Federal Election Commission Main Page
December 10, 1993
CERTIFIED MAIL
RETURN RECEIPT REQUESTED
ADVISORY OPINION 1993-21
Scott W. Spencer
Spencer & Ehrie
6100 Channingway Boulevard
Columbus, OH 43232
Dear Mr. Spencer:
This responds to your letters dated October 15 and
October 25, 1993, on behalf of the Ohio Republican Party
("the Party") concerning the application of the Federal
Election Campaign Act of 1971, as amended ("the Act"), and
Commission regulations to the application of a state law
forbidding a political party from depositing funds received
from a state tax check-off into the party's allocation
account.
In 1987, the Ohio legislature enacted a law creating the
Ohio Political Party Fund. Under this law, filers of Ohio
income tax returns may designate one dollar of their return
to be deposited into the Fund without increasing or
decreasing their tax liability. R.C. §3517.16. This money
is divided equally among all qualified political parties,
with one-half of a party's share paid to the treasurer of the
party's executive committee and one-half distributed to the
treasurer of each county executive committee in accordance
with the ratio of the number of check-offs in that county to
the total number of check-offs. R.C. §3517.17(A).1/
Ohio law provides that each party receiving such income
tax funds must maintain the funds "in an account separate
from all other assets of the political party" and file
statements of contributions and expenditures, indicating the
amounts received and the purposes for which it is spent. The
Ohio state auditor audits the statements of each party's
state committee and county committees to ascertain that such
funds are expended lawfully. R.C. §3517.17(A).
The funds distributed may be used for a number of
purposes related to support of party activities, but not
related to furthering the election or defeat of any
particular candidate or paying a party debt incurred as the
result of an election. Permissible uses include the
defraying of operating and maintenance costs associated with
party headquarters, including rent, staff salaries, supplies,
and computer needs; the administration of party fundraising
drives; and the organization of registration and
get-out-the-vote drives. R.C. §3517.18.2/
Since 1991, the Party has utilized an "allocation
account," pursuant to 11 CFR 106.5, "to allocate
administrative expenses associated with the lease and
maintenance of the state headquarters office, staff salaries,
office supplies, etc." In order to maintain the income tax
receipts separately from the other party assets, those
receipts have been deposited in a "separate segregated
account" known as the Income Tax Check-Off Account.
Periodically, as needed, the party would transfer funds from
the tax check-off account to the allocation account to pay
the above-described administrative expenses; checks would be
drawn from the latter account to pay the vendors. The
allocation account also received funds transferred from other
accounts or sources and was used to pay for the
administrative expenses.3/ No payments have been made from
the allocation account for candidates' campaigns.
In June 1992, the state auditor initiated an audit of
the Income Tax Check-Off Account for the years 1990 and 1991.
One year later, the auditor released a report asserting that
the Party had violated State law by failing to maintain the
income tax check-off funds in a separate account. The Party
was accused of commingling the income tax check-off funds
with other funds also deposited into the allocation account,
and of failing to maintain proper accountability of income
tax check-off funds. Recently, the State Auditor referred
the commingling allegation to the Ohio Elections Commission
for investigation and possible prosecution. The Party
continues the above-described practices, and the State
Auditor initiated an audit as to the Party's use of check-off
funds in 1992.
In view of these circumstances, which involve an ongoing
State audit and investigation, as well as continuation of the
practices that are the subject of the State's actions (see 11
CFR 112.1(b)), the Party seeks an advisory opinion as to the
following questions:
(1) Is the Party "correct" in transferring the tax check-off
funds from the "separate segregated account" to the
allocation account and thereafter paying vendors for the
described administrative expenses?
(2) Are the funds derived from the income tax check-off
scheme "appropriately designated" as Federal dollars for
the purposes of the allocation formula set forth in
Commission regulations?
(3) Does Federal law supersede or preempt Ohio law requiring
that the tax check-off funds be maintained in an account
separate from other assets of the party and may not be
moved to the allocation account? Must all expenditures
made for administrative expenses associated with the
support of the Party headquarters and its staff,
"including purposes required by R.C. §3517.18(A)," be
made from the allocation account?
(4) Is the requirement that the tax check-off funds be
maintained "in an account separate from all other assets
of the political party" satisfied when such funds are
transferred to the allocation account simultaneously or
in conjunction with payment to the vendors?
The Commission notes that the fourth question calls for
a response that is beyond the purview of the Commission's
responsibilities. It calls for an interpretation of specific
wording in a State statute rather than an interpretation
concerning the application of the Act or the Commission
regulations. See 2 U.S.C. §437f(a)(1); 11 CFR 112.1(a).
In interpreting the first question, the Commission notes
that there are a number of aspects to determining whether the
Party behavior described in the question is "correct,"
including what the Federal law is, whether State law should
apply, and if so, what State law requires. In view of what
the Commission is permitted to address and the subjects of
your other questions, the opinion responds to this question
in the course of answering question 3.
