outing where the
benefits received are inherently personal. Consequently, the use of
campaign funds to pay for these activities will generally be personal
use.
However, the rule is not so broad as to limit legitimate campaign
related or officeholder related activity. The costs of a fundraising
event held on club premises are no different under the FECA than the
costs of a fundraiser held at another location, so the rule contains
and exception that indicates that payments for these costs are not
personal use. However, this exception does not cover payments made to
maintain unlimited access to such a facility, even if access if
maintained to facilitate fundraising activity. The exception is limited
to payments for the costs of a specific fundraising event.
The rule also allows a candidate or officeholder to use campaign
funds to pay membership dues in an organization that may have political
interests. This would include community or civic organizations that a
candidate or officeholder joins in his or her district in order to
maintain political contacts with constituents or the business
community. Even though these organizations are not considered political
organizations under 26 U.S.C. Sec. 527, they will be considered to have
political aspects for the purposes of this rule.
8. Salary Payments to the Candidate's Family Members. The final
rules also clarify the Commission's policy regarding the payment of a
salary to members of the candidate's family. Under paragraph
(g)(1)(i)(H), salary payments to a member of the candidate's family are
personal use, unless the family member is providing bona fide services
to the campaign. If a family member provides bona fide services to the
campaign, any salary payment in excess of the fair market value of the
services provided is personal use. This rule is consistent with the
Commission's current policy, as set out in Advisory Opinion 1992-4.
Several commenters urged the Commission to take a stricter
approach. Two suggested that the Commission prohibit salary payments
for any member of the candidate's household unit, because the salary
could be used to pay the living expenses of the candidate. Other
commenters urged the Commission to prohibit salary payments unless the
family member was hired to perform services that he or she previously
provided in a professional capacity outside the campaign. Some
commenters expressed concern that the fair market value standard could
be abused.
In contrast, a number of commenters urged the Commission to allow
these payments. Two commenters questioned why family members should be
treated any differently from other employees who provide legitimate
services to the campaign. One commenter said the test should be whether
the family member is actually working for the campaign. If so, salary
payments should be allowed.
The Commission agrees with those commenters that argue that family
members should be treated the same as other members of the campaign
staff. So long as the family member is providing bona fide services to
the campaign, salary payments to that family member should not be
considered personal use. However, the Commission believes these
payments should be limited to the fair market value of the services
provided. Consequently, the final rules treat salary payments in excess
of that amount as personal use.
9. Additional Issues. Both the Notice of Proposed Rulemaking and
the Request for Additional Comments proposed to treat the use of
campaign funds to pay the candidate a salary as personal use. This rule
would have the effect of prohibiting candidate salaries, and would
resolve an issue raised in Advisory Opinion 1992-1. The
[[Page 7867]] Commission received numerous comments on this provision.
Several commenters objected to this provision and urged the
Commission to allow candidate salaries. Most said that a prohibition
would aggravate existing inequities between incumbents and challengers
and would create a wealth test or property qualification for running
for office. These commenters urged the Commission to allow candidate
salaries in order to level the playing field and open up the election
process to candidates of modest means. One commenter strongly believes
a candidate should be able to receive a reasonable salary based on his
or her experience and the services he or she renders to the campaign.
Many different proposals for determining the amount of a candidate's
salary were suggested.
Several other commenters questioned why full disclosure of salary
payments would not adequately prevent any unfairness to campaign
contributors. Another commenter argued that candidates are essentially
employees of the party by whom they are nominated, and, as such, the
party should be permitted to pay the candidate a salary.
In contrast, two commenters strongly supported a prohibition on
candidate salaries, saying such a prohibition is required under section
439a. They urged the Commission to adopt a blanket rule prohibiting the
use of campaign funds for this purpose, because permitting salaries
effectively allows the candidate to use campaign funds to pay his or
her personal living expenses and does away with the personal use
prohibition. These commenters acknowledged that the inequities that
exist between incumbents and challengers is a problem that needs to be
rectified. Nevertheless, they said this inequity cannot be resolved in
this rulemaking because nothing in section 439a requires a level
playing field. They also argue that nothing in section 439a justifies
distinguishing between incumbents and other candidates, and since
Members of Congress would not be allowed to take a salary from their
campaigns in addition to their Congressional salary, the statute
requires a prohibition on salary payments to the candidate.
One of these two commenters also urged the Commission not to try to
level the playing field by reversing what the commenter described as
the Commission's policy of requiring corporate employees to take an
unpaid leave of absence to campaign for office. This commenter also
said that a means test for payment of candidate salaries would not
work.
The Commission took up the candidate salary issue when it
considered the final rules, but could not reach a majority decision by
the required four affirmative votes. See 2 U.S.C. Sec. 437c(c).
Consequently, this issue has not been addressed in the final rules.
Paragraph (g)(1)(ii)
Paragraph (g)(1)(ii) explains how the Commission will address other
uses of campaign funds not covered by the per se list of examples. If
an issue comes before the Commission as to whether a use not listed in
paragraph (g)(1)(i) is personal use, the Commission will determine
whether the use is for an expense that would exist irrespective of the
candidate's campaign or duties as a Federal officeholder. If so, it
will be personal use unless some other specific exception applies.
These determinations will be made on a case by case basis. Committees
should look to the general definition for guidance in determining
whether uses not listed in paragraph (g)(1)(i) are personal use.
Two commenters expressed concerns with this approach. One said that
case by case review will cause great difficulty, and urged the
Commission to allow candidates to explain the campaign relationship of
any use that may appear to be personal. This commenter also argued that
if the use reasonably appears to have a campaign relationship, it
should not be personal use. The other commenter said that this
provision leaves the question of personal use unsettled, and urged the
Commission to affirm that candidates have wide discretion over the use
of campaign funds and treat uses outside the categories contained in
the rule as presumptively permissible.
In contrast, a third commenter expressed support for this provision
if it is implemented in conjunction with a general definition of
personal use that uses the irrespective standard.
The Commission is aware of the problems of case by case
decisionmaking. It has sought to minimize these problems by
incorporating a list of examples that specifically addresses the most
common personal use issues into the final rules.
