New Rules Regarding the Repayment of Applicant Loans | Perkins Coie

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Last month, a three-judge federal district court ruled unconstitutional a provision of the Biparty Campaign Reform Act 2002 (BCRA), which limited the amount of money a candidate’s authorized committee could collect after an election to repay personal loans made by the candidate in relation to that same election.[1] Prior to this decision, candidates who made or guaranteed personal loans to their campaign were prohibited from raising more than $ 250,000 to repay that debt after the election date for which the debt was incurred. The Federal Election Commission (FEC) has appealed this decision to the United States Supreme Court, but, so far, has not sought to stay the decision while the appeal is pending.[2] Unless the Supreme Court overturns this ruling, there will be no limit on the amount of money a campaign can raise after an election to pay off a campaign candidate’s personal loans.

The lawsuit, brought by Senator Ted Cruz and his 2018 campaign committee, challenged Article 304 of the BCRA, which provided that a candidate who had taken out personal loans as part of the candidate’s campaign could not repay more. $ 250,000 in personal loans made in connection with an election. by using contributions made to the campaign after the date of this election.[3] Under the FEC rules, personal loans, including loans from a third party that have been approved or guaranteed by the applicant or guaranteed by the applicant’s personal funds, could be repaid in full using contributions made to the applicant. committee. no later than election day, provided that any amount greater than $ 250,000 is reimbursed within 20 days of the election.[4] After the 20 day period expired, the campaign was required to process any outstanding personal loan amounts exceeding $ 250,000 (less amounts repaid with cash on hand the day after the election) as a contribution of the candidate to the committee. .[5] Campaign could repay up to $ 250,000 in personal loan using campaign contributions after the election date.[6]

The court ruled that the limitation on repayment of personal loans weighed on the interests of First Amendment candidates to spend to support their campaigns, restricting political expression and association for the candidates and their contributors. The FEC argued that the limitation served a compelling government interest as there is an increased risk and appearance of quid pro quo corruption when campaigns can raise funds to repay debts personally owed to a candidate after the candidate has been elected and hold federal office.[7] The court disagreed, finding that there was insufficient evidence that post-election contributions to repay a candidate’s personal debts presented an increased risk of corruption in return.[8] The court also ruled that the challenged law was insufficiently adequate to prevent corruption, because it limits loan repayment for winning and losing candidates, and because the $ 250,000 cap arbitrarily allowed loan repayments. post-election contributions up to, but not beyond, the cap.[9]

If the ruling is upheld, campaigns can collect an unlimited amount of contributions to repay a candidate’s personal loans before and after the election. In all cases, funds raised after the election to repay overdue campaign debt must be raised below the contribution limits that apply to the election in which the debt was incurred. For example, a donor who gave $ 1,000 for a candidate’s primary election could donate an additional $ 1,900 for primary loan debt outstanding after the primaries. However, the donor should designate the contribution for debt repayment. A donor who had already given the limit for the primary election would not be able to donate more funds for debt repayment for that same election.

The court did not say how the ruling, if upheld, would affect applicants who have already written off personal loans over $ 250,000 in order to comply with the now invalidated law. All candidates who wish to raise funds to pay off personal debts incurred in previous election cycles should consult a lawyer.

End Notes

[1] Ted Cruz for the Senate c. Federal Election Commission, n ° 1: 19-CV-00908, 2021 WL 2269415 (DDC June 3, 2021).

[2] Notice of Appeal, Ted Cruz for the Senate c. Like federal elections, n ° 1: 19-CV-00908, 2021 WL 2269415 (DDC June 13, 2021).

[3] 52 USCA § 30115 (j).

[4] 11 CFR § 116.11 (b) (1), (c) (1).

[5] Identifier. § 116.11 (c) (2).

[6] Identifier. § 116.11 (b) (3), (c) (2).

[7] Ted Cruz for the Senate c. Federal Election Commission, n ° 1: 19-CV-00908, 2021 WL 2269415 17 (DDC June 3, 2021).

[8] Identifier. at 24 years old.

[9] Identifier. at 26 years old.

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