[Federal Register Volume 60, Number 27 (Thursday, February 9, 1995)]
[Rules and Regulations]
[Pages 7862-7875]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-3162]




[[Page 7861]]

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Part III





Federal Election Commission





_______________________________________________________________________



11 CFR Parts 100, 104, and 113



Contribution and Expenditure Limitations and Prohibitions: Personal Use 
of Campaign Funds; Final Rule

Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / 
Rules and Regulations 
[[Page 7862]] 

FEDERAL ELECTION COMMISSION

[Notice 1995-5]

11 CFR Parts 100, 104 and 113


Expenditures; Reports by Political Committees; Personal Use of 
Campaign Funds

AGENCY: Federal Election Commission.

ACTION: Final rules; transmittal of regulations to Congress.

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SUMMARY: The Federal Election Commission has revised its regulations 
governing the personal use of campaign funds. These regulations 
implement portions of the Federal Election Campaign Act of 1971, as 
amended. The new rules insert a definition of personal use into the 
Commission's regulations. The rules also amend the definition of 
expenditure and the reporting requirements for authorized committees in 
the current regulations.

EFFECTIVE DATES: Further action, including the announcement of an 
effective date, will be taken after these regulations have been before 
Congress for 30 legislative days pursuant to 2 U.S.C. 438(d). A 
document announcing the effective date will be published in the Federal 
Register.

FOR FURTHER INFORMATION CONTACT:
Ms. Susan E. Propper, Assistant General Counsel, 999 E Street, NW., 
Washington, DC 20463, (202) 219-3690 or (800) 424-9530.

SUPPLEMENTARY INFORMATION: The Commission is today publishing the final 
text of revisions to its regulations at 11 CFR parts 100, 104 and 113. 
These revisions implement section 439a of the Federal Election Campaign 
Act of 1971, as amended, 2 U.S.C. Sec. 431 et seq. [``FECA'' or ``the 
Act'']. Section 439a states that no amounts received by a candidate as 
contributions that are in excess of any amount necessary to defray his 
or her expenditures may be converted by any person to any personal use, 
other than to defray and ordinary and necessary expenses incurred in 
connection with his or her duties as a holder of Federal office. The 
new rules insert a definition of personal use into Part 113 of the 
current regulations. The rules also amend the reporting requirements 
for authorized committees at 11 CFR 104.3, and the definition of 
expenditure at 11 CFR 100.8.
    The final rules published today are the result of an extended 
rulemaking process. In August of 1993, the Commission published a 
Notice of Proposed Rulemaking [``NPRM''] seeking comment on proposed 
rules governing the conversion of campaign funds to personal use. 58 FR 
45463 (August 30, 1993). The NPRM contained a proposed general 
definition of personal use, several enumerated examples, and other 
provisions for the administration of the personal use prohibition. The 
Commission subsequently granted a request for a 45 day extension of the 
comment period. 58 FR 52040 (Oct. 6, 1993). The Commission received 32 
comments from 31 commenters in response to the NPRM. The Commission 
also held a public hearing on January 12, 1994, at which it heard 
testimony from five witnesses on the proposed rules.
    After reviewing the comments received and the testimony given, 
Commission staff prepared draft final rules, which were considered at 
an open meeting held on May 19, 1994. The Commission also considered at 
that time several requests it had received for an additional 
opportunity to comment on the rules before they were finally 
promulgated. The Commission decided to seek additional comment on the 
rules, and published a Request for Additional Comments on August 17, 
1994 [``RAC'']. 59 FR 42183 (August 17, 1994). The RAC contained a 
revised set of draft rules, including a revised definition of personal 
use that differed significantly from the general definition set out in 
the 1993 NPRM. The Commission received 31 comments from 34 commenters 
in response to the Request.
    The comments received provided valuable information that serves as 
the basis for the final rules published today. Elements of both sets of 
draft rules have been incorporated into the final rules.
    Section 438(d) of Title 2, United States Code requires that any 
rules or regulations prescribed by the Commission to carry out the 
provisions of Title 2 of the United States Code be transmitted to the 
Speaker of the House of Representatives and the President of the Senate 
30 legislative days before they are finally promulgated. These 
regulations were transmitted to Congress on February 3, 1995.

Explanation and Justification

    The 1979 amendments to the Federal Election Campaign Act, Pub. L. 
No. 96-187, 93 Stat. 1339, 1366-67, amended 2 U.S.C. Sec. 439a to 
prohibit the use of campaign funds by any person for personal use, 
other than an individual serving as a Member of Congress on January 8, 
1980. Under this provision, the Commission must determine whether a 
disbursement of campaign funds is a campaign expenditure, a permissible 
expense connected to the duties of a holder of Federal office, or a 
conversion to personal use. The Commission undertook this rulemaking in 
an effort to provide additional guidance on these issues to the 
regulated community.
    Some of the comments received contained general observations on the 
Commission's effort to promulgate personal use rules. Many commenters 
expressed general support for the Commission's efforts, but other 
commenters objected to Commission action in this area. One commenter 
expressed doubt that the Commission would be able to regulate personal 
use with these kinds of rules. A number of commenters argued that this 
entire area should be left to Congress. Two of these commenters 
objected to the rulemaking on the grounds that it is an expansion of 
Commission authority that is not mandated by Congressional action, one 
saying Congressional inaction does not confer jurisdiction on the 
Commission to take action.
    However, this rulemaking is clearly within the Commission's 
jurisdiction and authority. Section 438(a)(8) of Title 2 states that 
``[t]he Commission shall prescribe rules, regulations and forms to 
carry out the provisions of [the Federal Election Campaign Act] * * 
*.'' This rulemaking is an effort by the Commission to carry out the 
provisions of section 439a by more clearly defining personal use. Thus, 
it is precisely the kind of rulemaking contemplated by Congress when it 
enacted section 438(a)(8).
    In addition, this rulemaking is prompted, in large part, by more 
recent Congressional action, specifically, the Ethics Reform Act of 
1989, Pub. L. No. 101-194, 103 Stat. 1716. Section 504 of the Ethics 
Reform Act repealed a ``grandfather'' provision that Congress included 
in section 439a when it enacted the personal use prohibition in 1979. 
This grandfather provision exempted any person who was a ``Senator or 
Representative in, or Delegate or Resident Commissioner to, the 
Congress'' on January 8, 1980 from the personal use prohibition. By 
repealing the grandfather provision, Section 504 of the Ethics Reform 
Act limited conversions to personal use by grandfathered Members and 
former Members to the unobligated balance in their campaign accounts on 
November 30, 1989. It also completely prohibited conversions of 
campaign funds by anyone serving in the 103rd or any later Congress. 
Thus, any grandfathered Members who returned to Congress in January, 
1993 gave up the right to convert funds to personal use.
    Many of the enforcement actions and advisory opinions the 
Commission [[Page 7863]] addressed before the start of the 103rd 
Congress involved persons who, because they were Members of Congress on 
January 8, 1980, were eligible to convert campaign funds to personal 
use. Consequently, the question of whether a particular disbursement 
was a legitimate campaign expenditure or a conversion of campaign funds 
to personal use may not have been fully explored during that period. A 
few former Members of Congress may still be covered by the grandfather 
provision and so continue to be eligible to convert campaign funds to 
personal use. These former Members are not affected by the new rules 
published today.
    However, the Commission expects that, in the future, most of the 
situations it will address will involve persons who are not eligible to 
convert funds to personal use. This increases the need for a clear 
distinction between permissible uses of campaign funds and 
impermissible conversions to personal use. In an effort to address this 
need, the Commission initiated this rulemaking. The Commission is 
hopeful that the promulgation of these rules will provide much needed 
guidance to the regulated community.
    This Explanation and Justification departs from the Commission's 
usual practice of discussing the provisions of the final rules in 
numerical order. The amendments to Parts 100 and 104 are an outgrowth 
of the new rules inserted in part 113. Consequently, part 113 will be 
discussed first, in order to place the amendments to parts 100 and 104 
in the proper context.

Part 113--Excess Campaign Funds and Funds Donated to Support Federal 
Officeholder Activities (2 U.S.C. 439a)

Section 113.1  Definitions (2 U.S.C. 439a)

    The final rules insert a definition of personal use into 
Sec. 113.1, which contains the definitions that apply to Part 113. Part 
113 lists the permissible uses of excess campaign funds and states that 
excess funds cannot be converted to personal use. Under Sec. 113.1(e), 
candidates can determine that a portion of their campaign funds are 
excess campaign funds. The final rules treat the use of campaign funds 
for personal use as a determination by the candidate that the funds 
used are excess campaign funds. The personal use definition is inserted 
as section 113.1(g).
    Section 113.1(g) contains a general definition of personal use. 
Section 113.1(g)(1) expands on this general definition. Paragraph 
(g)(1)(i) contains a list of expenses that are per se personal use. 
Paragraph (g)(1)(ii) explains how the Commission will analyze 
situations not covered by the list of expenses in paragraph (g)(1)(i). 
The remaining provisions of Sec. 113.1(g) set out specific exclusions 
from the definition of personal use, explain how the definition 
interacts with certain House and Senate rules, and describe the 
circumstances under which payments for personal use expenses by third 
parties will be considered contributions.

