FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

May 9, 2014 

MEMORANDUM 

TO: 

FROM: 

Patricia C. Orrock 

Chief Compliance Officer 

Thomas E. Hintermister 

Assistant Staff Director 

Audit Division 

Lisa J. Stevenson 

Deputy General Counsel - Law 

Lorenzo Holloway 'h ^ 

Assistant General Counsel 

Compliance Advice 

Margaret J. Forman '7y] A ^ 

Attorney ® 

SUBJECT: Proposed Draft Final Audit Report on the Republican Party of Orange County 

(Federal) (LRA 909) 

I. INTRODUCTION 

The Office of the General Counsel has reviewed the proposed Draft Final Audit Report 

("DFAR") on the Republi can County of Orange County (Federal) ("RPOC"). The DFAR contains 

four findings: Misstatement of Financial Activity (Finding 1); Reporting of Debts and Obligations 

(Finding 2); Recordkeeping for Employees (Finding 3); and Use of Levin Fund Transfers (Finding 

4). We concur with the findings and comment only on the Use of Levin Fund Transfers (Finding 

4) below. If you have any questions; please contact Margaret J. Forman, the attorney assigned to 

this audit. 
LR A 909 Republican Party of Orange County 

DFAR Legal Comments 

Page 2 of4 

n. A STATE PARTY MAY NOT USE LEVIN FUNDS TRANSFERRED FROM 

ANOTHER STATE PARTY 

In Finding 4 of the proposed DFAR, the Audit Division determined that RPOC received 

$74,132 from the California Republican Party's (CRP's) Levin account for reimbursement of 

RPOC's voter registration expenses, and then transferred $73,465 from its Levin account to its 

federal accounts as reimbursement for the voter registration expenses.' Since the Federal Election 

Campaign Act, as amended (the "Act"), requires that state party committees raise all of the Levin 

funds that it expends, 2 U.S.C. § 441i(b)(2)(B)(iv), the Audit Division recommended that RPOC 

demonstrate that it solely raised the expended Levin funds, or refund to its Levin account $73,465 

from its federal account. In response to the Interim Audit Report recommendation, RPOC added 

$73,465 in Levin fund transfers on Schedule D of its 2013 November monthly report as a debt to 

its Levin account, apparently because it did not have the cash reserves to make the refund. 

Although the RPOC indicates its intent to refund its Levin account in accordance with the 

recommendation in the proposed DFAR, it "contends that the Commission should not accept [the 

Use of Levin Fund Transfers] Finding... and instead should not penalize the Committee." 

Correspondence from the Republican Party of Orange County to Mr. Robert Morcomb, Federal 

Election Commission (Nov. 22,2013) at 2. RPOC asserts two reasons in support of its position. 

First, RPOC states that it is the California Republican Party's "agent and vendor" for party 

building activities, asserting that "the Commission should allow the RPOC to accept and use Levin 

funds obtained in reimbursement under the 'Operation Bounty' contract between the RPOC and 

the California Republican Party as a matter of contract and agency law." Id. at 2-3. In support of 

its position, RPOC states that a committee may use non-federal funds transferred to it by another 

State, local or district committee of a political party for part of the expenses associated with voter 

registration, which are conducted outside the Federal election activity ("FEA") period in 

11 CFR § 300.32(b)(l)(i), and that a State, local or district committee of a political party may pay 

vendors that are not a State, local or district committee of a political party with Levin funds for 

voter registration activity during the FEA period under 11 CFR § 300.32(b)(l)(i). Id. at 3. 

Second, RPOC states that the Commission should not enforce the statutory prohibition against 

using Levin funds from any other State, local or district committee of any State party because it 

would violate the Equal Protection Clause of the Fourteenth Amendment to the U.S. Constitution. 

Id. at 3. 

We disagree with both of RPOC's arguments. First, while the RPOC may be an agent or 

vendor to the CRP, RPOC is itself also a State, district, or local party committee. The Act and 

Commission's regulations prohibit the use of Levin funds received from another state or local 

party.^ The ability to use I^vin funds is subject to a number of conditions described at 

2 U.S.C. § 441 i(bX2)(B). Among these is a requirement that no person donate more than $ 10,000 

in Levin funds to a State, district, or local committee of a political party in a calendar year. 

' Voter registration activities conducted by a state or local political party committee within a period starting 

120 days before the date of a scheduled federal election and ending on the date of the election are considered so-called 

•Type I" Federal election activity. See 2 U.S.C. § 431(20)(A)(i). 

' There is no prohibition against a state or local party committee making or receiving transfers of Levin 

fends. The prohibition pertains to the use of such fends. 
LRA 909 Republican Paity of Orange County 

DFAR Legal Comments 

Page 3 of 4 

2 U.S.C. § 441i(b)(2)(B)(iii); see 11 C.F.R. § 300.3l(d)(lH2). Additionally, and topirevent 

ciixumvention of the $10,000 contribution limitation, another requirement is that "the amounts 

expended or disbursed are made solely from funds raised by the State, local, or district committee 

which makes such expenditure or disbursement, and do not include any funds provided to such 

committee from ... any other State, local, or district committee of any State paTty[.]" 