However, the Commission cannot anticipate every type of expense
that will raise personal issues. Thus, the Commission cannot create a
list that addresses every situation. Furthermore, some expenses that do
raise personal use issues cannot be characterized as either personal or
campaign related in the majority of situations, so they cannot be
addressed in a per se list. Consequently, it is necessary to have a
plan for addressing situations not covered by the per se list. The
Commission is including paragraph (g)(1)(ii) in the rules to provide
guidance to the regulated community as to how these situations will be
handled. Should a personal use issue arise, the candidate and committee
will have ample opportunity to present their views. The Commission,
however, reaffirms its long-standing opinion that candidates have wide
discretion over the use of campaign funds. If the candidate can
reasonably show that the expenses at issue resulted from campaign or
officeholder activities, the Commission will not consider the use to be
personal use.
The Notice of Proposed Rulemaking sought comments on other uses of
campaign funds that sometimes raise personal use issues. In particular,
the Commission encouraged commenters to submit their views on when the
use of campaign funds for legal expenses, meal expenses, travel
expenses and vehicle expenses would be personal use.
Because the use of campaign funds for these expenses can raise
serious personal use issues, the Commission attempted to draft specific
provisions on these uses and incorporate them into section
113.1(g)(1)(i). However, the Commission's efforts to craft language
that would distinguish permissible uses from those subject to the
prohibition generated rules that could have proved very confusing for
the regulated community. Consequently, the Commission opted for a
simpler approach. The Commission will address any issues raised by the
use of campaign funds for these expenses by applying the general
definition on a case by case basis. Thus, the use of campaign funds for
these expenses will be personal use if the expense would exist
irrespective of the candidate's campaign or duties as a Federal
officeholder.
Legal, meal, travel and vehicle expenses are listed under paragraph
(g)(1)(ii) as examples of uses that will be reviewed on a case by case
basis. The Commission has inserted this list in the final rules in
order to make it clear how issues involving the use of campaign funds
for these expenses will be handled. These provisions, and the comments
received in response to the NPRM, are discussed in detail below.
1. Legal expenses. Paragraph (g)(1)(ii)(A) indicates that issues
regarding the use of campaign funds for legal expenses will be
addressed on a case by case basis using the general definition of
personal use. One commenter argued that legal expenses should be per se
personal use except when they are incurred in ensuring compliance with
the election laws. This commenter also urged the Commission
[[Page 7868]] to prohibit contributions to the legal defense funds of
other candidates.
Treating legal expenses other than those incurred in ensuring
compliance with the election laws as per se personal use is too narrow
a rule. A committee or a candidate could incur other legal expenses
that arise out of campaign or officeholder activities but are not
related to compliance with the FECA or other election laws. For
example, a committee could incur legal expenses in its capacity as the
employer of the campaign staff, or in its capacity as a contracting
party in its dealings with campaign vendors. Consequently, the
Commission has decided that issues raised by the use of campaign funds
for a candidate's or committee's legal expenses will have to be
addressed on a case by case basis.
However, legal expenses will not be treated as though they are
campaign or officeholder related merely because the underlying legal
proceedings have some impact on the campaign or the officeholder's
status. Thus, legal expenses associated with a divorce or charges of
driving under the influence of alcohol will be treated as personal,
rather than campaign or officeholder related.
2. Meal Expenses. Paragraph (g)(1)(ii)(B) indicates that issues
regarding the use of campaign funds for meal expenses will be addressed
on a case by case basis using the general definition of personal use.
One commenter thought payments for meals should be strictly limited,
and recommended that the Commission prohibit the use of campaign funds
to pay for meals that are not directly related to the campaign. Another
commenter suggested the Commission follow the Internal Revenue Service
approach for business meals, and allow the use of campaign funds if
guests are present. Under this approach, family members would not
qualify as guests, so campaign funds could not be used to pay for their
meals.
A third commenter expressed doubt that persons who use campaign
funds for entertainment actually discuss campaign business while the
event is going on. The commenter said that, although these situations
often involve face to face fundraising and therefore are campaign
related, the Commission should require candidates to show that the
event is overwhelmingly campaign related in order to eliminate
borderline cases. A fourth commenter would require that the meal
involve an explicit solicitation of contributions in order to allow use
of campaign funds.
In contrast, two commenters objected to limits on the use of
campaign funds for these purposes.
The Commission is aware of the potential for abuse in the use of
campaign funds to pay for meal expenses. However, the Commission sought
to establish a rule that would effectively curb these abuses without
making it difficult to conduct legitimate campaign or officeholder
related business. Consequently, the Commission has decided to address
these situations on a case by case basis using the general definition
of personal use.
Under this approach, the use of campaign funds for meals involving
face to face fundraising would be permissible. Presumably, the
candidate would not incur the costs associated with this activity if he
or she were not a candidate. In contrast, the use of campaign funds to
take the candidate's family out to dinner in a restaurant would be
personal use, because the family's meal expenses would exist even if no
member of the family were a candidate or an officeholder.
It should be noted that this provision applies to meal expenses
incurred outside the home. It does not apply to the use of campaign
funds for household food items, which are covered by section
113.1(g)(1)(i)(A). Nor does it apply to subsistence expenses incurred
during campaign or officeholder related travel. These expenses will be
considered part of the travel expenses addressed by paragraph
(g)(1)(ii)(C).
3. Travel Expenses. Paragraph (g)(1)(iii)(C) indicates that the use
of campaign funds for travel expenses, including subsistence expenses
incurred during travel, will be addressed on a case by case basis using
the general definition of personal use.
One commenter said that the rules should prohibit the use of
campaign funds for expenses that are collateral to travel, such as
greens fees, ski lift tickets and court time. This commenter also said
the rules should prohibit the use the campaign funds for pleasure or
vacation trips or extensions of campaign or officeholder related trips.
Another commenter urged the Commission to adopt a two part test for
travel expenses which would allow them only if the travel is
predominantly for permissible purposes and the trip is necessary for
the fulfillment of those purposes. This commenter also urged the
Commission to prohibit the payment of per diems, since they allow
campaigns to use campaign funds without disclosing how they are used.