Section 113.1(g)  General Definition

    The general definition of personal use is set out in new paragraph 
113.1(g). Personal use is any use of funds in a campaign account of a 
present or former candidate to fulfill a commitment, obligation or 
expense of any person that would exist irrespective of the candidate's 
campaign or responsibilities as a Federal officeholder.
    Under this definition, expenses that would be incurred even if the 
candidate was not a candidate or officeholder are treated as personal 
rather than campaign or officeholder related. This approach is based on 
Advisory Opinions 1980-138 and 1981-2, in which the Commission said 
that ``expenses which would exist regardless of an individual's 
election to Federal office are not `incidental' and may not be paid 
from campaign funds.'' Advisory Opinion 1981-2. Since not all cases 
that raise personal use questions can be specifically addressed in a 
rule, this standard provides a guideline for the Commission and the 
regulated community to use in determining whether a particular expense 
is permissible or prohibited.
    The final rules supersede Advisory Opinion 1976-17, in which the 
Commission said that ``any disbursements made and reported by the 
campaign as expenditures will be deemed to be for the purpose of 
influencing the candidate's election.'' A disbursement for campaign 
funds will not be deemed to be for the purpose of influencing an 
election if the disbursement is for an expense that is considered a 
personal use under these rules.
    The rules supersede Advisory Opinion 1980-49, in which the 
Commission indicated that section 439a allows a campaign to pay the 
``personal living expenses'' of the candidate. The use of campaign 
funds to pay the personal living expenses of the candidate is a 
prohibited personal use under these rules. Similarly, the rules 
supersede Advisory Opinions 1982-64 and 1976-53, to the extent that 
they allowed the use of campaign funds for living expenses incurred 
during the campaign. However, the rules do not prohibit the use of 
campaign funds for campaign or officeholder related meal expenses or 
subsistence expenses incurred during campaign or officeholder related 
travel. Generally, these uses are permissible under 
Secs. 113.1(g)(1)(ii) (B) and (C). These sections will be discussed in 
detail below.
    In approving the irrespective definition for inclusion in the final 
rules, the Commission returned to the definition set out in the 1993 
NPRM. The Commission had proposed an alternative definition in the 
August 1994 Request for Additional Comments. Under the alternative 
definition, personal use would have been any use of funds that confers 
a benefit on a present or former candidate or a member of the 
candidate's family that is not primarily related to the candidate's 
campaign or the ordinary and necessary duties of a holder of Federal 
office. The Commission received numerous comments on both of these 
definitions.
    Many commenters expressed strong support for the irrespective 
definition contained in the final rules. These commenters said the 
alternative definition is vague and would force the Commission to 
engage in piecemeal decisionmaking. Thus, the commenters said, the 
alternative definition would be difficult to enforce, and would not 
curtail any of the abuses taking place under current law. Consequently, 
the alternative version would not be an improvement over the current 
situation.
    In contrast, the commenters who preferred the alternative version 
argued that it uses more established and well understood principles, 
and thus would reduce the likelihood of conflicts with other laws. They 
also said it more closely tracts the statute and more closely serves 
the purposes of the Ethics Reform Act of 1989, Pub. L. No. 101-194, 103 
Stat. 1716 (1989). Two commenters criticized the irrespective 
definition, saying it does not provide enough guidance and leaves too 
much room for regulatory interpretation. These commenters said the 
alternative version would be flexible enough to accommodate a wide 
range of political and campaign activity, and would preserve the 
discretion recognized in the Commission's previous advisory opinions.
    The irrespective definition is preferable to the alternative 
version because determining whether an expense would exist irrespective 
of candidacy can be done more objectively than determining whether an 
expense is primarily related to the candidacy. If campaign funds are 
used for a financial obligation that is caused by campaign activity or 
the activities of an [[Page 7864]] officeholder, that use is not 
personal use. However, if the obligation would exist even in the 
absence of the candidacy or even if the officeholder were not in 
office, then the use of funds for that obligation generally would be 
personal use.
    In contrast, determining whether an expense is primarily related to 
a campaign or the duties of an officeholder, or instead is primarily 
related to some other activity, would force the Commission to draw 
conclusions as to which relationship is more direct or significant. The 
Commission has been reluctant to make these kinds of subjective 
determinations in the past. Moreover, any rule that requires these 
kinds of determinations can result in more ad hoc decisionmaking. The 
Commission initiated this rulemaking in order to reduce piecemeal 
resolution of personal use issues, and to provide more prospective 
guidance to the regulated community as to the kinds of uses that will 
be considered personal use. The Commission has concluded that the 
irrespective definition will more successfully achieve these goals.
    The general definition of personal use originally proposed by the 
Commission in the 1993 NPRM applied to any use of campaign funds, 
regardless of whether the use benefited the candidate, a family member, 
a campaign employee or an unrelated party. However, under the revised 
draft rules set out in the RAC, the general definition would have been 
more limited. This definition would have covered only those uses of 
campaign funds that benefit the candidate or members of the candidate's 
family.
    The final rules return to the original approach because this 
approach is more consistent with the FECA. Section 439a states that no 
campaign funds ``may be converted by any person to any personal use.'' 
Thus, under the final rules, any use of campaign funds that would exist 
irrespective of the campaign or the duties of a Federal officeholder is 
personal use, regardless of whether the beneficiary is the candidate, a 
family member of the candidate, or some other person.

Paragraph (g)(1)(i)