2 U.S.C. § 441 i(b)(2)(B)(iv)(I). The RPOC, therefore, may not spend Levin funds transferred to it 

from the GRP. Id; see 11 C.F.R. § 300.31 (a) (Levin fund expended or disbursed by any State, 

district, or local committee must be raised solely by the committee that expends or disburses 

them); Explanation and Justification for 11 CFR 300.31 Receipt of Levin Funds, 67 Fed. Reg. 

49064,49094 (Jul. 29,2002) ("Paragraph (a) states as a general proposition a key point in the 

statute: a State, district, or local political party committee that spends Levin funds must raise those 

funds solely by itself."); see 11 C.F.R. § 300.34(b) (Levin funds must be raised solely by the State, 

district or local committee of a political party that expends or disburses the funds. A State, district, 

or local committee of a political party must not use as Levin funds any funds transferred or 

otherwise provided to the committee by... [a]ny other State, district, or local committee of any 

political party, any officer or agent acting on behalf of such a committee, or any entity directly or 

indirectly established, financed, maintained or controlled by such a committee"). 

Congress generally intended to prevent circumvention of the soft money ban when it 

passed restrictions prohibiting national party committees from soliciting, receiving, directing or 

spending any funds not subject to the limitations, prohibitions, and reporting requirements of the 

Act. See McConnell v. FEC, 540 U.S. 93, 95-96 (2003); 2 U.S.C. § 441i(a)(l). Congress 

predicted that the ban on the national committees' receipt and use of soft money could shift the 

focus to state party committees. Id. at 97-98. Therefore, Congress also placed a restriction on state 

party committees' ability to use of soft money contributions to influence Federal elections. 

2 U.S.C. § 441i(b)(l). There is an exception to this restriction: the Levin Account. The Levin 

Account allows state party committees to pay for Federal election activity with a mix Federal and 

nonfederal funds, but there is a $10,000 contribution limitation to the Levin Account. 2 U.S.C. 

§§ 441i(b)(l)(A) and (B). "Without the ban on transfers of Levin funds among state committees, 

donors could readily circumvent the $10,000 limit on contributions to a committee's Levin 

account by making multiple $10,000 donations to various committees that could then transfer the 

donations to the committee of choice." McConnell v. FEC, 540 U.S. at 171 -172. Therefore, the 

RPOC must only use Levin funds it raises itself, in order to comply with the overall statutory 

scheme, as intended by Congress, to prevent circumvention of the soft money ban. 

Second, the RPOC also asserts that enforcement of this statutory provision would violate 

the Equal Protection Clause of the Fourteenth Amendment to the U.S. Constitution. The RPOC's 

argument rests on the proposition that enforcement of the Levin fund restrictions would 

discriminate "against a political party and its members for engaging in voter registration political 

activity using Levin funds received in connection with its contract with the California Republican 

Party that is not applied to other vendors that contract to engage in voter registration activity that is 

payable with Levin funds, without constitutional justification." Correspondence from the 

Republican Party of Orange County at 3. RPOC, therefore, urges the Commission not to enforce 

this statutory prohibition. 
LRA 909 Republican Party of Orange County 

DFAR. Legal Comments 

Page 4 of 4 

Even if RPOC's constitutional argument had merit, which it does not, the Commission is 

not authorized to disregard a statutory provision simply becatise a committee contends that the 

statute is unconstitutional. Johnson v. Robison, 41S U.S. 361,368 (1974) (noting that adjudication 

of constitutionality is generally outside administrative agency's authority); Robertson v. FEC, 

4S F.3d 486,489 (D.C. Cir. 199S) C'lt was hardly open to the Commission, an administrative 

agency, to entertain a claim that Ae statute which created it was in some respect 

unconstitutional."); Meredith Corp. v. FCC, 809 F.2d 863,872 (D.C. Cir. 1987) (noting the "well 

known principle that regulatory agencies are not free to declare an act of Congress 

unconstitutional"). 

Even if the Commission had such authority to determine the constitutionality of a statutory 

provision, the statute at issue here is plainly constitutional.^ The RPOC rnaintains that the statute 

violates the Equal Protection Clause because it discriminates against state, district, or local 

political parties who are vendors, and who engage in voter registration activity using Levin funds. 

Correspondence from the Republican Party of Orange County at 3. Yet, contrary to RPOC's 

argument, the statute applies equally to all state, district, or local political parties and serves the 

reasonable and legitimate government interest of preventing circumvention of the soft money ban, 

discussed supra. 

^ In the conmxt of the First Amendment, the U.S. Supreme Court has recognized the constitutionality of the 

transfer restrictions involving Levin Funds as "justifrable anticircumvention measures," even though these restrictions 

created some burdens on associations! freedoms. MeConnell v. FEC, S40 U.S. 93,171 (2003).