NOTE: Effective June 7, 2018, the "debt" and "pledges" sections of Interpretation 12-01 will be superseded by ESHB 2938 and the commission's emergency rulemaking to implement the law. 

The Public Disclosure Commission enforces the campaign disclosure provisions and contribution limits found in RCW 42.17A and Title 390 WAC.  This interpretative statement is intended to guide campaigns with respect to in-kind loans, pledges, and disclosure of contributions on the 21- and 7-day pre-election reports.

IN-KIND LOANS

Contribution limits apply to in-kind loans, but not debts.  The purpose of this section is to distinguish the difference between an “in-kind loan” and a “debt.”

In-Kind (Non-Monetary) Loans

The term “contribution” is defined broadly and includes not only money, but also the vast majority of items and services donated or loaned to assist a campaign.  See RCW 42.17A.005(13).  Donated items include but are not limited to items such as campaign office space, computers, and auction items.  Donated services include, but are not limited to, printing, campaign consulting and campaign website development.  Donated items and services are commonly referred to as in-kind contributions.  See also WAC 390-05-210.

The dollar value for in-kind contributions is based on the “fair market value” of each item or service donated to the campaign.  See WAC 390-05-235 and 390-16-207.  In-kind contributions are subject to contribution limits and the pre-election timing provision of RCW 42.17A.420.  A candidate whose name appears on both the primary and general election ballots is prohibited from receiving general election in-kind contributions prior to the primary election being held.

 

An in-kind loan occurs when a person pays for a good or service on behalf of the campaign with the expectation of reimbursement.  The contributor may or may not be the person ultimately providing the goods or services.  A business owner, for example, may authorize employees to assist a campaign during work hours.

Indicators that an item or service provided to a campaign is an in-kind loan and not a debt include:

  • A person other than the campaign pays for the item or service and
  • before accepting the item or service, the campaign agrees to reimburse the contributor.
  • In the case of a commercial entity providing a good or service to the campaign in the course of its normal business, the campaign is given preferential treatment not granted to a majority of the entity’s customers.

For purposes of reporting requirements and contribution limits, an in-kind loan must be recorded in writing and executed at the time of the loan, listing the details of the loan.  The campaign must timely and accurately report the in-kind loan on a C-4 report, Schedules B and L, and disclose all required information about the contributor. 

 

In-kind loans are subject to contribution limits and the pre-election limitations of RCW 42.17A.420.[1]  A general election in-kind contribution may not be used for the primary election if to do so would cause the contributor to exceed the primary election contribution limit.  WAC 390-17-300.

The following examples illustrate the difference between an in-kind contribution, an in-kind loan, and debt as well as typical in-kind loan transactions:

Example of a typical in-kind loan:

Anna, a  campaign volunteer, buys ten rolls of stamps for the campaign with the prior agreement that she will be reimbursed.  When she submits the receipt for reimbursement, however, she tells the treasurer that she’s willing to wait until the end of the campaign and would forego reimbursement in the event there’s not enough money at the end.

 

Reporting:

Anna has made an in-kind loan.  At the end of the reporting period, Joe reports the amount owed to Anna on the C-4, Schedules B and L.  The in-kind loan continues to appear on subsequent reports until paid.

An in-kind loan also occurs when a candidate purchases campaign items or services using personal funds with the expectation of being repaid, and the campaign has not fully repaid the candidate within 21 days of the expenditure.   In order to be reimbursed with campaign funds for out-of-pocket expenditures, a candidate must first submit receipts or similar documentation to the campaign.  All out-of-pocket campaign expenditures made by a candidate must be documented in order to be reimbursed.  Any undocumented out-of-pocket campaign expenditures made by the candidate are not eligible for reimbursement and are considered in-kind contributions.  Repayment of in-kind loans made by the candidate, when combined with other loans repaid to the candidate, may not exceed $5,000.  RCW 42.17A.445; WAC 390-05-400 and 390-16-226.[2]

Debt

The term “expenditure” includes a promise to pay for a good or service.  RCW 42.17A.005 (20).  A debt is incurred when the candidate, campaign treasurer, campaign official, or campaign agent or principal decision maker, places an order for goods or services, or otherwise obligates itself to a vendor who is in the business of selling the goods or services provided to the campaign, and makes those services available to the campaign in its usual course of business.

A contractual liability, even when it is contingent on a future event such as a “win” bonus, is a debt.  WAC 390-16-042.

Campaign debts are not subject to contribution limits.  However, campaign debts that are forgiven by the vendor become contributions from the vendor and are subject to contribution limits.

 

Campaign debt must be timely and accurately disclosed on a C-4 report, Schedule B.  RCW 42.17A.240(8) and WAC 390-05-245.

Comparative Examples:

Candidate X is an employee of a public relations firm and asks the firm’s graphic artist to design a campaign logo.

In-kind contribution

In-kind loan

Debt

The firm donates the graphic artist’s time to the campaign.  No payment is expected.

The firm agrees to provide the graphic artist’s services to the campaign with the expectation of payment at a later date.  Since Candidate X is an employee, the firm agrees to flexible payment terms not ordinarily granted to other customers.