As will be discussed further below (see section 5 on ``mixed
use''), the final rules do prohibit the use of campaign funds for
personal expenses collateral to campaign or officeholder related travel
by treating these uses as personal use unless the committee is
reimbursed. However, the Commission has decided against adopting the
two part test suggested, because it would require closer review of a
candidate's or officeholder's travel to determine the predominant
purpose or necessity of a particular trip. This approach has been
rejected, and is a departure from the analysis under the irrespective
standard.
The Commission has also decided against imposing limits on per diem
payments, since the Commission has a long-standing policy of allowing
these payments, see Advisory Opinion 1984-8, and because these limits
would be impractical and would impose unreasonable burdens on
candidates and committees. However, per diem payments must be used for
expenses that meet the general standard. They cannot be converted to
personal use.
4. Vehicle Expenses. Paragraph (g)(1)(ii)(D) indicates that issues
regarding the use of campaign funds for vehicle expenses will be
addressed on a case by case basis using the general definition of
personal use. However, the rule contains an exception for vehicle
expenses of a de minimis amount. Thus, vehicle expenses that would
exist irrespective of the candidate's campaign or duties as a holder of
Federal office will be personal use, unless they are a de minimis
amount. If these expenses exceed a de minimis amount, the person(s)
using the vehicle for personal purposes must reimburse the committee
for the entire amount associated with the personal use. See section 5
on ``mixed use,'' below.
One commenter urged the Commission to make the vehicle expense
provision more specific by defining de minimis and setting a specific
cents per mile reimbursement amount. This commenter also urged the
Commission to include a limit on payments for the candidate's personal
vehicle.
The Commission is sensitive to the difficulties that candidates and
committees would face in completely eliminating all vehicle uses that
confer a personal benefit. Consequently, the Commission has sought to
carefully craft a rule that will provide a mechanism for addressing
apparent abuses of campaign vehicles without imposing unrealistic
burdens on candidates and committees. The Commission has decided not to
impose the more specific requirements [[Page 7869]] suggested by the
commenter. Instead, it will review the facts of a particular case in
order to determine whether personal use has occurred. The Commission
will make use of the de minimis concept by assessing whether the amount
of expenses associated with personal activities is significant in
relation to the overall vehicle use.
While the comments focused on the use of campaign funds to pay for
expenses associated with the candidate's personal vehicle, the rule
applies to the use of campaign funds for expenses associated with any
vehicle, regardless of whether it is owned or leased by the committee
or the candidate. Because the expenses associated with a personal
vehicle usually exist irrespective of the candidacy or the
officeholder's duties, the use of campaign funds for these expenses
will generally be considered personal use.
5. Mixed Use. Paragraphs (g)(1)(ii) (C) and (D) also explain the
Commission's policy regarding the use of campaign funds for travel and
vehicle expenses associated with a mixture of personal and campaign or
officeholder related activities.
Under paragraph (c), if a campaign committee uses campaign funds to
pay expenses associated with travel that involves both personal
activities and campaign or officeholder related activities, the
incremental expenses that result from the personal activities are
personal use, unless the person(s) benefiting from this use
reimburse(s) the campaign within thirty days for the amount of the
incremental expenses.
Paragraph (D) contains a similar rule regarding vehicle expenses.
However, this rule does not apply to vehicle expenses that are a de
minimis amount. If the vehicle expenses associated with personal
activities exceed a de minimis amount, the person(s) using the vehicle
for personal activities must reimburses(s) the campaign within thirty
days for the entire amount associated with the personal activities.
Otherwise, the use of campaign funds for the vehicle expenses is
personal use. This approach is consistent with Advisory Opinions 1984-
59 and 1992-12.
For example, under paragraph (C), if a Member of Congress travels
to Florida to make a speech in his or her official capacity, and stays
an extra week there to enjoy a vacation, the Member's campaign
committee can pay the Member's transportation costs and the subsistence
costs necessary for making the speech. However, if the committee pays
the cost of the entire trip, including the expenses incurred during the
extra week of vacation, the Member is required to reimburse the
committee for the expenses incurred during this extra week. This
includes the hotel and meal expenses for the extra week along with any
entertainment expenses incurred during this time that are included in
the amount paid by the committee.
Of course, the reimbursement need only cover the incremental costs
of the personal activities, that is the increase in the total cost of
the trip that is attributable to the extra week of vacation. Thus, if
the vacation and the speech take place in the same location, the Member
is not required to reimburse the committee for any portion of the
airfare, since that expense would have been incurred even if the trip
had not been extended. See Advisory Opinion 1993-6.
On the other hand, if the Member travels to one location to make
the speech, travels on to another location for the vacation, and then
returns to his or her point of origin, the Member is required to
reimburse the committee for the increase in transportation costs
attributable to the vacation leg of the trip. The increased costs would
be calculated by determining the cost of a fictional trip that includes
only the campaign and officeholder related stops, that is, a trip that
starts at the point of origin, goes to every campaign related or
officeholder related stop, and returns to the point of origin. The
difference between the transportation costs of this fictional, campaign
related trip and the total transportation costs of the trip actually
taken is the incremental cost attributable to the personal leg of the
trip.
These rules apply to any Federal candidate or officeholder. Thus,
challengers are also required to reimburse their committees for any
personal travel expenses that are paid with campaign funds.
These principles also apply to vehicle expenses for a trip that
involves both campaign or officeholder related activities and personal
activities in excess of a de minimis amount. If the personal activities
are more than a de minimis portion of the trip, the person using the
vehicle is required to reimburse the committee for the difference
between the total vehicle expenses incurred during the trip and the
amount that would be incurred on a fictional trip that only includes
the campaign or officeholder related stops. Section 106.3(b) of the
Commission's regulations sets out a method for allocating campaign and
non-campaign related vehicle expenses. Advisory Opinion 1992-34
contains an example of how this allocation mechanism works.
The Commission notes that if the person benefiting from the use of
campaign funds for personal travel or vehicle expenses makes a timely
reimbursement under this section, that reimbursement is not a
contribution under the Act. However, if a reimbursement required under
this section is made by a person other than the person benefiting, it
may be a contribution under Sec. 113.1(g)(6). Section 113.1(g)(6) will
be discussed further below.
