FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

August 5/ 2010 

MEMORANDUM : 

TO: Patricia Carmona 

Chief Compliance Officer 

Joseph F. Stoltz 

Assistant Staff Director 

FROM: Christopher Hughey 1 

Deputy General Counsel ' 

Lawrence L. Calvert, h. y^-j^f^y 

Associate General Couns&r|(_ ... 

Lorenzo Holloway 

Assistant General Counsel 

For Public Finance and Audit Advice 

Allison T. Steinle At3 

Attomey 

SUBJECT: Proposed Final Audit Report on the Kansas Republican Party (LRA 801) 

1. INTRODUCTION 

The Office ofthe General Counsel has reviewed the proposed Final Audit Report 

("proposed report" or "FAR") on the Kansas Republican Party ("the Committee"). We 

specifically address two issues in our legal analysis. First, the Audit Division has identified four 

corporate contributions used to defray national convention costs. Second, the Audit Division has 

identified two non-federal accounts that the Committee used for what appears to be federal or 

allocable activity. Because these issues affect all three findings, we have organized our analysis by 

issue rather than finding. We concur with any findings not specifically discussed in this 

memorandum. If you have any questions, please contact Allison T. Steinle, the attorney assigned 

to this audit. 
Legal Analysis 

Proposed Final Audit Report 

Kansas Republican Party (LRA 801) 

Page 2 of4 

TI. FUNDS USED TO DEFRAY NATIONAL CONVENTION COSTS 

Both Findings I and 2 involve four contributions totaling $52,498 from three corporations 

and one LLC that filed its taxes as a corporation. These four contributions were deposited into a 

non-federal account that the Committee used for expenses associated vvith the Republican 

National Convention. Finding I concludes that the activity in the Republican National Convention 

account, as well as the activity in other non-federal accounts, should have been reported to the 

Commission as federal activity. Finding 2 concludes that the four contribulions, which 

specifically were used to defray the cost of hotel rooms, breakfasts, and entertainment for the 

delegates at the Republican National Convention, were prohibited coiporate contributions. In 

response to the Interim Audit Report ("LAR"), the Committee states it agrees with the findings and 

acknowledged that the four contributions should have been deposited in the Committee's 

non-federal account. 

We concur with the Audit Division that the Republican National Convention costs should 

have been reported as federal activity, and that the four contributions were prohibited coiporate 

contributions. The Commission's regulations explicitly state that disbursements by national 

convention delegates or by "delegate committees" for the purpose of delegate travel and 

subsistence costs associated with attending a national nominating convention are expenditures. 11 

C.F.R. § 110.14(e)(1) and (h)(1). In a series of advisory opinions ("AOs"), the Commission has 

expanded the principle that national convention delegates' travel and subsistence costs are 

expenditures to disbursements by entities other than national convention delegates or delegate 

committees. First, in AO 1980-64 (National Education Association), the Commission held that 

direct donations by a labor organization for travel and subsistence expenses of delegates were 

expenditures and therefore prohibited by 2 U.S.C. § 441b.' Next, in three subsequent advisory 

opinions from the mid-1990s, it held that the authorized campaign committees of Members of 

Congress could permissibly pay for travel and subsistence costs incurred by the Members in their 

capacities as national convention delegates, because the payments would be "in connection with a 

Federal election." AO 1996-20 (Lucas for Congress); AO 1996-19 (Walsh for Congress); AO 

1995-47 (Robert Underwood). Finally, and most relevant to this situation, it concluded that 

disbursements made by a party committee for the travel and subsistence expenses of national 

convention delegates were expenditures and, as a result, the previously unregistered party 

committee was required to register with the Commission as a political committee. AO 2000-38 

(Democratic Party of Puerto Rico). Accordingly, this Committee's disbursements for delegate 

travel and subsistence costs at the Republican National Convention also were expenditures, and 

were required to be made from funds permissible under 2 U.S.C. § 441 b. 

' On January 21,2010, Citizen.i United v. FEC, 130 S. Ct. 876 (2010), struck down section 44 Ib's restrictions 

on corporate independent expenditures as unconstitutional. However, the Citizens United decision does not affect the 

restrictions of section 44 lb on direct corporate or union contributions to state party committees. Republican National 

Committee v. FEC. No. 08-1953 (D.D.C. Mar. 26,2010), slip op. at 2. Nor does it affect lhe requiremeiu that state 

party committees with federal and non-federal accounts pay for entirely federal expenditures using federally 

permissible funds. 
Legal Analysis 

Proposed Final .Audit Report 

Kansas Republican Party (LRA 801) 

Page 3 of 4 

IIL OTHER PAYMENTS FOR FEDERAL ACTIVITY WITH NON-FEDERAL FUNDS 

Finding 3 involves two other non-federal accounts, from which the Committee made 

5104,859 in payments that the proposed report concludes should have been paid from a federal 

account. The breakdown of these payments is as follows: (1) $6,000 for a mailer that mentioned a 

federal candidate; (2) $1,639 for pins that the Audit Division believes may have been associated 

with the Republican National Convention; (3) $5,000 for Republican National Convention 

lodging; (4) $83,861 for postage, rent, travel, printing, and office services, for which the 

Committee has failed to provide any documentation showing that the payments were solely 

non-federal; and (5) $8,359 for mailers, for which the Committee has not produced printed copies. 

