Handling a questionable contribution

A campaign is prohibited from knowingly accepting any contributions from prohibited sources. The treasurer of a political committee is responsible for examining all contributions to make sure they are not illegal (that is, prohibited or excessive).

Screening contributions

When campaigns accept contributions from groups that are not political committees registered with the FEC (such as state PACs, unregistered local party committees or nonfederal campaigns), they must make sure that the funds are permissible under the Federal Election Campaign Act (the Act). This is important because campaign laws in some states permit nonfederal political groups to accept funds that would violate the limits and prohibitions of the Act. To avoid a possible violation of the Act, a campaign must be certain that an unregistered group making a contribution:

• Can demonstrate through a reasonable accounting method that it has sufficient federally permissible funds to cover the amount of the contribution or expenditure at the time it is made; or
• Has established a separate account containing only funds permissible under the Act.

When itemizing a contribution from an unregistered organizations in its report, a campaign should note that the contribution contains only federally permissible funds. Contributions from such unregistered organizations are subject to contribution limits for individuals and other persons. These organizations should be aware, however, that making contributions to federal campaigns and political committees may trigger their own registration as a federal political committee. State political action committees sponsored by corporations, labor organizations or trade associations, in particular, must register as federal separate segregated funds within 10 days of the decision to make a contribution to a federal candidate. Additional requirements regarding their solicitations also apply. Contributions by other types of unregistered organizations (for example, local party organizations or committees not sponsored by an incorporated entity or labor organization) count against a $1,000 per year aggregate registration threshold.

How to handle a questionable contribution

If a committee receives a contribution of questionable legality, it must follow the procedures outlined in this section. Procedures for handling contributions that exceed the contribution limits or the campaign’s net debts outstanding are described on Raising contributions to retire debts.

Return or deposit contribution

When receiving a contribution of questionable legality, a committee must, within 10 days of the treasurer’s receipt, take one of two steps:

• Return the contribution to the donor without depositing it; or
• Deposit the contribution.

Be prepared to make refund

If it decides to deposit the questionable contribution, the committee must make sure that the funds are not spent because they may have to be refunded. To ensure this, the committee may either maintain sufficient funds in its regular campaign depository or establish a separate account used solely for the deposit of possibly illegal contributions.

Document the possibility of illegal contribution

The committee must keep a written record noting the reason why a contribution may be prohibited and must include this information when reporting the receipt of the contribution.

Seek evidence of legality

Within 30 days of the treasurer’s receipt of a possibly prohibited contribution, the committee must make at least one written or oral request for evidence that the contribution is legal. Evidence of legality includes, for example, a written statement from the contributor explaining why the contribution is legal, or an oral explanation that is recorded by the committee in a memorandum.

Confirm legality or refund contribution

Within these 30 days, the committee must either:

• Confirm the legality of the contribution; or
• Refund the contribution.

Disgorge prohibited contributions discovered late

If a committee deposits a contribution that appears to be legal and later discovers that it is prohibited (based on new information not available when the contribution was deposited), the committee must disgorge the contribution within 30 days of making the discovery. For example, the committee finds out that a corporation reimbursed employees for their contributions to the committee (and had thus made corporate contributions and contributions in the name of another).

Contributor known

If the identity of the original contributor is known, the committee must refund the funds to the source of the original contribution. Alternatively, the committee may pay the funds to the U.S. Treasury. To do so, send the funds to:

U.S. Department of the Treasury
Bureau of the Fiscal Service
P.O. Box 1328
Parkersburg, WV 26106-1328
Attn: Agency Cash Branch, Avery 3G

The committee should include a cover letter that explains that the funds being sent represent potential violations of the Act and requests that the funds be placed in the “general fund account.”

Contributor unknown

If, however, the identity of the original contributor cannot be determined or is in question, the committee may disburse the funds to a governmental entity (federal, state or local), or to a qualified charitable organization described in 26 U.S.C. § 170(c).

Prohibited in-kind contributions

If the prohibited contribution was an in-kind contribution, the committee should disgorge an amount equal to the value of the contribution to the appropriate party.

Insufficient Funds

If the committee does not have sufficient funds to disgorge the contribution when the illegality is discovered, the committee must use the next funds it receives.