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1999-10: Requirements for Authorized PACs under the New York City Campaign Finance Act

Thursday, August 05, 1999

Re: Charter §1052(a) (11) (b); Administrative Code §3-702(7), (11); 3-703(1) (f), (i), (9); 3-712; 3-801(2) (a); Campaign Finance Board Rules 1-02; 1-04(f); 1-05(h); 1-08(c) (1); 5-01(n) (3); Op. No. 1999-10.

The Board has received inquiries how the New York City Campaign Finance Act applies to political action committees (or "PACs") authorized by candidates who join the New York City Campaign Finance Program.

A PAC is a "political committee." New York State Election Law §14-100(1); New York City Administrative Code §3-702(11). As political committees, PACs must file periodic disclosure statements with the Board of Elections. Election Law §14-102. Neither State nor City law, however, uses the term "political action committee" or "PAC." The State Board of Elections has stated that "a PAC is considered to be any political committee that supports candidates or other political committees by making contributions only; i.e., PAC's do not make direct expenditures on behalf of Candidates." New York State Board of Elections, Handbook of Instructions for Campaign Financial Disclosure, 2-28-97, at 2 (emphasis omitted). This definition does not preclude PACs from making expenditures that indirectly assist or benefit the person with authority over the PAC, and indeed many, perhaps most, PAC expenditures are of this nature. The conclusions reached in this opinion are applicable to every PAC, as defined above, over which a participating candidate exercises authority1. This opinion is addressed only to political committees and does not reach other kinds of entities2.

The contribution and expenditure limits of the Act expressly apply to the participating candidate, his or her principal committee and any... political committee authorized by such participating candidate. Administrative Code §3-703(1) (f), (i) (emphasis added) 3. The Act makes no exception for PACs authorized by participating candidates4.

At the same time, all political committees (and therefore PACs) authorized by participating candidates are subject to the Board's presumption that contributions and loans accepted, and expenditures made, are for the "first election in which the participant is a candidate following the day" they are received or made. Campaign Finance Board Rules 1-04(f), 1-05(h), 1-08(c) (1) 5. The Board has emphasized the difficulty of overcoming the presumption in the case of a political committee that, among other things, makes contributions to other candidates. Noting that the express exemption of Administrative Code §3-712 is not applicable to such a committee, the Board stated:

Because political committees, by definition, are entities that ‘aid or take part in the election of candidates' it would be very difficult for the candidate to maintain that the... committee's expenditures bear no relation to any election. Citation omitted. Moreover, it is apparent that expenditures made for the purposes described above would tend to promote or facilitate the election of the candidate..., regardless whether they also serve other objectives.

Advisory Opinion No. 1993-12 (December 16, 1993) (emphasis in original) 6.

As noted above, neither New York State law nor the City's Campaign Finance Act provides a regulatory structure for PACs as distinct from political committees generally. Thus, current law does not provide any basis for distinguishing contributions made by a PAC under the direction of a participating candidate from those made by that same candidate's campaign committee. Nor is there any mechanism in place that would ensure compliance with the Act were PACs and campaign committees treated differently. Finally, the policies embodied in the Act's provisions for contribution and spending limits, and for public campaign financing, have no analogue under New York State law, which therefore offers no guidance on the treatment of candidate-directed PACs within the context of a comprehensive public financing scheme.

Presidential elections, for which federal law provides spending limits and public financing, provide some analogy. Yet even though federal law contains a specific regulatory regime for PACs, enabling the Federal Election Commission to permit potential candidates to organize PACs to pay certain expenses, this permission was not extended once the potential candidate qualifies as a candidate for federal office. See FEC Advisory Opinion No. 1986-6 (March 13, 1986).

The Board has repeatedly emphasized that campaign contributions made by a participating candidate's political committee are subject to the Act's spending limits (and result in a corresponding reduction in the amount of public funds payable to the campaign). Advisory Opinions Nos. 1997-6 (June 24, 1997), 1993-12, supra, and 1989-2 (January 3, 1989); Rule 5-01(n) (3).

