Reporting ultimate payees for committee disbursements (re: draft interpretive rules)

On January 31, 2013, the Commission posted for public comment a draft interpretive rule that would clarify how political committees must report disbursements to (or by) a person who is not the “ultimate payee”—i.e., the person who provided goods or services to the committee. The rule would apply in three specific situations: 

• Reimbursing an individual for personal funds advanced to pay committee expenses that aggregate more than $200 to a single vendor;
• Disclosing the candidate’s unreimbursed use of personal  funds to pay for committee expenses that aggregate more than $200 to a single vendor; and
• Paying a committee credit card bill that includes a charge(s) of more than $200 to a single vendor.

In all three situations, the committee should itemize any payment by the committee as otherwise required, and use “memo entries” on Schedule B to disclose vendors who received payments on behalf of the committee aggregating in excess of $200.

Comments on the draft interpretive rule are due by March 4, 2013.

Background

Commission regulations require that political committees report (itemize) the name and address of each person to whom they make expenditures or other disbursements that aggregate more than $200 per calendar year. For authorized committees (i.e. committees that are established by federal candidates), disbursements must be reported once they aggregate more than $200 in an election cycle. In addition to reporting the name and address of each person to whom disbursements are made that aggregate in excess of $200, all committees must report the date, amount and purpose of each disbursement. 2 U.S.C. 434(b)(5), (6); 11 CFR 104.3(b)(3)(i), (vii) (unauthorized committees); 11 CFR 104.3(b)(4)(i), (vi) (authorized committees); see also 104.9(a) and (b). Committees must maintain a receipt or invoice from the payee, except for an advance of $500 or less for travel and subsistence expenses by the individual who will be the recipient of the goods or services, for which committees need to keep the expense voucher or other expense account documentation and the cancelled check to the recipient. 11 CFR 102.9(b)(2).

The draft interpretive rule supplements these regulations by identifying three specific situations in which a committee must disclose not only the person to whom (or by whom) a disbursement was made, but also the “ultimate payee” –the person who provided the goods or services to the committee.  In each of the three scenarios, the committee must itemize as a memo entry on Schedule B the name and address of the original vendor, as well as the date, amount and purpose of the original disbursement made for or by the political committee.

Reimbursements to individuals for certain out-of-pocket expenses. Commission regulations state that when an individual who is not acting as a vendor advances his or her personal funds (including using a personal credit card) to pay costs on behalf of a political committee, the committee must treat the individual’s payment as a contribution. (Certain travel and subsistence expenses that are not reimbursed, or that are reimbursed within a limited amount of time, are exempt.) 11 CFR 116.5(a) and (b); 100.79. The committee must also treat the obligation arising from the individual’s payment as an outstanding debt until reimbursed. 11 CFR 116.5(c).

When the committee reimburses the individual, the committee should report  the reimbursement on Schedule B , and also identify in a memo entry any vendor to whom the individual paid more than $200 in a calendar year (or in an election cycle, if for an authorized committee) on behalf of the committee. Similarly, if the reimbursement is for travel and subsistence expenses that exceed $500, a memo entry is required for each payment to a specific vendor made by that individual on behalf of the committee if total payments to that vendor exceed $200 in a calendar year (or election cycle, for authorized committees).

Memo entries should include the name and address of the vendor, and the date, amount and purpose of the payment. For reimbursements of credit card payments made by an individual, the memo entry must include the name and address of the vendor providing the goods or services to the committee rather than the credit card company that processed the payment(s).

Unreimbursed disbursements by candidates. As candidates are able to make unlimited expenditures on behalf of their own campaigns, payments made by candidates from personal funds should be disclosed on reports filed with the Commission. 2 U.S.C. 434(b)(4), (5), (6)(A); 11 CFR 104.3(b)(4). When candidates pay out-of-pocket for unreimbursed expenses on behalf of their authorized committees, the committee should report as memo entries any payments to vendors that aggregate more than $200 for the election cycle.

Payments to credit card companies. When a political committee itemizes disbursements to credit card companies on Schedule B of its reports, the committee must itemize as memo entries any transactions with a single vendor that exceed the $200 itemization threshold discussed above. Itemizing the “ultimate payee” as the provider of goods or services to the committee accurately reflects the credit card company’s role only as a payment processor rather than as the provider of goods or services to the committee. See 11 CFR 102.9.

The draft interpretive rule was published on the Commission’s website on January 31, 2013. Public comments are due by March 4, 2013, and should be addressed to the Commission Secretary, 999 E Street, NW, Washington, DC 20463, via fax to 202-208-3333 or email to secretary@fec.gov.

Resources:

• Draft interpretive rule and request for comments [PDF]
• Commission consideration of draft [mp3]