A contribution is defined as anything of value given for the purpose of influencing a federal election. 100.52(a). Contributions are subject to the limits and prohibitions of the Federal Election Campaign Act (the Act), as explained later in this chapter. The most common types of contributions are:

• Gifts of money;

• Gifts of goods and services (in-kind contributions);

• Loans (other than bank loans meeting certain conditions); and

• Guarantees or endorsements of bank loans.

Gifts of Money

A contribution of more than $100 must be made by check or other written instrument. 110.4(c).

Proceeds from Sales

Sale of Fundraising Items and Tickets

The full purchase price of a fundraising item or ticket to a fundraising event is considered a contribution. For example, when a person buys a $50 ticket to a fundraising dinner, the amount of the contribution is $50, regardless of how much the meal costs the committee.

Note: A person who buys several tickets to a fundraiser makes a contribution in the amount of the total purchase unless the contribution is intended as a joint contribution.

Sale of Committee Assets

When a committee sells or leases an asset, the full amount received from the purchaser is generally considered a contribution to the committee unless:

• The asset was originally purchased or developed for the committee’s own use (such as a mailing list) rather than as a fundraising item;

• The asset has an ascertainable market value; and

• The purchaser pays the usual and normal charge. (Any payment in excess of that amount is considered a contribution). See, for example, Advisory Opinions (AOs) 2003-19, 1992-40 and 1991-34.

In some cases, a party may lease mailing lists developed for its own use and not for lease to others without receiving a contribution. First, the list must have an ascertainable fair market value in the market where it is leased. Second, the list must be leased at the usual and normal charge in a bona fide, arm's length transaction, and the list must be used in a commercially reasonable manner consistent with such an arms-length agreement. See AO 2002-14.

In-Kind Contributions

Definition

In-kind contributions include:

• Goods and services offered free of charge;

• Goods and services offered at less than the usual and normal charge (unless the discount is offered in the ordinary course of business—see, for example, AO 1994-10);

• Payments, by a third party, of committee bills; and

• Advances of personal funds. 100.52(d) and 100.54.

Value

The dollar value of an in-kind contribution is subject to limits. The value is determined as follows:

• Goods (such as equipment, supplies, facilities and mailing lists) are valued at their normal purchase or rental price.

• Services (such as advertising, printing and consulting) are valued at the prevailing commercial rate at the time the services are rendered.

• Discounts are valued at the difference between the usual or normal charge and the amount paid by the committee. 100.52(d).

Advances of Personal Funds

General Rule

When an individual uses his or her personal funds (or personal credit card) to pay for a committee expense, that payment is generally considered an in-kind contribution from that individual, even if he or she is later reimbursed by the committee. 116.5(b). For example, an in-kind contribution results if a committee staff member or volunteer pays for postage, office supplies or campaign materials with his or her personal funds. (The special reporting rules that apply to advances of personal funds are explained in Chapter 12.)

Travel Exceptions

When an individual uses personal funds to pay for his or her own travel expenses (transportation, food and lodging), the payments are not considered contributions if they fall under one of two exceptions:

• Exempt Travel. An individual may spend up to $2,000 per calendar year on his or her own transportation expenses for party-related travel without making a contribution, and a volunteer may spend unlimited amounts for his or her normal subsistence expenses (food and lodging) while volunteering. 100.79 and 116.5(b)(1).

• Reimbursed Travel. When individuals pay for their own travel expenses, and the expenses are not covered under the travel/volunteer exemptions (above), the payments are not considered contributions if the committee reimburses them within certain time limits: 30 days after payment by cash or personal check; or 60 days after the closing date of the billing statement on which the charges first appear, if the amount was charged to a personal credit card. 116.5(b)(2).

See Chapter 12 for more information on reporting travel expenses.

Loans

A loan to a committee is a contribution to the extent that it remains outstanding. 100.52(b)(2). (Loans from banks are not contributions if they meet certain conditions; see below.)

Repayments made on a loan reduce the amount charged against the lender’s contribution limit. However, a loan that exceeds the lender’s limit is unlawful even if repaid in full.

Endorsements and Guarantees of Bank Loans

An endorsement or guarantee of a bank loan is a contribution. The amount guaranteed counts against the endorser’s or the guarantor’s limit only to the extent that the loan remains outstanding. Repayments on the loan proportionally reduce the amount charged against each endorser’s contribution limit.

