Requested by: Senator Lincoln/Representative Kott
Prepared By: Jenifer Kohout, Assistant Director
Date Issued: December 5, 1996
Subject: Disbursement of Unused Campaign Contributions Prior to January 1, 1997 and Subsequent Disclosure Requirements
Representative Kott has asked for additional guidance regarding the "possible disposition" of his surplus campaign funds before the new Campaign Disclosure Law takes effect on January 1, 1997. In particular, he has identified three options available under existing law: (1) use in a future campaign; (2) transfer to an office expense account; and (3) taking the surplus as income. Related to each of those options, he has asked a series of specific questions. Those questions are addressed below.
Senator Lincoln has asked specifically whether funds from a legislator's campaign account which are transferred to a "legislative office allowance account" may be transferred from the office allowance account to a legislator's personal account or campaign account once the new Campaign Disclosure Law takes effect. Her question is addressed in paragraph #2 regarding transfer to an "office expense" account.
1. Use in a Future Campaign
Representative Kott asks the following: "[I]f I elect to use the surplus in a future election, as permitted by the grandfather clause, what procedural steps must I take prior to January 1, 1997? Do I need to notify you of my election? Should a new, designated account, be established? Are there any steps or actions that I should take to exercise my rights under the grandfather clause?"
a. Public Disclosure: The Commission has distributed bright green Certification Forms, asking former candidates to certify that they intend to use their campaign funds in a future election. To clarify your plans, please return that form to our office on or before December 31, 1996.
The statute does not require that you take any procedural steps to preserve your right to use surplus campaign funds in a future election. The Commission will assume that any money left in a campaign account after January 1, 1997 is held by an individual who intends to use the money for a future election. If that is not the case, the law requires that all money still held in a campaign account after January 1, 1997 be disbursed under the requirements of AS 15.13.116.
b. Creation of a New, Designated Account: To eliminate potential confusion over the reservation of surplus campaign funds for a "future election" under section 32, the Commission recommends that former candidates with surplus campaign funds segregate those campaign funds in a distinct account.
According to the November 4, 1996 opinion of the Attorney General, after January 1, 1997, surplus campaign funds are subject to the limitations of the new law. As such, they may only be spent for campaign related expenses. As a result, it is imperative that the campaign funds not be commingled with other moneys. Further, under section 32, a candidate is free to use the money in one future election. You are free to choose which election that will be. Spending one dollar of the surplus money on a campaign expense for an election, however, will indicate that you have chosen to use your pre-1997 surplus funds on that election. Thus, to reduce the risk of an inadvertent selection and to ensure that you are free to use the surplus money in the "future election" you intend, the Commission recommends that you keep your campaign contributions in a separate and distinct account.
2. Transfer to an "Office Expense" Account
Representative Kott asks the Commission
to address the following: "[P]rior to the new law's
effective date, can I transfer all or a portion of the surplus
to my office expense account? If so, what conditions must
be satisfied? Are there any restrictions as to the amount
that may be so transferred? If transferred to an office
expense account, for what purposes may the funds be expended?
Should I notify the APOC of the transfer, and if so, when
and how should notice be given? And, will the new law's
accounting requirements apply to the funds transferred?
What additional steps or actions need to be taken to legally
transfer funds to my office expense account?"
Senator Lincoln inquires whether funds from a legislator's campaign account which are transferred to a "legislative office allowance account" may be "transferred from the office allowance account to a legislator's personal account or campaign account" once the new Campaign Disclosure Law takes effect.
a. "Office Expense" Accounts: The Commission is aware of only two kinds of office accounts under state law. The first type of office account contains the annual allowance permitted legislators for "postage, stationery, stenographic services, and other expenses." AS 24.10.110. The account is overseen by the legislative fiscal officer and is limited to the amount of the annual allowance. Based on discussions with a representative from the Legislative Affairs Office, the Commission understands that candidates are not permitted to deposit surplus campaign funds in this account.
The second type of office account authorized by state law is the account established in AS 15.13.116(b)(9) of the new Campaign Disclosure Law regarding the disbursement of surplus funds following an election. Under the new law, following an election, a state candidate may transfer unused campaign contributions to a "legislative office account." There are specific limitations and restrictions on the new account. First, the transfer is limited to "$5,000 multiplied by the number of years in the term to which the candidate is elected." Second, the money in the account "may used only for expenses associated with the candidate's serving as a member of the legislature." Finally, legislators are required to annually report "all amounts expended from the legislative office account" on the Yearend Report.
Because you are unable to transfer money into either the Legislative Affairs annual allowance account or the APOC regulated legislative office account created under the new law, the Commission assumes that your question refers to a third type of office account. The Commission views such account no differently than it would a personal account. Under existing campaign disclosure law, you are free to transfer all or a portion of your surplus to the account you describe before January 1, 1997.
b. Public Disclosure: Should you transfer all or a portion of your surplus campaign funds to the account you describe, you are required to report the transfer as if you had taken the money as personal income. You would report the amount transferred under "Candidate's Own Money" on schedule C of your Yearend report. In addition, you would report your campaign account as a source of income on your Legislative Financial Disclosure report.
As long as funds in the account you describe are not commingled with funds in an APOC regulated legislative office account, AS 15.13 does not prohibit you from transferring your funds to a personal account or a campaign account. Transfers to your campaign account, however, are subject to the new time limitations on the acceptance of contributions; further, you must disclose the transfer on schedule C.
c. Further Caveats: Because the kind of account you describe is distinct from the legislative office account created by the new law, AS 15.13.116(a)(9)(C) does not require that you annually account for all amounts expended from that account. You should be aware, however, that following disbursement under AS 15.13.116 you may trigger the accounting requirement for all the money in the account if you commingle money transferred under the disbursement provision with money in an existing office account.
Recognizing the complexity of these distinctions, legislators interesting in transferring their surplus campaign funds to an "office expense" account might wish to consult with other relevant authorities in addition to the Commission; in particular, the Legislative Affairs Office and the Internal Revenue Service for tax implications.
3. Taking the Surplus as Personal Income
Representative Kott asks the following: "[D]o I still have the option, prior to January 1st, to take all or some of the funds as personal income? If so, how is this accomplished? What type of notice is required to take this action?"
a. Taking Unused Campaign Contributions as Personal Income: Prior to January 1, 1997, you are not prohibited from taking some or all of your surplus campaign contributions as personal income.
b. Procedural Steps for Taking Contributions as Income: If you choose to take your unused campaign contributions as personal income, you must move the money out of your campaign account before January 1, 1997. One way to demonstrate that you had taken the unused campaign contributions as personal income prior to January 1, 1997 would be to deposit a check from your campaign account to your personal account.
c. Public Disclosure: As described above, you are required to report your transfer on schedule C of the Yearend Report. In addition, you must report your campaign account as a source of income on your Legislative Financial Disclosure Report.
4. Combination of Options
Finally, Representative Kott inquires whether he may "exercise more than one option (for example, rolling part of the surplus over to be used in my next campaign and depositing part into my office account)."
Under existing campaign disclosure law, you are free to adopt any combination of the options you have described above.
The Commission approved this advisory opinion on December 5, 1996. The advice in this opinion applies only to the specific activity for which the advice was requested.
A copy of the original letter requesting the above advisory opinion is available upon request at the Alaska Public Offices Commission. (907) 276-4176.