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SUBMITTED ELECTRONICALLY ‘August 31, 2020 Federal Election Commission 1050 First Street, NE Washington, DC 20463 RE: Comments on Petition for Rulemaking (REG 2020-02) seeking to close the Bloomberg loophole on Transfers to national political party committees Dear FEC Commissioners: Citizens United and Citizens United Foundation (hereinafter collectively referred to as “Citizens United”) submit these comments in support of their Petition for Rulemaking urging the Commission to revise its regulations to close the loophole allowing a self-funded federal candidate to circumvent the limits on individual direct contributions to national political party committees by transferring unlimited funds from his or her campaign committee to those committees. Factual Background and Regulatory Framework When Congress amended the nation’s campaign finance laws in 1974, it imposed limits on the amounts that a Federal candidate could spend from “personal funds” in support of his or her campaign. Candidates for president were limited to an aggregate of $50,000 in personal funds “expenditures” in a calendar year. Candidates for U.S. Senate or a U.S. House of Representatives seat from a state having only one House member were limited to $35,000 per calendar year. All other candidates for the U.S. House were limited to $25,000 per year. See Pub. 93-443, § 101(b)(1), 88 Stat. 1263, 1266 (Oct. 15, 1974). Those limitations, however, were struck down by the U.S. Supreme Court on grounds that the “ceiling on personal expenditures by candidates on their own behalf .... imposes a substantial restraint on the ability of persons to engage in protected First Amendment expression.” Buckley v. Valeo, 424 U.S. 1, 51-54 (emphasis added). In light of the Buckley decision, the Commission adopted a rule generally allowing a Federal candidate to “make unlimited expenditures from personal fund” in support of his or her campaign. See 11 CFR § 110.10 (68 FR 3996, Jan. 27, 2003)(emphasis added). 1006 Pennsylvania Avenue, $.B, + Washington, D.C. 20003 Tel (202) 547-5420 + Fax (202) 547-5421 + wwweitizensunited.org Contributions orgs 1 Cicens United are not tac deductible. {In 1980, Congress amended the Federal Election Campaign Act (“FECA”) to allow candidates for federal office to transfer certain surplus funds in their official campaign accounts to national, State or local party committees without limitation. See Amendments to the Federal Election Campaign Act of 1971, PL 96-187, 93 Stat. 1339, 1366-67 (Jan, 8, 1980). The current regulatory provision governing such transfers states that “funds in a campaign account. .. (may be transferred without limitation to any national, State, or local committee of any political party.” 411 CFR §113.2(c)(emphasis added). This regulatory authorization is not quite the same as the relevant statutory provision passed by Congress, which allows “{a] contribution accepted by a candidate” to be “used by the candidate .... for transfers, without limitation, to a national, State, or local committee of a political party.” 52 U.S.C. § 30114(a)(4)(emphasis added). The distinction between the law and the regulation is important to the issue at hand. The law speaks in terms allowing the transfer of funds qualifying as a “contribution”, while the regulation is broader in scope, allowing unlimited transfers of any “funds” in a campaign account, irrespective of whether the funds to be transferred qualify as proceeds from “contribution accepted” by the candidate. Although the Commission's regulations recognize the right of a candidate to spend unlimited ‘amounts of personal funds in support of his or her campaign, there is very little in the way of corresponding statutory or regulatory authority addressing the deposit of a candidate's personal funds into his or her campaign account, the treatment of those deposits and any limits or restrictions related thereto. Aside from requiring deposits of a candidate's personal funds to be separately reported from other “contributions” to the committee, see 52 U.S.C. § 30104(b)(2)(B); and 11 CFR § 104.3(a)(3)\ii), FECA and its underlying regulations appear to be silent on the topic. In its Advisory Opinions, however, the Commission has opined that a candidate is permitted “to make unlimited contributions, including loans, from the candidate’s personal funds to her authorized committees.” AO 9885-33 (Nov. 22, 1985); see also AO 1984- 60 (Jan. 11, 1985)(same). But the authority cited for this conclusion is 11 CFR § 110.10, which, as noted above, speaks in terms of spending personal funds but says nothing about making “contributions”. In any event, for about four decades transfers from candidate committees to political party committees do not appear to have generated any significant controversy. From 1980 until this year, transfers were by and large made up of surplus funds attributable to contributions falling within the statutory limits imposed on contributions from individuals, multi-candidate PACs and national political party committees. In March of this year, however, a major loophole was brought to light. Former New York City Mayor Michael Bloomberg withdrew as an active candidate for the Democratic Party nomination for President and on March 18 transferred $18 million of surplus campaign funds to ‘the Democratic National Committee ("DNC”).! Those funds, however, were not made up of contributions subject to FECA’s strict limits based on the source, See 11 CFR §§ 110.1 and * See April 2020 FEC Report of Mike Bloomberg 2020, Inc. at 6458 (available at www.fec.gov). 