If a loan agreement does not stipulate the amount for which each guarantor is liable, then the contribution of each guarantor is determined by dividing the amount of the loan by the number of guarantors. 100.52.(b)(3) and 100.82(a)-(d).

Acceptance of Prohibited Contributions

A political committee is prohibited from knowingly accepting a contribution that violates the prohibitions on contributions. 110.20(g), 110.4(b)(1)(iv), 114.2(d) and 115.2(c). See also 110.9.

For information on how to handle possibly illegal contributions, "Handling Illegal Contributions."

For information on how to handle in-kind donations from corporations and labor organizations for mixed federal/nonfederal activities, see "Prohibited In-kind Donations."

Corporations and Labor Organizations

The Act prohibits corporations and labor organizations from making contributions or expenditures in connection with federal elections.[1] 114.2(b). This prohibition applies to all types of incorporated organizations, except political committees that incorporate for liability purposes.[2] 114.12(a).

National banks and federally chartered corporations, such as federal savings and loan associations, are prohibited from making contributions in connection with state and local as well as federal elections.[3] 114.2(a).

Contribution Reimbursements

A corporation or labor organization may not reimburse individuals who make contributions to a political committee, for example, through a bonus, expense account or other direct or indirect compensation. See 114.5(b)(1) and (c)(ii); see also 110.4(b).

Extensions of Credit

An extension of credit to a political committee by an incorporated commercial vendor is a prohibited contribution unless the credit is extended in the ordinary course of business with terms substantially similar to those given to nonpolitical clients of similar risk. A prohibited contribution can also result if a corporate vendor extends credit for longer than the normal practice in the vendor’s business or if the vendor fails to make a commercially reasonable effort to collect payment on the debt. 100.55 and 116.3(b) and (c).

Forgiveness or settlement of a debt owed by a political committee must comply with the debt settlement procedures explained in Chapter 15.

Discounts

If an incorporated commercial vendor sells goods or services to a committee at a price below the usual or normal charge, a prohibited contribution results in the amount of the discount. 100.52(d)(1). (There is, however, an exception for discounts offered by vendors of food and beverage.) A reduced price is not considered a prohibited discount, however, if it is offered by the vendor in the ordinary course of business at the same amount charged to nonpolitical clients. See, for example, AOs 2004-5, 1993-20 and 1992-24.

Compensation for Services

If a corporation or labor organization pays for services rendered to a committee, a prohibited contribution results. 100.54.

A corporation or labor organization may, however, provide free legal and accounting services to a party committee; see Legal "and Accounting Services" for more information.

Federal Government Contractors

Federal government contractors are prohibited from making contributions or expenditures in connection with federal elections. 115.2(a). For example, a contribution from a partnership with a government contract would be prohibited. 115.4. As another example, a contribution from the personal or business funds of an individual or a sole proprietor with a government contract would be prohibited. 115.5.

Foreign Nationals

Foreign nationals are prohibited from making contributions, donations or expenditures in connection with any election—federal, state or local. 110.20. (See Appendix E for information on how this prohibition applies to state and local elections.) Also, foreign nationals may not donate to any party committee building fund or fund electioneering communications. 110.20.

The Act prohibits knowingly soliciting, accepting or receiving contributions or donations from foreign nationals.  In this context, “knowingly” means that a person:

·       Has actual knowledge that the funds solicited, accepted or received are from a foreign national;

·       Is aware of facts that would lead a reasonable person to conclude that there is a substantial probability that the funds solicited, accepted or received are likely to be from a foreign national; or

·       Is aware of facts that would lead a reasonable person to inquire whether the source of the funds solicited, accepted or received is a foreign national, but the person failed to conduct a reasonable inquiry.  11 CFR 110.20(a)(4) (i), (ii) and (iii). For examples of facts which may be pertinent, see 110.20(a)(5).

It is also unlawful to knowingly provide substantial assistance to foreign nationals making contributions or donations in connection with any U.S. election.  11 CFR 110.20(h).  “Substantial assistance” refers to active involvement in the solicitation, making, receipt or acceptance of a foreign national contribution or donation with the intent of completing the transaction successfully.  This prohibition includes, but is not limited to, individuals who act as conduits or intermediaries. 

Definition of Foreign National

The following entities are considered foreign nationals and are therefore subject to the prohibition: foreign governments; foreign political parties; foreign corporations; foreign associations; foreign partnerships; and individuals with foreign citizenship unless they have “green cards” indicating they have been lawfully admitted for permanent residence. 110.20(a).

