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RETURN RECEIPT REQUESTED
ADVISORY OPINION 1994-37
David A. Barrett
Duker & Barrett
1585 Broadway
New York, NY 10036
Dear Mr. Barrett:
This responds to your letter dated November 17, 1994,
requesting an advisory opinion on behalf of Congressman
Charles E. Schumer, concerning the application of the Federal
Election Campaign Act of 1971, as amended ("the Act"), and
Commission regulations to proposed joint Federal and
non-federal activities to be undertaken by the Congressman.
Congressman Schumer represents the Ninth Congressional
District of New York. Presently, he wishes to establish a
principal campaign committee for his reelection to Congress
in 1996 ("the Federal Committee") and to begin exploring the
possibility of running for Governor of New York in 1998. In
brief, you seek an advisory opinion (i) permitting Mr.
Schumer to share the use of certain facilities and paid staff
between the Federal committee and a second committee
conducting exploratory activities (and ultimately, perhaps, a
separate campaign); and (ii) confirming the propriety of
applying certain allocation procedures to expenditures made
in connection with both the Federal and non-federal
activities.
You state that the Federal Committee will be funded by a
transfer of excess funds from Mr. Schumer's 1994 House
campaign committee, and it will seek additional contributions
during the 1996 campaign.1/ Meanwhile, Mr. Schumer's
exploratory committee ("the State Committee") would raise
funds for testing the waters purposes, and these funds would
be used for a gubernatorial campaign if he decides to run in
the 1998 election. The State Committee would be completely
separate from the Federal committee and would be organized in
conformity with New York State law.2/
Although the committees will have separate chairpersons,
treasurers, and bank accounts, certain paid employees may
perform services on behalf of both committees. It is also
anticipated that the committees will use the same office
space "at least until, and if," Mr. Schumer becomes a
candidate for Governor. You ask whether sharing personnel
and equipment according to 11 CFR 110.8(d)(3) will contravene
the requirements at subsections (1) and (2) for the
separation of campaign organizations.
You also propose a method of conforming to the
requirement to allocate expenditures between the campaigns as
set out in section 106.1(a)(1), which provides that
expenditures on behalf of one or more clearly identified
Federal candidates and one or more other candidates shall be
attributed to each candidate according to the benefit
reasonably expected to be derived. You ask whether this
method may apply where the Federal and non-federal candidates
are the same person. Specifically, you plan to apply this
formula as follows. You state that you will use a procedure
similar to that prescribed in 11 CFR 106.5(g) and 106.6(e)
for enabling payment by each committee. Instead of
attempting to estimate in advance the Federal and non-federal
funds, however, you propose that funds be transferred either
to the Federal Committee or to an allocation account "in such
a manner that, at the end of each calendar month, the total
expenditure by each committee for shared facilities and
services over the life of the arrangement will be
proportionate to the total contributions received by the
respective committees during such period of time." In other
words, the formula for allocating payments to be made by the
two committees is the ratio of each committee's contribution
receipts to the total of contribution receipts. Rather than
making an estimate before the exploratory committee begins
its operations, a ratio will be determined at the end of the
first month, and the ratio will be modified at the end of
each month based on the new cumulative totals which include
all contributions from prior months plus the contributions
newly received in that month.
Finally, you propose that the State Committee should pay
for expenses incurred in connection with political activities
outside of Kings and Queens Counties (the counties in which
the ninth district lies) and not "directly relating" to
Mr. Schumer's reelection to the House. Such expenditures
would include, but not be limited to: (1) expenditures for
travel outside the counties for political activities at which
his reelection is not urged and funds are not solicited for
that purpose; (2) expenditures for statewide polling not
related to the reelection effort; and (3) contributions to
candidates for office outside Kings and Queens Counties.
Commission regulations provide generally for the
sharing of personnel and facilities that you propose. The
regulations at section 110.8(d) provide that an individual
who is a candidate for a Federal office and a State office
must designate separate principal campaign committees and
establish completely separate organizations, and that no
funds, goods, or services, including loans and loan
guarantees may be transferred between or jointly used by the
separate campaigns. 11 CFR 110.8(d)(1) and (2). See
110.3(c)(5). Nevertheless, these regulations clarify the
concept of separation by providing that Congressional and
State office campaigns by the same person may share personnel
and facilities, as long as expenditures are allocated between
the campaigns, and the payment made from each campaign
account reflects the allocation. 11 CFR 110.8(d)(3).3/
In general, payments involving expenditures on behalf of
a clearly identified Federal candidate and disbursements on
behalf of a non-federal candidate should be attributed to
each such candidate according to the benefit expected to be
derived by each candidate. 11 CFR 106.1(a)(1). Advisory
Opinion 1978-67. In principle, the language of 11 CFR
110.8(d)(3) extends this concept to the situation where the
same person is seeking a Federal and non-federal office. In
illustrating how the benefit may be ascertained, Commission
regulations note that, in the case of a campaign publication
or broadcast communication, the attribution may be determined
by the proportion of space or time devoted to each candidate
as compared to all candidates. In connection with a
fundraising event or program, the attribution is determined
by the proportion of funds received by each candidate as
compared to the total received by all of them. 11 CFR
106.1(a)(1). There are two basic problems with your
proposal. First, the use of the ratio of contributions
received by each committee as the only allocation formula for
all allocable expenses is not appropriate. As a consequence,
your application of the proposed monthly payment based on a
revised, cumulative formula may not be permissible.
