BCRA FAQ

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This BCRA ((Bipartisan Campaign Reform Act of 2002) FAQ is meant to assist Libertarian Party state affiliates, and any other affiliate that wishes to generate memberships or engage in federal activity. It is organized by levels of complexity. That way, once you have reached the end of the level that covers all your activities, you can safely stop reading.

The advice contained here is designed to help affiliates avoid reaching the thresholds that require greater levels of compliance and reporting, or at least slow the progress towards those thresholds. Even so, it is presumed that we will continue to grow until we are truly competitive in every state, so keep this handy for the time your affiliate gets to the next level.

Disclaimer: Libertarian Wiki is not a lawyer, so this should not be construed as legal advice. It is simply an attempt to organize information contained in previously published sources. If you have any questions of a legal nature after reading this document, it would be better to bring them to a qualified attorney. LNC Counsel Bill Hall has a program to offer such legal advice to state affiliates, for a reasonable fee.

Contents

Level Zero: Say What?

What is BCRA?

The Bipartisan Campaign Reform Act (BCRA) is a package of “campaign finance reform” that was passed by the US Congress and took effect on November 6, 2002. It applies to all political organizations involved in any way in “federal election activities” (defined below). It also limits which organizations can send money to the national party (LNC).

It builds upon the Federal Election Campaign Act (FECA – no jokes, please) of 1971. In 1975, Congress established the Federal Election Commission (FEC) and gave them regulatory power over federal elections, based on FECA. The FEC is responsible for developing and enforcing the regulations that are authorized by these laws. BCRA was upheld almost in its entirety by a Supreme Court decision in December 2002.

This FAQ examines the direct impact of BCRA on Libertarian Party national, state, and local affiliates. However, the effects of BCRA extend well beyond this subject matter. This FAQ will also touch upon provisions of FECA and other campaign finance legislation that has an impact on LP affiliates.

Why should I care?

If your state or local affiliate does any of the following:

a) sends money to the LNC for memberships, literature, or for any other reason; or, b) nominates or supports candidates for federal office (US House and Senate); or, c) runs any candidates in an election where any federal candidates even appear on the ballot;

then it is subject to the provisions of BCRA.

In other words, if you are acting like a political party in any way, you should care. And if you are not, can I interest you in volunteering for the Advocates for Self-Government instead?

Screw BCRA! What if our affiliate decides to not comply with BCRA?

Well, God bless you for it. But be advised then, your affiliate cannot legally engage in any of these activities. Even if you think you can get away with it, the LNC probably can’t. So, at the very least, your affiliate will no longer be able to send payments to the LNC for individual memberships or literature. Well, you could, but national couldn’t deposit them and would have to return them to you without honoring your request.

While of course you have to answer to your own conscience, it is true that you could save yourself a lot of headaches if you do try to comply.

We’ve come up with a brilliant scheme to get around BCRA. Will it work?

Almost certainly not. Remember, this is the US government we are dealing with here. They really don’t care about your witty schemes and remain immune to logic, reason, or even reality. Not only would your scheme not hold up to their scrutiny, it would be evidence that your affiliate was aware of the law and deliberately chose to violate it. This might well lead to the feds deciding to make an example of you.

State and local Party Treasurers in particular should care about compliance, because if anyone is held legally liable for violations, it will be the Treasurer first. Committee treasurers rarely go to jail, but the FEC hands out fines regularly.

If you follow the advice presented in this FAQ, then you are probably safe. If you do not, then you are on your own. The LNC simply does not have the resources to defend its affiliates in legal battles. If this is your approach, noncompliance would be so much simpler. Don’t be stupid by trying to be too smart.

Level One: Basic Compliance

How does BCRA affect the LNC?

The main provision of BCRA is to ban national political parties from receiving “soft money.” Beginning on the day after the November 2002 election, the LNC can only accept funds from two sources: directly from individuals, or from other federally compliant committees.

There are several other effects worth considering, but this is the main one that is of concern to affiliates.

Can our state or local affiliate still send money to national?

Yes, but now it can only come from a special federal account. You can no longer send the LNC money from a non-federal account. This must actually be a separate bank account. Simply accounting for your federal funds as part of your treasury is not sufficient, and can have quite annoying consequences.

OK, how do we set up a federal account?

