Can a Maryland state legislator solicit donations to pay for a newsletter to constituents, and do campaign finance limits apply to that money?

Plain-English summary

A member of the Maryland House of Delegates asked the Attorney General to sort out how election and ethics law treated donations that lawmakers solicited to help pay for newsletters sent to their constituents. The opinion drew a line between two kinds of newsletters: an "electoral" newsletter, used by a candidate to directly advance an election bid, and a "constituent" newsletter, used by someone already in office simply to keep constituents informed about legislative developments. It concluded that Maryland's Fair Election Practices Act, with its contribution limits and detailed reporting rules, applied only to the first kind. Contributions for a purely informational constituent newsletter fell outside the Act entirely. That did not mean constituent newsletter funds were unregulated, though: the opinion found the Public Ethics Law permitted legislators to solicit these gifts, but required at least some of them to be reported on the legislator's annual financial disclosure statement, and it held that money raised for a constituent newsletter could not be spent on anything else, including a later campaign, while money raised as a campaign contribution could not be redirected to pay for a constituent newsletter either.

Currency note

This opinion was issued in 1983. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

The opinion applied Maryland's Fair Election Practices Act and Public Ethics Law as they existed in Article 33 and Article 40A of the 1983 Maryland Code, along with a federal income tax deduction for newsletter fund contributions under 26 U.S.C. §41 that Congress had added in 1975. Maryland's election and ethics statutes have since been substantially recodified (much of this subject matter now lives in the Election Law Article and the State Government Article's ethics provisions), and the federal newsletter fund tax credit referenced here may no longer exist in the same form. Verify the current statutory framework before relying on any specific contribution limit, disclosure threshold, or definition described in this opinion.

Common questions

Could a Maryland lawmaker ask donors for money to help pay for a newsletter sent to constituents?
Yes, according to this opinion. It found the Public Ethics Law did not prohibit legislators from soliciting these gifts, even though the law otherwise barred officials from soliciting gifts generally.

Did contributions for a legislator's constituent newsletter count against Maryland's campaign contribution limits?
No, this opinion concluded. It found the Fair Election Practices Act's $1,000 per-candidate and $2,500 total contribution limits applied only to contributions tied to an actual or prospective candidacy, and a newsletter used solely to inform constituents, regardless of the election cycle, fell outside that definition.

Did a legislator have to report constituent newsletter fund donations anywhere?
Yes. The opinion concluded these donations were "gifts" under the Public Ethics Law and had to be disclosed on the legislator's annual financial disclosure statement to the extent required by Article 40A, §4-103(d), which at the time meant disclosure only of gifts above a certain value from persons doing business with or regulated by the State.

Could a lawmaker use leftover campaign contributions to pay for a constituent newsletter?
No, according to this opinion. It reasoned that campaign contributions were given for electoral purposes, and using them for a newsletter that made no attempt to promote a candidacy would not qualify as a proper campaign "expenditure" under the Election Code.

If a fund was raised specifically for a constituent newsletter, could that money later be spent on a campaign instead?
No. The opinion found that donors to a constituent newsletter fund gave with the understanding that the money would be used solely for that nonelectoral purpose, and converting it to campaign use without disclosing that intent to donors would be inconsistent with the Fair Election Practices Act's contribution-limit and reporting scheme.

Background and statutory framework

The inquiry arose against the backdrop of a 1980 Maryland income tax provision, Article 81, §280(c)(11), that let taxpayers deduct "political and newsletter fund contributions" as defined by §41 of the federal Internal Revenue Code. That federal provision, added in 1975, gave equal tax treatment to contributions for a candidate's electoral newsletter and to contributions for a sitting officeholder's constituent newsletter, reflecting Congress's judgment that keeping citizens informed about their representatives' work served a public purpose. The opinion revisited and reaffirmed the reasoning of an earlier, unpublished 1979 opinion of the Office (Opinion No. 79-040) holding that the Fair Election Practices Act's definitions of "candidate," "contribution," "expenditure," and "political committee" in Article 33, §1-1(a) were all tied to actual or prospective candidacy, so that a newsletter operation serving only as an ongoing constituent service, unrelated to an election, did not trigger the Act's reporting or contribution-limit machinery, though the opinion acknowledged a constituent newsletter could later become "electoral" as a campaign approached, at which point the Act's requirements would attach.

Turning to the Public Ethics Law, the opinion addressed a gap in the statutory text: while Article 40A excluded "political campaign contributions regulated" under the Fair Election Practices Act from the definition of a prohibited "gift," a constituent newsletter contribution was by definition not regulated by that Act. The opinion followed a 1982 legislative investigating committee report (concerning a solicitation by Delegate Robin Ficker) in concluding that applying the gift-solicitation ban literally to newsletter fund contributions would produce an absurd result, since the same contributions received a tax deduction under Article 81, §280(c)(11) precisely because the General Assembly wanted to encourage them. Citing Board of Fire Comm'rs v. Potter and Pan American Sulphur Co. v. State Dep't of Assessments & Taxation for the principle that courts read statutes to avoid absurd results, the opinion held solicitation was permitted, but declined to extend that same absurdity exception to the separate financial disclosure requirement of Article 40A, §4-103(d), finding that requiring disclosure of qualifying newsletter gifts served the Public Ethics Law's transparency purpose without undermining the tax deduction.