    Paragraph (g)(1)(i) of the final rules contains a list of expenses 
that are considered personal use. The list includes household food 
items, funeral expenses, clothing, tuition payments, mortgage, rent and 
utility payments, entertainment expenses, club dues, and salary 
payments to family members. The rule assumes that, in the indicated 
circumstances, these expenses would exist irrespective of the 
candidate's campaign or duties as a Federal officerholder. Therefore, 
the rule treats the use of campaign funds for these expenses as per se 
personal use.
    In adopting a per se list, the Commission rejected the alternative 
approach set out in the RAC. Under the alternative approach, the 
expenses on the list were not presumed to fall within the general 
definition of personal use. Instead, they were merely examples of 
expenses to which the ``primarily related'' standard would then be 
applied on a case by case basis.
    Most of the commenters that addressed this issue preferred the list 
of per se personal uses that has been incorporated into the final 
rules. These commenters characterized the alternative version as a 
return to case by case review that would not provide any useful 
guidance to the regulated community and would not make it any easier to 
enforce the personal use prohibition. These commenters urged the 
Commission to use the per se approach and write whatever exceptions are 
necessary into the specific provisions of the list. The Commission used 
this approach in drafting the final rules.
    However, two commenters went a step further. They urged the 
Commission to limit the rule to a list of specific uses that would be 
personal use, and eliminate the general definition of personal use that 
would apply to other situations. However, the Commission decided not to 
adopt this approach. It is doubtful that the agency could draft a 
complete list of the kinds of uses that raise personal use issues under 
section 439a. In addition, the Commission has identified some 
situations that warrant allocation between permissible and personal 
expenses. See section 5 of the discussion of paragraph (g)(1)(ii), 
below. Therefore, the rules would be incomplete without a general 
definition that could be applied to other situations.
    One commenter argued that the per se list will reduce candidate 
flexibility in determining how to use campaign resources, and urged the 
Commission to adopt the alternative proposal because it strikes what 
the commenter believes is the appropriate balance.
    However, a list of per se personal uses is preferable to a list of 
examples to which a ``primarily related'' test would be applied. By 
listing those uses that will be considered personal use and setting out 
the exceptions that apply, the per se list draws a clearer line and 
reduces the need or case by case review. A committee or a candidate can 
examine the rules and be much more certain about what constitutes 
personal use.
    In contrast, the alternative approach undercuts the Commission's 
efforts to provide clearer guidance. Under the alternative approach, 
the Commission would have to examine the facts and circumstances of 
each situation in order to determine whether a particular use is 
personal use. Thus, the alternative approach would require more 
Commission involvement in the resolution of personal use issues.
    1. Household Food Items and Supplies. Under paragraph (g)(1)(i)(A) 
of the final rules, the use of campaign funds for household food items 
and supplies is personal use. This provision covers any food purchased 
for day to day consumption in the home, and any supplies purchased for 
use in maintaining the household. The need for these items would exist 
irrespective of the candidate's campaign or duties as a Federal 
officeholder. Therefore, the Commission regards them as inherently 
personal and subject to the personal use ban.
    However, this provision would not prohibit the purchase of food or 
supplies for use in fundraising activities, even if the fundraising 
activities take place in the candidate's home. Items obtained for 
fundraising activities are not household items within the meaning of 
this provision. Similarly, refreshments for a campaign meeting would 
not be covered by this paragraph.
    In addition, this provision does not apply to the use of campaign 
funds for meal expenses incurred outside the home. The use of campaign 
funds for these expenses is governed by section 113.1(g)(1)(ii)(B), 
which will be discussed further below. Similarly, this provision does 
not apply to the use of campaign funds for subsistence expenses, that 
is, food and shelter, incurred during travel. Section 
113.1(g)(1)(ii)(C) specifically addressed this situation, and will be 
discussed in greater detail below.
    2. Funeral, Cremation and Burial Expenses. Paragraph (g)(1)(i)(B) 
of the final rules indicates that the use of campaign funds to pay 
funeral, cremation or burial expenses is personal use. Campaign funds 
have been used for these expenses in the past by the estates of former 
Members of Congress who were covered by the grandfather provision and 
therefore could convert campaign funds to personal use. The Commission 
believes that these expenses are inherently personal in nature, and, 
under the current state of the law, should be covered by the personal 
use ban. The Commission [[Page 7865]] received no comments on this 
provision.
    Section 113.1(g)(4) of the final rules contains an exception to the 
personal use definition that is relevant here. Section 113.1(g)(4), 
which will be discussed further below, states that gifts and donations 
of nominal value made on special occasions are not personal use, unless 
they are made to a member of the candidate's family. Under this 
provision, campaign funds can be used to send flowers to a 
constituent's funeral as an expression of sympathy without violating 
section 439a. However, if campaign funds are used to pay for costs of 
the funeral, that use is personal use under paragraph (g)(1)(i)(B).
    3. Clothing. Under paragraph (g)(1)(i)(C) of the final rules, the 
use of campaign funds to purchase clothing is generally personal use. 
However, the rule contains an exception for clothing items of de 
minimis value that are used in the campaign. Thus, if a campaign 
committee uses campaign funds to purchase campaign T-shirts and caps 
with campaign slogans, the purchase is not personal use. One commenter 
expressed support for this provision.
    This rule supersedes Advisory Opinion 1985-22 to the extent that 
opinion can be read to allow the use of campaign funds for these 
purposes. In that opinion, the requester sought to use campaign funds 
to purchase ``specialized attire'' to wear at ``politically related 
functions which [were] both social and official business.'' The 
Commission concluded that the requester's committee could use the funds 
for these purposes because the requester was grandfathered. However, 
the language of the opinion suggests that the use of campaign funds for 
these purposes would also have been permissible if the clothing was to 
be used in connection with the campaign. Under paragraph (g)(1)(i)(C), 
the use of campaign funds for these purposes is personal use.
    4. Tuition Payments. Under paragraph (g)(1)(i)(D) of the final 
rules, the use of campaign funds for tuition payments is personal use. 
However, this provision contains an exception that allows a committee 
to pay the costs of training campaign staff members, including 
candidates and officeholders, to perform the tasks involved in 
conducting a campaign. The Commission received no comments on this 
provision.
    The Commission has concluded that only those tuition payments that 
fall within the narrow exception set out in the rule are campaign 
related and should be payable with campaign funds. Other tuition costs, 
whether for members of the campaign staff or other persons, are subject 
to the personal use prohibition.
    5. Mortgage, Rent and Utility Payments. Paragraph (g)(1)(i)(E) of 
the final rules addresses the use of campaign funds for mortgage, rent 
or utility payments on real or personal property owned by the candidate 
or a member of the candidate's family. In the past, the Commission has 
generally allowed campaigns to rent property owned by the candidate or 
a family member for use in the campaign, so long as the campaign did 
not pay rent in excess of the usual and normal charge for the kind of 
property being rented. See Advisory Opinions 1993-1, 1988-13, 1985-42, 
1983-1, 1978-80, 1977-12, and 1976-53.
    The new rule changes the Commission's policy with regard to rental 
of all or part of a candidate or family member's personal residence. 
Under paragraph (g)(1)(i)(E)(1), the use of campaign funds for 
mortgage, rent or utility payments on any part of a personal residence 
of the candidate or a member of the candidate's family is personal use, 
even if part of the personal residence is being used in the campaign. 
This paragraph supersedes Advisory Opinions 1988-13, 1985-42, 1983-1 
and 1976-53, since they allow the use of campaign funds for these 
purposes.
    In contrast, paragraph (g)(1)(i)(E)(2) continues the Commission's 
current policy in situations where the property being rented is not 
part of a personal residence of the candidate or a member of the 
candidate's family. Thus, a campaign committee can continue to rent 
part of an office building owned by the candidate for use in the 
campaign, so long as the committee pays no more than fair market value 
for the property usage.
    Paragraph (g)(1)(i)(E)(2) is consistent with Advisory Opinions 
1977-12 and 1978-80. It is also consistent with the result reached in 
Advisory Opinion 1993-1, in which the Commission allowed a candidate to 
rent a storage shed that was not part of his or her personal residence 
for use in the campaign. However, Advisory Opinion 1993-1 cites 
Advisory Opinions 1988-13, 1985-42, and 1983-1 as authority for this 
conclusion. As indicated above, these opinions are superseded by 
paragraph (1). Consequently, they should no longer be regarded as 
authority for the result reached in AO 1993-1.
    The use of campaign funds to make mortgage, rent or utility 
payments on real or personal property that is not used in the campaign 
would be reviewed under the general definition of personal use. These 
expenses presumably would exist irrespective of the candidacy, so the 
use of campaign funds to pay these expenses would be personal use.
    The Commission received a number of comments on its proposed rules 
in this area. Four commenters urged the Commission to prohibit all 
transactions between the campaign committee and the candidate, saying 
that the rules should require the committee to enter into arms length 
transactions with unrelated third parties. Two of these commenters said 
the prohibition should be extended to transactions with any member of 
the candidate's family unit. In contrast, four other commenters urged 
the Commission to continue to allow these transactions so long as they 
involve bona fide rentals at fair market value.
    The Commission has adopted what is essentially a middle ground. The 
rule prohibits payments for use of a personal residence because the 
expenses of maintaining a personal residence would exist irrespective 
of the candidacy or the Federal officeholder's duties. Thus, the rule 
draws a clear line, and avoids the need to allocate expenses associated 
with the residence between campaign and personal use.
    At the same time, the Commission believes it is unnecessary to 
change its current policy regarding payments for the use of other 
property. These arrangements more closely resemble arms length 
transactions in that the property in question is available on the open 
market. Also, these arrangements generally do not raise the same kinds 
of allocation issues. Consequently, so long as the campaign pays fair 
market value, these payments will not be considered personal use.
    It is important to note that paragraph (g)(1)(i)(E)(1) does not 
prohibit the campaign from using a portion of the candidate's personal 
residence for campaign purposes. It merely limits the committee's 
ability to pay rent for such a use. The candidate retains the option of 
using his or her personal residence in the campaign, so long as it is 
done at no cost to the committee. The Commission specifically allowed 
such an arrangement in Advisory Opinion 1986-28. That opinion is not 
affected by the new rules.
    Nor should this rule be read to prohibit a campaign committee from 
paying the cost of long distance telephone calls associated with the 
campaign, even if those calls are made on a telephone located in a 
personal residence of the candidate or a member of the candidate's 
family. Since these calls are separately itemized on the residential 
telephone bill, they can [[Page 7866]] easily be attributed to the 
campaign without raising allocation issues.
    6. Entertainment. Paragraph (g)(1)(i)(F) states that the use of 
campaign funds to pay for admission to a sporting event, concert, 
theater or other form of entertainment is personal use, unless the 
admission is part of a specific campaign or officeholder activity.
    Several commenters urged the Commission to impose limits on the use 
of campaign funds for admission to these kinds of events. One suggested 
that these uses be prohibited unless they are part of a bona fide 
fundraising event, and said the Commission should require explicit 
solicitation of contributions in order to ensure that fundraising takes 
place. Another commenter recommended that the rule only allow the use 
of campaign funds if guests are present, and then only for the guests' 
admissions. A third commenter would require the candidate to show that 
the event was overwhelmingly campaign related in order to eliminate 
borderline cases. A fourth argued that these uses should only be 
allowed when the event is integral to campaign activity, and not when 
it is merely an event at which those present occasionally discuss 
campaign related subjects.
    Other commenters took a different view. One commenter argued that 
meeting and mingling with supporters is a legitimate campaign activity, 
and that the expenses associated with that activity are a legitimate 
campaign expense. This commenter urged the Commission to allow the use 
of campaign funds for these purposes so long as the event takes place 
within the candidate's district. Another commenter said that the rules 
should allow committees to buy tickets for these events and give them 
to campaign workers, volunteers, and constituents.
    The final rules require that the purchase of tickets be part of a 
particular campaign event or officeholder activity and not a leisure 
outing at which the discussion occasionally focuses on the campaign or 
official functions. This is not intended to include traditional 
campaign activity, such as attendance at county picnics, organizational 
conventions, or other community or civic occasions. This approach 
recognizes that these activities can be campaign or officeholder 
related. Moreover, the rules do not require an explicit solicitation of 
contributions or make distinctions based on who participates in the 
activity, since this would be a significant intrusion into how 
candidates and officeholders conduct campaign business.
    7. Dues, Fees and Gratuities. Paragraph (g)(1)(i)(G) of the final 
rules provides that using campaign funds to pay dues, fees or 
gratuities to a country club, health club, recreational facility or 
other nonpolitical organization is personal use. Under this rule, 
membership dues, greens fees, court fees or other payments for access 
to these clubs are personal use, as are payments to caddies or 
professionals who provide services at the club, regardless of whether 
they are club employees or independent contractors. However, this rule 
contains an exception that allows a candidate holding a fundraising 
event on club premises to use campaign funds to pay the cost of the 
event. In this situation, the payments would be expenditures rather 
than personal use.
    The Commission received a mix of comments on this provision. One 
commenter supported the rule, but urged the Commission to make it 
stronger by narrowing the exception for fundraising events. Another 
commenter took a different view, saying that a candidate's greens fees 
for golf with supporters or potential supporters is a legitimate 
campaign expense and should be allowed.
    Once again, the rule charts a middle course. Playing a round of 
golf or going to a health club is often a social outing where the 
benefits received are inherently personal. Consequently, the use of 
campaign funds to pay for these activities will generally be personal 
use.
    However, the rule is not so broad as to limit legitimate campaign 
related or officeholder related activity. The costs of a fundraising 
event held on club premises are no different under the FECA than the 
costs of a fundraiser held at another location, so the rule contains 
and exception that indicates that payments for these costs are not 
personal use. However, this exception does not cover payments made to 
maintain unlimited access to such a facility, even if access if 
maintained to facilitate fundraising activity. The exception is limited 
to payments for the costs of a specific fundraising event.
    The rule also allows a candidate or officeholder to use campaign 
funds to pay membership dues in an organization that may have political 
interests. This would include community or civic organizations that a 
candidate or officeholder joins in his or her district in order to 
maintain political contacts with constituents or the business 
community. Even though these organizations are not considered political 
organizations under 26 U.S.C. Sec. 527, they will be considered to have 
political aspects for the purposes of this rule.
    8. Salary Payments to the Candidate's Family Members. The final 
rules also clarify the Commission's policy regarding the payment of a 
salary to members of the candidate's family. Under paragraph 
(g)(1)(i)(H), salary payments to a member of the candidate's family are 
personal use, unless the family member is providing bona fide services 
to the campaign. If a family member provides bona fide services to the 
campaign, any salary payment in excess of the fair market value of the 
services provided is personal use. This rule is consistent with the 
Commission's current policy, as set out in Advisory Opinion 1992-4.
    Several commenters urged the Commission to take a stricter 
approach. Two suggested that the Commission prohibit salary payments 
for any member of the candidate's household unit, because the salary 
could be used to pay the living expenses of the candidate. Other 
commenters urged the Commission to prohibit salary payments unless the 
family member was hired to perform services that he or she previously 
provided in a professional capacity outside the campaign. Some 
commenters expressed concern that the fair market value standard could 
be abused.
    In contrast, a number of commenters urged the Commission to allow 
these payments. Two commenters questioned why family members should be 
treated any differently from other employees who provide legitimate 
services to the campaign. One commenter said the test should be whether 
the family member is actually working for the campaign. If so, salary 
payments should be allowed.
    The Commission agrees with those commenters that argue that family 
members should be treated the same as other members of the campaign 
staff. So long as the family member is providing bona fide services to 
the campaign, salary payments to that family member should not be 
considered personal use. However, the Commission believes these 
payments should be limited to the fair market value of the services 
provided. Consequently, the final rules treat salary payments in excess 
of that amount as personal use.
    9. Additional Issues. Both the Notice of Proposed Rulemaking and 
the Request for Additional Comments proposed to treat the use of 
campaign funds to pay the candidate a salary as personal use. This rule 
would have the effect of prohibiting candidate salaries, and would 
resolve an issue raised in Advisory Opinion 1992-1. The 
[[Page 7867]] Commission received numerous comments on this provision.
    Several commenters objected to this provision and urged the 
Commission to allow candidate salaries. Most said that a prohibition 
would aggravate existing inequities between incumbents and challengers 
and would create a wealth test or property qualification for running 
for office. These commenters urged the Commission to allow candidate 
salaries in order to level the playing field and open up the election 
process to candidates of modest means. One commenter strongly believes 
a candidate should be able to receive a reasonable salary based on his 
or her experience and the services he or she renders to the campaign. 
Many different proposals for determining the amount of a candidate's 
salary were suggested.
    Several other commenters questioned why full disclosure of salary 
payments would not adequately prevent any unfairness to campaign 
contributors. Another commenter argued that candidates are essentially 
employees of the party by whom they are nominated, and, as such, the 
party should be permitted to pay the candidate a salary.
    In contrast, two commenters strongly supported a prohibition on 
candidate salaries, saying such a prohibition is required under section 
439a. They urged the Commission to adopt a blanket rule prohibiting the 
use of campaign funds for this purpose, because permitting salaries 
effectively allows the candidate to use campaign funds to pay his or 
her personal living expenses and does away with the personal use 
prohibition. These commenters acknowledged that the inequities that 
exist between incumbents and challengers is a problem that needs to be 
rectified. Nevertheless, they said this inequity cannot be resolved in 
this rulemaking because nothing in section 439a requires a level 
playing field. They also argue that nothing in section 439a justifies 
distinguishing between incumbents and other candidates, and since 
Members of Congress would not be allowed to take a salary from their 
campaigns in addition to their Congressional salary, the statute 
requires a prohibition on salary payments to the candidate.
    One of these two commenters also urged the Commission not to try to 
level the playing field by reversing what the commenter described as 
the Commission's policy of requiring corporate employees to take an 
unpaid leave of absence to campaign for office. This commenter also 
said that a means test for payment of candidate salaries would not 
work.
    The Commission took up the candidate salary issue when it 
considered the final rules, but could not reach a majority decision by 
the required four affirmative votes. See 2 U.S.C. Sec. 437c(c). 
Consequently, this issue has not been addressed in the final rules.