Section 113.1(g)(2) Charitable Donations
Section 113.1(g)(2) indicates that donations of campaign funds to
organizations described in section 170(c) of the Internal Revenue Code
are not personal use, so long as the candidate does not receive
compensation from the recipient organization before it has expended the
entire amount donated for purposes unrelated to the candidate's
personal benefit. Compensation does not include reimbursements for
expenses ordinarily and necessarily incurred on behalf of such
organization by the candidate. This provision is based on the approach
taken by the Commission in Advisory Opinion 1983-27, and is consistent
with subsequent Commission treatment of charitable donations made with
campaign funds. See Advisory Opinions 1986-39 and 1993-22. The
Commission received no comments on this provision.
Section 113.1(g)(3) Transfers of Campaign Assets
Under Sec. 113.1(g)(3), the sale or other transfer of a campaign
asset is not personal use so long as the transfer is for fair market
value. This provision seeks to limit indirect conversions of campaign
funds to personal use. An indirect conversion occurs when a committee
sells an asset for less than the asset's actual value, thereby
essentially giving part of the asset to the purchaser at no charge.
Section 113.1(g)(3) limits these conversions by requiring these
transactions be for fair market value.
Section 113.1(g)(3) also seeks to limit indirect conversions to
personal use by ensuring that any depreciation in the value of an asset
being transferred is properly allocated between the committee and the
purchaser. Many assets such as vehicles and office equipment depreciate
dramatically immediately after they are purchased. If a campaign
committee purchases an asset, uses it during a campaign season, and
then sells it to the candidate at its [[Page 7870]] depreciated fair
market value, the candidate receives the asset at a substantially
reduced cost but with significant time remaining in its useful life.
Thus, the cost of the depreciation falls disproportionately upon the
campaign committee. This would effectively be a conversion of campaign
funds to personal use.
Section 113.1(g)(3) addresses this situation by requiring that any
depreciation that takes place before the transfer be allocated between
the committee and the purchaser based on the useful life of the asset.
Thus, the committee should absorb only that portion of the depreciation
that is attributable to the time period during which it uses the asset.
This approach is consistent with Advisory Opinion 1992-12, in which the
Commission required a Congressman who was assuming a lease of a van
from his campaign committee to ``accept a pro rata share of the
financial obligations and charges attending the lease * * *.'' The
Commission also noted that ``the lease may provide for a discount on
the purchase price of the van at the conclusion of the agreement. In
that event, a portion of the discount may belong to the committee.''
Advisory Opinion 1992-12, n.3.
Two commenters expressed views on this provision. One commenter
argued that, even if the asset's depreciation is allocated between the
committee and the purchaser, the purchaser is still getting a bargain.
This commenter urged the Commission to require the committee to sell
its assets to third parties and use the proceeds to pay campaign debts
or to make contributions to charities.
The Commission has decided not to require committees to sell their
assets only to third parties, because such a requirement would not
serve the purposes of the personal use prohibition. Section 439a
prohibits conversions of campaign funds to any person's personal use.
Thus, a violation of section 439a occurs whenever an asset is
transferred for less than fair market value. It makes no difference
whether the purchaser is the candidate or an unrelated third party.
Consequently, a rule that requires that all transfers of campaign
assets be for fair market value will fully serve the purposes of
section 439a.
Section 113.1(g)(4) Gifts
As indicated above, the final rules generally apply with equal
force to uses of campaign funds that benefit third parties as they do
to uses of campaign funds that benefit the candidate or a member of the
candidate's immediate family. However, the final rules also contain a
provision that allows a committee to use campaign funds to benefit
constituents or supporters on certain occasions without violating the
personal use prohibition. Section 113.1(g)(4) indicates that gifts or
donations of nominal value given on special occasions to persons other
than family members of the candidate are not personal use. This will
allow a committee to use campaign funds to send flowers to a
constituent's funeral without violating the personal use prohibition.
The Commission recognizes that candidates and officeholders
frequently send small gifts to constituents and supporters on special
occasions as gestures of sympathy or goodwill, and that such an expense
would not exist irrespective of the candidate's or officeholder's
status. The Commission has included this provision in the rules to
specifically indicate that the use of campaign funds for this purpose
is permitted.
However, the exception does not cover gifts that are of more than
nominal value. For example, using campaign funds for other expenses
associated with special occasions, such as the funeral and burial
expenses covered under section 113.1(g)(1)(i)(B), would be personal
use. Nor does this exception allow the committee to use campaign funds
to send gifts to members of the candidate's family. Presumably, the
candidate would give such a gift irrespective of whether he or she were
a candidate or Federal officeholder. Therefore, the use of campaign
funds for such a gift would be personal use.
Section 113.1(g)(5) Political or Officially Connected Expenses
Section 113.1(g)(5) explains how the personal use rules interact
with the rules of the U.S. House of Representatives and the United
States Senate. Under House rules, a Member ``shall convert no campaign
funds to personal use * * * and shall expend no funds from his campaign
account not attributable to bona fide campaign or political purposes.''
House Rule 43, clause 6. Senate Rule 38 also prohibits personal use,
but allows a Member to use campaign funds to defray ``expenses incurred
* * * in connection with his official duties.'' Senate Rule 38, clause
1(a). Thus, these rules allow Members to use campaign funds for what
are described as ``political'' and ``officially connected'' expenses.
Several commenters have raised the question of how the personal use
rules would apply to the use of campaign funds for these purposes.
Section 113.1(g)(5) indicates that the use of campaign funds for a
political or officially connected expense is not personal use to the
extent that it 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. The rule also reiterates that any use of funds that
would be personal use under Sec. 113.1(g)(1) will not be considered an
expenditure or an ordinary and necessary expense incurred in connection
with the duties of a Federal officeholder.
One commenter urged the Commission to be consistent with House and
Senate rules in this area, saying that, since House rules specifically
allow Members to use campaign funds for political expenses, the
Commission's rules should specifically exclude these uses from the
definition of personal use. Two other commenters agreed, and urged the
Commission not to introduce additional confusion into this area.
In contrast, two commenters rejected the suggestion that the
Commission should defer to House and Senate rules in this area. They
asserted that enforcement of the personal use ban is the Commission's
responsibility, and that, since Congressional precedents are based on
rules with different language than section 439a, the Commission should
not look to those precedents for guidance.