110.2. They were instead derived almost entirely from candidate Bloomberg's personal funds.2 This audacious move on the part of Bloomberg caused a media firestorm. See e.g. Bloomberg makes massive $18M transfer from campaign to DNC, Politico (March 20, 2020)(available at www.palitico.com). It resulted in at least one complaint filed with the Commission, see Bloomberg campaign hit with FEC complaint for $18M transfer to DNC (March 27, 2020)(available at www.foxnews.com). There was also a requested advisory opinion on the subject, see FEC AO Request 2020-03 (available at www.FEC. cov). And it is the predicate grounds for Citizens United’s Petition for Rulemaking that is currently under consideration. Reasons Why the Commission’s Rules Governing Transfers Need to Be Revised While candidate Bloomberg's transfer of $18 million in campaign funds to the DNC may be lawful under the current regulation governing transfers to national political party committees, it certainly does not fall within the spirit of the law governing such transfers. As noted above, when Congress passed the amendments authorizing such transfers back in 1980, it did so under a regulatory framework recognizing a candidate's usage of personal funds to support his or her election as an “expenditure” in support of his or her campaign. It was simply not envisioned as a type of “contribution” that would be subject to transfer. The Supreme Court precedent allowing the unlimited usage of a candidate's personal funds to support his or her campaign referred to this activity as a form of “expenditure”. The statutory ceiling on such activity that was struck down in Buckley likewise referred to the limitations as a ceiling on the amount of Personal funds that a candidate could spend on his or her behalf. And the regulation, which formally implemented the Buckley decision on a candidate's usage of personal funds, also refers to the usage of personal funds as an “expenditure”. To be sure, once the candidate's personal funds are actually spent on behalf of the campaign, the amount expended would be subject to reporting as a contribution to the campaign of an equal amount. But it was simply not contemplated by Congress, the FEC or the courts that a candidate would be permitted to deposit his or her own personal funds into the campaign committee's account in amounts in excess of what was needed to cover campaign related expenses, so that the surplus deposits could later be transferred in unlimited amounts to one or more national political party ? According to the Bloomberg campaign's April 2020 Amended FEC Report (available at www.fec.gov), the campaign took in $1,048,811,519.23 in receipts from its inception in 2019 through March 31, 2020. Of that amount, $1,047,898,927.21 was attributed to Bloomberg’s personal funds. Receipts from sources subject to FECA limitations amounted to just, $912,592.02. In short, candidate Bloomberg's personal funds were the source of more than 99.9% of the committee’s total receipts, meaning more than $17 million of the transferred funds are attributable to Bloomberg's personal funds. The portion attributable to Bloomberg’s Personal funds far exceeds the $35,500 that he could have made in direct contributions to the DNC. Indeed, it is approximately 500 times the amount that he could have lawfully contributed directly to that committee, committees. Thus, while candidate Bloomberg's personal funds that were held in his campaign account certainly qualify as “funds” for purposes of the regulation governing transfers, it highly questionable whether those “funds” ought to be categorized as a “contribution accepted” by the Bloomberg committee. Further, as troubling as the Bloomberg transfer stands on its own merits, it reveals an even deeper flaw in the regulatory scheme governing transfers from candidate accounts to national party committees. Bloomberg was at least a legitimate candidate for the Democratic Party nomination. He appeared on the ballot in several states and spent over a billion dollars on his unsuccessful attempt to win the nomination. But there is nothing in the current regulatory framework that would prevent other self-funded candidates — whether serious or not - from manipulating the loophole to an even greater degree. Wealthy individuals could declare their candidacy for any federal elected office, contribute untold millions of dollars of their own money to the campaign, promptly withdraw their candidacy after spending a token sum, and thereafter transfer the balance of their campaign's funds to the national party committee or committees of their choice. This too is clearly not what Congress intended when it authorized the transfer of surplus campaign funds to national party committees. But given what recently transpired with the Bloomberg campaign and the publicity associated with it, itis clearly