FEC Brings Candidate Loan Provisions In Line With High Court Ruling

WASHINGTON — An authorized campaign committee can reinstate and repay candidate loans it previously converted to candidate contributions, the Federal Election Commission said on Tuesday.

The announcement, in a decision of a case involving Harley Rouda, a 2018 candidate in California’s 48th Congressional District, harmonizes agency rules with the U.S. Supreme Court’s decision earlier this year in FEC v. Cruz.

That ruling, handed down in May, invalidated previous loan repayment limitations.

Under the current rules, a committee may use funds currently on hand or raise funds to retire the loans, so long as there are net debts outstanding.

In 2018, Rouda loaned his principal campaign committee just over $1.6 million during the primary election period.

Consistent with the post-election repayment limitations in place at the time, the committee repaid him $472,127 prior to or within 20 days of the primary election and they repaid an additional $250,000 during 2018 and 2019.

Rouda forgave the remaining personal loan amounts and the committee converted them to contributions. 

In light of the Supreme Court’s decision this year in FEC v. Cruz, the committee and Rouda say that had the post-election repayment limits not been in place, the candidate would not have forgiven the 2018 loans.

The committee asked the FEC if it can reinstate Rouda’s loans and repay him with funds it currently has on hand or raises to retire debt.

The commission considered three prior advisory opinions to determine how to give retroactive effect to FEC v. Cruz. 

In one prior advisory opinion, the commission examined the “nature of the transaction” and permitted an authorized committee to amend disclosure reports previously reporting contributions from a candidate to instead report that activity as the candidate’s loan of personal funds to the committee. 

In another instance, the commission examined the nature of the transaction and allowed a campaign to recharacterize a contribution as an advance and repay the candidate from an unanticipated refund.

Considering the Supreme Court’s decision in FEC v. Cruz and the nature of Rouda’s loan transactions as reported on the committee’s disclosure reports before and after a Request for Additional Information from the commission, the commission concluded that the committee may reinstate the loans previously converted to candidate contributions pursuant to the now-invalid regulations. 

The commission further concluded that the committee may repay Rouda’s reinstated loans with funds currently on hand as well as from funds raised for 2018 primary debt retirement. 

The commission also provided guidance on how to report the reinstated loans:

“The committee should disclose the reinstated candidate loans in its next scheduled disclosure report, rather than amending its earlier reports,” the advisory opinion states. “The reinstated loans should be disclosed on Schedule C of the report covering the period when the loans were reinstated.”

The opinion goes on to say that “since the loans were incurred in a prior reporting period, the committee should not disclose the receipt of the loans on Line 13(a) (Loans Made or Guaranteed by the Candidate) of the Detailed Summary Page of this report.” 

“When disclosing the reinstated candidate loans, the committee should include memo text explaining that the loan forgiveness was revoked pursuant to the FEC v. Cruz decision. This memo text will serve as a clarifying note which can be linked to the loan transaction for anyone reviewing the disclosure report. 

“The committee must continuously disclose the amount of the outstanding debt until it is extinguished,” the opinion concluded.

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