Other commenters expressed their views on the specific language of
the rule. One commenter urged the Commission to treat what the
commenter referred to as campaign disbursements and political
disbursements as synonymous, and to treat what the commenter referred
to as political and officially connected expenses as permissible
ordinary and necessary expenses under section 439a. Another commenter
criticized the provision as tautological, and cited this as an area in
which the Commission should reaffirm that candidates and officeholders
have wide discretion.
Two commenters said the rule is an improvement over a previous
draft that was read to have ceded authority for determining whether
uses by incumbents are personal use to the House and Senate. However,
one said that the rule still defers too much to Congress because it
still says political and officially connected expenses are not personal
use to the extent that they are expenditures or the ordinary and
necessary expenses of a Federal officeholder. The other commenter said
the rule is acceptable so long as the list of uses is truly a per se
list. [[Page 7871]]
The Commission recognizes that the existence of two sets of rules
creates the potential for confusion. However, the Commission cannot
create a blanket exclusion from personal use for all uses that qualify
as a political or officially connected expense under Congressional
rules. Congress has given the Commission the authority to interpret and
enforce the personal use prohibition in section 439a. Creating an
exclusion for all political or officially connected expenses would
effectively be an abdication of that authority, particularly since
section 439a uses different standards than House and Senate rules for
determining whether a particular use of campaign funds is permissible.
Nevertheless, the Commission anticipates that, in most
circumstances other than those specifically addressed in the rules,
political and officially connected expenses will be considered ordinary
and necessary expenses incurred in connection with the duties of a
Federal officeholder, as that term is used under the FECA. As such,
they will not be personal use under Sec. 113.1(g)(1). In other
circumstances, political and officially connected expenses may be
expenditures under the Act, and therefore clearly permissible. In
short, the Commission does not anticipate a significant number of
conflicting results under these rules.
The Commission notes that the FY 1991 Legislative Branch
Appropriations Act (Pub. L. 101-520) provides that ``official
expenses'' may not be paid from excess campaign funds. Thus, even
though 2 U.S.C. Sec. 439a, House Rule 43, and Senate Rule 38
contemplate the use of campaign funds for ``ordinary and necessary
expenses,'' ``political purposes,'' and expenses ``in connection with''
official duties, guidance regarding the scope of the Legislative Branch
Appropriations Act provision referred to above should be sought by
persons covered.
Section 113.1(g)(6) Third Party Payments of Personal Use Expenses
Section 113.1(g)(6) sets out Commission policy on payments for
personal use expenses by persons other than the candidate or the
candidate's committee. Generally, payments of expenses that would be
personal use if made by the candidate or the candidate's committee will
be considered contributions to the candidate if made by a third party.
Consequently, the amount donated or expended will count towards the
person's contribution limits. However, no contribution will result if
the payment would have been made irrespective of the candidacy. The
final rule contains three examples of payments that will be considered
to be irrespective of the candidacy.
Several commenters expressed views on this provision. Three
commenters objected to it, arguing that it is inconsistent to say that
the use of campaign funds for certain expenses is personal use when
those expenses are not campaign related, while at the same time saying
that payments for those same expenses by third parties are
contributions because they are being made for the purpose of
influencing an election. Two of these commenters recommended that the
Commission reverse its existing policy and allow corporate employers to
pay employee-candidates a salary during the campaign in order to level
the playing field.
Another commenter objected to this provision, saying that third
parties should be allowed to pay the personal living expenses of a
candidate who loses his or her salary upon becoming a full time
candidate, subject to three conditions: (1) The payments are disclosed
and limited as in-kind contributions under the FECA; (2) the payments
are for essential living expenses; and (3) the total payments and the
candidate's salary during the campaign period do not exceed his or her
average monthly salary over the previous year, or that of an incumbent
Member of Congress.
In contrast, one commenter approved of this provision. Another
commenter urged the Commission to flatly prohibit these payments rather
than treating them as contributions, saying that third parties should
not be able to label as contributions payments that could not be made
by the committee itself.
The Commission has decided to treat payments by third parties for
personal use expenses as contributions subject to the limits and
prohibitions of the Act, unless the payment would have been made
irrespective of the candidacy. If a third party pays for the
candidate's personal expenses, but would not ordinarily have done so if
that candidate were not running for office, the third party is
effectively making the payment for the purpose of assisting that
candidacy. As such, it is appropriate to treat such a payment as a
contribution under the Act. This rule follows portions of Advisory
Opinions 1982-64, 1978-40, 1976-70 and the Commission's response to
Advisory Opinion Request 1976-84. The Commission understands the
concerns about the inequities between incumbents and challengers
expressed by the commenters in relation to this provision and other
aspects of this rulemaking. However, the FECA is not intended to level
the playing field between incumbents and challengers. See Buckley v.
Valeo, 424 U.S. 1, 48-49 (1976).
If the payment would have been made even in the absence of the
candidacy, the payment should not be treated as a contribution. Section
113.1(g)(6) excludes payments that would have been made irrespective of
the candidacy, and sets out three examples of such payments. These
examples protect a wide range of payments of personal use expenses from
being treated as contributions. Other situations will be examined on a
case by case basis.
First, the final rule excludes payments to a legal expense trust
fund established under House and Senate rules. House and Senate rules
provide Members of Congress with a mechanism they can use to accept
donations to pay for legal expenses. The final rule places donations to
these funds outside the scope of the contribution definition of the
FECA. Donations to other legal defense funds will be examined on a case
by case basis.
Second, the final rule excludes payments made from the personal
funds of the candidate, as defined in 11 CFR 110.10(b). Section 110.10
allows candidates for Federal office to make unlimited expenditures
from personal funds, as defined in paragraph (b) of that section. Thus,
if a payment by a third party is made with the candidate's personal
funds, the payment will not be considered a contribution that is
subject to the limits and prohibitions of the Act. Similarly excluded
from contribution treatment under this provision are payments made from
an account jointly held by the candidate and a member of the
candidate's family.
