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1999-3: Conditions for Transferring Funds from a Committee for an Office Not Covered by the Campaign Finance Program to a Covered Committee

January 07, 1999

Re: Administrative Code § 3-702(9); 3-703(1)(c), (f), (k), (1-a); 3-705(2), 3-706(3)(b)(ii), 3-707; Charter §1052(a)(12); Campaign Finance Board Rules 1-07(a), 1-07(d), 1-08(c); Op. No. 1999-3

An advisory opinion has been requested to address the implications of transferring funds from a candidate's campaign committee for an election not covered under the Campaign Finance Program ("non-covered committee")1 to a committee for an election in which the candidate is a participant in the Campaign Finance Program ("covered committee"). The request states that a candidate plans on running in the 2000 election for State legislature, and may consider running again in 2001 for a city office (other than City Council). The request makes the following inquiries:

Because he may have surplus campaign funds after the 2000 election, a number of questions arise. Can all of the assets of his political committee be transferred to a new committee under the city program without any restriction? If this existing political committee has accepted corporate contributions, as is legal under state law, would this affect his ability to transfer surplus funds to a new city committee? What is the latest date he can decide to participate in your program and still be eligible for public funds?

Pursuant to New York City Administrative Code §3-703(1)(c), as recently amended by Local Law No. 48 of 1998, the deadline for candidates to submit written certification to join the Campaign Finance Program for the 2001 elections is June 1, 20012.

The remaining inquiries require the Board to address three provisions of the Act: the contribution limits (Administrative Code §3-703(1)(f), as amended by Local Law No. 48 of 1998); and two new provisions, added by Local Law No. 48 of 1998: the prohibition against contributions by unregistered political committees (§3-703(1)(k) 3); and the prohibition against contributions by corporations (§3-703(1-a)). Each of these requirements applies to contributions a covered committee accepts "directly or by transfer." Administrative Code §3-703(1)(f), (k); (1-a) (emphasis added)3.

In light of these provisions, a transfer received by the covered committee must not derive from contributions in excess of the contribution limits, Campaign Finance Board Rule 1-07(c), or, similarly, from unregistered political committees or from corporations4. The burden is on the participating candidate to demonstrate that the contributions that underlie a transfer from a non-covered committee do not consist of these improper contributions. Id. Funds derived from improper contributions may not be transferred to a covered committee5.

Except for the transfer, the non-covered committee may not use any funds for an election subject to the Act. The participating candidate has the burden of demonstrating that expenditures made by a non-covered committee were not made for a covered election. See Rule 1-08(c)(3). In determining whether an expenditure was for a covered election, timing is relevant, see Rule 1-08(c), but not always dispositive, see Rule 1-07(d). Expenditures by a non-covered committee for a covered election violate the disclosure requirements, and may also violate the contribution and spending limits, of the Act.

Although funds originally received for non-covered elections may be transferred for use in covered elections, as described in this opinion, the contributions that underlie these transfers may not be claimed as matchable contributions. Rule 1-07(a).


1 Robert A. Unger, an attorney, submitted this request by letter dated December 1, 1998.

2 Later certifications may be permitted only under extraordinary circumstances. See Administrative Code §3-703(1)(c).

3Administrative Code §3-707 (provisions for political committee registration).

4See also Administrative Code §3-702(9) (definition of "transfer").

5 The prohibitions against corporate (and unregistered political committee) contributions apply from October 22, 1998 onward. Acceptance of, and compliance with, the corporate contribution prohibition is required for the participating candidate to be eligible for public funds payments at a 4:1 rate for matchable contributions of up to $250. Administrative Code §3-703(1-a); 3-705(2) (b); see also §3-706(3)(b)(ii). New York City Charter §1052(a)(12), adopted into law by the voters on November 3, 1998, took effect on January 1, 1999. As discussed in Advisory Opinion No. 1998-2 (October 22, 1998), from January 1, 1999 onward participating candidates may no longer accept contributions from corporations.

Charter §1052(a)(12) bans the acceptance of corporate campaign contributions, "either directly or indirectly", whereas, as noted above, Administrative Code §3-703(1-a) bans corporate contributions accepted, "either directly or by transfer". It is arguable whether the Charter provision, by itself, applies to corporate contributions accepted "by transfer" and the Board takes no position on this question for purposes of this advisory opinion.

In any event, corporate contributions accepted on and after October 22, 1998 that are transferred to a committee the participating candidate has authorized for an election subject to the Act will make the participating candidate ineligible for public funds payments at a 4:1 rate, in which case public funds payments would be made only at a 1:1 rate for matchable contributions up to $1,000. See Administrative Code §3-705(2)(a); see also §3-706(3)(b)(ii). Thus, it is inadvisable for a participating candidate to accept, by transfer, corporate contributions originally received on or after October 22, 1998.

Arguably, such transferred corporate contributions, originally received on or after January 1, 1999 would violate the Program's corporate contribution prohibition altogether. If requested to do so, the Board will address whether a participating candidate may accept, by transfer, corporate contributions originally received on or after January 1, 1999, with the understanding that, if permitted at all, the candidate could qualify to receive public funds payments only at the 1:1 matching rate.

6 Before making a transfer from a non-covered committee to a covered committee, the candidate must first determine whether any portion of the funds sought to be transferred derives from improper contributions, as described in this opinion. If requested to do so, Board auditors will provide information on the "reverse chronological order" methodology that is used, eqivalent to a first-in-first-out (FIFO) accounting for expenditures. In brief, the total initially sought to be transferred must exclude an amount equal to all improper contributions (if any appear within the reverse chronological order attribution) to which the total is attributable (in part or in whole), such that only a reduced amount may actually be transferable. Although attribution of a transfer is no longer required to be reported in disclosure statements submitted to the Board, Board auditors will review these transfers to ensure that the funds transferred do not derive from contributions that are not proper under the Act.