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Investment income of nonconnected PACs

Interest and dividends

A nonconnected committee may raise money by earning interest and dividends on invested funds. For example, a committee may invest contributions it has received in a savings account, a money market fund or a certificate of deposit.

Interest and dividends are not contributions (and are therefore not subject to limits) but they must be reported.

Investments at banks

Any bank where the committee deposits funds must be listed on Line 9 of the committee’s Statement of Organization (Form 1).

Other investments

Committee investments that are not held by banks (such as stocks, bonds, etc.) are not required to be listed as depositories on the committee’s Statement of Organization. Before disbursing the funds earned from such investments, the committee must first transfer them to a checking account maintained at one of the committee’s campaign depositories.

Committee must pay taxes

A nonconnected committee generally must pay taxes on interest and dividend income. Contact the Internal Revenue Service and state tax collection agencies for more information.

Reporting investments

Principal

When the committee invests funds in a savings account, money market fund, certificate of deposit or similar type of account, the principal deposited must be included in the committee’s cash-on-hand total. (Investment properties, such as shares of stock, are not included in cash-on-hand.) The committee does not report this type of investment as a disbursement because the money is still a committee asset. Any other committee investments valued at cost are also included in cash-on-hand because they would be a conversion of one form of cash-on-hand to another.

Funds invested with banks

If the committee invests its funds in an account at a bank that was not previously identified as a campaign depository on the committee’s Statement of Organization (FEC Form 1), the committee must file an amended Form 1 disclosing the name and address of the additional depository. The amendment must be filed within 10 days of opening the account.

Funds invested with other establishments

If committee funds are invested in an account that is not operated by a bank (such as a money market account operated by a brokerage firm), no amendment to the Form 1 is required. However, before disbursing the funds in the account (principal and interest), the committee must first transfer them to a committee checking account maintained in a designated depository.

Investment income or loss

Report interest income received during the reporting period in the “Other Receipts” category (Line 17) of the Detailed Summary Page. If investment income received from one source aggregates over $200 during a calendar year, itemize the interest on a Schedule A for Line 17. To report an investment loss, enter the amount as a negative entry.

Income tax

Include income taxes paid by the committee as an operating expenditure on Line 21b. Itemize income tax payments on Schedule B only if they aggregate over $200 per year to the same payee—i.e., the local, state or federal government.