Finally, the rule indicates that a third party's payment of a
personal use expense will not be considered a contribution if payments
for that expense were made by the third party before the candidate
became a candidate. If the third party is continuing a series of
payments that were made before the beginning of the candidacy, the
Commission considers this convincing evidence that the payment would
have been made irrespective of the candidacy, and therefore should not
be considered a contribution. For example, if the parents of a
candidate had been making college tuition payments for the candidate's
children, the parents could continue to do so during the candidacy
without making a contribution.
It should be noted, however, that the exclusion for payments made
before the candidacy contains a caveat for [[Page 7872]] compensation
payments. Compensation payments that were made before the candidacy and
continue during the candidacy will be considered contributions to the
candidate unless three conditions are met: the compensation results
from bona fide employment that is genuinely independent of the
candidacy, the compensation is exclusively in consideration of services
provided by the candidate as part of the employment, and the
compensation does not exceed the amount that would be paid to a
similarly qualified person for the same work over the same period of
time. The Commission assumes that, when these three conditions exist,
the compensation payment would have been made irrespective of the
candidacy and should not be treated as a contribution. This rule is
based on Advisory Opinion 1979-74, and is consistent with Advisory
Opinions 1977-45, 1977-68, 1978-6 and 1980-115.
Section 113.1(g)(7) Members of the Candidate's Family
Section 113.1(g)(7) lists the persons who are members of the
candidate's family for the purposes of Secs. 113.1(g) and 100.8(b)(22).
This list is significant for several provisions of the rules. Under
Sec. 113.1(g)(7), the candidate's family includes those persons
traditionally considered part of an immediate family, regardless of
whether they are of whole or half blood. Consistent with the laws of
most states, the rules make no distinction between biological
relationships and relationships that result from adoption or marriage.
The grandparents of the candidate are also considered part of the
candidate's family. Finally, the candidate's family also includes a
person who has a committed relationship with the candidate, such as
sharing a household and mutual responsibility for each other's welfare
or living expenses. These persons will be treated as the equivalent of
the candidate's spouse for the purposes of these rules.
Section 113.2 Use of Funds (2 U.S.C. 439a)
The final rules also contain an amendment to the list of
permissible uses of excess campaign funds contained in 11 CFR 113.2.
The amendment specifically indicates that certain travel costs and
certain office operating expenditures will be considered ordinary and
necessary expenses incurred in connection with the duties of a Federal
officeholder.
The costs of travel for a Federal officeholder and an accompanying
spouse who are participating in a function that is directly connected
to bona fide official responsibilities will be considered ordinary and
necessary expenses. 11 CFR 113.2(a)(1). The rule cites fact-finding
meetings and events at which the officeholder makes an appearance in an
official capacity as examples of functions covered by the rule. Note
that spouse travel for campaign purposes continues to be a permissible
expense.
In addition, the costs of winding down the office of a former
Federal officeholder for six months after he or she leaves office will
be considered ordinary and necessary expenses. 11 CFR 113.2(a)(2).
Consequently, the use of excess campaign funds to pay for these
expenses is permissible.
The Commission notes that the FY 1991 Legislative Branch
Appropriations Act (Pub. L. 101-520) provides that ``official
expenses'' may not be paid from excess campaign funds. Thus, even
though 2 U.S.C. Sec. 439a, House Rule 43, and Senate Rule 38
contemplate the use of campaign funds for ``ordinary and necessary
expenses,'' ``political purposes,'' and expenses ``in connection with''
official duties, guidance regarding the scope of the Legislative Branch
Appropriations Act provision referred to above should be sought by
persons covered.
1. Travel Costs. Several commenters criticized the travel cost
provision. One commenter thought Members of Congress received a stipend
for these expenses, and argued that campaign funds should not be used
for this purpose. Another commenter urged the Commission to only allow
the use of campaign funds for travel between Washington, D.C. and the
Member's district. A third commenter argued that the provision allowing
travel expenses for a Member's spouse should be deleted because it
creates confusion, and opens a loophole because it does not require the
Member to demonstrate that the spouse participated in the official
function.
One commenter urged the Commission to allow the use of campaign
funds to defray expenses connected to officeholder duties, including
travel, as permitted under House rules.
The Commission has concluded that the expenses of both the
officeholder and the officeholder's spouse should be permitted. If an
officeholder incurs expenses in traveling to a function that is
directly connected to his or her bona fide official responsibilities,
those expenses clearly would not exist irrespective of his or her
duties as a Federal officeholder. As such, the use of campaign funds
for those expenses would not be personal use under section 113.1(g)(1).
The Commission also recognizes that an officeholder's spouse is
often expected to attend these functions with the officeholder. See
Advisory Opinion 1981-25. In this context, the spouse's attendance
alone amounts to a form of participation in the function, even if the
spouse has no direct role in the activities that take place during the
event. Consequently, the Commission has decided that the rule should
specifically indicate that the expenses of an accompanying spouse can
be paid with campaign funds when an officeholder travels to attend an
official function.
This provision also helps to clarify the relationship between the
personal use rules and the rules of the House and Senate on the use of
campaign funds for travel. Although Members receive appropriated funds
for certain travel expenses, House and Senate rules also allow them to
pay for certain other expenses with campaign funds. The amendments to
Sec. 113.2 make it clear that, so long as the travel is for
participation in a function connected to the Member's official
responsibilities, the permissibility of this use is not affected by the
personal use rules.
Advisory Opinion 1980-113 indicated that campaign funds could be
used to defray expenses incurred in carrying out the duties of a state
officeholder. That opinion also suggested that campaign funds could be
used to defray the travel expenses of the spouse of such an
officeholder if the spouse's expenses are incident to the duties of the
state officeholder. However, in Advisory Opinion 1993-6, the Commission
explicitly superseded Advisory Opinion 1980-113 to the extent that it
allowed the use of campaign funds ``for expenses related to that
person's position as a holder of state office or any office which is
not a Federal office as defined in the Act.'' Advisory Opinion 1993-6,
n.3. The amendments to Sec. 113.2 are consistent with Advisory Opinion
1993-6. As revised, Sec. 113.2(a)(1) does not permit the use of
campaign funds for travel expenses associated with official
responsibilities other than those of a Federal officeholder.
Finally, the Commission has not limited this rule to expenses
associated with travel between a Member's district and Washington, D.C.
The Commission recognizes that travel to other locations may be
directly connected to a Member's bona fide official responsibilities.
