State tax checkoff funds

State and local party committees in some states may receive funds derived from state tax checkoffs or fees paid for a state service (such as fees for personalized license plates). This section explains when these funds may be deposited in a federal account and, if so, when they are considered contributions rather than miscellaneous receipts.

Deposit in federal account

As a general rule, if the funds in question are from permissible sources (for example, individuals) rather than from persons prohibited from making contributions under federal law (for example, corporations, labor organizations, foreign nationals), the funds may be deposited into a federal account. For example, in several advisory opinions (AOs), the Commission concluded that proceeds from state income tax checkoff programs (whereby individual taxpayers designate funds for political parties) and fees for personalized license plates were permissible funds and could therefore be deposited into a federal account.

In another opinion, AO 1988-33, a state party committee was allowed to deposit into its federal account ballot fees and party assessments paid to the state of Florida by federal candidates. However, because state law allowed nonfederal candidates to accept funds that would be considered prohibited or excessive under federal law, fees and assessments from nonfederal candidates could not be deposited into the federal account.

Treatment as contributions

In the cited advisory opinions, checkoff funds that did not increase the taxpayer’s liability or decrease his or her refund were not considered contributions. Nor were the personalized license plate fees. In these situations, the funds were considered miscellaneous receipts (reportable as “other receipts”).

However, in AO 1983-15, the checkoff funds represented taxpayer refunds. Under those circumstances—where the money would otherwise be refunded to the taxpayer—the funds were considered contributions if deposited into a federal account. Because the amount of each contribution was only $2 per taxpayer, the contributions were reportable as unitemized contributions from individuals.