Safe Harbor Provision

In some cases, a committee may have questions regarding whether or not a contribution is from a foreign national. For example, the contributor may have a foreign address or bank. In this case, a committee has made reasonable assurances that the individual is not a foreign national if the committee obtains current and valid U. S. passport papers for the contributor. 110.20(a)(7).

The safe harbor cannot be relied on if the committee has actual knowledge the contribution is from a foreign national. 110.20(a)(7).

Domestic Subsidiaries of Foreign Corporations

A political committee may accept contributions from the PAC (separate segregated fund) of a United States corporation that is a subsidiary of a foreign corporation as long as:

• The foreign parent does not finance the PAC’s activities through the subsidiary; and

• No individual foreign national participates in the operation of the PAC (including the selection of persons to run the PAC) or makes any decisions regarding PAC contributions or expenditures. 110.20(i). See also AOs 1990-8, 1989-29 and 1989-20.

Contributions in the Name
of Another

Contributions made by one person in the name of another person are prohibited, and no one may help someone make such a contribution. 110.4(b).

Political committees are prohibited from accepting contributions that violate the contribution limits. 110.9. For information on how to handle excessive contributions, see "Handling Illegal Contributions."

State and Local Committees

A state party committee may receive up to $10,000 per calendar year from any person. 110.1(c)(5). As explained later in this chapter, this limit is shared with local party committees within the state unless a local committee can demonstrate its independence.

National Party Committees

A national party committee may receive up to $15,000 per calendar year from a multicandidate committee and $25,000 per calendar year from non-multicandidate committees and individual contributors. 110.1(c)(1), 110.1(c)(3) and110.2(c)(3).

Biennial Limit for Individuals

In addition to the limits on individual contributions to a particular political committee, there is an overall biennial limit. During a two-year calendar year cycle, an individual may contribute a total of $95,000 to all political committees combined.[4]

This amount may not go entirely to any one type of political committee. Only $37,500 may be contributed to candidate committees. The remaining $57,500 may be contributed to PACs and party committees, but only $37,500 of that amount may go to state and local parties and PACs. The remaining $20,000 is reserved for national party committees. 110.5(b).

Candidate Limit May Apply

A contribution received by a party committee may count against the contributor’s contribution limit for the candidate if:

• The contributor knows that a substantial portion of his or her contribution will be given to or spent on behalf of a particular candidate; or

• The contributor retains control over the funds after making the contribution (for example, the contributor earmarks the contribution for a particular candidate). 110.1(h) and 110.2(h). See also Chapter 6.

Contributions from Affiliated PACs

Political action committees (PACs) that are affiliated with one another share the same set of contribution limits. For example, affiliated PACs may contribute a combined total of $10,000 per year to a state party committee (and its local affiliates). 110.3(a).

Contributions from Spouses

A husband and wife each have separate contribution limits, even if only one spouse has an income. 110.1(i). A couple may make a joint contribution (part of which would be attributed to each), as explained below.

Joint Contributions

A joint contribution is a contribution that is made by more than one person using a single check or other written instrument. A joint contribution represents the personal funds of each donor, so each donor must sign either the check or an accompanying statement. 110.1(k)(1).

For the purposes of the contribution limits, a joint contribution is attributed equally to each donor, unless an accompanying statement indicates that the funds should be divided differently. 110.1(k)(2). See “Excess Contributions: Reattributions."

Partnership Contributions

A contribution from a partnership counts against the partnership’s limit and also counts proportionally against the limits of each participating partner. 110.1(e). See Appendix C for more information.

$100 Limit on Cash Contributions

Contributions of currency from any one source are limited to $100. A cash contribution in excess of that limit must be returned to the contributor. 110.4(c)(1) and (2).

$50 Limit on Anonymous Contributions

An anonymous contribution is limited to $50. Any amount in excess of $50 may not be used for federal election purposes. 110.4(c)(3).

State and Local Committees

General Rule

A state party committee and local party committees within that state are presumed to be affiliated. That is, all contributions received and made by local party committees count against the state committee’s limits. 110.3(b)(3).

This means that the state committee and local committees may receive a maximum of $10,000 per calendar year from any one contributor. 110.1(c)(5). Similarly, the state committee and local committees together may not contribute more than $5,000 per candidate, per election, assuming the state party committee has qualified as a multicandidate committee. 110.2(b)(1).

