Federal Election Commission Main Page
July 22, 1993
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
ADVISORY OPINION 1993-10
Delia Castillo De Colorado
Comite Amigos Tito Colorado
PO Box 192772
San Juan, PR 00919-2772
Dear Mrs. Castillo De Colorado:
This refers to your May 13, and June 28, 1993, letters
concerning the application of the Federal Election Campaign
Act of 1971 ("the Act"), as amended, to various uses of
excess campaign funds from the 1992 campaign of your husband,
Antonio J. Colorado.
You state that Mr. Colorado was a Federal candidate in
1992 for Resident Commissioner of Puerto Rico. According to
reports filed with the Commission, Mr. Colorado's principal
campaign committee, Comite Amigos Tito Colorado (the
"Committee"), had cash on hand totaling $56,604 and no debts
as of December 31, 1992. Mr. Colorado wishes to use funds
which you identify as excess campaign funds for the three
purposes detailed below.
(1) You state that Mr. Colorado's party, the Popular
Democratic Party (the "Party"), will elect its leader, the
President of the Party, during the first part of 1994. As
part of this process, you explain that there may be a primary
in which Mr. Colorado plans to be a candidate. You state
that a committee will be formed to support his candidacy, and
Mr. Colorado wishes to transfer excess campaign funds to this
committee for the purpose of supporting his election as Party
President.1/
(2) You state that the current government in Puerto Rico
is planning to hold a November 1993 plebiscite to determine
the political status of the Island. Mr. Colorado and other
associates wish to create a non-profit corporation, not
related to any political party, to campaign for retention of
the commonwealth status. You state that this corporation
will not be subject to United States tax law because its area
of operation will be restricted to Puerto Rico. You state
that Mr. Colorado wishes to transfer the Committee's excess
campaign funds for the use of this corporation in its
campaign.
(3) Finally, you state that Mr. Colorado is planning to
become a candidate in the 1996 election for Governor of
Puerto Rico. You state that as part of his preparation for
the 1996 campaign, Mr. Colorado would like to study the
reasons for his 1992 election loss and to gather research on
the issues that interest voters. Therefore, you state he
wishes to use excess campaign funds to conduct a survey of
public opinion in these areas.
Your request wishes guidance from the Commission on
whether these are permissible uses of excess campaign funds.
You further affirm that in all of the above instances the
funds will never be used for the personal benefit of Mr.
Colorado since the Committee understands and abides by the
provision that "prohibits said [personal] use, except for
reimbursement of any ordinary and necessary expenses that Mr.
Colorado may incur on behalf of the committee and corporation
described in [purposes] one and two above."
Several provisions of the Act and Commission regulations
are applicable to your proposed uses of Committee funds. The
use of "excess campaign funds" by political committees is
regulated by 2 U.S.C. §439a. This section states:
Amounts received by a candidate as contributions
that are in excess of any amount necessary to
defray his expenditures, and any other amounts
contributed to an individual for the purpose of
supporting his or her activities as a holder of
Federal office, may be used by such candidate or
individual, as the case may be, to defray any
ordinary and necessary expenses incurred in
connection with his or her duties as a holder of
Federal office, may be contributed to any
organization described in section 170(c) of title
26, or may be used for any other lawful purpose,
including transfers without limitation to any
national, State, or local committee of any
political party; except that no such amounts may be
converted by any person to any personal use, other
than to defray any ordinary and necessary expenses
incurred in connection with his or her duties as a
holder of Federal office.
Commission regulations define the phrase "excess
campaign funds" to mean "amounts received by a candidate as
contributions which he or she determines are in excess of any
amount necessary to defray his or her campaign expenditures."
11 CFR 113.1(e). If the use of excess campaign funds for the
proposed purposes does not constitute a "personal use" and is
not otherwise "unlawful," it is permissible under the
statute. See Advisory Opinion 1993-6.
The Committee has no debts and has determined that the
funds in the proposed transactions are excess campaign funds.