In arriving at the costs allocable or attributable to a
committee, the Commission has used different methods for
different activities. As referred to above, for the direct
costs of a fundraising event such as a dinner or a mailing
[e.g., as in 11 CFR 106.5(a)(2)(ii), disbursements for
solicitation of funds and for actual planning or
administration of events], the attribution of expenses
according to the funds received by each candidate is
appropriate. See Advisory Opinions 1992-27 and 1992-2 for
further discussion of direct costs of fundraising events, as
compared to other expenses.
For allocation of costs or expenses that are not part of
the direct costs of a fundraising event, the committees
should use other methods. The use of office space and
furniture may be allocated on a number of bases reasonably
reflecting the benefit derived (which includes the concept of
actual usage). See Advisory Opinions 1980-38 and 1978-67.
For example, when committees have shared facilities with
businesses, office space and utilities have been allocated on
the percentage of time or space used by each entity.
Advisory Opinions 1994-8, 1991-37, and 1977-12. A reasonable
allocation of telephone costs for phone time not spent in
fundraising would be a time-based division of the monthly
base charge and the actual long-distance charges incurred by
each committee. Advisory Opinions 1991-37 and 1977-12. For
payment of compensation to personnel for time not spent on
planning or administering a fundraising program or event or
soliciting funds for such program or events, the actual time
worked on each campaign may be used. See, by analogy, 11 CFR
106.5(a)(2)(ii).4/
In addition, as you have noted, travel costs by a
Federal candidate making a trip with both Federal campaign-
related stops, and stops not related to the Federal
candidacy, are determined by a specific method set out at
11 CFR 106.3(b). The expenditures are calculated based on
the actual cost-per-mile of the means of travel actually
used, starting at the point of origin of the trip, via every
campaign-related stop and ending at the point of origin.
11 CFR 106.3(b)(2). Where a candidate makes one campaign-
related appearance in a city, that city is a campaign-related
stop and the trip to that city is reportable as a campaign-
related expense. 11 CFR 106.3(b)(3). See Advisory Opinion
1992-34. The amount calculated as travel to stops (cities or
towns) related to your Federal campaign, even if also related
to other purposes such as your gubernatorial campaign, would
be allocable to and payable by the Federal campaign.
The use of a cumulative ratio, modified every month, may
be appropriate if all expenses were the direct costs of
fundraising events. It appears, however, that both campaigns
will have significant expenses for other purposes. In a
testing the waters effort, for example, the possible
candidate's activities are not aimed at amassing funds or
raising more funds than would be reasonable to use for such
an effort. See 11 CFR 100.7(b)(1)(i)(B) [referring to
Federal exploratory efforts].
The Commission concludes, therefore, that payments
should be made to vendors and lessors by the Federal
committee and the non-federal committee as the expenses are
billed, according to the appropriate percentage attributable
to each committee. Ratios based on cumulative amounts may be
used in determining the proper allocation for direct costs of
fundraising programs, and adjustments may be made later in
the form of greater or lesser percentage payments by the
Federal committee on subsequent payments to the vendors
involved in those events.
The committees may each pay their share of the bill on
their own checking accounts to the same vendor who provides
services or goods for shared use by each committee. In the
alternative, the Federal Committee may create and use a
proposed allocation account for the purpose of making
payments in a single check to the vendor. Each committee
would transfer its share of a billed amount to the separate
allocation account, and it would issue a check to the vendor.
The Federal Committee must disclose in its reports the vendor
recipient of each payment on a bill for shared services or
goods. The Federal Committee allocation account may accept
transfers from the State Committee, but those transfers must
be identified in the Federal Committee's reports (filed with
the Commission) as related only to allocable expenses. The
funds transferred must be deposited and maintained only in
the separate allocation account of the Federal Committee and
may not be used for any purpose, other than payment of the
allocable expenditures of both committees. See, by analogy,
11 CFR 106.5(g)(1)(ii)(A). This last method also
contemplates the use of bulk transfers of funds. If the
committees wish to pay a number of bills or compensation to
several persons at the same time, each committee would
transfer to the allocation account its share of the total
amount payable to all payees, and the Federal Committee would
then issue a check to each vendor or person, as appropriate.
The Federal Committee would still report for each item billed
or person paid as if a separate transfer had been made for
each separate payee.5/
The Federal Committee has another option. It may use
its regular operating account to accept transfers from the
State Committee, provided that such transfers do not exceed
the State Committee's portion of the shared expenditures and
that the State Committee does not improperly advance any
Federal election costs. See, by analogy, 11 CFR
106.5(g)(1)(i), (2)(i), (2)(ii)(B), and (2)(iii). The
reporting would be the same as noted above for the use of an
allocation account.