Paragraph (g)(1)(ii)

    Paragraph (g)(1)(ii) explains how the Commission will address other 
uses of campaign funds not covered by the per se list of examples. If 
an issue comes before the Commission as to whether a use not listed in 
paragraph (g)(1)(i) is personal use, the Commission will determine 
whether the use is for an expense that would exist irrespective of the 
candidate's campaign or duties as a Federal officeholder. If so, it 
will be personal use unless some other specific exception applies. 
These determinations will be made on a case by case basis. Committees 
should look to the general definition for guidance in determining 
whether uses not listed in paragraph (g)(1)(i) are personal use.
    Two commenters expressed concerns with this approach. One said that 
case by case review will cause great difficulty, and urged the 
Commission to allow candidates to explain the campaign relationship of 
any use that may appear to be personal. This commenter also argued that 
if the use reasonably appears to have a campaign relationship, it 
should not be personal use. The other commenter said that this 
provision leaves the question of personal use unsettled, and urged the 
Commission to affirm that candidates have wide discretion over the use 
of campaign funds and treat uses outside the categories contained in 
the rule as presumptively permissible.
    In contrast, a third commenter expressed support for this provision 
if it is implemented in conjunction with a general definition of 
personal use that uses the irrespective standard.
    The Commission is aware of the problems of case by case 
decisionmaking. It has sought to minimize these problems by 
incorporating a list of examples that specifically addresses the most 
common personal use issues into the final rules.
    However, the Commission cannot anticipate every type of expense 
that will raise personal issues. Thus, the Commission cannot create a 
list that addresses every situation. Furthermore, some expenses that do 
raise personal use issues cannot be characterized as either personal or 
campaign related in the majority of situations, so they cannot be 
addressed in a per se list. Consequently, it is necessary to have a 
plan for addressing situations not covered by the per se list. The 
Commission is including paragraph (g)(1)(ii) in the rules to provide 
guidance to the regulated community as to how these situations will be 
handled. Should a personal use issue arise, the candidate and committee 
will have ample opportunity to present their views. The Commission, 
however, reaffirms its long-standing opinion that candidates have wide 
discretion over the use of campaign funds. If the candidate can 
reasonably show that the expenses at issue resulted from campaign or 
officeholder activities, the Commission will not consider the use to be 
personal use.
    The Notice of Proposed Rulemaking sought comments on other uses of 
campaign funds that sometimes raise personal use issues. In particular, 
the Commission encouraged commenters to submit their views on when the 
use of campaign funds for legal expenses, meal expenses, travel 
expenses and vehicle expenses would be personal use.
    Because the use of campaign funds for these expenses can raise 
serious personal use issues, the Commission attempted to draft specific 
provisions on these uses and incorporate them into section 
113.1(g)(1)(i). However, the Commission's efforts to craft language 
that would distinguish permissible uses from those subject to the 
prohibition generated rules that could have proved very confusing for 
the regulated community. Consequently, the Commission opted for a 
simpler approach. The Commission will address any issues raised by the 
use of campaign funds for these expenses by applying the general 
definition on a case by case basis. Thus, the use of campaign funds for 
these expenses will be personal use if the expense would exist 
irrespective of the candidate's campaign or duties as a Federal 
officeholder.
    Legal, meal, travel and vehicle expenses are listed under paragraph 
(g)(1)(ii) as examples of uses that will be reviewed on a case by case 
basis. The Commission has inserted this list in the final rules in 
order to make it clear how issues involving the use of campaign funds 
for these expenses will be handled. These provisions, and the comments 
received in response to the NPRM, are discussed in detail below.
    1. Legal expenses. Paragraph (g)(1)(ii)(A) indicates that issues 
regarding the use of campaign funds for legal expenses will be 
addressed on a case by case basis using the general definition of 
personal use. One commenter argued that legal expenses should be per se 
personal use except when they are incurred in ensuring compliance with 
the election laws. This commenter also urged the Commission 
[[Page 7868]] to prohibit contributions to the legal defense funds of 
other candidates.
    Treating legal expenses other than those incurred in ensuring 
compliance with the election laws as per se personal use is too narrow 
a rule. A committee or a candidate could incur other legal expenses 
that arise out of campaign or officeholder activities but are not 
related to compliance with the FECA or other election laws. For 
example, a committee could incur legal expenses in its capacity as the 
employer of the campaign staff, or in its capacity as a contracting 
party in its dealings with campaign vendors. Consequently, the 
Commission has decided that issues raised by the use of campaign funds 
for a candidate's or committee's legal expenses will have to be 
addressed on a case by case basis.
    However, legal expenses will not be treated as though they are 
campaign or officeholder related merely because the underlying legal 
proceedings have some impact on the campaign or the officeholder's 
status. Thus, legal expenses associated with a divorce or charges of 
driving under the influence of alcohol will be treated as personal, 
rather than campaign or officeholder related.
    2. Meal Expenses. Paragraph (g)(1)(ii)(B) indicates that issues 
regarding the use of campaign funds for meal expenses will be addressed 
on a case by case basis using the general definition of personal use. 
One commenter thought payments for meals should be strictly limited, 
and recommended that the Commission prohibit the use of campaign funds 
to pay for meals that are not directly related to the campaign. Another 
commenter suggested the Commission follow the Internal Revenue Service 
approach for business meals, and allow the use of campaign funds if 
guests are present. Under this approach, family members would not 
qualify as guests, so campaign funds could not be used to pay for their 
meals.
    A third commenter expressed doubt that persons who use campaign 
funds for entertainment actually discuss campaign business while the 
event is going on. The commenter said that, although these situations 
often involve face to face fundraising and therefore are campaign 
related, the Commission should require candidates to show that the 
event is overwhelmingly campaign related in order to eliminate 
borderline cases. A fourth commenter would require that the meal 
involve an explicit solicitation of contributions in order to allow use 
of campaign funds.
    In contrast, two commenters objected to limits on the use of 
campaign funds for these purposes.
    The Commission is aware of the potential for abuse in the use of 
campaign funds to pay for meal expenses. However, the Commission sought 
to establish a rule that would effectively curb these abuses without 
making it difficult to conduct legitimate campaign or officeholder 
related business. Consequently, the Commission has decided to address 
these situations on a case by case basis using the general definition 
of personal use.
    Under this approach, the use of campaign funds for meals involving 
face to face fundraising would be permissible. Presumably, the 
candidate would not incur the costs associated with this activity if he 
or she were not a candidate. In contrast, the use of campaign funds to 
take the candidate's family out to dinner in a restaurant would be 
personal use, because the family's meal expenses would exist even if no 
member of the family were a candidate or an officeholder.
    It should be noted that this provision applies to meal expenses 
incurred outside the home. It does not apply to the use of campaign 
funds for household food items, which are covered by section 
113.1(g)(1)(i)(A). Nor does it apply to subsistence expenses incurred 
during campaign or officeholder related travel. These expenses will be 
considered part of the travel expenses addressed by paragraph 
(g)(1)(ii)(C).
    3. Travel Expenses. Paragraph (g)(1)(iii)(C) indicates that the use 
of campaign funds for travel expenses, including subsistence expenses 
incurred during travel, will be addressed on a case by case basis using 
the general definition of personal use.
    One commenter said that the rules should prohibit the use of 
campaign funds for expenses that are collateral to travel, such as 
greens fees, ski lift tickets and court time. This commenter also said 
the rules should prohibit the use the campaign funds for pleasure or 
vacation trips or extensions of campaign or officeholder related trips. 
Another commenter urged the Commission to adopt a two part test for 
travel expenses which would allow them only if the travel is 
predominantly for permissible purposes and the trip is necessary for 
the fulfillment of those purposes. This commenter also urged the 
Commission to prohibit the payment of per diems, since they allow 
campaigns to use campaign funds without disclosing how they are used.
    As will be discussed further below (see section 5 on ``mixed 
use''), the final rules do prohibit the use of campaign funds for 
personal expenses collateral to campaign or officeholder related travel 
by treating these uses as personal use unless the committee is 
reimbursed. However, the Commission has decided against adopting the 
two part test suggested, because it would require closer review of a 
candidate's or officeholder's travel to determine the predominant 
purpose or necessity of a particular trip. This approach has been 
rejected, and is a departure from the analysis under the irrespective 
standard.
    The Commission has also decided against imposing limits on per diem 
payments, since the Commission has a long-standing policy of allowing 
these payments, see Advisory Opinion 1984-8, and because these limits 
would be impractical and would impose unreasonable burdens on 
candidates and committees. However, per diem payments must be used for 
expenses that meet the general standard. They cannot be converted to 
personal use.
    4. Vehicle Expenses. Paragraph (g)(1)(ii)(D) indicates that issues 
regarding the use of campaign funds for vehicle expenses will be 
addressed on a case by case basis using the general definition of 
personal use. However, the rule contains an exception for vehicle 
expenses of a de minimis amount. Thus, vehicle expenses that would 
exist irrespective of the candidate's campaign or duties as a holder of 
Federal office will be personal use, unless they are a de minimis 
amount. If these expenses exceed a de minimis amount, the person(s) 
using the vehicle for personal purposes must reimburse the committee 
for the entire amount associated with the personal use. See section 5 
on ``mixed use,'' below.
    One commenter urged the Commission to make the vehicle expense 
provision more specific by defining de minimis and setting a specific 
cents per mile reimbursement amount. This commenter also urged the 
Commission to include a limit on payments for the candidate's personal 
vehicle.
    The Commission is sensitive to the difficulties that candidates and 
committees would face in completely eliminating all vehicle uses that 
confer a personal benefit. Consequently, the Commission has sought to 
carefully craft a rule that will provide a mechanism for addressing 
apparent abuses of campaign vehicles without imposing unrealistic 
burdens on candidates and committees. The Commission has decided not to 
impose the more specific requirements [[Page 7869]] suggested by the 
commenter. Instead, it will review the facts of a particular case in 
order to determine whether personal use has occurred. The Commission 
will make use of the de minimis concept by assessing whether the amount 
of expenses associated with personal activities is significant in 
relation to the overall vehicle use.
    While the comments focused on the use of campaign funds to pay for 
expenses associated with the candidate's personal vehicle, the rule 
applies to the use of campaign funds for expenses associated with any 
vehicle, regardless of whether it is owned or leased by the committee 
or the candidate. Because the expenses associated with a personal 
vehicle usually exist irrespective of the candidacy or the 
officeholder's duties, the use of campaign funds for these expenses 
will generally be considered personal use.
    5. Mixed Use. Paragraphs (g)(1)(ii) (C) and (D) also explain the 
Commission's policy regarding the use of campaign funds for travel and 
vehicle expenses associated with a mixture of personal and campaign or 
officeholder related activities.
    Under paragraph (c), if a campaign committee uses campaign funds to 
pay expenses associated with travel that involves both personal 
activities and campaign or officeholder related activities, the 
incremental expenses that result from the personal activities are 
personal use, unless the person(s) benefiting from this use 
reimburse(s) the campaign within thirty days for the amount of the 
incremental expenses.
    Paragraph (D) contains a similar rule regarding vehicle expenses. 
However, this rule does not apply to vehicle expenses that are a de 
minimis amount. If the vehicle expenses associated with personal 
activities exceed a de minimis amount, the person(s) using the vehicle 
for personal activities must reimburses(s) the campaign within thirty 
days for the entire amount associated with the personal activities. 
Otherwise, the use of campaign funds for the vehicle expenses is 
personal use. This approach is consistent with Advisory Opinions 1984-
59 and 1992-12.
    For example, under paragraph (C), if a Member of Congress travels 
to Florida to make a speech in his or her official capacity, and stays 
an extra week there to enjoy a vacation, the Member's campaign 
committee can pay the Member's transportation costs and the subsistence 
costs necessary for making the speech. However, if the committee pays 
the cost of the entire trip, including the expenses incurred during the 
extra week of vacation, the Member is required to reimburse the 
committee for the expenses incurred during this extra week. This 
includes the hotel and meal expenses for the extra week along with any 
entertainment expenses incurred during this time that are included in 
the amount paid by the committee.
    Of course, the reimbursement need only cover the incremental costs 
of the personal activities, that is the increase in the total cost of 
the trip that is attributable to the extra week of vacation. Thus, if 
the vacation and the speech take place in the same location, the Member 
is not required to reimburse the committee for any portion of the 
airfare, since that expense would have been incurred even if the trip 
had not been extended. See Advisory Opinion 1993-6.
    On the other hand, if the Member travels to one location to make 
the speech, travels on to another location for the vacation, and then 
returns to his or her point of origin, the Member is required to 
reimburse the committee for the increase in transportation costs 
attributable to the vacation leg of the trip. The increased costs would 
be calculated by determining the cost of a fictional trip that includes 
only the campaign and officeholder related stops, that is, a trip that 
starts at the point of origin, goes to every campaign related or 
officeholder related stop, and returns to the point of origin. The 
difference between the transportation costs of this fictional, campaign 
related trip and the total transportation costs of the trip actually 
taken is the incremental cost attributable to the personal leg of the 
trip.
    These rules apply to any Federal candidate or officeholder. Thus, 
challengers are also required to reimburse their committees for any 
personal travel expenses that are paid with campaign funds.
    These principles also apply to vehicle expenses for a trip that 
involves both campaign or officeholder related activities and personal 
activities in excess of a de minimis amount. If the personal activities 
are more than a de minimis portion of the trip, the person using the 
vehicle is required to reimburse the committee for the difference 
between the total vehicle expenses incurred during the trip and the 
amount that would be incurred on a fictional trip that only includes 
the campaign or officeholder related stops. Section 106.3(b) of the 
Commission's regulations sets out a method for allocating campaign and 
non-campaign related vehicle expenses. Advisory Opinion 1992-34 
contains an example of how this allocation mechanism works.
    The Commission notes that if the person benefiting from the use of 
campaign funds for personal travel or vehicle expenses makes a timely 
reimbursement under this section, that reimbursement is not a 
contribution under the Act. However, if a reimbursement required under 
this section is made by a person other than the person benefiting, it 
may be a contribution under Sec. 113.1(g)(6). Section 113.1(g)(6) will 
be discussed further below.