Citations

Statutes:

• Article 81, §280(c)(11) of the Maryland Code (income tax deduction for political and newsletter fund contributions)
• 26 U.S.C. §41(a) (federal newsletter fund contribution tax credit)
• 26 U.S.C. §41(c)(5) (federal definition of "newsletter fund contribution")
• 26 U.S.C. §527(g)(1) (federal definition of a newsletter fund)
• Article 33, §1-1(a)(4),(5),(7),(12), and (14) (Fair Election Practices Act definitions)
• Article 33, §26-11 (campaign finance reporting requirements)
• Article 33, §26-9(b) (contribution limits)
• Article 33, §26-7(d) (disposition of surplus campaign funds)
• Article 40A, §3-106(a) (prohibition on officials soliciting gifts)
• Article 40A, §1-201(p) (Public Ethics Law definition of "gift")
• Article 40A, §4-103(d) (annual financial disclosure statement requirements)

Cases:

• Board of Fire Comm'rs v. Potter, 268 Md. 285, 291 (1973)
• Pan American Sulphur Co. v. State Dep't of Assessments & Taxation, 251 Md. 620, 627 (1968)

Source

• Landing page: https://oag.maryland.gov/resources-info/Pages/attorney-general%E2%80%99s-opinions.aspx
• Original PDF: https://oag.maryland.gov/resources-info/Documents/pdfs/Opinions/1983/Volume68_1983.pdf

Original opinion text

Best-effort transcription from a scanned PDF. Minor errors may remain, the linked PDF is authoritative.

ELECTIONS

Public Ethics—Income Tax—General Assembly—Newsletters—Legal Status Under Fair Election Practices Act and Public Ethics Law of Contributions Solicited by Elected Officials for Use in Distributing Newsletters—Distinction Between Electoral and Constituent Newsletters.

December 28, 1983

The Honorable Helen L. Koss
Maryland House of Delegates

You have requested our opinion on the legal status of contributions solicited by Members of the General Assembly to help defray the cost of distributing newsletters.

Specifically, you have asked for our views on the following questions:

1. In what respects, if any, does the Maryland Fair Election Practices Act govern the establishment of a fund to receive newsletter contributions or the solicitation of such contributions?

2. Does the Maryland Public Ethics Law permit members of the General Assembly to solicit contributions for newsletters that are intended to keep the member's constituents informed about legislative developments?

3. May contributions solicited by an elected official for use in distributing newsletters intended to keep his or her constituency informed be used for any other purpose?

4. May campaign contributions be used for newsletters?

For the reasons given below, we have concluded as follows:

1. As currently drafted, the Maryland Fair Election Practices Act regulates only the solicitation and expenditure of funds for electoral newsletters, newsletters that are used by a candidate, including an incumbent running for reelection, to directly advance his or her electoral prospects. However, the Act does not apply to funds for nonelectoral, or "constituent", newsletters, newsletters that are used by an elected official to keep his or her constituency informed.

2. The Maryland Public Ethics Law does not prohibit members of the General Assembly from soliciting contributions for constituent newsletters. Some, but not all, of such contributions must be reported as gifts in the annual financial disclosure statements required by the Public Ethics Law.

3. Contributions solicited by an elected official for use in distributing constituent newsletters may not be used for any other purpose.

4. Campaign contributions may generally be used for any lawful purpose that enhances the candidate's electoral prospects, including the distribution of electoral newsletters. However, these contributions may not later be used by an elected official to produce nonelectoral newsletters.

I
Background

As your inquiry points out, a Maryland taxpayer, in determining the amount of income subject to the State income tax, may "subtrac[t] from federal adjusted gross income" the following:

"An amount equal to the total of political and newsletter fund contributions made by a nonfiduciary individual taxpayer in the taxable year, as determined, calculated, and limited by the provisions of §41 of the federal Internal Revenue Code." Article 81, §280(c)(ll) of the Maryland Code.

Under §41 of the federal Internal Revenue Code, an individual taxpayer may claim a credit against tax equal to "one-half of all political contributions and all newsletter fund contributions" made during the taxable year. 26 U.S.C. §41(a).1 The Internal Revenue Code contains the following definition of "newsletter fund contribution":

1 The credit claimed may not exceed $50 or, for a joint return, $100. 26 U.S.C. §41(b)(1).

"The term 'newsletter fund contribution' means a contribution or gift of money to a fund established and maintained by an individual who holds, has been elected to, or is a candidate for nomination or election to, any Federal, State, or local elective public office for use by such individual exclusively for the preparation and circulation of a newsletter." 26 U.S.C. §41(c)(5).

