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1989-20: Treatment of Art Auction Proceeds As Contributions

May 24, 1989

An opinion has been requested concerning the treatment of the proceeds of an art auction as contributions to or expenditures by a candidate participating in the New York City Campaign Finance Program. The following example and questions have been presented:

A campaign committee holds an art auction in order to raise funds. Art is contributed by artists for this purpose. At the auction, bidders purchase the art and make all checks payable to the committee.

1) Is the artist who donates his or her art credited with an ‘in-kind' contribution?

2) Is such an in-kind contribution eligible for threshold/matching funds?

3) Is the ‘value' of the above contribution (assuming it is indeed a contribution) the amount of the sales price the art sells for at the auction?

4) If the sales price of the art exceeds $3,000, does the artist have his or her ‘in-kind' contribution allocated to more than one campaign?

5) Is the purchaser of the art also a contributor, and if so, is the amount credited the actual amount of the sales price of the art?

6) If the above is a contribution, is it eligible for threshold/matching funds?

7) If the sales price exceeds $3,000, is the contribution simply allocated to more than one campaign?

Under the New York City Campaign Finance Act, "contribution" includes "any thing of value, made in connection with the... election... of any candidate" and includes payments by persons other than the candidate or the candidate's authorized political committees. New York City Administrative Code §3-702(8). See also Campaign Finance Board Regulation §101(w) (definition of "in-kind contribution"). In-kind contributions are reported as both contributions to and expenditures by a candidate. Campaign Finance Board Regulation §106(a).

1, 3, 4) Unless the committee reimburses the artist, the artist has made an in-kind contribution to the committee equal in value to the cost of the materials used to create the donated artwork1. The value of the artist's services in creating a work (the ultimate value of which is greater than the cost of the materials used) is analogous to any services an individual may volunteer to a candidate's campaign. Compare Federal Election Commission, Advisory Opinion 1979-35 (Aug. 17, 1979). Unpaid voluntary services are not a contribution. Administrative Code §3-702(8) (i). The committee may not accept an in-kind contribution in excess of the contribution limit applicable in an election. See Administrative Code §3-703(1) (f) .

2) An in-kind contribution is not a threshold or matchable contribution. Only monetary contributions may be used for meeting the threshold for eligibility and for matching public funds. See Administrative Code §3-702(2) , (3) .

5) The full amount of the purchase price paid by the buyer of the artwork is a contribution to the committee. Section 102(s) of the Campaign Finance Board Regulations provides, in relevant part:

the entire amount paid as the purchase price for a fundraising item sold by a candidate or authorized committee shall be deemed the amount of a contribution or contributions.

6) If the purchaser is an individual, resident in New York City, and the purchase price paid does not exceed the applicable contribution limit, the purchase may qualify as a threshold or matchable contribution under Administrative Code §3-702(2), (3). The fair market value of the artwork purchased must be deducted from the gross amount of the purchase price in order to determine the amount which qualifies as a threshold or matchable contribution. Id.

7) The purchase price paid may be claimed by the committee to constitute monetary contributions for more than one election. The candidate must deposit portions of the payment into separate accounts for different elections, pursuant to Campaign Finance Board Regulation §401, in order to demonstrate to the Board the amount of the contribution accepted for each election.

The hypothetical describes two separate contributions, the donation of art and the purchase price paid for the art, each of which is reported once. The artist's in-kind contribution is equivalent to a purchase by the committee of artwork or other goods, which are then resold in order to raise funds.



1 For purposes of this opinion, it is assumed that the art sold was donated by the artist who produced the work and not by an art collector.