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1989-49: Post-Election Loans Constitute Contributions

Thursday, October 12, 1989

An opinion has been requested whether a campaign committee of a candidate participating in the New York City Campaign Finance Program, who was defeated in a primary election and is not otherwise a candidate in the general election, may accept loans from the candidate or other individual who previously made primary election contributions equal to the maximum amount permitted under New York City Administrative Code §3-703(1) (f) for the purpose of repaying debts incurred in the primary election.

Campaign Finance Board Rule 102(o) provides, in relevant part, that:

A contribution made by a person or other entity after the date of an election, which is used to pay liabilities incurred in that election, shall be totaled with any other contribution or contributions accepted from the person or entity for that election for purposes of determining compliance with the contribution limit of Section 3-703(1) (f) of the code.

The question therefore is whether a loan received after the date of the primary election is a contribution for that election1.

Under the New York City Campaign Finance Act, a loan is deemed to be a contribution in the following circumstances:

A loan made to an eligible candidate or an authorized committee of such candidate other than in the regular course of the lender's business shall be deemed, to the extent not repaid by the date of the primary or general election, as the case may be, a contribution by the lender.

New York City Administrative Code §3-702(8). Compare New York Election Law §14-100(9) (1); 14-114(6). As the Board has previously noted, the "loan rule is an adjunct to the contribution limit, which was intended to ‘reduce improper influence on local officers by large campaign contributors.'" Advisory Opinion No. 1989-42, dated September 5, 1989, quoting Local Law No. 8 of 1988 §1. The loan rule also serves to implement the City Council's finding that:

it is vitally important to democracy in the city of New York to ensure that citizens, regardless of their personal wealth, access to large contributions or other financial connections, are enabled and encouraged to compete effectively for public office...

Local Law No. 8 of 1988 §1. Neither the Act nor its legislative history suggests that a differential treatment of loans, based on the time of their acceptance, supports these legislative purposes.

Rather, a conclusion that post-election loans are not contributions would thwart the contribution limits and undermine the achievement of these legislative purposes. Campaigns would be able to incur expenses before the election to be paid by large loans received after the election, without any pre-election fundraising. Furthermore, if post-election loans were not subject to the contribution limits, campaigns would have an incentive to disguise post-election contributions as loans with extended repayment periods. For these reasons, the Board concludes that loans received after the date of an election are contributions, to the extent these loans are used to pay liabilities incurred in the election.

 

NEW YORK CITY CAMPAIGN FINANCE BOARD

1 A loan by a candidate to his or her own campaign committee which is deemed to be a contribution is subject to the applicable contribution limit. Administrative Code §3-703(1) (h).