This definition, which the Maryland income tax law expressly incorporates, thus gives equal tax treatment to two different types of newsletters: (i) a newsletter distributed by "a candidate for . . . elective public office", surely intended to directly advance his or her candidacy (an "electoral newsletter"); and (ii) a newsletter distributed by "an individual who holds [or] has been elected to . . . public office", arguably intended primarily to inform his or her constituents about pending issues (a "constituent newsletter").

The legislative history of this definition, which was added in 1975, makes clear that Congress specifically sought to encourage the latter type of newsletter:

"[T]he committee believes that the governmental process is strengthened by encouraging such contributions [i.e., to newsletter funds]. It is vital that citizens know what their elected public officials are doing in office, so the voters can evaluate their performance for future elections and can tell their officials what they want them to do and not to do. Consequently, the committee has extended the existing credit and deduction provisions for political contributions to contributions to newsletter funds." S. Rep. No, 93-1357, 93d Cong., 2d Sess. (1974), reprinted in 1974 U.S. Code Cong. & Adm. News 7511.2

2 A contribution for an electoral newsletter would apparently have been credited as a "political contribution" even without this definitional addition to the tax law. Presumably, the definition of "newsletter fund contribution" was drafted to encompass both constituent and electoral newsletters to avoid questions about the status of electoral newsletter contributions that might have arisen if a provision limited only to constituent newsletters had been enacted.

II
Applicability of Fair Election Practices Act to Newsletter Funds

At the outset we repeat an observation made in the only prior Opinion of this Office that addressed the subject of newsletters:

"As is often the case, the relevant provisions of the Election Code do not chart a precise course; but as we have done on prior occasions, we will respond to your inquiry by attempting to make sense out of legislative provisions which frequently seem designed to frustrate that objective." Opinion No. 79-040, at 1 (July 6, 1979) (unpublished).

In revisiting the question of whether the Maryland Fair Election Practices Act applies to newsletters, we are constrained to reach the same conclusion that we did in that prior Opinion: the Fair Election Practices Act applies to the solicitation, donation, and expenditure of funds only for newsletters that are used by a candidate, including an incumbent running for reelection, to directly advance his or her electoral prospects. The Act does not apply to funds for newsletters that are used by an elected official solely to keep his or her constituency informed about legislative developments.

But we cannot pretend that this distinction, compelled, in our view, by the wording of the Act, makes sense. To the contrary, it is little more than a conceit. A newsletter produced by an incumbent through private donations and distributed widely among his or her constituents inevitably has, and, in truth, is intended to have, political impact, no matter how "neutral" and "informational" it appears. Although the Maryland Public Ethics Law both permits solicitation of donations for newsletters and requires disclosure of some such donations (see Part III below), it imposes no contribution limitations and its disclosure requirements, as compared to the Fair Election Practices Act, are relatively limited. Thus, there is a gap in the law that cries out for reform.

A. Constituent Newsletters

1. Reporting Requirements

In our 1979 Opinion, we addressed the question of "whether a group making contributions to pay the cost of production and/or postage of a constituent newsletter must file reports as a political committee pursuant to Article 33, §26-11 of the Maryland Code". Opinion No. 79-040, at 1.

The Opinion concluded that reporting under Article 33, §26-11 was not required:

"An organization must in some way assist or attempt to assist a candidate (or principle) in an election (past, present or future) in order to be subject to the reporting requirements of §26-11. If the sole purpose of the newsletter, and thus of the committee, is to provide a regular constituent service, performed in the same manner whether [or] not an election is imminent, then it seems to us that the committee is neither a political committee nor a partisan organization." Id. at 2 (emphasis in original).

We see no basis on which we can adopt a different reading of the Act. The terms that define the regulatory scheme, although far from a model of precision, are all clearly linked to actual or prospective candidacy:

"'Candidate' means any person who files a certificate of candidacy for any public or party office. . . . 'Contributions' means the gift ... of money or other thing of value to any candidate, or his representative, or a representative of any political party or partisan organization to promote . . . the success or defeat of any candidate. . . . 'Expenditure' means any . . . disbursement or promise of money or valuable thing by any candidate, treasurer, ... or partisan organization to promote . . . the success or defeat of any candidate. . . . 'Partisan organization' means any combination of two or more persons formed for the purpose of assisting the promotion of the success or defeat of any candidate. . . . 'Political committee' means any combination of two or more persons . . . which assists or attempts to assist in any manner the promotion of the success or defeat of any candidate. ..." Article 33, §l-l(a)(4),(5),(7),(12), and (14).

