A campaign is prohibited from knowingly accepting any contributions from prohibited sources. The treasurer of a political committee is responsible for examining all contributions to make sure they are not illegal (i.e., prohibited or excessive).
When campaigns accept contributions from groups that are not political committees registered with the FEC (such as state PACs, unregistered local party committees or nonfederal campaigns), they must make sure that the funds are permissible under the Federal Election Campaign Act (the Act). This is important because campaign laws in some states permit nonfederal political groups to accept funds that would violate the limits and prohibitions of the Act. To avoid a possible violation of the Act, a campaign must be certain that an unregistered group making a contribution:
- Can demonstrate through a reasonable accounting method that it has sufficient federally acceptable funds to cover the amount of the contribution or expenditure at the time it is made; or
- Has established a separate account containing only funds permissible under the Act.
When itemizing such a contribution in its report, a campaign should note that the contribution contains only federally permissible funds. Contributions from such unregistered organizations are subject to contribution limits for individuals and other persons. These organizations should be aware, however, that making contributions to federal campaigns and political committees may trigger their own registration as a federal political committee. State political action committees sponsored by corporations, labor organizations or trade associations, in particular, must register as federal separate segregated funds within 10 days of the decision to make a contribution to a federal candidate. Additional requirements regarding their solicitations also apply. Contributions by other types of unregistered organizations (for example, local party organizations or committees not sponsored by an incorporated entity or labor organization) count against a $1,000 per year aggregate registration threshold.
How to handle a questionable contribution
If a committee receives a contribution of questionable legality, it must follow the procedures outlined in this section.
When receiving a contribution of questionable legality, a committee must, within 10 days of the treasurer’s receipt, take one of two steps:
- Return the contribution to the donor without depositing it; or
- Deposit the contribution.
If it decides to deposit the questionable contribution, the committee must make sure that the funds are not spent because they may have to be refunded. To ensure this, the committee may either maintain sufficient funds in its regular campaign depository or establish a separate account used solely for the deposit of possibly illegal contributions.
The committee must keep a written record noting the reason why a contribution may be prohibited and must include this information when reporting the receipt of the contribution.
Within these 30 days, the committee must either:
- Confirm the legality of the contribution; or
- Refund the contribution.
Prohibited contributions discovered late
If a committee deposits a contribution that appears to be legal and later discovers that it is prohibited (based on new information not available when the contribution was deposited), the committee must disgorge the contribution within 30 days of making the discovery. This situation might arise, for example, if the committee learned that a past contributor was a foreign national or had a contract with the federal government. As another example, the committee might find out that a corporation reimbursed employees for their contributions to the committee (and had thus made corporate contributions and contributions in the name of another).
If the committee does not have sufficient funds to disgorge the contribution when the illegality is discovered, the committee must use the next funds it receives.
If the identity of the original contributor is known, the committee must refund the funds to the source of the original contribution. Alternatively, the committee may pay the funds to the U.S. Treasury. To do so, send the funds to:
U.S. Department of the Treasury
Financial Management Services
Reporting and Analysis Branch (2)
3201 Pennsy Drive, Building E
Landover, MD 20785
The committee should include a cover letter that explains that the funds being sent represent potential violations of the Act and requests that the funds be placed in the “general fund account.”
If, however, the identity of the original contributor cannot be determined or is in question, the committee may disburse the funds to a governmental entity (federal, state or local), or to a qualified charitable organization described in 26 U.S.C. § 170(c).
If the prohibited contribution was an in-kind contribution, the committee should disgorge an amount equal to the value of the contribution to the appropriate party.