Simone Lawson
Political campaigns can raise millions, if not billions, of dollars through personal and business donations. This money is used to pay for travel, administration, salaries, and other campaign-related expenses. However, if a campaign ends, it must find ways to disperse the funds, such as donating to other candidates or refunding donors. Candidates are prohibited from using these funds for personal use. Campaigns must also report debts and obligations continuously until they are repaid. If a candidate borrows money during a campaign, it must be paid back unless the candidate is the one owed money. In the case of outstanding debts, campaigns may sell certain assets, such as office equipment, to raise funds to retire debts.
| Characteristics | Values |
|---|---|
| Reasons for debt | Overspending, taking out loans, lending their own money to the campaign, unpaid bills to vendors, staff, and consultants |
| Rules for leftover money | Cannot be used for personal use, must be used to pay off debts, can be donated to charity, donated to other candidates, saved for a future campaign, refunded to donors, or used to back other candidates and a political agenda |
| Reporting debts | Debts of $500 or less must be reported 60 days after being incurred, debts over $500 must be reported immediately |
| Debt settlement | Candidates must agree with creditors on repayment, FEC verifies that the debt was extended in the ordinary course of business, and the creditor tried their best to collect |
| Bankruptcy | Political committees can declare bankruptcy, but this is almost unheard of |
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What You'll Learn
Candidates can't keep funds for personal use
Political campaigns can raise millions or even billions of dollars through personal and business donations. This money can be used to pay for travel, administration, salaries, and any other campaign-related expenses. However, candidates are prohibited from using these funds for personal use. This includes expenses such as mortgage, rent, or utility payments for the personal residence of the candidate or their family, attire for political functions, and tuition payments (unless associated with training campaign staff).
Campaign funds are intended to cover campaign-related expenses only, and any money left over after a candidate drops out or an election is over must be used to pay off debts or dispersed in other ways, such as charitable donations, donations to other candidates, or refunds to donors. Candidates may also choose to refund contributions to donors for moral or ethical reasons, or if a donor has exceeded the maximum allowable contribution.
FEC regulations bar the personal use of campaign funds, with "personal use" defined as any use of funds in a campaign account to fulfill a commitment, obligation, or expense that would exist irrespective of the candidate's campaign or responsibilities as a federal officeholder. For example, salary payments to a candidate's family would be considered personal use unless they provide a bona fide service to the campaign, and the payment reflects the value of the service in the free market.
While candidates cannot use campaign funds for personal expenses, they may use their personal funds for campaign purposes. These contributions are not subject to any limits but must be reported. Candidates may also use their portion of assets owned jointly with a spouse, such as a checking account or jointly-owned stock, as personal funds for their campaign.
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Campaigns must report debts and obligations
Campaigns must continuously report debts and obligations until they are repaid. A debt of $500 or less is reportable once it has been outstanding for 60 days from the date incurred (the date of the transaction, not the date the bill is received). This debt is disclosed on the next regularly scheduled report. A debt exceeding $500 must be reported in the report covering the date on which the debt was incurred.
If the exact amount of a debt is not known, the treasurer may report an estimated amount, noting that the figure is an estimate. Once the committee knows the actual amount, the treasurer must either amend the earlier report (and all subsequent reports) to indicate the correct amount, or include the correct figure with an explanation of the change in the campaign’s next report.
A disputed debt occurs when a creditor and committee disagree on the existence or amount of a debt. State laws govern whether an alleged debt exists, what the amount is, and who is responsible for paying it. If a disputed debt exists, the committee must disclose the amount it admits it owes, the amount the creditor claims is owed, and any amounts the committee has paid the creditor. The committee may use memo text to provide additional explanation. It is important to note that the disclosure of a disputed debt is not an admission of liability or a waiver of any claims against the creditor.
To calculate a campaign’s “net debts outstanding”, the campaign first tallies up all of its unpaid debts as of the election date. Then, the campaign subtracts its cash on hand and any amounts owed to the campaign or candidate from its unpaid debts. The resulting amount is the campaign’s net debts outstanding.
If a candidate has loaned more than $250,000 per election to a campaign, then any amount over $250,000 per election is not included in net debts outstanding. The campaign continually recalculates its total net debts outstanding as additional funds are received for, or spent on, the election for which the debt remains.
Publicly funded presidential committees may settle debts if no other committee authorized by the same candidate has permissible funds available to pay the amounts outstanding. The indebted publicly funded presidential campaign committee is subject to the same requirements and procedures as other political committees eligible to settle debts.