See also Article 33, §26-4(b) (a "committee", undefined in the Act, must report "contributions and expenditures" in excess of $51 that "aid or oppose the nomination or election of any candidate" to that candidate's treasurer).

The Act imposes various financial reporting obligations on candidates, political committees, committees, and partisan organizations. See Article 33, §26-ll(a) (candidates); §26-ll(c) (political committees "which continu[e] in existence from year to year"); §26-ll(d) ("all other [political] committees"); §26-4(b) (committees); and §26-4(a) (partisan organizations).3

3 The Act is especially confusing concerning the reporting requirements applicable to partisan organizations. There is no mention of partisan organizations in Article 33, §26-11, which specifies who must file reports of receipts and expenditures. On the other hand, Article 33, §26-4(a), which applies to partisan organizations as well as to political committees, directs the treasurer and chairman of the covered entities to "file campaign fund reports in accordance with subsection (b) of this section and §26-11 of this article". In light of this latter provision, we conclude that partisan organizations must comply with the reporting obligations of Article 33, §§26-11 and 26-12 throughout their existence, if they have reportable transactions. Any suggestion to the contrary in 59 Opinions of the Attorney General 282, 296 (1974) is disapproved.

However, as the definitions quoted above indicate, an entity that benefits an incumbent solely in his or her capacity as an officeholder, but does not aid the incumbent as a candidate, is not governed by the Act.

Summarizing this principle as applied, for example, to groups that hold testimonial dinners, this Office wrote:

"[T]he definition of a political committee relate[s] to candidates and elections .... [A]n 'early' testimonial dinner committee (i.e., one "formed well in advance of any election and of a candidate's announcing for public office") [is] not a political committee [and, therefore, is] not required to comply with the [Act's] full filing, record keeping and reporting requirements . ..." 60 Opinions of the Attorney General 232, 235 (1975) (emphasis in original).

Cf. 60 Opinions of the Attorney General 223, 230 (1975). Moreover, such a group would need to prepare the abbreviated report of a "committee" only if it "expended $51.00 or more, directly or indirectly, to aid the nomination or election of a candidate". 60 Opinions of the Attorney General at 235.4

4 See also 58 Opinions of the Attorney General 266, 270 (1973) (if a committee raises funds for the future campaign of a person who does not in fact run, "the Maryland Fair Election Practices Act never becomes applicable and thus never places any obligation on the committee with respect to the distribution of its funds").

2. Contribution Limitations

The Fair Election Practices Act also imposes a $1,000 limit on the amount that a person or entity may "contribute ... to any candidate ... in any primary, general or special election" and a $2,500 limit on total "contributions ... in any primary or general election". Article 33, §26-9(b). In our view, these limitations are likewise inapplicable to gifts for constituent newsletters, because the close nexus with candidacy and elections required under the Act is missing.

No doubt it would be more true to real world politics to presume that incumbents are indeed candidates for reelection throughout their tenures, and to thus view constituent newsletters, and contributions for their production, as long-range campaign tools. But to do so would be inconsistent with the terminology used in the Act.5

5 When the General Assembly chose to treat all incumbents as "candidates", for purposes of the statement of contributions required of certain entities that do business with the State, it did so expressly. Article 33, §30-l(d).

Under the Act's current wording, the reasoning in 61 Opinions of the Attorney General 407 (1976) regarding "a non-election year contribution for the benefit of an incumbent office holder" is correct:

"[M]oney given to a fund-raising affair held for the benefit of incumbent office holders will not be deemed to constitute a contribution chargeable to the $2,500 per election limitation if that affair is not conducted for the purpose of raising money either to eliminate a prior election campaign deficit or to accumulate a campaign fund for use in a subsequent election effort on the part of the incumbent officer holders .... It is, for example, entirely possible that such affairs may be conducted solely for the purpose of providing the incumbent office holder with a gift or appropriate recognition of his public service or, conceivably, for the purpose of enabling him to defray the normal expenses of holding office and serving his constituency. If this is the only purpose of the affair and if this is the only purpose which the contributors to it intend to serve, then donations would not constitute political contributions chargeable to the $2,500 limitation." 61 Opinions of the Attorney General at 413.

See also 63 Opinions of the Attorney General 263, 269-71 (1978) (contributions for a political committee's administrative expenses not subject to limitations); 60 Opinions of the Attorney General 259, 261-62 (1975) (contributions for a political party's normal headquarters office and staff not subject to limitations).

