When one program or event is held for the purpose of collecting both federal funds (funds to be used in federal elections) and nonfederal funds (funds to be used in nonfederal elections), the sponsoring committee may allocate the direct costs of the activity, including planning, administrative and solicitation costs. The direct costs may be paid by a combination of federal and nonfederal funds.
Such expenses must be allocated pursuant to the “funds received” method. This method is described in detail.
Paying for allocable fundraising expenses
Funds received ratio–Fundraising expenses
Used for: The direct costs of each fundraising program or event in which the committee collects both federal and nonfederal funds. This method is also used to allocate the direct expenses of a fundraiser for multiple federal and nonfederal candidates.
Costs are allocated according to the ratio of federal funds received to total receipts for the program or event.
The allocation ratio is estimated before making payments for the program or event, based on a reasonable prediction of receipts. The committee has up to 60 days after the ending date of the program or event to:
- Adjust the ratio based on the actual funds received; and
- Transfer funds from the nonfederal account to the federal (or allocation) account based on the adjusted allocation percentage.
Should additional federal receipts come in after the 60-day period, further ratio adjustments and reimbursements from the federal account to the nonfederal account will be necessary. The committee must note the initial ratio and adjustments in its reports. (Federal law permits the federal account to pay more than its share of an allocable expense. However, overpayments by the nonfederal account are illegal. See “Transfers from federal account.”)
For purposes of the 60-day time period, the last day of an event is either the final day of a telemarketing campaign or the day on which final direct mail solicitations are mailed.
Assigning a unique identifier
Because the allocation ratios will vary with each fundraising activity, committees are required to assign a unique title or code to each program or event and to use that identifier consistently when reporting the activity.
Payment from federal or allocation account
There are two ways to make payments for allocated expenses:
- A party committee may pay the entire amount of the expense from the federal account. It may then transfer funds from the nonfederal account to the federal account solely to cover the nonfederal share of each allocable expense; or
- A party committee may establish a separate federal account—called an allocation account—solely for the purpose of paying allocable expenses. The committee transfers funds from its federal and nonfederal accounts to the allocation account in amounts equal to the federal and nonfederal shares of each allocable expense.
Transfers from nonfederal account
Transfers from the nonfederal account to pay the nonfederal portion of an allocable expense must be made within a 70-day window: no more than 10 days before or 60 days after the day the federal account (or allocation account) makes the payment. Transfers of nonfederal funds to the federal account must be reported on Schedule H3 of Form 3X.
Exception: If the nonfederal account transfers additional funds to the federal or allocation account due to an adjusted allocation ratio for a fundraising event, the transfer must be made within 60 days after the date of a fundraising program or event.
Note that transfers from a nonfederal account to pay its allocated share of expenses are an exception to the overall ban on nonfederal transfers to a federal or allocation account.
Transfers from federal account
If an adjusted ratio for a fundraising event results in an increased federal portion, the federal account must transfer to the nonfederal account, as necessary, the increased share of federal fundraising payments. This is required because a nonfederal overpayment of an allocated expense, if left uncorrected, is a violation of the Federal Election Campaign Act (the Act).
Reporting allocated committee fundraising expenses
- Schedule H2—Allocation Ratios
- Schedule H3—Transfers from Nonfederal Account
- Schedule H4—Payments for Allocable Expenditures