In response to question 2, the Commission concludes that
the Party may treat the funds derived from the tax check-off
as Federal dollars. In Advisory Opinion 1991-14, the
Commission considered a program in Kentucky similar to the
Ohio check-off. A state taxpayer could designate two dollars
of his or her state income tax payment to be paid to the
political party of his or her choice, without increasing or
decreasing the tax liability, or reducing the size of a
refund. The political party officers receiving these funds
were to use them only for supporting the party's candidates
in the general election and for the administrative costs of
maintaining a party headquarters. They were to deposit these
funds in a bank account separate from the party's other
accounts. The state Republican Party wished to consider
these check-off funds to be funds of its Federal committee.
The Commission observed that, although these funds would
not be considered contributions from the taxpayers (since
their tax liability was not increased) and would instead be
miscellaneous receipts, the funds were from permissible
sources, i.e., revenues generated by designations of
individual taxpayers, and did not exceed the Act's limits.
These funds, therefore, could be considered as funds of its
Federal committee, be deposited into a Federal account, and
be used for the support of Federal candidates. The
Commission also noted that a political committee could have
more than one account for its Federal committee. 2 U.S.C.
§432(h)(1); 11 CFR 103.2. Advisory Opinion 1991-14.
The Commission has also issued a number of other
opinions that have concluded, or assumed as a general rule,
that funds from state tax check-offs or fees paid for a state
service (e.g., personalized license plate fees) may be
deposited in a state party's Federal account. Advisory
Opinions 1983-15, 1982-17, and 1980-103. Compare Advisory
Opinion 1988-33 where the Commission limited the amount of
proceeds, resulting from a Florida candidate qualification
fee and party assessment fee collected by the Department of
State and distributed to the state's parties, that could be
deposited into a party's Federal account because some of the
sources may have been impermissible.
Your third question initially calls for a statement of
what the Federal regulations require. Commission regulations
provide for allocation of expenses by political party
committees making disbursements for administrative expenses,
fundraising, exempt activities, or generic voter drives in
connection with both Federal and non-Federal elections. 11
CFR 106.1(e). More specifically, party committees that make
disbursements in connection with Federal and non-federal
elections shall allocate expenses for (i) administrative
expenses not attributable to a clearly identified candidate,
including rent, utilities, supplies, and salaries; (ii) the
direct costs of a fundraising program or event, including
disbursements for solicitation of funds and for planning and
administration of actual fundraising events, where Federal
and non-federal funds are collected by one committee through
such a program or event; (iii) party activities that are
exempt from the Act's definition of contribution and
expenditure such as the production and distribution of slate
cards and sample ballots, campaign materials distributed by
volunteers, and voter registration and GOTV drives for
presidential nominees, where such activities are conducted in
conjunction with non-Federal activities; and (iv) generic
voter drives or other activities that urge the public to
support candidates of a particular party or associated with a
particular issue without mentioning a specific candidate.
11 CFR 106.5(a)(2)(i), (ii), (iii), and (iv).
Commission regulations provide that committees that have
established separate Federal and non-Federal accounts shall
pay the expenses of mixed Federal and non-Federal activities
in one of two ways. 11 CFR 106.5(g)(1). The committee can
pay the entire amount from one of its regular Federal
accounts and transfer funds from one of its non-Federal
accounts to the Federal account solely to cover the
non-Federal share of the allocable expense. 11 CFR
106.5(g)(1)(i). See Federal Election Commission Regulations
on Methods of Allocation Between Federal and Non-Federal
Accounts; Payments; Reporting, Explanation and Justification,
55 Fed. Reg. 26058, 26066 (June 26, 1990).
In the alternative, the committee can establish a
separate allocation account into which funds from its Federal
and non-Federal accounts will be deposited solely for the
purpose of paying the allocable expenses of mixed Federal and
non-Federal activity. Funds from the Federal and non-Federal
accounts will be transferred in amounts proportionate to the
Federal and non-Federal share of each allocable expense.
Once a committee has established a separate allocation
account, all allocable expenses must be paid from that
account as long as the account is maintained. Furthermore,
no funds maintained in this account may be transferred to any
other account of the committee. 11 CFR 106.5(g)(1)(ii).
The Act states that its provisions and the rules
prescribed thereunder, "supersede and preempt any provision
of State law with respect to election to Federal office."
2 U.S.C. §453. The House committee that drafted this
provision intended "to make certain that the Federal law is
construed to occupy the field with respect to elections to
Federal office and that the Federal law will be the sole
authority under which such elections will be regulated."
H.R. Rep. No. 93-1239, 93d Cong., 2d Sess. 10 (1974).
According to the Conference Committee report on the 1974
Amendments to the Act, "Federal law occupies the field with
respect to criminal sanctions relating to limitations on
campaign expenditures, the sources of campaign funds used in
Federal races, the conduct of Federal campaigns, and similar
offenses, but does not affect the States' rights" as to other
areas such as voter fraud and ballot theft. H.R. Rep. No.
93-1438, 93d Cong., 2d Sess. 69 (1974). The Conference
report also states that Federal law occupies the field with
respect to reporting and disclosure of political
contributions to and expenditures by Federal candidates and
political committees, but does not affect state laws as to
the manner of qualifying as a candidate, or the dates and
places of elections. Id. at 100-101.