B. Electoral Newsletters

As our 1979 Opinion indicated, a newsletter committee, even one that originally was not subject to the Act because it merely enabled an elected official to communicate with his or her constituents, "would become a political committee if it 'assists or attempts to assist in any manner the promotion of the success or defeat of any candidate, candidates, political party, principle or proposition submitted to a vote at any election'". Opinion No. 79-040, at 3 (quoting Article 33, §l-l(a)(14) (definition of "political committee")). The Opinion then observed:

"Once [an elected official's newsletter fundraising committee] engages in such activity with regard to an announced candidate, it would be subject to all the reporting requirements applicable to political committees. See 59 Opinions of the Attorney General 282, 290 (1974). The question of if and when a constituent committee becomes a political committee is, of course, a factual one which must be determined on a case-by-case basis. However, if in preparation for an impending election constituent newsletter is suddenly more frequently published, or more lengthy, or includes campaign as opposed to constituent materials or becomes substantially more costly, these factors would indicate that it is being published not merely as an ongoing constituent service but to assist [a] candidacy[,] and thus those raising money to underwrite its publication would constitute a political committee and be subject to all of the attendant legal obligations." Id.

Given the current state of the governing statutes, this passage provides as much guidance as can reasonably be given on the conditions under which the Fair Election Practices Act is triggered. Once a constituent newsletter becomes an electoral newsletter, contributions for it would be subject to the limitations of Article 33, §26-9(b).

III
Applicability of Public Ethics Law to Newsletter Funds

A. Solicitation

The Maryland Public Ethics Law provides that "[a]n official or employee may not solicit any gift". Article 40A, §3-106(a). However, the term "gift" does not include "political campaign contributions regulated in accordance with the provisions of [the Fair Election Practices Act], or any other provision of State law regulating ... the receipt of political campaign contributions." Article 40A, §l-201(p).

A legislative investigating committee recently examined the applicability of this provision to a certain "newsletter/questionnaire" solicitation. Report of the Legislative Investigating Committee, In re: Delegate Robin Ficker (April, 1982). It was stipulated that the solicitation was not made for "political campaign contributions regulated in accordance with the provisions of [the Fair Election Practices Act]", because the newsletter in question was evidently a constituent newsletter.

The Investigating Committee nevertheless observed that the inapplicability of the Fair Election Practices Act did not resolve the question, because the definition of "gift" in the Public Ethics Law also excludes "solicitations of contributions in accordance with 'any other provision of State law regulating . . . the receipt of political campaign contributions'". Report at 9 (ellipsis in original, emphasis added).

The Investigating Committee treated the tax deduction for "political and newsletter fund contributions" in Article 81, §280(c)(ll) as if it were one such "other" provision. Given the identical tax treatment of these two kinds of contributions, "the fact that the solicitation may have been a newsletter fund solicitation, as opposed to a political campaign solicitation, is of no consequence". Report at 10. In order to avoid "the absurd result of having a contributor entitled to a tax deduction on the one hand, yet making the solicitation of such a contribution by an official an ethical violation," the Investigating Committee concluded that "solicitations for newsletter fund contributions do not constitute solicitations for gifts in violation of the Maryland Public Ethics Law". Report at 11.

We agree with this conclusion, despite the problematic statutory language. It must be acknowledged that the exclusion, from the definition of "gift", of political campaign contributions "regulat[ed]" by other law does not literally apply. The most that can be said unequivocally about the tax deduction is that it reflects the General Assembly's wish to permit and encourage constituent newsletter fund contributions; surely it does not "regulate" them in any true sense of the word, nor does it transmute them into "political campaign contributions".

Constituent newsletter donations are undoubtedly "gifts", not regulated political contributions. Yet, because the later-enacted tax deduction provision must be given practical effect, we agree that they may be solicited.6

6 Article 81, §280(c)(ll) was added by Chapter 373, Laws of Maryland 1980. Article 40A, §l-201(p) was enacted as part of Chapter 513, Laws of Maryland 1979.

To read the Public Ethics Law as preventing their solicitation would lead to an absurd result that can and should be avoided. See, e.g., Board of Fire Comm'rs v. Potter, 268 Md. 285, 291 (1973) (later statute governs to extent of inconsistency); Pan American Sulphur Co. v. State Dep't of Assessments & Taxation, 251 Md. 620, 627 (1968) (avoiding absurd consequences).

B. Disclosure

The Public Ethics Law requires annual disclosure of certain "gifts":

"The [annual financial disclosure] statement . . . shall contain ... [a] schedule of each gift permitted by law in excess of $25 in value or a series of gifts totaling $100 or more from any one person received at any time during the year for which the statement is filed . . . from, or on behalf of, directly or indirectly, any person who does business with the State or is regulated by the State, or is a registrant [under the lobbying disclosure title of the Public Ethics Law.]" Article 40A, §4-103(d).7

7 The phrase "doing business with the State" is defined in Article 40A, §l-201(e) as referring, in general, to those whose transactions with the State involve consideration of $5,000 or more.

However, "campaign contributions regulated in accordance with the provisions of [the Fair Election Practices Act] or any other provision of State law regulating the conduct of elections or the receipt of political campaign contributions" need not be disclosed. Id.