Your federal account must operate under the same rules that now affect the LNC. The only funds you can deposit there are funds from other federal committees, or from individual donors if and only if the donor is aware that the money may be used for federal election activities. A simple disclaimer to that effect in your fundraising appeals for your federal account will do the trick.

If your state affiliate receives UMP, then the easiest thing to do is to deposit one or more of your UMP payments directly into this account. If you follow the advice in this FAQ, then one or two UMP checks should be more than sufficient to fund all your federal activity.

It is important to keep this strict segregation between your federal and nonfederal accounts. If you use your nonfederal account to pay for memberships, or engage in certain other activities described below, you make it subject to federal regulations.

Note that there is precisely one exception, allocation, when you can transfer money from your federal to your nonfederal account (see below).

One option is to keep only one bank account and classify it as federal. This is not recommended, as then you would have to report all your activity to the FEC as well as to your state elections agency. It is also almost certainly the case that your state campaign finance laws are less restrictive than the FEC’s.

Can we transfer money between our federal and non-federal accounts?

You may transfer money from your federal account to the non-federal one. However, you may NOT transfer money from your non-federal account into the federal account. Remember, your state or local account is not acting like a federal committee, so it is prohibited from sending money to any federal account, even your own.

It is important to note that you cannot send any money to a 501(c) nonprofit organization that spends money in connection with federal elections from your federal account. Groups like the Advocates for Self-Government, which do not run issue ads, or support or oppose candidates, are safe.

Does this mean we have to file with the FEC?

Probably not yet. There is a critical distinction between being federally compliant and actually rising to the level of being a federal committee. If you manage your accounts as advised here, many Libertarian state and local affiliates will not raise or spend enough federal money to become a federal committee. Only federal committees have to file with the FEC.

At this point, you only have to be able to show through a reasonable accounting method that you are complying with federal regulations. They do throw you one bone, though – any costs of this recordkeeping do not count towards the spending threshold.

When does our federal activity become so much that we become a federal committee?

If your federal account either raises or spends $1000 in a calendar year, only then must your affiliate start filing with the FEC as a federal committee. If you stay below those thresholds, then you only have to be federally compliant, but you do not have to file yet.

Some expenditures paid from the federal account do not count toward the $1000 registration threshold: the allocable expenses for core administrative activities (see below), and activities such as slate cards, sample ballots, and generic campaign materials.

Do our UMP payments count towards the threshold?

Thankfully, no. Any transfer of funds from one federal committee to another only applies to the committee initiating the transfer, for the purpose of calculating these thresholds.

What are the contribution limits for our federal account?

It’s complicated for the donor, but essentially an individual can give a state party and its local affiliates up to $10,000 a year combined in federal funds. Any contributions above that would have to be nonfederal funds, and would be governed by state law.

A state party federal account may receive unlimited transfers of federal funds from any other affiliated Libertarian Party committee, from national to local and everything in between. A multicandidate federal PAC can donate up to $5,000 a year to a state party’s federal account, and a garden variety federal PAC, $10,000 a year.

Corporations and foreign nationals were prohibited from making federal contributions since before BCRA.

If you are seriously engaged in fundraising for your federal account, you have to keep a photocopy of every check or credit card receipt you receive of $50 or more. That’s just so they’ll have something to look at if they audit you.

BCRA does allow the FEC to increase these contribution limits in the future, indexed to inflation.

Level Two: Federal Election Activities (FEA)

What, exactly, are federal election activities?

Fortunately, the FEC has promulgated a very narrow definition of “federal election activities” (FEA). Besides transfers to other federal committees, only these four activities fit the official description of FEA:

a) Voter registration within 120 days of a regularly scheduled general election;

b) Get out the vote activity (GOTV), voter identification, and generic campaign activity where a federal candidate appears on the ballot;

c) Public communications which identify candidates; and,

d) Payment for employees devoting more than 25% of their time to federal elections.

Let’s examine each one a bit more.

What is meant by “voter registration”?

Voter registration means helping an individual register to vote. For example, if you include a voter registration form in an inquiry packet, the cost of the inquiry packets sent during this 120 day window would count as FEA. However, general pronouncements simply urging people to register to vote would not be subject to this definition.

What is meant by “get out the vote” (GOTV) activity?

GOTV is any activity that helps specific individuals get to the polls, acquire absentee ballots, or cast their vote some other way. Again, general advertising simply encouraging people to vote would not count as FEA. But, for example, the costs of a phone bank to remind people to vote would qualify. Most of your standard GOTV activity (informing people where and when to vote) only counts as FEA if it is within 72 hours of the opening of the polls.