Section 113.1(g)(2)  Charitable Donations

    Section 113.1(g)(2) indicates that donations of campaign funds to 
organizations described in section 170(c) of the Internal Revenue Code 
are not personal use, so long as the candidate does not receive 
compensation from the recipient organization before it has expended the 
entire amount donated for purposes unrelated to the candidate's 
personal benefit. Compensation does not include reimbursements for 
expenses ordinarily and necessarily incurred on behalf of such 
organization by the candidate. This provision is based on the approach 
taken by the Commission in Advisory Opinion 1983-27, and is consistent 
with subsequent Commission treatment of charitable donations made with 
campaign funds. See Advisory Opinions 1986-39 and 1993-22. The 
Commission received no comments on this provision.

Section 113.1(g)(3)  Transfers of Campaign Assets

    Under Sec. 113.1(g)(3), the sale or other transfer of a campaign 
asset is not personal use so long as the transfer is for fair market 
value. This provision seeks to limit indirect conversions of campaign 
funds to personal use. An indirect conversion occurs when a committee 
sells an asset for less than the asset's actual value, thereby 
essentially giving part of the asset to the purchaser at no charge. 
Section 113.1(g)(3) limits these conversions by requiring these 
transactions be for fair market value.
    Section 113.1(g)(3) also seeks to limit indirect conversions to 
personal use by ensuring that any depreciation in the value of an asset 
being transferred is properly allocated between the committee and the 
purchaser. Many assets such as vehicles and office equipment depreciate 
dramatically immediately after they are purchased. If a campaign 
committee purchases an asset, uses it during a campaign season, and 
then sells it to the candidate at its [[Page 7870]] depreciated fair 
market value, the candidate receives the asset at a substantially 
reduced cost but with significant time remaining in its useful life. 
Thus, the cost of the depreciation falls disproportionately upon the 
campaign committee. This would effectively be a conversion of campaign 
funds to personal use.
    Section 113.1(g)(3) addresses this situation by requiring that any 
depreciation that takes place before the transfer be allocated between 
the committee and the purchaser based on the useful life of the asset. 
Thus, the committee should absorb only that portion of the depreciation 
that is attributable to the time period during which it uses the asset. 
This approach is consistent with Advisory Opinion 1992-12, in which the 
Commission required a Congressman who was assuming a lease of a van 
from his campaign committee to ``accept a pro rata share of the 
financial obligations and charges attending the lease * * *.'' The 
Commission also noted that ``the lease may provide for a discount on 
the purchase price of the van at the conclusion of the agreement. In 
that event, a portion of the discount may belong to the committee.'' 
Advisory Opinion 1992-12, n.3.
    Two commenters expressed views on this provision. One commenter 
argued that, even if the asset's depreciation is allocated between the 
committee and the purchaser, the purchaser is still getting a bargain. 
This commenter urged the Commission to require the committee to sell 
its assets to third parties and use the proceeds to pay campaign debts 
or to make contributions to charities.
    The Commission has decided not to require committees to sell their 
assets only to third parties, because such a requirement would not 
serve the purposes of the personal use prohibition. Section 439a 
prohibits conversions of campaign funds to any person's personal use. 
Thus, a violation of section 439a occurs whenever an asset is 
transferred for less than fair market value. It makes no difference 
whether the purchaser is the candidate or an unrelated third party. 
Consequently, a rule that requires that all transfers of campaign 
assets be for fair market value will fully serve the purposes of 
section 439a.

Section 113.1(g)(4)  Gifts

    As indicated above, the final rules generally apply with equal 
force to uses of campaign funds that benefit third parties as they do 
to uses of campaign funds that benefit the candidate or a member of the 
candidate's immediate family. However, the final rules also contain a 
provision that allows a committee to use campaign funds to benefit 
constituents or supporters on certain occasions without violating the 
personal use prohibition. Section 113.1(g)(4) indicates that gifts or 
donations of nominal value given on special occasions to persons other 
than family members of the candidate are not personal use. This will 
allow a committee to use campaign funds to send flowers to a 
constituent's funeral without violating the personal use prohibition.
    The Commission recognizes that candidates and officeholders 
frequently send small gifts to constituents and supporters on special 
occasions as gestures of sympathy or goodwill, and that such an expense 
would not exist irrespective of the candidate's or officeholder's 
status. The Commission has included this provision in the rules to 
specifically indicate that the use of campaign funds for this purpose 
is permitted.
    However, the exception does not cover gifts that are of more than 
nominal value. For example, using campaign funds for other expenses 
associated with special occasions, such as the funeral and burial 
expenses covered under section 113.1(g)(1)(i)(B), would be personal 
use. Nor does this exception allow the committee to use campaign funds 
to send gifts to members of the candidate's family. Presumably, the 
candidate would give such a gift irrespective of whether he or she were 
a candidate or Federal officeholder. Therefore, the use of campaign 
funds for such a gift would be personal use.