The Commission notes that the required allocation
procedures and options discussed above would be greatly
simplified if there is total separation of the two campaigns
and committees; e.g. separate office facilities and
equipment, separate personnel, separate contracts for
consultant and polling services.
Finally, you present three examples of expenses incurred
outside of Kings and Queens County that you state are not
directly related to the Federal reelection effort and thus
may be paid by the State Committee. Your first example is
travel expenses for political activities at which Mr.
Schumer's reelection to Congress is not advocated and no
funds are solicited. The Commission has frequently
considered whether particular activities involving the
participation of a Federal candidate, or communications
referring to a Federal candidate, result in a contribution to
or expenditure on behalf of such a candidate under the Act.
The Commission has determined that financing such activities
will result in a contribution to or expenditure on behalf of
a candidate if the activities involve (i) the solicitation,
making or acceptance of contributions to the candidate's
campaign, or (ii) communications expressly advocating the
nomination, election or defeat of any candidate. See
Advisory Opinions 1994-15, 1992-6, and opinions cited
therein. The Commission has also indicated that the absence
of solicitations for contributions or express advocacy
regarding candidates will not preclude a determination that
an activity is "campaign-related." Advisory Opinions
1994-15, 1992-37, 1992-6, and opinions cited therein on that
point. In the absence of further information as to specific
appearances or events, the Commission cannot conclusively
state that such appearances will not be considered to be
related to the Congressional campaign.
With respect to expenditures for statewide polling, the
geographic coverage of the poll is a strong indicator that it
would not be related to the House reelection effort. A
definite conclusion may not be made, however, without further
knowledge as to the questions asked and the analysis of the
data.
It is also premature to conclude that contributions to
candidates for office outside of Kings and Queens Counties
would, in all cases, be exclusively to influence Mr.
Schumer's State office campaign and not his House reelection
campaign. The underlying purpose and the recipient of each
such contribution would be relevant factors. The Commission
notes, however, that, when previously addressing a situation
involving a political organization formed by a House member
for the support only of non-federal candidates and charities,
the entity was not required to register and report. Advisory
Opinion 1985-38. There is a likelihood, therefore, that
contributions to non-federal candidates by the State
Committee would not be considered as influencing your House
candidacy.
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,
Danny L. McDonald
Chairman
Enclosure (AOs 1994-15, 1994-8, 1993-22, 1992-37, 1992-34,
1992-27, 1992-6, 1992-2, 1991-37, 1990-7,
1985-38, 1980-38, 1978-67, and 1977-12)
1/ The Federal Committee's 1994 post-general election
report disclosed cash on hand of $2,194,729, with $10,000
owed to the committee. The Federal Committee did not report
any debts owed to others.
2/ Although you do not specifically propose to use excess
campaign funds from the Federal Committee to fund activities
for the gubernatorial effort, the Commission cautions you
that the prohibition on personal use of campaign funds
applies to all funds of the Federal Committee, whether they
are expended by that committee or transferred to the State
Committee. 2 U.S.C. §439a. See Advisory Opinion 1993-22.
3/ Although a testing the waters effort is not technically
a candidacy as defined for Federal purposes (see Advisory
Opinion 1990-7), the exploratory efforts by Mr. Schumer for a
gubernatorial candidacy would constitute a campaign
necessitating a separate organization from that of his House
candidacy. In addition, the exploratory effort may very well
develop into a candidacy.
4/ In Advisory Opinion 1992-2, a national party committee
sought Commission approval to recompute retroactively the
Federal/non-federal allocation for employees who had worked
solely in programs devoted 100 percent to fundraising. The
national party wished to reallocate such expenses as direct
fundraising expenses, instead of administrative expenses.
The opinion appears to be limited to those types of
employees. The Commission notes that that situation involved
a request for reallocation and thus certainty or precision in
the recalculation was even a more important issue than usual.
In your situation, the Commission is not requiring that the
fundraising formula be applied only to those personnel who
work entirely in fundraising.
5/ For example, a consultant who worked twenty hours during
a billing period for each committee at $20 per hour on
matters not related to the direct costs of fundraising would
be paid $400 by each committee. This may be done through a
payment of separate $400 checks to the consultant or a
payment by each committee of $400 to the allocation account,
with an $800 check issued by the allocation account to the
consultant. If other costs are due at the same time, e.g.,
(a) telephone costs of $100 for the Federal Committee and
$150 for the State Committee, based on factors described
above, and (b) the $700 rent divided at a rate of $200 from
the Federal Committee and $500 from the State committee based
on time used, payment (including the consultant payment) may
be done as follows: the State Committee pays $1,050 and the
Federal committee pays $700 to the allocation account. The
allocation account issues checks of $800, $250, and $700 to
the respective payees. If funds are transferred to the
allocation account, the Federal Committee must report the
amounts received as transfers from the State Committee
[Detailed Summary Page of FEC Form 3 - Line 12] and must
report the total amounts disbursed to payees, itemized as
required.