Neither the Fair Election Practices Act nor the tax law "regulate[s]" contributions for constituent newsletters; these contributions are simply permitted, not "regulated". Therefore, (i) they are "gifts", as defined in Article 40A, §l-201(p), and (ii) they are not within the exception from disclosure contained in Article 40A, §4-103(d) itself.

In Part III A above, we described the absurd result that would occur if the prohibition on the solicitation of gifts were applied literally to constituent newsletter funds. By contrast, literal application of the disclosure requirement would have no absurd results. Disclosure of gifts for constituent newsletters would further the purposes of the Public Ethics Law without in any way vitiating the purpose or practical effect of the tax deduction for such contributions. Accordingly, in our view, these contributions must be disclosed to the extent required by Article 40A, §4-103(d).8

8 When it was originally enacted, Article 40A, §4-103(d) permitted non-disclosure of "campaign contributions which are otherwise reported by name of donor". Chapter 513, Laws of Maryland 1979. Under this formulation, donations for constituent newsletters would clearly be reportable, because such donations are not "otherwise reported". The exception that now appears in §4-103(d), which is identical to that in the definition of "gift", Article 40A, §l-201(p), as first enacted and unchanged since, was added by Chapter 796, Laws of Maryland 1981. There is no indication that the new language in §4-103(d) was intended to broaden the scope of nondisclosure permitted by the exception.

However, this disclosure, required only as to gifts above a specified value and, then, only if received from "any person who does business with the State or is regulated by the State, or is a registrant", is markedly less comprehensive than that required under the Fair Election Practices Act. Moreover, the Public Ethics Law contains no limit on the value of gifts that may be given. For these reasons, the Public Ethics Law does not fill the regulatory gap that exists as to constituent newsletters.

IV
Use of Constituent Newsletter Funds for Other Purposes

As our discussion in Part II above indicates, the Fair Election Practices Act creates a broad, and, at least in the case of newsletters, rather unrealistic, distinction between (i) donations for electoral purposes, to which the various requirements in the Act apply, and (ii) donations for official purposes, theoretically unrelated to an election, to which the Act does not apply.

From this overall statutory plan, as well as from specific provisions in the Act, we draw the conclusion that funds given for the production of a constituent newsletter may not be used for electoral purposes. In addition, newsletter funds established to take advantage of favorable tax treatment under federal and State law, i.e., the funds that are the subject of your inquiry, may not be applied even to other forms of constituent service. These funds may be used only for newsletters.9

9 We discuss the permissible uses of donations for electoral purposes in Part V below.

A. Conversion to Electoral Use

In our view, the Fair Election Practices Act requires that those who solicit political contributions, i.e., contributions for electoral use, do so in a manner that informs potential donors of the intended use of their gifts.

The very definition of "contribution" implies that the donor intend his or her gift to be used for electoral purposes:

"'Contributions' means the gift ... of money or other thing of value to any candidate, or his representative, or a representative of any political party or partisan organization to promote ... the success or defeat of any candidate. ..." Article 33, §l-l(a)(5).

By contrast, if the donor is told that the gift will be used solely for a constituent newsletter, a nonelectoral use, there is no basis on which one can simply assume that the donor intends "to promote . . . any candidate" with the gift.

Moreover, as discussed in Part II A above, the Fair Election Practices Act prescribes certain limits on contributions by individuals and entities, no more than $1,000 to any candidate, and no more than $2,500 total, in any election. Article 33, §26-9(b). In order to comply with these limits, donors must be made aware that their gifts are indeed contributions governed by the Act.

Thus, in 61 Opinions of the Attorney General 407 (1976), this Office, describing "the circumstances under which ... a non-election year contribution for the benefit of an incumbent office holder might be held not chargeable to the $2,500 limitation", emphasized "the purpose which the contributors . . . intend to serve". Id. at 413.10

10 That Opinion also spoke of the possibility that those soliciting funds for electoral purposes might "conceal that intent from the persons contributing . . . and [thus] those persons [would] give money without any expectation that the money will be used in connection with an election effort". 61 Opinions of the Attorney General at 413. In that case, the Opinion went on, "their donations will not be chargeable to any $2,500 limitation". Id. We agree with this conclusion, as far as it goes: a contributor who was deceived in this way would undoubtedly not be subject to prosecution for violating a contribution limitation. See 58 Opinions of the Attorney General 266, 269 (1973). However, the passage quoted above certainly should not be taken to suggest that fund solicitors are authorized by the Act to conceal the intended use of the funds.

Similarly, this Office has concluded that the Act's contribution limits do not apply to a corporation's annual payment of certain administrative costs incurred by its political committee: "[N]ot only is the designated purpose of the funds of no benefit to any candidate, but because the donor has complete control over the administration of the political committee, it is certain that in practice the recipient cannot direct the funds to some other use." 63 Opinions of the Attorney General 263, 271 (1978).