The first and third parts of your proposal involve the use of
these excess funds for future non-Federal campaigns. In past
opinions, the Commission has determined that the use of
excess campaign funds for future Federal and local or state
races would not violate the personal use prohibition of
section 439a. See Advisory Opinions 1986-5, and 1980-113.2/
Following these precedents, the use of the Committee's excess
campaign funds for purposes related to Mr. Colorado's 1996
Gubernatorial campaign would be permitted. Similarly, while
no opinion has dealt with the use of excess campaign funds in
campaigns to seek office in a political party organization,
these prior opinions would suggest that such use is not
unlawful or personal use under section 439a.3/ Therefore,
the Commission concludes that the Committee may use excess
campaign funds for both purposes as presented in the first
and third parts of your proposal.
Regarding the second part of your proposal, the Act, as
quoted above, specifically states that excess campaign funds
may be contributed to any tax exempt organization described
in section 170(c) of title 26. However, you have proposed
donations to a charitable, non-profit organization which is
not subject to United States tax law. The Commission has
found that transfers and donations to other recipients where
section 170 does not apply may still be permissible under the
"any other lawful purpose" clause of section 439a as long as
it did not involve conferring a personal benefit on the
former candidate. See Advisory Opinion 1986-39.4/ You have
explicitly stated that Mr. Colorado would not receive
compensation for his involvement in the proposed non-profit
corporation beyond reimbursement of ordinary and necessary
expenses incurred on its behalf. Under these circumstances,
the use of excess campaign funds to create and fund the
non-profit corporation you describe would be permissible
under the Act.
The Commission emphasizes that if any provisions of
Puerto Rican law are applicable to your proposed transfers or
donations, such provisions would not be pre-empted by
2 U.S.C. §453 and 11 CFR 108.7. Thus, the application of any
Puerto Rican law concerning, for example, the amount of such
transfers or donations, or their reporting by any transferee
entity, would not be superseded or pre-empted by the Act or
regulations of the Commission. See Advisory Opinions 1986-39
and 1986-5.
The Commission expresses no opinion as to the possible
tax ramifications of the proposed transaction, because that
issue is not within its jurisdiction.
This response constitutes an advisory opinion concerning
application of the Act, or regulations prescribed by the Com-
mission, to the specific transaction or activity set forth in
your request. See 2 U.S.C. §437f.
Sincerely,
(signed)
Scott E. Thomas
Chairman
Enclosures (AOs 1993-6, 1986-39, 1986-5, 1983-27,
and 1980-113)
ENDNOTES
1/ You further explain that, following the election of the
Party President, the Party will nominate a candidate to run
for Governor of Puerto Rico. This may or may not be the
person occupying the Party presidency. As noted below, Mr.
Colorado is also interested in seeking election to this
office.
2/ In Advisory Opinion 1986-5, a former Congressional
candidate wished to transfer his committee's excess campaign
funds to his campaign for County prosecutor. Advisory
Opinion 1980-113 dealt with the desire of a Senate candidate
to use his excess campaign funds for future state wide
office.
3/ This conclusion would be consistent with the Internal
Revenue Code's treatment of the personal use of excess
campaign funds. Under 26 U.S.C. §527(e)(1) and (2) and IRS
Reg. 1.527-5(c)(1), the transfer of excess campaign funds to
a political organization whose function is to influence "the
selection, nomination, election, or appointment of any
individual to any Federal, State, or local public office or
office in a political organization" would not be considered
the personal use of such funds. See 26 U.S.C. §527(d).
4/ In Advisory Opinion 1986-39, the Commission concluded
that a defeated candidate's donation of excess campaign funds
to a trust for a child would not, in and of itself, be a
prohibited personal use because it would "not benefit [him]
in any apparent financial respect."
Advisory Opinion 1983-27 indicated the circumstances
where a former candidate's transfer of excess funds to a
nonprofit organization could violate section 439a. These
were situations where the candidate would "receive any funds
from [the organization], including, but not limited to, any
compensation, loans, awards, grants, or fellowships, until
such time as [the organization] has expended, for purposes
unrelated to [the candidate's] personal benefit, the entire
amount so donated." The reimbursement of ordinary and
necessary expenses incurred on behalf of the foundation,
however, was permitted. See Advisory Opinion 1983-27; see
also Advisory Opinion 1993-6.