What is meant by “voter identification”?

That would be any specific action to enhance lists of voters to identify those who are more or less likely to vote for our candidates. For example, the costs of acquiring lists of registered voters does not count as FEA. But if you combine that with more information to help you identify your likely voters, that would be FEA.

What are “generic campaign activities”?

These would be public communications (see below) that promote or oppose a political party without naming any federal candidates. So, if you are running generic TV or radio ads promoting the party slate in connection with a federal election, that counts.

What are “public communications”?

Any broadcast, cable or satellite communication, newspaper, magazine, outdoor advertising facility, mass mailing (over 500 pieces) or telephone bank to the general public, or any other form of general public political advertising. One media specifically excluded from this definition is the Internet.

One new annoying wrinkle of BCRA is that local or state candidates may no longer engage in public communications that clearly identify a federal candidate. Unless, of course, they want to also comply with all these federal regulations.

We have an Executive Director. Is that FEA?

Only if your Executive Director or other paid staff is spending at least a quarter of their time on your federal candidates. If you run only federal candidates, this might qualify. However, most state parties can easily show that paid staff work on other activities accounts for more than three quarters of their time. Even if your paid staff does qualify, you track the activity on a monthly basis, and only account for those months where they exceed the 25% threshold.

Here’s another wacky exception: unlike almost anything else, the FEC takes the position that a state party employee who spends less than 25% of their time on federal campaigns must be paid entirely from non-federal funds (an exception to the normal rule that you can use federal funds for anything).

If your Executive Director or other paid staff is an independent contractor, this provision does not apply.

At what times are our activities considered FEA?

Remember, an activity is only FEA if it is in connection with a federal election. If you engage in any of these activities outside that time period, it can be considered nonfederal activity.

There are special windows noted above of 120 days for voter registration, and 72 hours for certain kinds of GOTV. For all other FEA, it depends on what year it is.

In even numbered years, the period begins on the date of the earliest filing deadline for access to the primary election ballot for Federal candidates as determined by your state law. In those states that do not conduct primaries, it starts on January 1st. The end date is the date of the general election, including any runoffs.

In an odd-numbered year, the period begins on the date on which the date of a special election in which a candidate for Federal office appears on the ballot is set, and ends on the date of the special election.

Is that all? What about our newsletter, website, etc.?

Yes, that’s all. Your newsletter, website, and other usual core and critical activities do not count as FEA, even if they are used to promote your federal candidates. As long as you are doing more than simply running people for Congress or President, nothing else beyond what is listed above counts as FEA.

A note, though, on newsletters: this assumes your newsletter only goes to members. If you are using your newsletter as more of an outreach publication, then you may want not to run articles on your federal candidates, just to be sure. This is one of those dreaded “gray areas,” of the law.

However, beyond FEA the FEC also regulates core administrative expenses. This was actually in place before BCRA. Core administrative expenses must be allocated among federal and nonfederal activities, and paid for accordingly (see below for the appropriate methods and formulas). If the state LP rents an office, a percentage of the rent and utilities must be allocated to federal activity, and paid from federal funds. Other examples of core administrative expenses would be office supplies and equipment, or postage for other than mass mailings. Your options are to make these expenditures out of your federal account, and then within 70 days transfer the nonfederal portion from your nonfederal/Levin funds account to reimburse the federal account for its share; or maintain a separate allocation account (see below).

How can we pay for FEA?

If you do intend to engage in any of the above federal election activities, you have three options. You can pay for them with all federal funds, or with what are known as Levin funds, or a with a combination of the two. There are two exceptions (see below) which much be paid entirely with federal funds.

Level Three: Levin funds and allocated expenses

Levin funds? What the heck is that?

Named after Sen. Carl Levin, the genius who can find yet another level of bureaucracy to add to an already unmanageable system. You should actually be thanking him for the loophole. Levin funds are a way for you to be able to pay for FEA out of your nonfederal (state) account. Technically, they are all funds (up to $10,000 per donor) that comply with state law. One notable exception is money received from another federal committee, such as UMP payments.

Do we have to establish yet another bank account for these Levin funds?

No. You can safely reclassify your state account as a combined non-federal/Levin funds account. Most all of your own internal fundraising efforts already count as Levin funds. All you have to do is be able to show through a reasonable accounting method that you have enough Levin funds in your account to cover the costs of your FEA.