In sum, we think that the Act itself and these interpretations of it stand for the following basic principle: A solicitation of funds for a politician or a political entity must make clear to potential donors whether or not the donation is within the scope of the Act. If the donation is not within the scope of the Act, that is, if it is given with the understanding that it is to be applied to a nonelectoral use such as a constituent newsletter, it may not then be converted to electoral use.

B. Conversion to a Different Nonelectoral Use

The Fair Election Practices Act has no application to the separate question of whether funds given for one nonelectoral purpose, a constituent newsletter, may be converted to other nonelectoral uses. However, the law that grants such funds favorable tax treatment itself prohibits conversion to any other use.

The federal Internal Revenue Code defines a "newsletter fund contribution" as "a contribution or gift of money to a fund established and maintained . . . exclusively for the preparation and circulation of a newsletter". 26 U.S.C. §41(c)(5). Under the implementing regulation, a donor may claim a tax credit for a newsletter fund contribution only if the contribution is a "gift of money directly to a fund described in section 527(g)" of the Code. 26 C.F.R. §1.41-l(f). A newsletter fund is described in §527(g) as follows: "a fund established and maintained by an individual who holds, has been elected to, or is a candidate ... for nomination or election to any Federal, State, or local elective public office for use by such individual exclusively for the preparation and circulation of such individual's newsletter". 26 U.S.C. §527(g)(l). Finally, a newsletter fund is itself exempt from federal taxation provided that its "exempt function shall be only the preparation and circulation of the newsletter." 26 U.S.C. §527(g)(2)(A).

These provisions are dispositive as to the newsletter funds about which you inquire: a newsletter fund that qualifies for favorable tax treatment must be used for newsletters, and nothing else.11

11 We have very substantial doubts about whether gifts for nonelectoral purposes other than constituent newsletters may lawfully be solicited under the Maryland Public Ethics Law. See Part III A above. Similarly, if gifts were lawfully solicited for newsletters, but these funds were then directed to some other use, serious issues of noncompliance with the Public Ethics Law would arise.

V
Use of Campaign Contributions for Newsletters

In our view, just as funds given for nonelectoral purposes may not be converted to electoral use, funds given for electoral purposes may not be converted to nonelectoral use. The reasoning is the same: the Fair Election Practices Act requires that a distinction be drawn between the two kinds of donations, because it regulates electoral donations stringently and nonelectoral donations not at all. Therefore, a donor is entitled to know what kind of donation he or she is in fact making and to have the general purpose for that donation carried out.

To be sure, the Act permits a very wide range of uses for campaign funds. An "expenditure" is merely defined as "any . . . disbursement ... of money or valuable thing by any candidate, treasurer, or other agent of such candidate, political party or partisan organization to promote or assist in the promotion of the success or defeat of any candidate". Article 33, §l-l(a)(7).

We were recently asked to elaborate on the purposes for which a "continuing committee" might properly spend the funds in its treasury.12

12 A "continuing committee" is a "political committee which continues in existence from year to year". Article 33, §26-ll(c). See generally 63 Opinions of the Attorney General 273 (1978).

In a letter dated April 27, 1983, we summarized our view of the law as follows:

"In the absence of any other directive from the legislature, it is our view that any lawful expense, that is, an expense not prohibited by some other provision of State or federal law or Constitution, which enhances a candidate's election chances and would not be incurred if there were no potential candidacy, is a proper expenditure so long as the expense is reported in accordance with the reporting requirements of the Election Code. Thus monies used to promote a candidacy, even if not expended immediately prior to an election, whether for staff, salary, equipment, supplies, postage, receptions, newsletters, etc. constitute proper expenditures under the State Election Code so long as they are reported." Letter from Stephen H. Sachs, Attorney General, to Dennis F. Rasmussen, State Senator, at 3 (April 27, 1983) (emphasis added).

Thus, an expenditure of campaign contributions for an electoral newsletter is certainly proper. Such use of contributed funds would surely be within the contemplation of most contributors.13

13 We are not addressing, however, the permissible uses of contributions that have been earmarked by the donor for some specified purpose.

But the use of campaign contributions for a constituent newsletter is quite another matter. For the reasons explained in Part II A above, outlays for a constituent newsletter cannot be said "to promote . . . the success ... of any candidate". By definition, they would be incurred even if, to borrow from our recent letter, "there were no potential candidacy". In short, the use of campaign contributions for a constituent newsletter is not, in our view, a proper "expenditure".14