To receive public funding in the primary or general election, eligible presidential candidates agree to comply with all FEC regulations, including those governing contribution limitations and prohibitions. This includes regulations governing raising funds to retire debts, as well as certain provisions of the public funding rules. Even if they no longer campaign actively in primary elections, presidential primary candidates may continue to request public funds to pay off campaign debts until the first Monday of March of the year following an election.
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Candidates can donate to other committees
Political campaigns can raise millions or billions of dollars through personal and business donations. Candidates are not allowed to use any remaining funds for personal use after all campaign-related debts are settled. Campaign funds may not be used for an expense that exists independent of the campaign.
If a candidate does not plan to run for federal office in the future, the committee may presumptively redesignate the contribution to retire any net primary debts or request a written redesignation from the contributor to retire net debts from a previous election cycle. If a contribution designated to retire the net debt of a previous campaign exceeds the amount of the net debt, the contribution must be returned, refunded, redesignated, or reattributed.
In some cases, a party caucus or convention is considered an election, and each of these would be considered a separate election with separate contribution limits. A candidate who loses a primary election or does not participate in the general election does not have a separate limit for the general election. If a candidate accepts contributions for the general election but does not make it past the primary, their principal campaign committee must refund, redesignate, or reattribute the general election contributions within 60 days of the primary or the date the candidate publicly withdraws from the race.
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Campaigns can sell assets to raise funds
Political campaigns can accrue substantial debts, including money owed to campaign vendors and other outstanding debts and obligations. Campaigns must report these debts and are required to find ways to settle them. One method to address campaign debt is through the sale of assets.
Under specific conditions, committees are permitted to sell certain assets, such as campaign office equipment and mailing lists, at the "usual and normal charge." This allows them to raise funds to retire debts without the sale resulting in a contribution from the purchaser. The sale of these assets must be disclosed and reported on the appropriate forms, with proper itemization and schedules.
It is important to note that campaigns must continuously report their debts and obligations until they are fully repaid. If a campaign is terminating, estimated winding-down costs are included as unpaid debts in the calculation of net debts outstanding.
Additionally, publicly funded presidential committees may dispose of assets acquired for fundraising purposes by selling them to a wholesaler or intermediary. These sales are not subject to the same contribution limitations and prohibitions as other transactions.
By selling assets, campaigns can generate the necessary funds to settle their debts without relying solely on donations or other sources of funding. This provides a mechanism to address financial obligations and ensure compliance with reporting requirements.
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Candidates can request public funds to pay debts
Political campaigns can raise millions, or even billions, of dollars through personal and business donations. This money is used to pay for travel, administration, salaries, and any other campaign-related expenses. Candidates must keep diligent records of where the money comes from and how much is spent. However, if a campaign ends, it must find ways to disperse the funds. This includes spreading the money to other candidates, gifts, and refunds to donors. Candidates are prohibited from using these funds for personal use.
Once the Federal Election Commission (FEC) determines that a candidate has met the eligibility requirements, it certifies the amount of public funds to which the candidate is entitled. The U.S. Treasury then makes the payments using funds from the $3 tax checkoff. The federal income tax form asks taxpayers whether they would like to designate $3 of their taxes to the Presidential Election Campaign Fund. Checking "yes" does not increase the amount of tax that taxpayers owe, nor does it decrease any refund to which they are entitled.
Under the presidential public funding program, eligible presidential candidates receive federal government funds to pay for the qualified expenses of their political campaigns in both the primary and general elections. The public funding program was designed to use tax dollars to match the first $250 of each contribution from individuals that an eligible presidential candidate receives during the primary campaign. To be eligible to receive the public funds, the candidate must limit spending to the amount of the grant and cannot accept private contributions for the campaign.
Even if they are no longer actively campaigning in primary elections, candidates may continue to request public funds to pay off campaign debts until the first Monday of March of the year following an election. Eligible candidates may receive public funds equaling up to half of the national spending limit for the primary campaign.
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Frequently asked questions
Leftover money from a campaign can be used for charitable donations, donations to other candidates, or saved for a future campaign. Candidates are prohibited from using these funds for personal use.
Campaigns must report debts and obligations continuously until they are repaid. If a candidate borrows money during a campaign, it needs to be paid back unless the candidate is the one owed the money. Campaigns can also go through a process with the FEC called "debt settlement", where the former candidate must agree with creditors on how much they will pay back.
Technically, political committees can declare bankruptcy, but this is almost unheard of. Instead, publicly funded presidential committees may settle debts if no other committee authorized by the same candidate has permissible funds available to pay the amounts outstanding.