Section 113.1(g)(5)  Political or Officially Connected Expenses

    Section 113.1(g)(5) explains how the personal use rules interact 
with the rules of the U.S. House of Representatives and the United 
States Senate. Under House rules, a Member ``shall convert no campaign 
funds to personal use * * * and shall expend no funds from his campaign 
account not attributable to bona fide campaign or political purposes.'' 
House Rule 43, clause 6. Senate Rule 38 also prohibits personal use, 
but allows a Member to use campaign funds to defray ``expenses incurred 
* * * in connection with his official duties.'' Senate Rule 38, clause 
1(a). Thus, these rules allow Members to use campaign funds for what 
are described as ``political'' and ``officially connected'' expenses. 
Several commenters have raised the question of how the personal use 
rules would apply to the use of campaign funds for these purposes.
    Section 113.1(g)(5) indicates that the use of campaign funds for a 
political or officially connected expense is not personal use to the 
extent that it is an expenditure under 11 CFR 100.8 or an ordinary and 
necessary expense incurred in connection with the duties of a holder of 
Federal office. The rule also reiterates that any use of funds that 
would be personal use under Sec. 113.1(g)(1) will not be considered an 
expenditure or an ordinary and necessary expense incurred in connection 
with the duties of a Federal officeholder.
    One commenter urged the Commission to be consistent with House and 
Senate rules in this area, saying that, since House rules specifically 
allow Members to use campaign funds for political expenses, the 
Commission's rules should specifically exclude these uses from the 
definition of personal use. Two other commenters agreed, and urged the 
Commission not to introduce additional confusion into this area.
    In contrast, two commenters rejected the suggestion that the 
Commission should defer to House and Senate rules in this area. They 
asserted that enforcement of the personal use ban is the Commission's 
responsibility, and that, since Congressional precedents are based on 
rules with different language than section 439a, the Commission should 
not look to those precedents for guidance.
    Other commenters expressed their views on the specific language of 
the rule. One commenter urged the Commission to treat what the 
commenter referred to as campaign disbursements and political 
disbursements as synonymous, and to treat what the commenter referred 
to as political and officially connected expenses as permissible 
ordinary and necessary expenses under section 439a. Another commenter 
criticized the provision as tautological, and cited this as an area in 
which the Commission should reaffirm that candidates and officeholders 
have wide discretion.
    Two commenters said the rule is an improvement over a previous 
draft that was read to have ceded authority for determining whether 
uses by incumbents are personal use to the House and Senate. However, 
one said that the rule still defers too much to Congress because it 
still says political and officially connected expenses are not personal 
use to the extent that they are expenditures or the ordinary and 
necessary expenses of a Federal officeholder. The other commenter said 
the rule is acceptable so long as the list of uses is truly a per se 
list. [[Page 7871]] 
    The Commission recognizes that the existence of two sets of rules 
creates the potential for confusion. However, the Commission cannot 
create a blanket exclusion from personal use for all uses that qualify 
as a political or officially connected expense under Congressional 
rules. Congress has given the Commission the authority to interpret and 
enforce the personal use prohibition in section 439a. Creating an 
exclusion for all political or officially connected expenses would 
effectively be an abdication of that authority, particularly since 
section 439a uses different standards than House and Senate rules for 
determining whether a particular use of campaign funds is permissible.
    Nevertheless, the Commission anticipates that, in most 
circumstances other than those specifically addressed in the rules, 
political and officially connected expenses will be considered ordinary 
and necessary expenses incurred in connection with the duties of a 
Federal officeholder, as that term is used under the FECA. As such, 
they will not be personal use under Sec. 113.1(g)(1). In other 
circumstances, political and officially connected expenses may be 
expenditures under the Act, and therefore clearly permissible. In 
short, the Commission does not anticipate a significant number of 
conflicting results under these rules.
    The Commission notes that the FY 1991 Legislative Branch 
Appropriations Act (Pub. L. 101-520) provides that ``official 
expenses'' may not be paid from excess campaign funds. Thus, even 
though 2 U.S.C. Sec. 439a, House Rule 43, and Senate Rule 38 
contemplate the use of campaign funds for ``ordinary and necessary 
expenses,'' ``political purposes,'' and expenses ``in connection with'' 
official duties, guidance regarding the scope of the Legislative Branch 
Appropriations Act provision referred to above should be sought by 
persons covered.

Section 113.1(g)(6)  Third Party Payments of Personal Use Expenses

    Section 113.1(g)(6) sets out Commission policy on payments for 
personal use expenses by persons other than the candidate or the 
candidate's committee. Generally, payments of expenses that would be 
personal use if made by the candidate or the candidate's committee will 
be considered contributions to the candidate if made by a third party. 
Consequently, the amount donated or expended will count towards the 
person's contribution limits. However, no contribution will result if 
the payment would have been made irrespective of the candidacy. The 
final rule contains three examples of payments that will be considered 
to be irrespective of the candidacy.
    Several commenters expressed views on this provision. Three 
commenters objected to it, arguing that it is inconsistent to say that 
the use of campaign funds for certain expenses is personal use when 
those expenses are not campaign related, while at the same time saying 
that payments for those same expenses by third parties are 
contributions because they are being made for the purpose of 
influencing an election. Two of these commenters recommended that the 
Commission reverse its existing policy and allow corporate employers to 
pay employee-candidates a salary during the campaign in order to level 
the playing field.
    Another commenter objected to this provision, saying that third 
parties should be allowed to pay the personal living expenses of a 
candidate who loses his or her salary upon becoming a full time 
candidate, subject to three conditions: (1) The payments are disclosed 
and limited as in-kind contributions under the FECA; (2) the payments 
are for essential living expenses; and (3) the total payments and the 
candidate's salary during the campaign period do not exceed his or her 
average monthly salary over the previous year, or that of an incumbent 
Member of Congress.
    In contrast, one commenter approved of this provision. Another 
commenter urged the Commission to flatly prohibit these payments rather 
than treating them as contributions, saying that third parties should 
not be able to label as contributions payments that could not be made 
by the committee itself.
    The Commission has decided to treat payments by third parties for 
personal use expenses as contributions subject to the limits and 
prohibitions of the Act, unless the payment would have been made 
irrespective of the candidacy. If a third party pays for the 
candidate's personal expenses, but would not ordinarily have done so if 
that candidate were not running for office, the third party is 
effectively making the payment for the purpose of assisting that 
candidacy. As such, it is appropriate to treat such a payment as a 
contribution under the Act. This rule follows portions of Advisory 
Opinions 1982-64, 1978-40, 1976-70 and the Commission's response to 
Advisory Opinion Request 1976-84. The Commission understands the 
concerns about the inequities between incumbents and challengers 
expressed by the commenters in relation to this provision and other 
aspects of this rulemaking. However, the FECA is not intended to level 
the playing field between incumbents and challengers. See Buckley v. 
Valeo, 424 U.S. 1, 48-49 (1976).
    If the payment would have been made even in the absence of the 
candidacy, the payment should not be treated as a contribution. Section 
113.1(g)(6) excludes payments that would have been made irrespective of 
the candidacy, and sets out three examples of such payments. These 
examples protect a wide range of payments of personal use expenses from 
being treated as contributions. Other situations will be examined on a 
case by case basis.
    First, the final rule excludes payments to a legal expense trust 
fund established under House and Senate rules. House and Senate rules 
provide Members of Congress with a mechanism they can use to accept 
donations to pay for legal expenses. The final rule places donations to 
these funds outside the scope of the contribution definition of the 
FECA. Donations to other legal defense funds will be examined on a case 
by case basis.
    Second, the final rule excludes payments made from the personal 
funds of the candidate, as defined in 11 CFR 110.10(b). Section 110.10 
allows candidates for Federal office to make unlimited expenditures 
from personal funds, as defined in paragraph (b) of that section. Thus, 
if a payment by a third party is made with the candidate's personal 
funds, the payment will not be considered a contribution that is 
subject to the limits and prohibitions of the Act. Similarly excluded 
from contribution treatment under this provision are payments made from 
an account jointly held by the candidate and a member of the 
candidate's family.
    Finally, the rule indicates that a third party's payment of a 
personal use expense will not be considered a contribution if payments 
for that expense were made by the third party before the candidate 
became a candidate. If the third party is continuing a series of 
payments that were made before the beginning of the candidacy, the 
Commission considers this convincing evidence that the payment would 
have been made irrespective of the candidacy, and therefore should not 
be considered a contribution. For example, if the parents of a 
candidate had been making college tuition payments for the candidate's 
children, the parents could continue to do so during the candidacy 
without making a contribution.
    It should be noted, however, that the exclusion for payments made 
before the candidacy contains a caveat for [[Page 7872]] compensation 
payments. Compensation payments that were made before the candidacy and 
continue during the candidacy will be considered contributions to the 
candidate unless three conditions are met: the compensation results 
from bona fide employment that is genuinely independent of the 
candidacy, the compensation is exclusively in consideration of services 
provided by the candidate as part of the employment, and the 
compensation does not exceed the amount that would be paid to a 
similarly qualified person for the same work over the same period of 
time. The Commission assumes that, when these three conditions exist, 
the compensation payment would have been made irrespective of the 
candidacy and should not be treated as a contribution. This rule is 
based on Advisory Opinion 1979-74, and is consistent with Advisory 
Opinions 1977-45, 1977-68, 1978-6 and 1980-115.

Section 113.1(g)(7)  Members of the Candidate's Family

    Section 113.1(g)(7) lists the persons who are members of the 
candidate's family for the purposes of Secs. 113.1(g) and 100.8(b)(22). 
This list is significant for several provisions of the rules. Under 
Sec. 113.1(g)(7), the candidate's family includes those persons 
traditionally considered part of an immediate family, regardless of 
whether they are of whole or half blood. Consistent with the laws of 
most states, the rules make no distinction between biological 
relationships and relationships that result from adoption or marriage. 
The grandparents of the candidate are also considered part of the 
candidate's family. Finally, the candidate's family also includes a 
person who has a committed relationship with the candidate, such as 
sharing a household and mutual responsibility for each other's welfare 
or living expenses. These persons will be treated as the equivalent of 
the candidate's spouse for the purposes of these rules.

