AO 2007-09: Use of GELAC funds to cover compliance portion of broadcast ads
The Kerry-Edwards 2004 General Legal and Compliance Fund (Kerry-Edwards GELAC) may reimburse the Kerry-Edwards 2004, Inc. Presidential campaign committee (Kerry-Edwards 2004) for the portion of its advertising expenses dedicated to compliance with the "stand-by-your-ad" provision of the Bipartisan Campaign Reform Act (BCRA).
Background
Kerry-Edwards 2004 is the authorized committee of Presidential and Vice-Presidential candidates John F. Kerry and John R. Edwards. Kerry-Edwards 2004 received public funds for the 2004 general election and established a general legal and compliance fund (GELAC). During the 2004 general election, Kerry-Edwards 2004 purchased $43,794,095 of broadcast time for political ads. Each of these ads included a minimum of four seconds devoted to compliance with disclaimer requirements. Kerry-Edwards GELAC proposes to treat some portion of these advertising costs as compliance expenses and reimburse Kerry-Edwards 2004 for this portion of the costs.
Legal analysis
Presidential candidates in general elections may receive public funds under the Presidential Election Campaign Fund Act (Fund Act). In exchange for receiving public funds, candidates must accept a spending limit on qualified campaign expenses and must agree not to accept private contributions to pay for qualified campaign expenses. 2 U.S.C. §9002(11)(A). Commission regulations allow publicly funded Presidential candidates to accept private contributions for a separate GELAC account, which can be used to pay for legal, accounting and other compliance expenses incurred solely to ensure compliance with the Federal Election Campaign Act (FECA) and the Fund Act. 11 CFR 9003.3. If a Presidential campaign uses public funds to pay for compliance costs, the GELAC may reimburse the campaign’s public funds account for such payments. 11 CFR 9003.3(a)(2)(ii)(G). GELAC funds may also be used for certain other expenses, such as recount expenses.
The BCRA requires candidates to devote at least four seconds of any authorized television ad to a written disclaimer and a personal statement of accountability, in which the candidate identifies him or herself and states that he or she has approved the ad. All of the ads run by Kerry-Edwards 2004 complied with this requirement.
Use of GELAC funds. The Commission determined that the portion of the broadcasting costs incurred by Kerry-Edwards 2004 in complying with these disclaimer requirements fits within the permissible uses of GELAC funds and that Kerry-Edwards GELAC may reimburse Kerry-Edwards 2004 for these costs. All of the Kerry-Edwards 2004 ads were required to devote a minimum of four seconds specifically to compliance with the FECA’s disclaimer requirements. Absent these disclaimer requirements, Kerry-Edwards 2004 could have used that portion of the broadcast time purely for campaign purposes. Thus, if the Kerry-Edwards Campaign were required to use public funds to pay for the cost of broadcasting the four-second disclaimer, it would be able to purchase a measurably smaller amount of broadcasting time that could actually be devoted to campaign speech than it otherwise would have been able to purchase. By contrast, if the Kerry-Edwards Campaign used GELAC funds to pay for the broadcasting time devoted to compliance with these disclaimer requirements, the campaign’s public funds would be available to pay for costs of campaign speech. This use of funds would advance the GELAC’s purpose of preserving public funds for campaign expenses.1
Percentage of costs deemed compliance costs. Commission regulations provide an allocation method for identifying compliance costs that GELACs may pay or reimburse. For example, GELAC funds may be used to pay for a portion of payroll and overhead expenditures of national campaign headquarters and state offices because "a portion" of these expenditures "are related to ensuring compliance" with the FECA and the Fund Act. 11 CFR 9003.3(a)(2)(i)(A). The regulation provides several allocation methods using fixed percentages, including an allowance of five percent of all payroll and overhead expenditures associated with the national campaign headquarters office. Recognizing that compliance expenses are part of the Kerry-Edwards Campaign’s advertisement program, the Commission concluded that it is appropriate to use an analogous five percent figure in this instance. Kerry-Edwards 2004 may therefore consider up to five percent of the costs of airing ads to be compliance expenses for its television advertising program. Thus Kerry-Edwards GELAC may reimburse Kerry-Edwards 2004 an aggregate amount up to five percent of the costs of airing those ads, provided that these costs are properly documented. See 26 U.S.C. §9003(a), 11 CFR 9003.3(a)(3)(ii) and 9003.5.
The Commission noted that this decision to allow an allocation and reimbursement from Kerry-Edwards GELAC to Kerry-Edwards 2004 stems from the unique nature of the Presidential public funding program, and that this Advisory Opinion has no applicability to any candidate or political committee without a GELAC fund.
AO 2007-09: Date: August 7, 2007; length: 5 pages
1) The Commission additionally noted that the advertising costs attributable to the disclaimer requirements were not unlike recount expenses, which the Commission deemed permissible uses of GELAC funds in a previous advisory opinion. AO 2004-35.