How Do You Report Loans to NC Political Committees?

ElectaFile Short Summary:NC Political Committees can receive loans—they are generally treated as contributions for purposes of limits, prohibited givers, etc. The key exception that you’ll see frequently is situations where a candidate or his or her spouse loans funds to the candidate’s campaign committee.

Happy Monday morning! The ElectaFile action news team is reporting today on how to deal with loans to an NC political committee.

OK—right out of the box—loans are essentially contributions for everyone but the candidate and his or her spouse. This means that loans can only be received from someone or something eligible to contribute. For example, one candidate campaign committee can contribute to another candidate committee. A PAC can contribute to another PAC. Subject to the then-current contribution limits. When the NC State Board Campaign Finance Manual was last published (2022) the campaign contribution limits were $5,600 per election. That number has increased to $6,400 per election. Here’s the good word from the State Board on how to calculate that limit.

The second key point for starters is that there’s a clear beginning, middle and end form requirements for the life of a loan. So we’re going to necessarily spill some ink today. Buckle up!

What’s Different About Candidates and Candidate Spouses? Key point here: candidates and their spouses can make unlimited contributions to their campaigns. John R. Cash can run for County Commissioner and can write his campaign a million dollar check. This can be a contribution or deemed a loan. Mr. Cash can call it a contribution or a loan—it’s the same thing. He can decide later that he wants to pay himself back even if it was called a contribution initially.

How Are New Loans Reported Differently? Loans have special forms that must be used and extra data fields that must be completed. If you’re using software to report the software may guide you through the forms. If you’re filing the old fashioned way via paper, the forms are called CRO-1410 and CRO-6100.

Here’s the Manual’s word on it…

What Additional Data Points Must Be Reported on Loans? If you’re reporting a loan, you have to provide the name of the lending institution, any guarantors, rate of interest, and time for repayment. In other words, if it’s a loan, it should be reported with all the typical characteristics of loans.

Key Point: Candidates making loans to their committees don’t need to include any thing other than name of lender (the candidate or spouse), the date of the loan and the amount of the loan (the dollar amount).

How Do I Report Loans that the Committee Hasn’t Repaid Yet? You’d use Form 1430 to tell the Board that the loan remains outstanding. This is sort of like the 7th Inning Stretch form. The loan exists and it hasn’t been repaid yet. Remember: self-funded loans by candidates can be repaid as refunded contributions at any time (whether you previously called it a loan or not…).

How Do I Report Payments on a Loan? You’d use Form 1420 to tell the Board that you’ve made an expenditure that is an ongoing or final repayment on a loan. Remember how you characterize expenditures about a million different ways? This is just one more.

What if the Lender (i.e., the Candidate or Somebody Else) Forgives the Loan? You’d use Form 1440 that must accompany the forgiven loan. This is how you “close the book” on a loan to your committee.

Are PACs and Party Committees Different? Yes and no. They are different because they cannot receive unlimited candidate contributions. No they are not different because they too are subject to loan (i.e., prevailing contribution) limits (with the exception of Party Committees who don’t have the same limitations that we’ll write about separately….) and subject to reporting obligations.

What Happens to Loans at the End of a Committee’s Life? Trick Question! The Committee cannot be closed until all the loans are accounted for, i.e., paid in full or forgiven…You’re going to have to close out the committee or else you have an ongoing reporting obligation and you cannot close out the committee without accounting for the loan(s). So it pays to wrap these things up…

Loans are straightforward until they aren’t. The tricky thicket arises with campaign loans by the candidate to his or her campaign committee. Even there, though, the hoops are straightforward. And the great news for the candidate is contributions and loans are uncapped and can be re characterized as needed to get the candidate repaid.

Let us know what questions you have! And see you again soon!

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