14 It can be argued that most people who make a contribution to a candidate, that is, who intend "to promote" that candidate in an election, also intend to aid the successful candidate's performance in office. Although this generalization is probably true, it does not necessarily follow that contributors intend their funds to be used for any purpose that the legislator regards as job-related. A contributor might well be unpleasantly surprised to learn that his or her campaign contribution was later spent by the legislator to attend, for example, a parliamentary convention in Paris.
In any event contributions under the Fair Election Practices Act are given for use in a particular election year: "[T]he contributor must have some way of knowing in connection with which election he is contributing money .... If a committee is not identified as 'continuing' the contributor can assume it is organized with one election year (usually one primary and one general election) in mind and limit his contributions accordingly. If a committee is identified as 'continuing' in nature, then a contributor is alerted to the fact that he should determine the particular election for which his contribution is to be used." 63 Opinions of the Attorney General at 278. See also 58 Opinions of the Attorney General 266, 267 (1978) ("money received at a fundraising event must be identified at the time the contribution is made as being for one election or another"). Such an allocation among elections would become even more difficult than these examples suggest if contributions were applied to nonelectoral expenses throughout a legislator's term.

Our conclusion in this regard is reinforced by a provision in the Act, Article 33, §26-7(d), which specifies the disposition of "surplus funds" by noncontinuing committees:

"Prior to the time of filing the final report required by §26-11 of this article, any surplus funds remaining after payment of all campaign expenditures shall be (1) returned, pro rata, to the contributors by the treasurer; or (2) paid to the State central committee of the party of which the candidate is a member or for which the political committee is acting; or (3) paid to a central committee of the party of which the candidate is a member or for which the political committee is acting so long as the central committee is located in a county in which the candidate resides or seeks to represent; or (4) paid to the local board of education or to a recognized nonprofit organization providing services or funds for the benefit of pupils or teachers; or (5) paid to a charitable organization registered pursuant to §103B of Article 41 or to a charitable organization exempt from such registration pursuant to §103C(a) of Article 41."

Payment of the successful candidate's official expenses, unrelated to an election, is not a permitted use of surplus funds.15

15 Federal law presents a noteworthy contrast in this regard. It specifically permits the use of campaign contributions for office expenses generally: "Amounts received by a candidate as contributions that are in excess of any amount necessary to defray his expenditures, and any other amounts contributed to an individual for the purpose of supporting his or her activities as a holder of Federal office, may be used by such candidate or individual, as the case may be, to defray any ordinary and necessary expenses incurred in connection with his or her duties as a holder of Federal office, may be contributed to any organization described in section 170(c) of Title 26, or may be used for any other lawful purpose, including transfers without limitation to any national, State, or local committee of any political party; except that, with respect to any individual who is not a Senator or Representative in, or Delegate or Resident Commissioner to, the Congress on January 8, 1980, no such amounts may be converted by any person to any personal use, other than to defray any ordinary and necessary expenses incurred in connection with his or her duties as a holder of Federal office." 2 U.S.C. §439a.

"[A] political committee, formed to assist a candidate ... in a given election year[,] is required by Section 26-7(d) to dispose of funds remaining after payment of campaign expenditures when the committee had done all it is going to do in the one election year in which it was formed." 63 Opinions of the Attorney General at 279 (emphasis added).16

16 Article 33, §26-7(d) does not apply to a continuing committee. 63 Opinions of the Attorney General at 279. The reason is that, unlike a regular political committee, a continuing committee is one "which intend[s] from the outset to continue to exist and be active, not just for election year but from year to year and from election to election". 63 Opinions of the Attorney General at 276. Therefore, any funds remaining after a particular election are not truly "surplus".
There is certainly a tension between the right of a continuing committee to spend money collected during one election in a later election, on the one hand, and the obligation of contributors to adhere to the contribution limits in Article 33, §26-9(b), on the other. See the second paragraph of note 14 above. The General Assembly may wish to dress this problem.

VI
Conclusion

In summary, it is our opinion that:

1. As currently drafted, the Maryland Fair Election Practices Act regulates only the solicitation and expenditure of funds for newsletters that are used by a candidate, including an incumbent running for reelection, to directly advance his or her electoral prospects. However, the Act does not apply to funds for newsletters that are used by an elected official to keep his or her constituency informed.

2. The Maryland Public Ethics Law does not prohibit members of the General Assembly from soliciting contributions for constituent newsletters. Some, but not all, of such contributions must be reported as gifts in the annual financial disclosure statements required by the Public Ethics Law.

3. Contributions solicited by an elected official for use in distributing constituent newsletters may not be used for any other purpose.

4. Campaign contributions may generally be used for any lawful purpose that enhances the candidate's electoral prospects, including the distribution of electoral newsletters. However, these contributions may not later be used by an elected official to produce nonelectoral newsletters.

In closing, we repeat our observation that the distinction between electoral newsletters and constituent newsletters created by current law is unrealistic and could lead to abuse. We urge the General Assembly to consider ways in which the deficiencies in the current law may be remedied.

Stephen H. Sachs, Attorney General
Jack Schwartz, Assistant Counsel, Opinions and Advice
Avery Aisenstark, Chief Counsel, Opinions and Advice