Section 113.2  Use of Funds (2 U.S.C. 439a)

    The final rules also contain an amendment to the list of 
permissible uses of excess campaign funds contained in 11 CFR 113.2. 
The amendment specifically indicates that certain travel costs and 
certain office operating expenditures will be considered ordinary and 
necessary expenses incurred in connection with the duties of a Federal 
officeholder.
    The costs of travel for a Federal officeholder and an accompanying 
spouse who are participating in a function that is directly connected 
to bona fide official responsibilities will be considered ordinary and 
necessary expenses. 11 CFR 113.2(a)(1). The rule cites fact-finding 
meetings and events at which the officeholder makes an appearance in an 
official capacity as examples of functions covered by the rule. Note 
that spouse travel for campaign purposes continues to be a permissible 
expense.
    In addition, the costs of winding down the office of a former 
Federal officeholder for six months after he or she leaves office will 
be considered ordinary and necessary expenses. 11 CFR 113.2(a)(2). 
Consequently, the use of excess campaign funds to pay for these 
expenses is permissible.
    The Commission notes that the FY 1991 Legislative Branch 
Appropriations Act (Pub. L. 101-520) provides that ``official 
expenses'' may not be paid from excess campaign funds. Thus, even 
though 2 U.S.C. Sec. 439a, House Rule 43, and Senate Rule 38 
contemplate the use of campaign funds for ``ordinary and necessary 
expenses,'' ``political purposes,'' and expenses ``in connection with'' 
official duties, guidance regarding the scope of the Legislative Branch 
Appropriations Act provision referred to above should be sought by 
persons covered.
    1. Travel Costs. Several commenters criticized the travel cost 
provision. One commenter thought Members of Congress received a stipend 
for these expenses, and argued that campaign funds should not be used 
for this purpose. Another commenter urged the Commission to only allow 
the use of campaign funds for travel between Washington, D.C. and the 
Member's district. A third commenter argued that the provision allowing 
travel expenses for a Member's spouse should be deleted because it 
creates confusion, and opens a loophole because it does not require the 
Member to demonstrate that the spouse participated in the official 
function.
    One commenter urged the Commission to allow the use of campaign 
funds to defray expenses connected to officeholder duties, including 
travel, as permitted under House rules.
    The Commission has concluded that the expenses of both the 
officeholder and the officeholder's spouse should be permitted. If an 
officeholder incurs expenses in traveling to a function that is 
directly connected to his or her bona fide official responsibilities, 
those expenses clearly would not exist irrespective of his or her 
duties as a Federal officeholder. As such, the use of campaign funds 
for those expenses would not be personal use under section 113.1(g)(1).
    The Commission also recognizes that an officeholder's spouse is 
often expected to attend these functions with the officeholder. See 
Advisory Opinion 1981-25. In this context, the spouse's attendance 
alone amounts to a form of participation in the function, even if the 
spouse has no direct role in the activities that take place during the 
event. Consequently, the Commission has decided that the rule should 
specifically indicate that the expenses of an accompanying spouse can 
be paid with campaign funds when an officeholder travels to attend an 
official function.
    This provision also helps to clarify the relationship between the 
personal use rules and the rules of the House and Senate on the use of 
campaign funds for travel. Although Members receive appropriated funds 
for certain travel expenses, House and Senate rules also allow them to 
pay for certain other expenses with campaign funds. The amendments to 
Sec. 113.2 make it clear that, so long as the travel is for 
participation in a function connected to the Member's official 
responsibilities, the permissibility of this use is not affected by the 
personal use rules.
    Advisory Opinion 1980-113 indicated that campaign funds could be 
used to defray expenses incurred in carrying out the duties of a state 
officeholder. That opinion also suggested that campaign funds could be 
used to defray the travel expenses of the spouse of such an 
officeholder if the spouse's expenses are incident to the duties of the 
state officeholder. However, in Advisory Opinion 1993-6, the Commission 
explicitly superseded Advisory Opinion 1980-113 to the extent that it 
allowed the use of campaign funds ``for expenses related to that 
person's position as a holder of state office or any office which is 
not a Federal office as defined in the Act.'' Advisory Opinion 1993-6, 
n.3. The amendments to Sec. 113.2 are consistent with Advisory Opinion 
1993-6. As revised, Sec. 113.2(a)(1) does not permit the use of 
campaign funds for travel expenses associated with official 
responsibilities other than those of a Federal officeholder.
    Finally, the Commission has not limited this rule to expenses 
associated with travel between a Member's district and Washington, D.C. 
The Commission recognizes that travel to other locations may be 
directly connected to a Member's bona fide official responsibilities. 
So long as the travel is [[Page 7873]] so connected, the use of 
campaign funds to pay the expenses of that travel will also be 
permissible.
    2. Winding Down Costs. Six commenters expressed views on the 
provision regarding winding down costs. 11 CFR 113.2(a)(2). One 
commenter disagreed with the proposed rule, and argued that former 
officeholders should not be allowed to use campaign funds for this 
purpose. Another commenter agreed that a candidate should not be 
allowed to retain and use campaign funds beyond a certain reasonable 
period after the campaign to pay debts and operating expenses. This 
commenter suggested that any funds that remain unused after that time 
period should be returned to donors or taxed at one hundred percent.
    A third commenter urged the Commission to allow these uses only for 
incumbents who lose their seat, and recommended against allowing 
Members of Congress to build up a large treasury and then use that 
treasury after voluntarily leaving Federal office.
    Three commenters agreed these uses should be allowed, but urged the 
Commission to approve a rule that limits the time period to sixty days.
    The Commission believes the costs of winding down the office of a 
former Federal officeholder are ordinary and necessary expenses within 
the meaning of section 439a. See Advisory Opinion 1993-6. Therefore, 
the use of campaign funds to pay these costs is permissible under the 
FECA. Furthermore, there is no basis in the Act for distinguishing 
between winding down costs incurred by officeholders who lose their 
seats and those incurred by officeholders who leave office for other 
reasons. The costs incurred by either kind of former officeholder are 
equally permissible.
    The Commission initially proposed a sixty day time period. Since 
this process often takes longer than anticipated, the Commission is 
inclined to provide former officeholders with some leeway in the use of 
funds for these purposes. Consequently, the Commission has extended the 
period to six months to ensure that former officeholders have ample 
time to close down their offices. It should also be noted that, as 
written, this provision acts as a safe harbor. It does not preclude a 
former officeholder who can demonstrate that he or she has incurred 
ordinary and necessary winding down expenses more than six months after 
leaving office from using campaign funds to pay those expenses.

Part 100--Scope and Definitions

Section 100.8  Expenditure (2 U.S.C. 431(9))

    Current Sec. 100.8(b) of the Commission's regulations excludes 
certain disbursements from the definition of expenditure. Paragraph 
(b)(22) of that section specifically excludes payments by a candidate 
from his or her personal funds, as defined in 11 CFR 110.10(b), for 
routine living expenses which would have been incurred without 
candidacy. Thus, a candidate can pay his or her routine living expenses 
from personal funds without making an expenditure that must be reported 
under the Act.
    New language has been added to Sec. 100.8(b)(22) that indicates 
that payments for routine living expenses by a member of the 
candidate's family are not expenditures if made from an account held 
jointly with the candidate, or if the expenses were paid by the family 
member before the candidate became a candidate. The revised rule treats 
payments from an account jointly held by the candidate and a family 
member the same as payments made from the candidate's personal funds, 
and excludes them from the expenditure definition. Similarly, the rule 
assumes that payments by a family member that are a continuation of 
payments made before the candidacy are not in connection with the 
candidacy, and should not be treated as expenditures.
    Under this section, payments from an account that contains only the 
candidate's personal funds will be exempt from the definition of 
expenditure even if the payment is made by another person such as a 
housekeeper or an accountant who has access to the account in order to 
pay the candidate's routine living expenses. These payments will also 
be exempt if the housekeeper makes the payment from an account jointly 
held by the candidate and a member of the candidate's family. The 
ability of a person who is not a family member to make payments from 
the account will not change otherwise exempt payments from the account 
into contributions.
    However, if the account is jointly held by the candidate and 
someone who is not a member of the candidate's family, or contains the 
funds of such a person, the exemption in Sec. 100.8(b)(22) does not 
apply, and payments from that account for the candidate's personal 
living expenses will be expenditures that have reporting consequences 
under the Act. These payments will also be in-kind contributions under 
section 113.1(g)(6), and will count towards the joint account holder's 
contribution limits. See 11 CFR 110.1.
    This section has been revised to parallel new Sec. 113.1(g)(6). One 
commenter expressed general support for this provision.

Part 104--Reports by Political Committees

Section 104.3  Contents of Reports (2 U.S.C. 434(b))

    The Notice of Proposed Rulemaking invited commenters to submit 
their views on any other issues raised by this rulemaking. Several 
commenters suggested that the Commission amend its reporting 
requirements in order to administer the personal use prohibition. These 
commenters urged the Commission to require more detailed reporting of 
expenditures that would force committees to bear the burden of 
establishing a clear connection between each expenditure and a campaign 
event. One commenter cited meals as an example, saying that the 
Commission should require the candidate to explain how the meal was 
related to the campaign and why it was not personal use. Two of these 
commenters recommended that the Commission initiate a separate 
rulemaking to implement more detailed reporting requirements.
    The Commission agreed that additional reporting may be useful in 
administering the personal use rules, and solicited comments in the RAC 
on how new reporting requirements could be crafted to be both useful 
and not overly burdensome. One commenter responded, recommending that 
the Commission require committees to provide a detailed description of 
the relationship between a use of campaign funds and the candidate's 
campaign or officeholder duties.
     The Commission has concluded that any significant changes to the 
reporting requirements should be taken up as part of a comprehensive 
review of the recordkeeping and reporting regulations. Such a review is 
currently under way as a separate rulemaking.
    Nevertheless, the Commission has identified one limited change that 
can be made now and will be useful in administering the personal use 
rules. Section 104.3 contains a new reporting requirement for 
authorized committees that itemize certain disbursements implicating 
the personal use prohibition. The new reporting requirement is set out 
in section 104.3(b)(4)(i)(B).
    Revised section 104.3(b)(4)(i)(B) requires an authorized committee 
that itemizes a disbursement for which [[Page 7874]] partial or total 
reimbursement is expected under new Sec. 113.1(g)(1)(ii) (C) or (D) to 
briefly explain the activity for which reimbursement will be made. For 
example, when itemizing a disbursement of funds for travel expenses 
associated with a trip that was partially campaign related and 
partially a personal trip for the candidate, the committee is required 
to indicate that the trip includes the cost of the candidate's personal 
trip, for which the committee is anticipating reimbursement. This 
information would be included on schedule B of Form 3. Committees 
receiving reimbursements will report them as ``other receipts'' on the 
Detailed Summary Page of Form 3.
    If an individual benefiting from the use of campaign funds for 
personal travel or vehicle expenses makes a reimbursement under this 
section, the reimbursement is not a contribution under the Act, and the 
individual is not required to report the reimbursement. However, if the 
reimbursement is made by a person other than the person benefiting from 
the use of the funds, it may be a contribution by the person making the 
reimbursement under Sec. 113.1(g)(6). If so, it must be reported as a 
contribution.