a distinct possibility going forward unless the Commission acts promptly to close the Bloomberg loophole. Citizens United fully supports the right of a candidate to spend unlimited amounts of personal funds in support his or her campaign. But allowing that right to be exercised does not mean that self-funded candidates should be allowed to circumvent the limits on direct contributions to party committees that are applicable to everyone else. The Commission should act promptly to close the Bloomberg loophole on transfers to national party committees. In Citizens United's view, a candidate's deposit of personal funds in amounts that exceed the campaign’s expenditures on campaign-related acti ‘should not be treated as a “contribution accepted by the candidate”, which in turn would be subject to transfer. If those funds are not spent on campaign-related activities they should be viewed as contributions in excess of the lawful limit and either be refunded to the candidate or used for other permissible purposes that are not subject to FECA’s contribution limitations, such as contributions to charitable organizations. As Bloomberg's conduct demonstrates, allowing personal funds to be used for transfers to party committees lets a wealthy self-funded candidate completely circumvent the limits on direct contributions by individuals. Buckley in no way requires allowing that. Buckley merely allows a candidate to self-fund campaign expenditures. Once the campaign's legitimate expenses are met in full, the candidate's right to fund the campaign committee is concluded. Requested Regulatory Action The loophole identified above can and should be promptly remedied by revision to the Commission’s relevant regulations in order to prohibit a self-funded candidate from using his 4 campaign committee funds to circumvent the limits imposed on direct contributions to national political party committees. There are multiple ways in which this can be accomplished. Citizens United offers two suggestions. One possible solution would be to revise 11 CFR § 113.2(c) to limit the amount that a candidate’s campaign committee can transfer to a national political party committee to the sum total of contributions received by the committee that fall within the limits imposed on contributions by individuals, multi-candidate PACs and party committees. This would allow a candidate to fully fund his or her campaign, while allowing for the transfer of surplus funds up. to the amount of the contributions received from sources subject to FECA’s contribution limits. Such a non transfers would be fully consistent with Buckley's recognition of a candidate's right to self-fund his or her campaign while creating a bright-line rule that would Prevent transfers of the type undertaken by Bloomberg. The rule be easy to understand, easy to implement and easy to enforce. Further, it would in no way impair the ability of a candidate, individual, to make direct contributions to national party committees up to the amounts permitted by law for individuals. Another possible solution would be a new regulation that requires a candidate committee to refund to the candidate any personal funds that are deposited into the campaign account that exceed the committee’s campaign-related expenditures during the duration of the campaign, or to dispose of those surplus amounts for another lawful purpose that is not subject to FECA’s contribution limits, such as contributions to charitable organizations. This too would be fully compliant with the Buckley mandate but would be easy to understand and administer. Finally, Citizens United does not believe that regulatory revisions of the type suggested herein would require revision of the underlying statutory provision governing transfers of campaign funds to the committees of a national political party. As noted above, the statutory provision ‘on which the current regulatory framework is based speaks in terms of “[a] contribution accepted by a candidate”. See 11 U.S.C. § 30114(a). That language is ambiguous and subject to administrative gap filling that is entitled to Chevron deference.? In Citizens United’s view, the Commission has ample authority to close the Bloomberg loophole by revising its regulations to make clear that amounts that a candidate deposits into his or her campaign committee that exceed the actual campaign-related expenditures of the committee do not qualify as a “contribution accepted by a candidate” that would be subject to transfer to national political party committees. 3 See Chevron, USA, Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837 (1984); see also, Van Hollen v.FEC, 811 F.3d 486, 492 (DC Cir. 2016)(Explaining that where a statute in ambiguous under step one of Chevron analysis, step two “does not require the best interpretation, only a reasonable one”). Conclusion For the reasons stated herein Citizens United urges Commission to forthwith initiate a rulemaking to close the Bloomberg loophole that allows a self-funded candidate to transfer unlimited amounts from his or her campaign account to national political party committees. Respectfully mitted, LAL hael Boos Executive Vice President & General Counsel Citizens United and Citizens United Foundation