As the 2016 elections draw closer, it is an ideal time to highlight some of the rules regarding nonfederal committees’ involvement in federal elections, including the prohibition on transfers from a candidate’s own nonfederal campaign committee and the federal registration requirements for state-registered committees.
Prohibited: Transfers from candidate’s own nonfederal committee
A federal candidate’s authorized committee may not accept funds or assets transferred from a committee established by the same candidate for a nonfederal campaign. Instead, the candidate’s nonfederal committee may refund its leftover funds to its contributors and arrange for the federal campaign to solicit those same donors, within the limits and prohibitions of the Federal Election Campaign Act (the Act). The full cost of this solicitation must be paid by the federal committee. 11 CFR 110.3(d).
Contributions by nonfederal campaigns to the campaigns of other federal candidates are covered below.
Permissible but restricted: Contributions from state PACs, unregistered local party organizations and nonfederal campaign committees
State PACs, unregistered local party organizations and nonfederal campaign committees (nonfederal committees) may, under certain circumstances, contribute to federal candidates, but:
- The funds that comprise the contribution must come from permissible sources under the Act, as explained below; and
- Making the contribution may require the nonfederal committee to register with the FEC as a federal political committee, subject to federal laws and regulations. See 11 CFR 102.1.
When campaigns receive contributions from nonfederal committees, they must ensure the funds are permissible under the Act. See 11 CFR 300.61. Federal campaigns must confirm that the nonfederal committee making the contribution:
- Can demonstrate through a reasonable accounting method [FN1] that it has sufficient federally acceptable funds to cover the amount of the contribution at the time it is made; or
- Has established a separate account containing only funds permissible under the Act. 11 CFR 102.5(b).
When itemizing such a contribution in its report, a federal campaign should note that the contribution contains only federally permissible funds. Contributions from nonfederal committees are subject to the $2,700 per-election limit at 11 CFR 110.1(b). Note, however, that amount is well above the federal registration threshold for a nonfederal committee, as explained below.
Registration thresholds for nonfederal PACs
The federal registration threshold for a state-registered PAC depends on whether that PAC has a sponsoring connected organization.
State PAC with sponsoring connected organization. A state PAC with a sponsoring connected organization (i.e., a corporation/labor organization/trade association/membership organization) that wants to make contributions to a federal campaign must register as a federal separate segregated fund (SSF) regardless of the amount it contributes. Under the Act and Commission regulations, there is no monetary threshold for having to register a separate segregated fund. Instead, any federal expenditure by a connected nonfederal PAC would trigger the requirement to register as a SSF within 10 days. 11 CFR 102.1(c); See Advisory Opinion (AO) 2003-29 (National Fraternal Order of Police PAC).
In order to bring the former nonfederal PAC into compliance with federal solicitation and reporting rules, the SSF must notify its current donors that it has become a federal SSF and offer them an opportunity to receive a refund. See AO 2003-29. The SSF must also disclose the sources of its cash-on-hand in its first FEC report. 11 CFR 104.12.
Moving forward, the committee must comply with all requirements for federally registered SSFs. It must maintain an account into which only funds that are permissible under the Act are deposited, and use that account to make contributions or expenditures in connection with federal elections. With limited exceptions, the committee’s solicitations must be directed only to the restricted class of the connected organization, describe the SSF’s political purpose and specify that persons have the right to refuse to contribute to the SSF without reprisal. See Chapters 1-3 of the Campaign Guide for Corporations and Labor Organizations for more information.
State PAC without sponsoring connected organization. A state PAC without a sponsoring connected organization, may make contributions to federal candidates, provided the funds used are permissible under federal law. Such contributions count towards the $1,000 registration threshold. See 11 CFR 100.5(a) and (c) and 102.1(d).
Should the PAC raise or spend more than $1,000 in federal contributions or expenditures in a calendar year, it must register with the FEC as a nonconnected committee (unless it is a local party committee, described below). 11 CFR 100.5(a) and (c). From that point on, the nonconnected PAC must file regular reports with the FEC and ensure that it maintains an account into which only federally permissible contributions are deposited for use in federal elections. See 11 CFR 102.5(a). On its first report, the committee must disclose the sources of the cash-on-hand. 11 CFR 104.12.
Registration thresholds for nonfederal campaigns and local parties
A nonfederal campaign or unregistered local party organization also may contribute to federal candidates using federally permissible funds. Those contributions count toward the $1,000 federal registration threshold, described above. A local party may also trigger registration if it receives federal contributions that exceed $5,000 in a calendar year or if it spends more than $5,000 on certain activities that are exempt from the Act’s definitions of contribution and expenditure. (For additional information, see our Local Party Activity brochure.) Once registered, the committee must file regular reports disclosing its receipts and disbursements, including the sources of its initial cash-on-hand. See 11 CFR 104.12; see e.g., AOs 1997-20 (Friends of McCarthy), 1990-16 (Governor James R. Thompson and Citizens for Thompson) and 1982-38 (Committee to Re-Elect Senator Moynihan).