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

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.

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. § 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. § 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
Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Rules and Regulations 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 § 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

§ 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 § 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

§§ 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
7864 Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Rules and Regulations

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
Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Rules and Regulations 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
7866 Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Rules and Regulations

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.

§ 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
Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Rules and Regulations 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. § 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
7868 Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Rules and Regulations

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
Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Rules and Regulations 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 § 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 § 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
7870 Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Rules and Regulations

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

§ 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.
Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Rules and Regulations 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

§ 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. § 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 employeecandidates 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
7872 Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Rules and Regulations

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 §§ 113.1(g)

and 100.8(b)(22). This list is significant

for several provisions of the rules.

Under § 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. § 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 § 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 § 113.2 are

consistent with Advisory Opinion

1993–6. As revised, § 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
Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Rules and Regulations 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 § 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

§ 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 § 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 § 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
7874 Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Rules and Regulations

partial or total reimbursement is

expected under new § 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

§ 113.1(g)(6). If so, it must be reported

as a contribution.

Certification of No Effect Pursuant to 5

U.S.C. § 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:

§ 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:

§ 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:

§ 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
Federal Register / Vol. 60, No. 27 / Thursday, February 9, 1995 / Rules and Regulations 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, stepchild, parent, grandparent, sibling, halfsibling 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:

§ 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 factfinding 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]

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