AO 2010-28: State party refund to federal campaign not a contribution

A state party committee may refund all or a portion of funds transferred to it by a federal campaign committee without making a contribution subject to the limitations of the Act.

Background 

Indiana Democratic Congressional Victory Committee (the State Committee) is registered with the Commission as a state committee of a political party. Hoosiers for Hill is the principal campaign committee of Representative Baron Hill, a candidate for the U.S. House of Representatives for the 9th Congressional District of Indiana.

On September 14, 2010, Hoosiers for Hill transferred $34,600 to the State Committee’s federal account to be used for general party projects on behalf of its candidates in connection with the 2010 general election. Because the State Committee will not be engaging in the activities, Hoosiers for Hill requested a full refund of the transfer. The State Committee asks if it may refund all or a portion of the funds transferred to it by Hoosiers for Hill without making a contribution subject to the limitations of the Federal Election Campaign Act (the Act).

Analysis

A candidate’s authorized committee may transfer an unlimited amount of campaign funds to a national, state or local party committee. See 2 U.S.C. § 439a(a)(4) and 11 CFR 113.2(c). These provisions do not limit the purposes that any transferred funds may be put to, nor do they restrict the amount that may be transferred. Furthermore, such transfers are not subject to the contribution limitations of 2 U.S.C. § 441a(a)(1)(D) or 11 CFR 110.1(c)(5).

Although the Act and Commission regulations provide for the refund of a contribution, the Commission acknowledged that the regulations do not address the specific question presented here. See 2 U.S.C. § 434(b)(4)(F), 2 U.S.C. § 434(b)(5)(E), 11 CFR 103.3(b). 

Instead, the Commission cited two advisory opinions where it previously held that a refund could be made notwithstanding the fact that the amount of the refund would exceed the applicable contribution limits. In Advisory Opinion 2002-08, the Commission permitted a state exploratory committee to refund $700,500 to the federal candidate’s principal campaign committee. It concluded that the refund was permissible because the federal committee raised the funds within the limits and prohibitions of the Act, and the state committee kept the funds in a segregated account and had not commingled the funds with nonfederal funds. In Advisory Opinion 1995-43, the Commission determined that a refund by a law firm of $150,000 in legal fees that were paid by a federal candidate would not be a contribution to the candidate because the scope of the services to be provided by the law firm had been “materially altered” from those originally contemplated by the parties. 

In this case, the Commission found that Hoosiers for Hill transferred the funds from its federal account to the State Committee’s federal account, and determined that the transferred funds had not been commingled with nonfederal funds. The Commission also concluded that the transfer was made with the understanding that the State Committee would undertake certain activities that it did not, which materially altered the circumstances justifying the transfer. Finally, the Commission concluded that, since the transfer occurred just weeks before the committees requested an advisory opinion and well within the 30- and 60-day deadlines for refunding contributions under 11 CFR 103.3(b), the parties were seeking a refund rather than making a contribution subject to the Act. 

If the State Committee decides to refund the transferred funds to Hoosiers for Hill, the Commission advised the State Committee and Hoosiers for Hill to maintain appropriate documentation of the transaction and to disclose the refund in their reports. Since the reporting forms do not have a method for reporting the specific refund here, the Commission advised the State Committee to report its refund to Hoosiers for Hill on Form 3X, Schedule B, Line 28c. Hoosiers for Hill should report the receipt of the refund on Form 3, Schedule A, Line 15. The committees should also include memo text in their reports explaining the circumstances of the refund. 

AO 2010-28: Date issued: October 27, 2010; Length: 4 pages.