So long as the travel is [[Page 7873]] so connected, the use of
campaign funds to pay the expenses of that travel will also be
permissible.
2. Winding Down Costs. Six commenters expressed views on the
provision regarding winding down costs. 11 CFR 113.2(a)(2). One
commenter disagreed with the proposed rule, and argued that former
officeholders should not be allowed to use campaign funds for this
purpose. Another commenter agreed that a candidate should not be
allowed to retain and use campaign funds beyond a certain reasonable
period after the campaign to pay debts and operating expenses. This
commenter suggested that any funds that remain unused after that time
period should be returned to donors or taxed at one hundred percent.
A third commenter urged the Commission to allow these uses only for
incumbents who lose their seat, and recommended against allowing
Members of Congress to build up a large treasury and then use that
treasury after voluntarily leaving Federal office.
Three commenters agreed these uses should be allowed, but urged the
Commission to approve a rule that limits the time period to sixty days.
The Commission believes the costs of winding down the office of a
former Federal officeholder are ordinary and necessary expenses within
the meaning of section 439a. See Advisory Opinion 1993-6. Therefore,
the use of campaign funds to pay these costs is permissible under the
FECA. Furthermore, there is no basis in the Act for distinguishing
between winding down costs incurred by officeholders who lose their
seats and those incurred by officeholders who leave office for other
reasons. The costs incurred by either kind of former officeholder are
equally permissible.
The Commission initially proposed a sixty day time period. Since
this process often takes longer than anticipated, the Commission is
inclined to provide former officeholders with some leeway in the use of
funds for these purposes. Consequently, the Commission has extended the
period to six months to ensure that former officeholders have ample
time to close down their offices. It should also be noted that, as
written, this provision acts as a safe harbor. It does not preclude a
former officeholder who can demonstrate that he or she has incurred
ordinary and necessary winding down expenses more than six months after
leaving office from using campaign funds to pay those expenses.
Part 100--Scope and Definitions
Section 100.8 Expenditure (2 U.S.C. 431(9))
Current Sec. 100.8(b) of the Commission's regulations excludes
certain disbursements from the definition of expenditure. Paragraph
(b)(22) of that section specifically excludes payments by a candidate
from his or her personal funds, as defined in 11 CFR 110.10(b), for
routine living expenses which would have been incurred without
candidacy. Thus, a candidate can pay his or her routine living expenses
from personal funds without making an expenditure that must be reported
under the Act.
New language has been added to Sec. 100.8(b)(22) that indicates
that payments for routine living expenses by a member of the
candidate's family are not expenditures if made from an account held
jointly with the candidate, or if the expenses were paid by the family
member before the candidate became a candidate. The revised rule treats
payments from an account jointly held by the candidate and a family
member the same as payments made from the candidate's personal funds,
and excludes them from the expenditure definition. Similarly, the rule
assumes that payments by a family member that are a continuation of
payments made before the candidacy are not in connection with the
candidacy, and should not be treated as expenditures.
Under this section, payments from an account that contains only the
candidate's personal funds will be exempt from the definition of
expenditure even if the payment is made by another person such as a
housekeeper or an accountant who has access to the account in order to
pay the candidate's routine living expenses. These payments will also
be exempt if the housekeeper makes the payment from an account jointly
held by the candidate and a member of the candidate's family. The
ability of a person who is not a family member to make payments from
the account will not change otherwise exempt payments from the account
into contributions.
However, if the account is jointly held by the candidate and
someone who is not a member of the candidate's family, or contains the
funds of such a person, the exemption in Sec. 100.8(b)(22) does not
apply, and payments from that account for the candidate's personal
living expenses will be expenditures that have reporting consequences
under the Act. These payments will also be in-kind contributions under
section 113.1(g)(6), and will count towards the joint account holder's
contribution limits. See 11 CFR 110.1.
This section has been revised to parallel new Sec. 113.1(g)(6). One
commenter expressed general support for this provision.
Part 104--Reports by Political Committees
Section 104.3 Contents of Reports (2 U.S.C. 434(b))
The Notice of Proposed Rulemaking invited commenters to submit
their views on any other issues raised by this rulemaking. Several
commenters suggested that the Commission amend its reporting
requirements in order to administer the personal use prohibition. These
commenters urged the Commission to require more detailed reporting of
expenditures that would force committees to bear the burden of
establishing a clear connection between each expenditure and a campaign
event. One commenter cited meals as an example, saying that the
Commission should require the candidate to explain how the meal was
related to the campaign and why it was not personal use. Two of these
commenters recommended that the Commission initiate a separate
rulemaking to implement more detailed reporting requirements.
The Commission agreed that additional reporting may be useful in
administering the personal use rules, and solicited comments in the RAC
on how new reporting requirements could be crafted to be both useful
and not overly burdensome. One commenter responded, recommending that
the Commission require committees to provide a detailed description of
the relationship between a use of campaign funds and the candidate's
campaign or officeholder duties.
The Commission has concluded that any significant changes to the
reporting requirements should be taken up as part of a comprehensive
review of the recordkeeping and reporting regulations. Such a review is
currently under way as a separate rulemaking.
Nevertheless, the Commission has identified one limited change that
can be made now and will be useful in administering the personal use
rules. Section 104.3 contains a new reporting requirement for
authorized committees that itemize certain disbursements implicating
the personal use prohibition. The new reporting requirement is set out
in section 104.3(b)(4)(i)(B).
Revised section 104.3(b)(4)(i)(B) requires an authorized committee
that itemizes a disbursement for which [[Page 7874]] partial or total
reimbursement is expected under new Sec. 113.1(g)(1)(ii) (C) or (D) to
briefly explain the activity for which reimbursement will be made. For
example, when itemizing a disbursement of funds for travel expenses
associated with a trip that was partially campaign related and
partially a personal trip for the candidate, the committee is required
to indicate that the trip includes the cost of the candidate's personal
trip, for which the committee is anticipating reimbursement. This
information would be included on schedule B of Form 3. Committees
receiving reimbursements will report them as ``other receipts'' on the
Detailed Summary Page of Form 3.
