A party committee may terminate its registration and reporting obligations by filing a termination report, provided that:
• The committee no longer intends to receive contributions, make expenditures, or make any disbursements that would otherwise qualify it as a political committee. 102.3(a)(1);
• Neither the committee seeking to terminate nor any affiliated committee has any outstanding debts or obligations (102.3); and
• The committee is not involved in an enforcement action, an audit or litigation with the FEC.
A party committee that meets the above criteria may file a termination report at any time. The treasurer must check the “Termination Report” box on Line 4 of the Form 3X Summary Page.
The termination report must disclose:
• All receipts and disbursements not previously reported, including an accounting of debt retirement; and
• The purposes for which any remaining committee funds will be used. 102.3(a).
A party committee may use its remaining funds for any lawful purpose, including refunding them to their donors or giving them to charity. AOs 1992-10 and 1991-21.
When to Stop Reporting
The committee’s reporting obligation ends when the Commission notifies the committee in writing that the termination report has been accepted.
Eligibility for Debt Settlement
A committee that has outstanding debts but wants to terminate may settle its debts for less than the full amount owed to the creditors. This option is available only to a terminating committee —i.e., a committee which no longer intends to support candidates and which receives contributions and makes expenditures only for the purpose of paying winding-down administrative expenses (if any) and retiring debts. 116.1(a) and 116.2(a). (An ongoing committee—i.e., a committee that does not qualify as a terminating committee—is not eligible for debt settlement and must continuously report debts until they are extinguished. 104.3(d), 116.1(b) and 116.2(b). However, the committee may resolve their disputed debts or may request a Commission determination that such debts are not payable. 116.10 and 116.9)
Debts Subject to Settlement
The types of debts that are subject to debt settlement requirements include:
• Amounts owed to commercial vendors;
• Debts arising from advances by individuals (e.g., staff using personal funds or credit to purchase goods and services on behalf of the committee);
• Salary owed to committee employees; and
• Loans owed to political committees or individuals (including candidates). 116.7(b).
Debts Not Subject to Settlement
The debt settlement rules do not apply to:
• Disputed debts, which are covered by other rules (see below). 116.7(c)(2) and 116.10.
• Bank loans. However, the Commission recognizes that under extraordinary circumstances, such as the death or bankruptcy of the candidate, settlement of bank loans may be appropriate. (The Commission will consider specific requests on a case-by-case basis.)
Debt Settlement Rules
A commercial vendor (incorporated or unincorporated) may forgive or settle debts owed by a committee without incurring a contribution if:
• Credit was initially extended in the ordinary course of business, and the terms of the credit are similar to those observed by the vendor when extending a similar amount of credit to a nonpolitical client of similar risk and size of obligation. 116.3 and 116.4(d)(1);
• The committee undertook all reasonable efforts to satisfy the outstanding debt, such as fundraising, reducing overhead costs and liquidating assets. 116.4(d)(2); and
• The vendor made the same efforts to collect the debt as those made to collect debts from a nonpolitical debtor in similar circumstances. Remedies might include, for example, late fee charges, referral to a debt collection agency or litigation. 116.4(d)(3). If the committee or the creditor fails to take these steps, the difference between the amount owed and the amount actually paid may be considered a contribution. 114.2(b).
No commercial vendor or other creditor is required to forgive or settle debts owed by committees. 116.4(e).
Debt Settlement Plans
Once a terminating committee has reached an agreement with a creditor, the treasurer should file a debt settlement plan on FEC Form 8 (Examples: Part I, Part II and Part III). Debt settlement plans must include the signature of all creditors listed in Part I of Form 8. The treasurer may use a separate form for each debt or may combine several debt settlements in one plan.
Completing Form 8
Step-by-step instructions for completing Form 8 are included with the form. The treasurer must sign and date the first page, Part I.
The Commission reviews each debt settlement plan to ensure compliance with the rules discussed above and with the criteria listed in Commission regulations 116.7(f). After reviewing the plan, the Commission sends a written notification to the committee.
Payment to Creditors
The committee must postpone paying the creditors included in a plan until the Commission has completed its review. 116.7(a).
Reporting Debts Undergoing Settlement
Debts undergoing settlement must be continuously reported until the Commission has completed its review of the committee’s debt settlement plan. The committee may file a termination report once all debts have been paid, settled, forgiven or otherwise extinguished. Payments to creditors should be disclosed on this report. 116.4(f), 116.5(e) and 116.6(c).
A disputed debt is a bona fide disagreement between the creditor and the committee as to the existence of a debt or the amount owed by the committee. 116.1(d). See here for information on how to report a disputed debt on Schedule D.
When filing a debt settlement plan, a terminating committee must describe any disputed debts and the committee’s efforts to resolve them on Part II of Form 8. 116.10. Disclosure of a disputed debt does not constitute an admission of liability or a waiver of any claims the committee may have against the creditor. 116.10(a).
Both terminating and ongoing committees may obtain a determination from the Commission that a debt is unpayable for purposes of the Act because the creditor cannot be located or has gone out of business. The committee must demonstrate that it made the necessary efforts to locate the creditor and must continue to report the debt until the Commission determines that the debt is unpayable. 116.9.
An inactive committee that wants to terminate but still has outstanding debts must make efforts to settle the debts under the procedures described above. If debt settlement efforts fail, however, such a committee may seek administrative termination by the FEC. (The Commission may also, at its own initiative, administratively terminate a committee’s reporting status.)
Criteria for Administrative Termination
When determining a committee’s eligibility for administrative termination, the Commission will consider the following factors:
• The committee is not involved in any matter
before the Commission (such as a
• The committee’s aggregate reported financial activity in one year is less than $5,000.
• The committee’s reports disclose no receipt of contributions for the previous year.
• The committee’s last report disclosed minimal expenditures.
• The committee’s primary purpose for filing its reports has been to disclose outstanding debts and obligations.
• The committee has failed to file reports for the previous year.
• The committee’s last report disclosed that the debts owed to the committee were not substantial.
• The committee’s outstanding debts and obligations do not appear to present a possible violation of the Act’s contribution prohibitions and limitations.
• The committee’s outstanding debts and obligations exceed the total of the committee’s reported cash-on-hand balance. 102.4(a) and FEC Directive 45.
Procedures for Requesting Administrative Termination
When requesting administrative termination, the committee’s treasurer should set forth the committee’s eligibility in writing, based on the factors listed above. 102.4(b). In addition, with respect to any outstanding debts, the committee’s request should describe:
• The terms and conditions of the initial extension of credit;
• Steps taken by the committee to repay the debt; and
• Efforts made by the creditors to obtain payment.
Requests should be addressed to the Commission’s Reports Analysis Division.
Once the Commission completes its review of the request, the committee will be sent a written notification of the Commission’s approval or disapproval. Committees must continue to file regular reports until the request for administrative termination has been approved. For more information, see FEC Directive 45.