AO 2010-02: State party committee may use nonfederal funds to purchase office building

A state party committee may use a building fund account containing nonfederal funds to purchase a state party office building if it enters into a land sale contract with the building’s owner. However, since the State Party Committee does not yet know the key terms of the eventual contract, the Commission did not have sufficient information to determine if the particular contract would in fact constitute a land sale contract, and would therefore qualify as a “purchase” of an office building under federal law.

Background

The West Virginia Republican Party, Inc. (State Party Committee), is a political committee registered with the Commission as a state committee of a political party. 2 U.S.C. § 431(15) and 11 CFR 100.14. The State Party Committee rents its current party headquarters under a lease with an option to purchase. To pay the rent on this building, it uses funds derived from the sale of its previous headquarters.

Shortly before November 6, 2002, the effective date of the Bipartisan Campaign Reform Act (BCRA), the West Virginia State Republican Executive Committee, the predecessor committee to the current State Party Committee, received corporate contributions that it deposited in a building fund account to be used to purchase an office building to be used as the state party’s headquarters, which it purchased in January 2003. In February 2008, the State Party Committee sold the building and some of the proceeds were placed in the building fund account, which is segregated from the State Party Committee’s federal account. Beginning in September 2009, the State Party Committee began to lease a different office building. This lease included an option to purchase the building.

The State Party Committee proposes to use the proceeds from the sale of its previous headquarters (plus accrued interest on the proceeds) to pay the rent on the current lease. If the State Party Committee is unable to use solely nonfederal funds from the sales proceeds to pay for such rent, the state party committee proposes to exercise the option to purchase and enter into a “land sales contract” with the building’s owner. The State Party Committee would then use the remaining proceeds in the building fund account to make payments on the land sales contract.

Under the land sales contract, the State Party Committee would hold the equitable title to the property, and the seller would retain legal title to the property until the final payment on the contract is made. The State Party Committee could not provide additional information about the possible land sale contract because the terms of the contract have not yet been negotiated with the owner of the building. 

Analysis

The State Party Committee may use its building fund account, which contains nonfederal funds, to make the payments required on a land sales contract on the current office building. The Federal Election Campaign Act and Commission regulations permit a state party committee to use exclusively nonfederal funds to purchase an office building, provided that the use of such funds is permitted under state law. 2 U.S.C. § 453(b) and 11 CFR 300.35. The Commission has previously treated a land sale contract as a contract to purchase a building. See AO 1993-09.

Since the State Party Committee has not yet entered into a contract, the Commission could not make a definitive conclusion as to whether an eventual contract between the current owner and the state party committee would qualify as a “purchase” for the purposes of 2 U.S.C. § 453(b) and 11 CFR 300.35. The Commission could not approve a response by the required four affirmative votes as to whether the State Party Committee could use only the proceeds of the sale of its previous office building (which consisted of nonfederal funds), to make payments on its lease with an option to buy its current office building.

AO 2010-02: Date issued: March 12, 2010; Length: 4 pages