To avoid exceeding the contribution limits, a state party committee should set up a centralized monitoring system to ensure that all contributions made and received by local party committees are within the limits. 103.3(b) and 110.9.

Independent Local Committees

A local party committee may operate under its own separate set of contribution limits if the committee’s independence can be demonstrated. For more information, consult FEC rules at 110.3(b)(3). See also AO 1978–9 and AO 1999-4.

National Party Committees

A national party committee operates under its own set of contribution limits. 110.3(b)(1)(i).

The Democratic and Republican parties each have three national party committees: a national committee, a House campaign committee and a Senate campaign committee. Each of these committees has a separate set of contribution limits, except for a special limit on contributions to Senate campaigns. 110.2(e) and 110.3(b)(2)(i), (ii).

Bank Loans

Unlike other loans, a loan or line of credit from a bank is not considered a contribution if the conditions set forth below are satisfied. If a loan fails to meet any of these conditions, it is considered a prohibited contribution from the lending institution.

Conditions

A committee may obtain a loan or line of credit from a bank provided that the loan:

1. Bears the bank’s usual and customary interest rate for the category of loan involved;

2. Is evidenced by a written instrument;

3. Is subject to a due date or amortization schedule; and

4. Is made on a basis which assures repayment. 100.82(a)-(d).

Methods of Assuring Repayment

A loan is made on a basis which assures repayment if it is obtained using one or more of the following authorized methods of securing the loan:

Collateral. A loan may be secured using assets of the committee, such as real estate, personal property, negotiable instruments and stocks. The fair market value of the assets pledged must, on the date of the loan, equal or exceed the amount of the loan and any senior liens. The committee must ensure that the bank has established a “perfected security interest” in the collateral (that is, taken steps to legally protect its interest in the collateral in the event that the committee defaults on the loan.) 100.82(e)(1).

Guarantees or Endorsements. A loan may also be secured using guarantors or endorsers, who agree to repay the loan should the committee default. As previously stated, an endorsement or guarantee of a bank loan is considered a contribution by the endorser or guarantor and is therefore subject to the law’s prohibitions and limits on contributions. 100.82(e)(1)(ii).

Pledge of Future Receipts. A committee may pledge its future receipts as security for the loan; the amount of the loan must not exceed a reasonable estimate of anticipated receipts, based on documentation provided by the committee (such as cash flow charts or fundraising plans). Future receipts may include, for example, anticipated contributions or interest income. The loan agreement must require the committee to deposit the pledged funds into a separate account established for this purpose. If the account is established at a depository other than the lending institution, the committee must assign the account’s funds to the lender and notify the depository of the assignment. 100.82(e)(2).

Other Methods of Assuring Repayment

The Commission may, on a case-by-case basis, approve other methods of assuring repayment. 100.82(e)(3). A committee may want to request an advisory opinion from the Commission before entering into an alternative repayment agreement.

Overdrafts

If a bank honors a check written by a committee with insufficient funds in its account, no contribution from the bank results as long as the overdraft:

• Is made on an account subject to automatic overdraft protection;

• Is subject to the usual and customary interest rate; and

• Is subject to a repayment schedule. 100.82(d).

An overdraft that does not meet the above conditions is a prohibited contribution.

Overdraft protection secured through a line of credit is subject to the rules on bank loans.

A committee may earn interest and dividends on funds invested in, for example, a savings account, money market fund or certificate of deposit. Interest and dividends are not contributions.

Disclosure of Bank on Statement of Organization

• Any bank where the committee deposits funds must be listed on the Statement of Organization (Form 1) or an amendment.

• Other institutions holding committee investments (such as stocks, bonds, mutual funds, etc.) are not disclosed on Form 1. Before disbursing such funds, however, the committee must transfer them to a checking account maintained at one of the committee’s campaign depositories. 102.10 and 103.3(a). See also AOs 1998-8, 1997-6, 1986-18 and 1980-39.

Taxes

A committee must generally pay taxes on interest and dividend income; see "Investments" and Appendix F.

Offsets to Operating Expenditures

Offsets to operating expenditures, such as returns of deposits, refunds and rebates, are not considered contributions. Rebates, however, must be offered in the ordinary course of business and on the same terms and conditions as those offered to nonpolitical entities. Otherwise, the rebate may be considered a contribution—a prohibited contribution if the vendor is a corporation. See, for example, AOs 1986-22 and 1985-28.