Candidate X asks the firm to extend him credit.  He enters into the firm’s standard contract to pay for services and is not treated differently from any other client.

Reporting:

C-4, Schedule B, reported at the end of the period in which the staff time was donated.

C-4, Schedules B (part 1) & L, reported at the end of the period in which the time was donated and on subsequent Schedules L until reimbursed.

C-4, Schedule B (part 3), reported at the end of the period in which the contract was signed and on subsequent Schedules B until paid.

 

 

 

Candidate Y is permitted by her employer, an insurance broker, to use the office copy machine for her campaign.

In-kind contribution

In-kind loan

Debt

No reimbursement is expected.

Candidate Y is expected to reimburse for the cost of paper, a per-use copy fee, or both.

N/A – copying/reproduction services is not the customary business of the insurance broker.

See examples above for reporting instructions

 

PLEDGES

A pledge is a promise from a contributor to make a future contribution to the campaign. A pledge may be written or verbal and for monetary and/or in-kind contributions.  To be considered a pledge for purposes of reporting requirements and contribution limits, the promise must be for a specific amount if a monetary pledge or for specific goods or services if an in-kind pledge and the contributor must intend to pay the pledged amount in its entirety.  A pledge is a form of contribution and thus subject to contribution limits.  RCW 42.17A.005(13).  The pledged amount, when combined with other contributions from a contributor, may not exceed the contribution’s limit.

Once received, a pledge valued at $100 or more must be timely and accurately disclosed on a C-4 report, Schedule B.  RCW 42.17A.240; WAC 390-16-041.  Once a pledge has been redeemed or is valued at less than $100 it is no longer disclosed on the C-4 report.  As pledges are redeemed, the payments or goods and services received are disclosed as contributions on the appropriate reports.

A candidate subject to contribution limits may not redeem a primary election pledge after the date of the primary unless the candidate loses the primary election and has outstanding debts, loans, or orders placed to retire.  A candidate who loses the primary election and has outstanding debts or liabilities may redeem a primary election pledge up to 30 days after the primary election is held.  A general election pledge must be redeemed on or before the end of the election, or no later than December 31 of the election year.  RCW 42.17A.405 and 42.17A.410; WAC 390-16-245.

A state official or a person employed by or acting on behalf of a state official may not accept a pledge or payment of a pledge during a session freeze period.  RCW 42.17A.560 and WAC 390-16-245.

Unless the recipient is a ballot measure committee, a pledge may not be made or redeemed within twenty-one days of an election if the amount of the pledge or redemption exceeds the maximum amount provided in RCW 42.17A.420. [3]  However, when payment of a pledge is made and the monetary or in-kind contribution is in possession of the recipient twenty-two or more days before the election, the contribution may be accepted.  WAC 390-16-245.

DISCLOSURE OF CONTRIBUTIONS ON 21- AND 7-DAY PRE-ELECTION C-4 REPORTS

A campaign is required to file a Campaign Summary Receipts & Expenditures Report (PDC Form C-4) at regular intervals including 21 and 7 days before an election in which the campaign participates.  The 21- and 7-day pre-election C-4 reports disclose all campaign contribution and expenditure activities made as of the end of one business day before the date of the report, including in-kind contributions, orders-placed, debts, pledges, and loans.  RCW 42.17A.235.

Monetary contributions must be deposited within five business days of receipt.  A contribution received by a candidate or political committee that is returned to the contributor within five business days of receipt is not a contribution and need not be disclosed. RCW 42.17A.005(13)(b)(iii).

 

The C-4 report, WAC 390-16-041, provides for the disclosure of deposits.  The C-4 report does not require disclosure of contributions received but not yet deposited.

The Commission interprets RCW 42.17A.235 to require campaigns to disclose on the 21- and 7-day pre-election reports contributions that have been deposited as of the end of one business day before each report is due.

 

[1] RCW 42.17A.420(1) prohibits a candidate for statewide office from receiving aggregate contributions exceeding $50,000 and all other candidates and political committees from receiving aggregate contributions exceeding $5,000 within 21 days of a general election.  By law, this prohibition does not apply to contributions made by or accepted from a bona fide political party’s state committee.  The prohibition also no longer applies to ballot measure committees, pursuant to the federal court ruling in Family PAC v. McKenna et al., 9th Circuit Court of Appeals Nos. 10-35832 and 10-35893 (Dec. 29, 2011).

 

[2] At the beginning of even-numbered years, the Commission adjusts the candidate loan repayment limit in accordance with RCW 42.17A.125.  See WAC 390-05-400.

[3] See footnote one.  Also see RCW 42.17A.405 and 42.17A.410 and WAC 390-05-400 for candidate contribution limits.


Cite as PDC Interpretation No. 12-01

Approved:  June 28, 2012

References:  RCW 42.17ARCWs 42.17.005(13)42.17A.12542.17A.23542.17A.24042.17A.40542.17A.41042.17A.42042.17A.445, and 42.17A.560.  Title 390 WACWACs 390-05-210390-05-235390-05-245390-05-400390-16-041390-16-042390-16-207390-16-245 and WAC 390-37-300