Certification of No Effect Pursuant to 5 U.S.C. Sec. 605(b) (Regulatory 
Flexibility Act)

    The attached final rules, if promulgated, will not have a 
significant economic impact on a substantial number of small entities. 
The basis of this certification is that the final rules are directed at 
individuals rather than small entities within the meaning of the 
Regulatory Flexibility Act. Therefore, no small entities will be 
significantly impacted.

List of Subjects

11 CFR Part 100

    Elections.

11 CFR Part 104

    Campaign funds, Political committees and parties, Political 
candidates.

11 CFR Part 113

    Campaign funds, Political candidates, Elections.

    For the reasons set out in the preamble, subchapter A, chapter I of 
title 11 of the Code of Federal Regulations is amended as follows:

PART 100--SCOPE AND DEFINITIONS (2 U.S.C. 431)

    1. The authority citation for part 100 continues to read as 
follows:

    Authority: 2 U.S.C. 431, 438(a)(8).

    2. Section 100.8 is amended by revising paragraph (b)(22) to read 
as follows:


Sec. 100.8   Expenditure (2 U.S.C. 431(9)).

* * * * *
    (b) * * *
    (22) Payments by a candidate from his or her personal funds, as 
defined at 11 CFR 110.10(b), for the candidate's routine living 
expenses which would have been incurred without candidacy, including 
the cost of food and residence, are not expenditures. Payments for such 
expenses by a member of the candidate's family as defined in 11 CFR 
113.1(g)(7), are not expenditures if the payments are made from an 
account jointly held with the candidate, or if the expenses were paid 
by the family member before the candidate became a candidate.
* * * * *

PART 104--REPORTS BY POLITICAL COMMITTEES (2 U.S.C. 434)

    3. The authority citation for part 104 is revised to read as 
follows:

    Authority: 2 U.S.C. 431(1), 431(8), 431(9), 432(i), 434, 
438(a)(8), 438(b), 439a.

    4. Section 104.3 is amended by revising the section heading and 
adding paragraph (b)(4)(i) (B) as follows:


Sec. 104.3   Contents of reports (2 U.S.C. 434(b), 439a).

* * * * *
    (b) * * *
    (4) * * *
    (i) * * *
    (A) * * *
    (B) In addition to reporting the purpose described in 11 CFR 
104.3(b)(4)(i)(A), whenever an authorized committee itemizes a 
disbursement that is partially or entirely a personal use for which 
reimbursement is required under 11 CFR 113.1(g)(1)(ii) (C) or (D), it 
shall provide a brief explanation of the activity for which 
reimbursement is required.
* * * * *

PART 113--EXCESS CAMPAIGN FUNDS AND FUNDS DONATED TO SUPPORT 
FEDERAL OFFICEHOLDER ACTIVITIES (2 U.S.C. 439a)

    5. The authority citation for part 113 continues to read as 
follows:

    Authority: 2 U.S.C. 432(h), 438(a)(8), 439a, 441a.

    6. Section 113.1 is amended by adding paragraph (g) as follows:


Sec. 113.1  Definitions (2 U.S.C. 439a).

* * * * *
    (g) Personal use. Personal use means any use of funds in a campaign 
account of a present or former candidate to fulfill a commitment, 
obligation or expense of any person that would exist irrespective of 
the candidate's campaign or duties as a Federal officeholder.
    (1)(i) Personal use includes but is not limited to the use of funds 
in a campaign account for:
    (A) Household food items or supplies;
    (B) Funeral, cremation or burial expenses;
    (C) Clothing, other than items of de minimis value that are used in 
the campaign, such as campaign ``T-shirts'' or caps with campaign 
slogans;
    (D) Tuition payments, other than those associated with training 
campaign staff;
    (E) Mortgage, rent or utility payments--
    (1) For any part of any personal residence of the candidate or a 
member of the candidate's family; or
    (2) For real or personal property that is owned by the candidate or 
a member of the candidate's family and used for campaign purposes, to 
the extent the payments exceed the fair market value of the property 
usage;
    (F) Admission to a sporting event, concert, theater or other form 
of entertainment, unless part of a specific campaign or officeholder 
activity;
    (G) Dues, fees or gratuities at a country club, health club, 
recreational facility or other nonpolitical organization, unless they 
are part of the costs of a specific fundraising event that takes place 
on the organization's premises; and
    (H) Salary payments to a member of the candidate's family, unless 
the family member is providing bona fide services to the campaign. If a 
family member provides bona fide services to the campaign, any salary 
payment in excess of the fair market value of the services provided is 
personal use.
    (ii) The Commission will determine, on a case by case basis, 
whether other uses of funds in a campaign account fulfill a commitment, 
obligation or expense that would exist irrespective of the candidate's 
campaign or duties as a Federal officeholder, and therefore are 
personal use. Examples of such other uses include:
    (A) Legal expenses;
    (B) Meal expenses;
    (C) Travel expenses, including subsistence expenses incurred during 
travel. If a committee uses campaign funds to pay expenses associated 
with travel that involves both personal activities and campaign or 
officeholder related activities, the incremental expenses that result 
from the personal activities are personal use, unless the person(s) 
benefiting from this use [[Page 7875]] reimburse(s) the campaign 
account within thirty days for the amount of the incremental expenses; 
and
    (D) Vehicle expenses, unless they are a de minimis amount. If a 
committee uses campaign funds to pay expenses associated with a vehicle 
that is used for both personal activities beyond a de minimus amount 
and campaign or officerholder related activities, the portion of the 
vehicle expenses associated with the personal activities is personal 
use, unless the person(s) using the vehicle for personal activities 
reimburse(s) the campaign account within thirty days for the expenses 
associated with the personal activities.
    (2) Charitable donations. Donations of campaign funds or assets to 
an organization described in section 170(c) of Title 26 of the United 
States Code are not personal use, unless the candidate receives 
compensation from the organization before the organization has expended 
the entire amount donated for purposes unrelated to his or her personal 
benefit.
    (3) Transfers of campaign assets. The transfer of a campaign 
committee asset is not personal use so long as the transfer is for fair 
market value. Any depreciation that takes place before the transfer 
must be allocated between the committee and the purchaser based on the 
useful life of the asset.
    (4) Gifts. Gifts of nominal value and donations of a nominal amount 
made on a special occasion such as a holiday, graduation, marriage, 
retirement, or death are not personal use, unless made to a member of 
the candidate's family.
    (5) Political or officially connected expenses. The use of campaign 
funds for an expense that would be a political expense under the rules 
of the United States House of Representatives or an officially 
connected expense under the rules of the United States Senate is not 
personal use to the extent that the expense is an expenditure under 11 
CFR 100.8 or an ordinary and necessary expense incurred in connection 
with the duties of a holder of Federal office. Any use of funds that 
would be personal use under 11 CFR 113.1(g)(1) will not be considered 
an expenditure under 11 CFR 100.8 or an ordinary and necessary expense 
incurred in connection with the duties of a holder of Federal office.
    (6) Third party payments. Notwithstanding that the use of funds for 
a particular expense would be a personal use under this section, 
payment of that expense by any person other than the candidate or the 
campaign committee shall be a contribution under 11 CFR 100.7 to the 
candidate unless the payment would have been made irrespective of the 
candidacy. Examples of payments considered to be irrespective of the 
candidacy include, but are not limited to, situations where--
    (i) The payment is a donation to a legal expense trust fund 
established in accordance with the rules of the United States Senate or 
the United State House of Representatives;
    (ii) The payment is made from funds that are the candidate's 
personal funds as defined in 11 CFR 110.10(b), including an account 
jointly held by the candidate and a member of the candidate's family;
    (iii) Payments for that expense were made by the person making the 
payment before the candidate became a candidate. Payments that are 
compensation shall be considered contributions unless--
    (A) The compensation results from bona fide employment that is 
genuinely independent of the candidacy;
    (B) The compensation is exclusively in consideration of services 
provided by the employee as part of this employment; and
    (C) The compensation does not exceed the amount of compensation 
which would be paid to any other similarly qualified person for the 
same work over the same period of time.
    (7) Members of the candidate's family. For the purposes of section 
113.1(g), the candidate's family includes:
    (i) The spouse of the candidate;
    (ii) Any child, step-child, parent, grandparent, sibling, half-
sibling or step-sibling of the candidate or the candidate's spouse;
    (iii) The spouse of any child, step-child, parent, grandparent, 
sibling, half-sibling or step-sibling of the candidate; and
    (iv) A person who has a committed relationship with the candidate, 
such as sharing a household and having mutual responsibility for each 
other's personal welfare or living expenses.
    7. In section 113.2, the introductory text is republished and 
paragraph (a) is revised to read as follows:


Sec. 113.2  Use of funds (2 U.S.C. 439a).

    Excess campaign funds and funds donated:
    (a) May be used to defray any ordinary and necessary expenses 
incurred in connection with the recipient's duties as a holder of 
Federal office, if applicable, including:
    (1) The costs of travel by the recipient Federal officeholder and 
an accompanying spouse to participate in a function directly connected 
to bona fide official responsibilities, such as a fact-finding meeting 
or an event at which the officeholder's services are provided through a 
speech or appearance in an official capacity; and
    (2) The costs of winding down the office of a former Federal 
officeholder for a period of 6 months after he or she leaves office; or
* * * * *
    Dated: February 3, 1995.
Danny L. McDonald,
Chairman, Federal Election Commission.
[FR Doc. 95-3162 Filed 2-8-95; 8:45 am]
BILLING CODE 6715-01-M