The only major difference between Levin funds and the funds your party raises under your state law is that an individual can only donate up to $10,000 a year in Levin funds.

Is there any FEA that has to be paid for solely with federal funds?

Yes. Specifically: 1) a public communication that refers to a clearly identified federal candidate and that promotes, supports, attacks or opposes any federal candidate; and 2) services of an employee who devotes more than 25% of his compensated time to activities in connection with a federal election.

Furthermore, the money spent on these particular activities must not come from another federal committee. In other words, you can’t use UMP money to pay for these activities. You have to raise this money yourself from individuals.

What do we use Levin funds for?

Any voter registration, voter identification, or GOTV activity can be paid for with Levin funds. Furthermore, all your FEA can be paid for with Levin funds up to a limit of $5,000 in a calendar year.

It is recommended that you use the Levin fund option as much as you can. Most state affiliates are of a size that they can use Levin funds to pay for all of their FEA without touching their federal account, and without getting into the dreaded allocation formulas (below). Even better, if you stay below the $5,000 spending threshold, you do not have to report your use of Levin funds to the FEC.


We’re spending more than $5,000 a year on FEA. So what is allocation?

Once you reach this level of spending, you can no longer use only Levin funds to pay for your FEA. You have to either pay for it all from your federal account, or you can allocate the costs between your federal and Levin funds. If you can stand the accounting headache, allocation is worth your while, because of the greater restrictions on raising federal funds.

As if it couldn’t get more complicated, the allocation formula changes depending on who is on the ballot:

If there is a Presidential race and no Senate race on the ballot that year, at least 28% of your FEA must be paid with federal funds.

If you have a Senate race but no Presidential race, the minimum federal percentage becomes 21%. If you have both on the ballot, the minimum federal percentage shoots up to 36%.

If you have neither, the minimum federal percentage is only 15%.

How do we pay these allocated costs?

You have two options. You can establish a separate allocation bank account, and transfer money from your federal and Levin funds accounts in the proper proportions into it. The easier way is to simply pay for it all out of your federal account, and transfer money from your Levin funds account to cover its share. However, if you use this option, you have to make the transfer within a 70 day window, from 10 days before to 60 days after the FEA expenditure.

Level Four: Filing

We haven’t crossed the spending or fundraising thresholds yet. Should we start filing with the FEC anyway?

Don’t be a fool. If you followed the advice above, you have no reason to open your accounts to FEC scrutiny. And as you’ll see below, it a bureaucratic pain in the neck you’d do well to avoid.

OK, we’ve crossed the threshold. How do we file?

You can find all the forms you need at http://www.fec.gov/. When you get there, click on “Reporting Forms and Filing Information” in the left column.

You need to fill out FEC Form 1, your Statement of Organization. This is a simple four page form which asks for your basic contact, bank, and organizational info. Print the form, fill it out, and mail it to the address listed.

Here are some magic tips to what they are looking for:

For question 3, write “pending” – now that you’ve introduced yourself, they’ll be quick to reclassify you as a number.

The correct answer to 5 is (d), with “STA” for state and “LIB” for Libertarian.

You’ll need to fill in the contact info for the LNC under question 6, and your relationship is “affiliate.”

Do we need to send anything else to the FEC?

Yes. Besides your Statement of Organization, you should also send them a copy of your bylaws, or other documents that show your connections with the national party. You should also send them a statement that your state affiliate secured ballot access for one or more federal Libertarian candidates, which is easily confirmed through publicly available sources, such as archived election coverage on news websites. It would also help to include a letter from the national office vouching for you. This letter can be provided by LNC Accounting Supervisor Rod Severson operations@hq.lp.org.

In your cover letter, you will have to ask the FEC for an Advisory Opinion that recognizes you as the state party affiliate of the Libertarian National Committee. It’s a pain in the neck, I know. I blame the Green and Reform parties. After they both had two competing groups each claiming to be the one true party, not just anyone can claim to be a state party affiliate anymore.

After the FEC recognizes us, then what?

You’ll be dealing primarily with FEC Form 3X. Under BCRA, state and local party committees will have to start filing monthly. What you have to report depends on your level of spending:

If you spend less than $5,000 on FEA, you only need to report the activity in your federal account. Since you could spend it all in Levin funds, you may have nothing to report.

If you spend $5,000 or more on FEA, then you have to also report your use of Levin funds.

