AO 2007-07: Candidate’s loans initially misreported as contributions
James W. Craig’s campaign committee, Craig for U.S. Congress, may amend its disclosure reports to disclose as loans funds that it received from Mr. Craig and erroneously reported as contributions. The committee may then accept contributions to repay these loans. An affidavit from Mr. Craig and a statement from the campaign’s bookkeeper indicate that Mr. Craig intended the funds to be treated as loans.
Background
As a House candidate in the 2006 primary elections, Mr. Craig provided personal funds to his campaign committee totaling $37,000, and the committee reported these funds as contributions. However, Mr. Craig has submitted an affidavit and a statement from his committee’s bookkeeper indicating that he intended for the funds to be treated as loans to the campaign, rather than as contributions. He additionally submitted a statement from the committee’s outside compliance consultant, who was in charge of preparing and filing the committee’s reports, indicating that the bookkeeper was unaware of the candidate’s intent to treat the funds as loans.
Legal Analysis
Under the Federal Election Campaign Act (the Act), a campaign committee cannot convert campaign funds to personal use by any person. “Personal use” occurs when a contribution is used to pay an expense that would exist irrespective of the candidate’s election campaign, or the individual’s duties as an officeholder. 2 U.S.C. §§439a(b)(1) and (b)(2). Campaign funds may be used to repay a loan from a candidate, the proceeds of which were used in connection with his or her campaign, because the repayment is an authorized campaign expenditure. 2 U.S.C. §439a(a)(1) and AO 2003-30. A campaign committee may only repay up to $250,000 in candidate loans with proceeds from contributions received after the date of the election in which the candidate was running. 2 U.S.C. §441a(j) and 11 CFR 104.11(a).
When determining the nature of a transaction between a candidate and a campaign committee, the Commission has in past advisory opinions considered not only how the transaction was reported, but also affidavits showing the intent of the parties involved. See AOs 2006-37 and 1997-21. In this case, Mr. Craig’s affidavit and the statement of the committee’s bookkeeper indicate that the candidate and his committee intended for the funds he provided to be considered loans. The statement of the committee’s outside compliance consultant presents no contrary information. Thus, the Commission concluded that the funds Mr. Craig provided were loans to his committee that were mistakenly reported as contributions.
Because the funds were initially misreported, Craig for U.S. Congress must, within 30 days, amend all relevant reports to reflect the debts owed to the candidate. Furthermore, the committee must continue to report the obligations until they are repaid or, if appropriate, report the candidate’s forgiveness of the loans.
In addition, the committee may now accept contributions for the 2006 primary election to repay the candidate’s loans. 2 U.S.C. §441a(j) and 11 CFR 110.1(b)(3)(iii) and 116.12(a). Contributions attributed to the 2006 primary may only be raised to retire debts for this election. Contributions from individuals must be aggregated with any previous contributions for this election and are subject to the contribution limits in effect for the 2006 election cycle.
Date Issued: June 1, 2007; Length: 4 pages.