Given the routine practice by political committees of contributing money to other candidates..., the Board is very skeptical that such expenditures could be excluded from the... spending limit. Furthermore, because it would be extremely difficult for a regulatory agency to gauge, after the fact, the significance or meaning that a political contribution holds for the contributor, recipient, and other interested parties, it is unlikely that the campaign could carry the heavy burden to demonstrate that these expenditures made during an abandoned campaign for mayor had no relation to the ultimate campaign for borough president... Advisory Opinion No. 1997-6, supra

Similarly, if a PAC's contributions to candidates were not subject to the spending limits that apply to the authorizing candidate's campaign committee, all participating candidates would have an incentive to authorize PACs to make contributions to other campaigns, instead of having their own campaign committees make the contributions. This would, in effect, create categories of unregulated expenditures on behalf of participating candidates that if conducted through the candidate's regular campaign committee would be limited and would result in reductions in public funds received.

Because a PAC is a political committee, a claim of a "non-election" purpose to avoid coverage under the Act would invite similar claims by other political committees and similar entities created by, or operated on behalf of, a participating candidate. This is a Pandora's box that would eviscerate the Act's limits and would result in public funds payments to candidates evading the very requirements they purport to have assumed. Effective enforcement of the Act requires that PACs making contributions do not displace costs that would otherwise be incurred by campaign committees covered under the Act.

This conclusion is supported by a Charter amendment recently adopted by the electorate to help safeguard the voluntary Campaign Finance Program from "soft money" abuse. The new law directs the Board to ensure that "expenditures that indirectly assist or benefit" participating candidates are attributed to those candidates. Charter §1052(a) (11) (b).

Thus, a PAC authorized by a candidate participating in the Campaign Finance Program is subject to the contribution and expenditure limits, and other requirements, of the New York City Campaign Finance Act.


1 Additional issues are posed by political committees subject to the authority of more than one candidate, if at least one of the candidates is participating in the Campaign Finance Program. See Administrative Code §3-703(9).

2 Moreover, this opinion does not address political committees formed and operating solely for the purpose of advocating a position on a ballot measure, entities over which the Board has no jurisdiction. See Advisory Opinion No. 1989-53 (October 26, 1989).

3 Amendments adopted in Local Law No. 69 of 1990 made clear that the Act also applies to political committees authorized by a participating candidate other than those the candidate specifically authorizes to aid or take part in the candidate's election. (Previously, the Act's limits were expressly applicable only to "authorized committees", as defined in Administrative Code §3-702(7).) Thus, Board rules define the terms "participant" and "prospective participant" to include "every political committee authorized by the candidate, the treasurer of each such committee, and any other agent of the candidate." Campaign Finance Board Rule 1-02 (emphasis added).

4 In contrast, the Act expressly exempts contributions, expenditures, and political committees from its requirements when they pertain to campaigns for elections for which the candidate did not choose to participate in the Program or if the office sought is one that is not covered by the Act, such as state and federal offices. Administrative Code §3-712.

5 Even political committees authorized for non-covered elections, otherwise exempt from the Act's coverage, are subject to this presumption. See Advisory Opinion No. 1996-2 (July 18, 1996) (footnote 5) (federal committee for 1998 U.S. Senate race operating simultaneously with City committee for 1997 Public Advocate re-election campaign). See also Advisory Opinion No. 1999-5 (February 23, 1999) (gubernatorial campaign committee).

6 Cf. Advisory Opinion No. 1989-57 (December 19, 1989) (concluding that the presumption was not applicable to a political committee authorized by a participating candidate for transition and inauguration into office, but cautioning that "the candidate's decision... to authorize an entity ordinarily associated with the raising and spending of funds for elections (a political committee) creates inevitable confusion whether donations received by that committee are campaign contributions.") This opinion has now been superseded by the adoption of Local Law No. 39 of 1998, which prohibits the use of political committees for transition and inauguration activities. Administrative Code §3-801(2) (a).