BOARDROOM GUIDE - FEDERAL ELECTION COMMISSION RULES
Category: Boardroom Guide
Author: Christopher Younger
New Federal Election Commission Rules
Advice for those interested in providing flights to their favorite Federal candidate.
The next general election is less than six months away. Federal and state election campaigns have moved into high gear in anticipation of upcoming primary elections and the general election next fall. Perhaps you have considered giving your favorite candidate’s campaign a boost by providing him or her with the use of your aircraft or your interest in a fractionally owned or leased aircraft in connection with campaign travel.
Many governmental entities, including the Federal Aviation Administration (FAA), the Federal Election Commission (FEC), the Internal Revenue Service (IRS), the U.S. Senate, the U.S. House of Representatives and the state counterparts to these agencies and legislative bodies have enacted rules and regulations governing aspects of providing air transportation to candidates and elected officials. In particular, this article will address new rules issued by the FEC that became effective January 6, 2010.
Failure to comply with these rules can have unintended and often serious consequences for both individual candidates and, more importantly, business aircraft owners and operators. Therefore, it is imperative that the business aircraft owner/operator consider such issues before providing noncommercial air transportation to a candidate for elected office.
Prior to the passage of the Honest Leadership and Open Government Act of 2007, the FEC had issued regulations that addressed the requirements for travel of candidates for Federal office on private aircraft during election campaigns. These regulations were primarily designed to create a mechanism to prevent aircraft owners and operators from inadvertently making in-kind contributions to a candidate’s campaign for non-commercial air travel.
The passage of the Honest Leadership and Open Government Act of 2007 was partially the result of perceived abuses of the campaign process by candidates for Federal office. One component of that legislation addressed the carriage of such candidates and tightened the rules already in place relating to such carriage.
In connection with the new statutory restrictions, the FEC has promulgated new rules governing the private carriage of Federal candidates. The new rules act to prohibit or restrict Federal candidates and certain individuals traveling on behalf of such candidates from utilizing non-commercial air travel. The new rules also change the previously existing methodology for determining the amount that a candidate must reimburse the provider of non-commercial air transportation so that the method for such reimbursement is aligned with the requirements set forth in the new legislation.
The new FEC rules distinguish between candidates for the U.S. House of Representatives and candidates for the U.S. Senate, Vice President and President. Under the new rules, candidates for the U.S. House of Representatives and individuals working on their campaigns are prohibited from utilizing non-commercial air transportation in connection with the campaign activities of that candidate. However, in certain very limited circumstances, individuals associated with such campaigns may utilize non-commercial air transportation where the purpose of the flight is not connected with the candidate’s campaign.
Candidates for the U.S. Senate, and for the U.S Vice President and President are permitted to utilize non-commercial air transportation under the new FEC rules provided that they timely reimburse the provider of such flight for the transportation provided in accordance with the terms of the rules.
The prior rules used three methods for reimbursement amounts depending on whether first-class, coach or charter service existed between the departure and arrival airports. Under the new rules, this methodology is simplified in that the reimbursement amount must be equal to the amount that it would cost the candidate to charter a comparable aircraft for the same trip.
Where multiple individuals are passengers on a particular flight and they represent multiple candidates’ election campaigns, the rules specify how to allocate the reimbursement amount between each such candidate. Under the new rules, press and government personnel who accompany a candidate may reimburse the service provider directly instead of requiring them to directly reimburse the Federal candidate, as was the case with the prior rules. The new rules specify the method for making such allocations based on a pro-rata portion of the reimbursement amount as determined, based on the number of individuals on such flight who represent a particular candidate.
The new rules contain two important exceptions to the foregoing requirements (which are also available to House candidates). These exceptions create “carve-outs” that permit candidates to accept non-commercial air transportation using government provided aircraft and using aircraft owned by the candidate, or his or her immediate family members.
Where a candidate utilizes aircraft owned by such candidate or his or her family members, the new rules provide that the candidate must reimburse the candidate or the family member for the costs of operating the flight in question.
Also, if the candidate is using a fractional or “time-share” aircraft, such use may not exceed the use allocated to the candidate or his or her family pursuant to such arrangement. If the use does exceed the allowable use allocated to such candidate or his or her family, the rules for non-family owned aircraft apply as if the aircraft were not owned by the candidate or his or her family member(s).
It is important that payment be made in advance of the flight, otherwise, the flight could be considered a campaign contribution that could violate Federal election law. Finally, the new rules also contain recordkeeping requirements that must be followed by both the candidate for federal office and the provider of non-commercial air transportation to such candidate.
In addition to the foregoing, there are other rules that must be followed when providing non-commercial air transportation to candidates for Federal office. These include IRS and FAA requirements, rules of the U.S. House of Representatives and Senate, and requirements of various state and local authorities.
Please keep in mind that this article serves as a general and broad overview of the new FEC rules and does not constitute as legal advice or a legal opinion. Therefore, it is always advisable to consult with qualified aviation counsel when considering whether to provide such transportation to your favorite candidate(s).
IRS Circular 230 Notice: Pursuant to Sections 10.35(b)(4) and (5) of IRS Circular 230 (31 CFR Part 10), if and to the extent that this communication contains any tax advice, we advise you that such tax advice is not intended to be used, and cannot be used, by you for the purpose of avoiding any U.S. tax penalties that may be imposed on you, or for the purpose of promoting, marketing or recommending to another party any transaction or matter addressed herein.
Christopher Younger is an attorney at the Law Offices of Christopher B. Younger, LLC. He is a tax and FAA specialist concentrating in the areas of corporate aircraft transactions and aviation taxation. He has extensive experience in planning and implementing unique aircraft ownership and operating structures on a global level. He has worked on numerous tax audits with the IRS and with various state taxing authorities. The firm’s services include Code Section 1031 tax-free exchanges, federal tax and regulatory planning, state sales and use tax planning, and preparation and negotiation of transactional documents commonly used in the business aviation industry, including aircraft purchase agreements, leases, joint-ownership and joint-use agreements, management and charter agreements, and fractional program documents.
Mr. Younger can be reached at the firm’s offices at 47 East All Saints Street, Frederick, Maryland 21701; telephone (301) 696 5735; email: email@example.com