If you spend $50,000 or more a year on FEA, then you have to start filing electronically.

At this point, you really should be reading the FEC’s Campaign Guide for Political Party Committees http://www.fec.gov/pdf/partygui.pdf. Don’t worry, they’ll send you a copy in your welcome wagon pack, but this is one class where it doesn’t hurt to read ahead.

Level Five: Miscellaneous Wild Cards

Can federal candidates and national party officers speak at our state convention or other events?

Yes, with few restrictions. They may not represent themselves as a federal candidate or national party representative when soliciting donations for nonfederal committees or candidates, but they are allowed to do so speaking as an individual. In other words, I would say, “I want you to give money to Joe Blow for County Commissioner,” but I shouldn’t say, “As a member of the Libertarian National Committee, I am proud to ask you to contribute to Joe Blow’s campaign.”

If these individuals solicit nonfederal contributions for your party, state law generally controls, except that federal limits and prohibitions on individual donations apply. A federal candidate may have to be careful about how they solicit contributions for their own campaign, so they should also become conversant with these rules.

What about the prohibition of donations by minors?

Fortunately, the Supreme Court struck down this provision of BCRA. It was the one bright victory in what was otherwise a rout for freedom. Thanks to LP Tennessee member Trevor Southerland, for being the plaintiff that got this obnoxious rule thrown out.

What if we want to run ads in support of our federal candidates?

This is another aspect of BCRA that was struck down by the Supreme Court. You can make two types of expenditures on behalf of a candidate, coordinated or independent. BCRA had replaced restrictions on these, but now you can engage in both types of expenditures freely.

A state or local party can make coordinated expenditures without them counting against the limits on direct subsidies you can give to the candidate. If you do engage in any “public communication” that costs more that $10,000, you have to notify the FEC within 24 hours of the expense.

There are all kind of rules and limits on both types of expenditures. You’d probably do better to consult with the FEC directly if you are interested in making either type of expenditure. We are beginning to get beyond my level of expertise.

What if we want to buy or build a party headquarters?

If you are seriously thinking about this, get back to me. But right now, let’s just leave it at this, you don’t wanna know.

Resources:

Two nonprofits have compiled some simple and useful guides that are shorter and probably better organized than this one:

“Some Facts About State and Local Political Parties and the New Federal Campaign Finance Law,” from The Campaign and Media Legal Center, at http://www.camlc.org/attachment.html/statelocalBCRA.pdf?id=415; and,

“The FEC's Soft Money Rules,” from the Center for Responsive Politics, which gives an excellent breakdown of how BCRA affects state and local party fundraising, at http://www.capitaleye.org/FECsoftmoneyrules.asp.

Note that both of these were written before the Supreme Court’s decision.

The “BCRA Campaign Guide Supplement” is the FEC’s definitive report on new rules made to enforce BCRA as of January 2003. You can find that at http://www.fec.gov/pdf/guidesup03.pdf. They are still apparently working on updating this in light of the Supreme Court’s lengthy ruling. You can find documents relating to the case, including the decision itself, at http://www.fec.gov/pages/bcra/litigation.htm.

The FEC website has many other pages, explaining all the laws and their histories in gory bureaucratic detail. Check new issues of the FEC Record http://www.fec.gov/pages/record.htm for the drama of BCRA rulemaking as it unfolds.

If you are filing, you’ll need the FEC’s “Campaign Guide For Political Party Committees,” http://www.fec.gov/pdf/partygui.pdf.

If you really want to become the total expert, check out the Code of Federal Regulations 11 (CFR 11). Over 400 pages, at http://www.access.gpo.gov/nara/cfr/waisidx_03/11cfrv1_03.html, or just call the FEC to order the book. This option is for nerds and lawyers only.

If all else fails, call an FEC Information Specialist at 1-800-424-9530. You can remain anonymous, if all you want is some advice.

Note from original author

This article started with a FAQ written by Sean Haugh.

This FAQ relies on a variety of sources. Most of all, I would not be in a position to write this document except for the excellent research by LPNC Treasurer Robert Dorsey. Much of the above is restated from two memos he wrote for our executive committee in October 2002. Bob has also been generous with his time and knowledge in answering followup questions.

yours in liberty –
Sean Haugh
Executive Director, Libertarian Party of North Carolina
Region 4 Alternate, Libertarian National Committee
seanhaugh at mindspring dot com