In response to the lAR, the Committee has stated that, due to "scant records," it is unable lo 

demonstrate that these payments were for non-federal purposes. 

We generally agree with the Audit Division's application of the law in the proposed report. 

We briefly address each type of expense below. 

Mailer Mentioning a Federal Candidate 

The expenditures for a mailer that mentioned a federal candidate should have been paid 

with 100 percent federal funds because they were made for Federal Election Activity ("FEA"). 

The definition of FEA includes any public communications that refer to a clearly identified 

candidate for federal office, and that promote or support a candidate for that office, or attack or 

oppose a candidate for that office ("PASO"). See 2 U.S.C. § 431(20); 11 C.F.R. § 100.24. The 

mailer at issue here was for a public communication that PASO-ed a federal candidate. 

Accordingly, these expenditures were required to be paid from 100 percent federal funds. 11 

C.F.R. §§ 106.7(c), 300.30(b)(1). 

National Convention Lodging 

The analysis regarding the expenditures for national convention lodging is identical to that 

in Part TI of our comments, and these disbursements also should have been paid from 100 percent 

federal funds for the reasons stated above. 

National Convention Pins 

With respect to the expenditures for pins, the Committee has been unable to produce copies 

ofthe pins or other evidence of the content ofthe pins, such as order forms or prototypes. The 

proposed report notes that the pins may have had some relation to the Republican National 

Convention because the disbursement was made in close temporal proximity to the convention and 

the Committee made other payments to the same vendor for convention gifts. In our view, these 

facts alone are not sufficient to support the conclusion that disbursements for the pins should have 

been paid with 100 percent federal funds. Depending on their content, the pins may have been 

payable with 100 percent federal funds, but they also may have been allocable, or payable with 100 

percent non-federal funds. See 11 C.F.R. §§ 106.7, 300.30(b), 300.33. The auditors, however, 

have been unable to verify that this disbursement was properly made from a non-federal account 
Legal Analysis 

Proposed Final Audit Repoil 

Kansas Republican Party (LRA 801) 

Page 4 of4 

because the Corhmittee has been unable to provide copies of the pins or otherwise demonstrate the 

non-federal nature of the pins in response to the lAR. As noted above, the Committee has 

acknowledged that it cannot demonstrate that the disbursement was properly made from a 

non-federal account, and has amended its reports to reflect that the activity was federal. 

Postage, Rent. Travel. Printing, and Ojfice Services 

The expenditures for postage, rent, travel, printing, and office services should have been 

treated as 36/64 percent allocable administrative and non-get-out-the-vote ("non-GOTV") 

expenses. Commission regulations define ordinary non-GOTV expenses such as rent, utilities, 

and office equipment and supplies as administrative costs, and as such, they are subject to the 

administrative cost allocation rules. 11 C.F.R. § 106.7(c)(2). Specifically, in both a Presidential 

and Senatorial election year, state and local party committees must allocate at least 36 percent of 

non-GOTV administrative expenses to their federal accounts. 11 C.F.R. § 106.7(d)(2)(ii) and 

(3)(ii). 

Undocumented Mailers 

The treatment of the expenditures for the mailers that the Committee was unable ro 

produce would depend on their content. For example, if the mailers were public communications 

that referred to a clearly identified candidate for federal office, and promoted, supported, attacked, 

or opposed a candidate for that office, they would be federal election activity that would be 

required to be paid with 100 percent federal funds. See 2 U.S.C. § 431 (20); 11 C.F.R. § 100.24. If 

the mailers fell into one of several enumerated exemptions, such as generic campaign or GOTV 

activity, they could be paid with a combination of federal and non-federal Levin funds. 11 C.F.R. 

§ 106.7(c). Only if the mailers were 100 percent non-federal could they be paid with 100 perceni 

non-federal funds. 11 C.F.R. §§ 300.30(b), 300.33. As with the pins discussed above, however, 

the auditors have been unable to verify that these disbursements were properly made from a 

non-federal account because the Committee has been unable to provide copies ofthe mailers or 

otherwise demonstrate the non-federal nature of the mailers in response to the lAR. The 

Committee has acknowledged that it cannot demonstrate that these disbursements were properly 

made from a non-federal account, and has amended its reports to reflect that the activity was 

federal.