Transfers from Other Party Committees

A party committee may receive unlimited transfers of permissible funds from other party committees and party organizations. A party organization making such transfers, however, may trigger federal registration. 102.6(a)(1)(ii), (iv) and (a)(2).

Transfers of Excess Funds

A candidate committee may transfer unlimited campaign funds to a party committee or organization. 113.2(c). Any nonfederal law that would prohibit such a transfer to a party organization is preempted by federal law. AO 1993-8.

Loan Repayments

If a committee makes a loan to another political committee or organization, the loan repayments received are not contributions but must be composed of permissible funds.

Any interest charged on the loan must also be paid with permissible funds. Interest payments are not considered contributions unless they exceed the prevailing interest rates. 100.52(b)(5).

(Remember that a loan to another political committee is subject to the contribution limits.)

Ballot Access Payments

Fees paid to a party committee as a condition of ballot access are not contributions. This exemption covers ballot access fees paid by federal candidates as a requirement of state law and those paid to state and subordinate party committees by delegates and delegate committees. Such fees must be paid with permissible funds, except that individual delegates may use funds that are not subject to the limits. 100.90 and 110.14(c)(1)(i) and (2). See Appendix D for information on delegate activity.

Building Fund Donations

State, district and local party committees may accept unlimited funds donated specifically to defray the costs of constructing or purchasing a party office building (but not to influence any particular federal election). Building fund donations are not considered contributions and are not subject to any limits or prohibitions, other than the prohibition against donations from foreign nationals. 100.84, 114.1(a)(2)(ix) and 300.35. (This exemption does not apply to to national party committees. AOs 1996-8 and 1988-12. 300.12(d).)

A party committee must deposit the donations in a nonfederal account, since they do not meet the requirements for deposit in a federal account (see Chapter 1). 102.5(a)(2).

If nonfederal funds are used, they are subject to the limits and prohibitions of state law. State party committees may need to report such activity under state law. AOs 1993-9 and 1991-5.

Note that this exemption does not apply to funds used to pay rent, operating costs, property taxes or other administrative expenses of a party office building. (See AOs cited above. See also AOs 2001-12 and 2001-01.)

Leasing a Portion of the Office Building

A state or local party committee may lease a portion of its office building at the normal charge. If the building is purchased or constructed with any nonfederal funds, all rental income is nonfederal funds. If the building is purchased or constructed solely with federal funds, the income may be deposited in the federal account. 300.35(c).

State and local party committees in some states may receive funds derived from state tax checkoffs or fees paid for a state service (e.g., fees for personalized license plates). This section explains when these funds may be deposited in a federal account and, if so, when they are considered contributions rather than miscellaneous receipts.

Deposit in Federal Account

As a general rule, if the funds in question are from permissible sources (e.g., individuals) rather than from persons prohibited from making contributions under federal law (e.g., corporations, labor organizations, foreign nationals), the funds may be deposited into a federal account. For example, in several advisory opinions, the Commission concluded that proceeds from state income tax checkoff programs (whereby individual taxpayers designate funds for political parties) and fees for personalized licenses plates were permissible funds and could therefore be deposited into a federal account. AOs 1993-21 (Ohio checkoff),[5] 1991-14 (Kentucky checkoff), 1983-15 (Virginia checkoff), 1982-17 (Indiana license plate fees), 1980-103 (North Carolina checkoff) and 1978-9 (Iowa checkoff).

In another opinion, AO 1988-33, a state party committee was allowed to deposit into its federal account ballot fees and party assessments paid to the state of Florida by federal candidates. However, because state law allowed nonfederal candidates to accept funds that would be considered prohibited or excessive under federal law, fees and assessments from nonfederal candidates could not be deposited into the federal account.

Treatment as Contributions

In the above cited advisory opinions, checkoff funds that did not increase the taxpayer’s liability or decrease his or her refund were not considered contributions. Nor were the personalized license plate fees. In these situations, the funds were considered miscellaneous receipts (reportable as “other Federal receipts”).

However, in AO 1983-15 (Virginia checkoff), the checkoff funds represented taxpayer refunds. Under those circumstances—where the money would otherwise be refunded to the taxpayer—the funds were considered contributions if deposited into a federal account. Because the amount of each contribution was only $2 per taxpayer, the contributions were reportable as unitemized contributions from individuals.