If an individual benefiting from the use of campaign funds for
personal travel or vehicle expenses makes a reimbursement under this
section, the reimbursement is not a contribution under the Act, and the
individual is not required to report the reimbursement. However, if the
reimbursement is made by a person other than the person benefiting from
the use of the funds, it may be a contribution by the person making the
reimbursement under Sec. 113.1(g)(6). If so, it must be reported as a
contribution.
Certification of No Effect Pursuant to 5 U.S.C. Sec. 605(b) (Regulatory
Flexibility Act)
The attached final rules, if promulgated, will not have a
significant economic impact on a substantial number of small entities.
The basis of this certification is that the final rules are 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 104
Campaign funds, Political committees and parties, Political
candidates.
11 CFR Part 113
Campaign funds, Political candidates, Elections.
For the reasons set out in the preamble, subchapter A, chapter I of
title 11 of the Code of Federal Regulations is amended as follows:
PART 100--SCOPE AND DEFINITIONS (2 U.S.C. 431)
1. The authority citation for part 100 continues to read as
follows:
Authority: 2 U.S.C. 431, 438(a)(8).
2. Section 100.8 is 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)(7), 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 104--REPORTS BY POLITICAL COMMITTEES (2 U.S.C. 434)
3. The authority citation for part 104 is revised to read as
follows:
Authority: 2 U.S.C. 431(1), 431(8), 431(9), 432(i), 434,
438(a)(8), 438(b), 439a.
4. Section 104.3 is amended by revising the section heading and
adding paragraph (b)(4)(i) (B) as follows:
Sec. 104.3 Contents of reports (2 U.S.C. 434(b), 439a).
* * * * *
(b) * * *
(4) * * *
(i) * * *
(A) * * *
(B) In addition to reporting the purpose described in 11 CFR
104.3(b)(4)(i)(A), whenever an authorized committee itemizes a
disbursement that is partially or entirely a personal use for which
reimbursement is required under 11 CFR 113.1(g)(1)(ii) (C) or (D), it
shall provide a brief explanation of the activity for which
reimbursement is required.
* * * * *
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 continues to read as
follows:
Authority: 2 U.S.C. 432(h), 438(a)(8), 439a, 441a.
6. Section 113.1 is amended by adding paragraph (g) as follows:
Sec. 113.1 Definitions (2 U.S.C. 439a).
* * * * *
(g) Personal use. Personal use means any use of funds in a campaign
account of a present or former candidate to fulfill a commitment,
obligation or expense of any person that would exist irrespective of
the candidate's campaign or duties as a Federal officeholder.
(1)(i) Personal use includes but is not limited to the use of funds
in a campaign account for:
(A) Household food items or supplies;
(B) Funeral, cremation or burial expenses;
(C) Clothing, other than items of de minimis value that are used in
the campaign, such as campaign ``T-shirts'' or caps with campaign
slogans;
(D) Tuition payments, other than those associated with training
campaign staff;
(E) Mortgage, rent or utility payments--
(1) For any part of any personal residence of the candidate or a
member of the candidate's family; or
(2) For real or personal property that is owned by the candidate or
a member of the candidate's family and used for campaign purposes, to
the extent the payments exceed the fair market value of the property
usage;
(F) Admission to a sporting event, concert, theater or other form
of entertainment, unless part of a specific campaign or officeholder
activity;
(G) Dues, fees or gratuities at a country club, health club,
recreational facility or other nonpolitical organization, unless they
are part of the costs of a specific fundraising event that takes place
on the organization's premises; and
(H) Salary payments to a member of the candidate's family, unless
the family member is providing bona fide services to the campaign. If a
family member provides bona fide services to the campaign, any salary
payment in excess of the fair market value of the services provided is
personal use.
(ii) The Commission will determine, on a case by case basis,
whether other uses of funds in a campaign account fulfill a commitment,
obligation or expense that would exist irrespective of the candidate's
campaign or duties as a Federal officeholder, and therefore are
personal use. Examples of such other uses include:
(A) Legal expenses;
(B) Meal expenses;
(C) Travel expenses, including subsistence expenses incurred during
travel. If a committee uses campaign funds to pay expenses associated
with travel that involves both personal activities and campaign or
officeholder related activities, the incremental expenses that result
from the personal activities are personal use, unless the person(s)
benefiting from this use [[Page 7875]] reimburse(s) the campaign
account within thirty days for the amount of the incremental expenses;
and
(D) Vehicle expenses, unless they are a de minimis amount. If a
committee uses campaign funds to pay expenses associated with a vehicle
that is used for both personal activities beyond a de minimus amount
and campaign or officerholder related activities, the portion of the
vehicle expenses associated with the personal activities is personal
use, unless the person(s) using the vehicle for personal activities
reimburse(s) the campaign account within thirty days for the expenses
associated with the personal activities.
(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 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. The transfer of a campaign
committee asset is not personal use so long as the transfer is for fair
market value. 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) Gifts. Gifts of nominal value and donations of a nominal amount
made on a special occasion such as a holiday, graduation, marriage,
retirement, or death are not personal use, unless made to a member of
the candidate's family.
(5) 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.
(6) Third party payments. Notwithstanding that the use of funds for
a particular expense would be a personal use under this section,
payment of that expense by any person other than the candidate or the
campaign committee shall be a contribution under 11 CFR 100.7 to the
candidate unless the payment would have been made irrespective of the
candidacy. Examples of payments considered to be irrespective of the
candidacy include, but are not limited to, situations where--
(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 State 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) 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 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.
(7) Members of the candidate's family. For the purposes of section
113.1(g), the candidate's family includes:
(i) The spouse of the candidate;
(ii) Any child, step-child, parent, grandparent, sibling, half-
sibling or step-sibling of the candidate or the candidate's spouse;
(iii) The spouse of any child, step-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, including:
(1) The costs of travel by the recipient Federal officeholder and
an accompanying spouse to participate in a function directly connected
to bona fide official responsibilities, 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
(2) The costs of winding down the office of a former Federal
officeholder for a period of 6 months after he or she leaves office; or
* * * * *
Dated: February 3, 1995.
Danny L. McDonald,
Chairman, Federal Election Commission.
[FR Doc. 95-3162 Filed 2-8-95; 8:45 am]
BILLING CODE 6715-01-M