These principles are codified in Commission regulations
which provide for Federal preemption with respect to the
organization and registration of political committees
supporting Federal candidates, disclosure of receipts and
expenditures by Federal candidates and political committees,
and the limitations on contributions and expenditures
regarding Federal candidates and political committees.
Federal Election Commission Regulations, Explanation and
Justification, House Document No. 95-44, at 51 (1977).
11 CFR 108.7(b).
The Party may, therefore, rely on Federal law as
preempting Ohio law which purports to bar the transfer of tax
check-off funds from the "separate segregated account" to the
allocation account set up by the party. Federal law requires
that payments to vendors for certain mixed expenses be made
from a Federal account, which may receive appropriate
transfers from its non-Federal accounts, or, if the party
sets up an allocation account, from the allocation account
only. The expenses for headquarters, staff salaries, office
supplies, and similar support are administrative expenses
that must be paid from one of these two accounts, under
Federal law. The Party has exercised one of the two options
allowed under Federal law, and, under the Commission's broad
preemptive powers, may not be prohibited by the State of Ohio
from transferring funds from the "separate segregated
account" to the allocation account to pay for administrative
expenses. See Advisory Opinion 1993-17.
The Commission's conclusion does not attempt to fully
resolve your dispute with the State of Ohio. In this
context, Federal preemption extends only to the allocation
requirements of Federal law. Although state revenues may, at
some point after their receipt by a state party, be treated
as Federal campaign funds or used for allocable expenses,
nothing in the Act or Commission regulations prevents a state
from auditing the use of those funds to determine whether
they were used in accordance with state law restrictions.4/
(Of course, the Act and Commission regulations may prevent
the use of such funds in a manner inconsistent with Federal
law.) The Commission distinguishes this situation from the
proposed financing of Congressional campaigns by the State of
Minnesota which was rejected in Advisory Opinion 1991-22.
The Commission stated that permitting a state to deposit
money in a party's Federal account is "a separate question
from whether a state may regulate Federal campaign finance
under the guise of a public funding mechanism conditioned on
abiding by spending limits." In the situation presented
here, however, funds were not given by the State for
specifically Federal election purposes or for spending by a
clearly identified Federal candidate.5/
This response constitutes an advisory opinion concerning
application of the Act, or regulations prescribed by the
Commission, 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 1993-17, 1991-22, 1991-14, 1988-33, 1983-15,
1982-17, and 1980-103)
Endnotes
1/ Because of the burden on county organizations in
administering their share of the funds, several of the
smaller organizations sign over their checks in partial
satisfaction of their state quotas to the state party.
2/ The permissible and non-permissible uses are set out as
follows:
(A) A political party receiving moneys from the Ohio
political party fund may expend the moneys only for the
following purposes:
(1) The defraying of operating and maintenance costs
associated with political party headquarters, including
rental or leasing costs, staff salaries, office equipment and
supplies, postage, and the purchase, lease, or maintenance of
computer hardware and software;
(2) The organization of voter registration programs and
get-out-the-vote campaigns;
(3) The administration of party fund-raising drives;
(4) Paid advertisements in the electronic or printed
media, sponsored jointly by two or more qualified political
parties, to publicize the Ohio political party fund and to
encourage taxpayers to support the income tax checkoff
program;
(5) Direct mail campaigns or other communications with
the registered voters of a party that are not related to any
particular candidate or election;
(6) The preparation of reports required by law.
(B) Moneys from the Ohio political party fund shall not be
used for any of the following purposes:
(1) To further the election or defeat of any particular
candidate or to influence directly the outcome of any
candidate or issue election;
(2) To pay party debts incurred as the result of any
election;
(3) To make a payment clearly in excess of the market
value of that which is received for the payment.
3/ Funds would be transferred into the allocation account
from the "operating account," which is an account from which
the party expends money either (i) to inform its members, by
mail or other direct communication, of its activities or
endorsements; or (ii) for the staff and maintenance of the
headquarters, or for a political poll, survey, or index that
is not on behalf of a specific candidate. R.C. §3517.08(B)
and (C). In addition, "campaign funds" would be deposited
into the allocation account "if necessary."
4/ The Commission does not reach any conclusion or make any
evaluation of whether the Party is in compliance with the
State's auditing standards. The Commission notes that
Federal law requires compliance with specific standards for
record-keeping and documentation. See, e.g., 11 CFR 102.9
and 104.14(b).
5/ A review of the permissible purposes of the use of tax
check-off funds set out in R.C. §3517.18(A) (see footnote 2)
and operating account set out in §3517.08(B) and (C) (see
footnote 3) indicate an apparent similarity with the
permissible uses of the allocation account. Because of the
use of different terminology or phrasing, however, the
Commission cautions that funds from those sources should not
be transferred to the allocation account for payment by that
account for any purpose that is not permitted to it by 11 CFR
106.5. Similarly, the Commission notes, consistent with 11
CFR 106.5(g)(1)(ii), that the Party should use the allocation
account for all other properly allocable activity, not just
administrative expenses.