Chapter 11: After the Election (Winning, Losing, and Closing Shop)

Official Source: Chapter 11 - After the Election

Introduction

The campaign is over. The balloons have dropped, and the votes are counted. Whether you won or lost, the Political Reform Act is not done with you yet.

Many candidates assume they can just walk away after Election Day. Do not make this mistake. You legally exist as a committee until you formally terminate. If you walk away without filing the right paperwork, you will continue to owe the $50 annual fee and will eventually face fines for missing reports.

This chapter guides you through the two main paths: Transitioning to Office (if you won) or Winding Down (if you lost), and how to legally close your committee.

Part A: The "Surplus Funds" Clock

This is the most critical concept for post-election finance. Campaign funds have an expiration date.

After an election, your leftover money eventually turns into "Surplus Funds." Once funds become "surplus," you lose the right to use them for future elections.

When do funds become Surplus?

It depends on whether you won or lost.

1. Defeated Candidates: Funds become surplus 90 days after the end of the post-election reporting period.
   • June Primary Defeat: Reporting period ends June 30. Funds become surplus September 29.
   • November General Defeat: Reporting period ends December 31. Funds become surplus March 31.
2. Successful Candidates (Officeholders): Funds become surplus 90 days after you leave office (at the end of your term or resignation).

The "Use It or Lose It" Rules

Once funds are classified as Surplus, your spending options are severely restricted.

What you CAN do with Surplus Funds:

• Pay Debts: Pay off outstanding campaign bills.
• Refund Donors: Return money to contributors on a pro-rata (proportional) basis.
• Charity: Donate to a bona fide tax-exempt, nonprofit organization (provided no campaign staff or family member is employed by the charity).
• Political Parties: Contribute to a political party committee (so long as the money isn't earmarked for a specific candidate).
• Federal/Out-of-State: Contribute to federal candidates or candidates in other states (subject to their local laws).
• Professional Fees: Pay for lawyers or accountants to help you wind down the committee.

What you CANNOT do with Surplus Funds:

• No Future Elections: You cannot transfer surplus funds to a new committee for a future state or local election.
• No Personal Use: You absolutely cannot use the money for personal expenses.

Trigger Warning for Future Runs: If you lost but plan to run again, you MUST transfer your leftover funds to a new campaign committee before the 90-day surplus deadline hits. If you wait until day 91, that money is locked and cannot be used for your next race.

Part B: If You Won (Successful Candidates)

Congratulations! You are now an officeholder. Your campaign committee doesn't automatically close, but your rules change.

1. Carrying Over Funds

You can keep your campaign committee open, but generally, successful candidates open a new committee for their next election (e.g., "Smith for Senate 2030") and transfer the funds there.

• Note: You must properly attribute these transfers (LIFO/FIFO accounting) to ensure you don't violate contribution limits for the new election. (See Chapter 1).

2. The Officeholder Account

You are allowed to open a separate Officeholder Committee to pay for expenses related to your job (travel to meetings, constituent meals, etc.).

• Funding: You can transfer campaign funds to this account, or raise new money (subject to limits).
• Restrictions: You generally cannot use Officeholder funds for campaign advertising.

3. The 24-Month Rule

If you have no debts, you are required to close your old election committee within 24 months of the election (or leaving office). You cannot keep old committees open indefinitely just to hoard cash.

Part C: If You Lost (Defeated Candidates)

If you lost, your primary goal is usually to wind down the committee and stop the paperwork.

1. Form 470 Filers (The Small Campaigns)

If you raised/spent less than $2,000 and filed the "Short Form" 470, you generally don't need to do anything else. Your obligations end automatically unless you have leftover cash or debt.

2. Form 501/410 Filers (The Standard Campaigns)

You must continue filing Form 460 (Semi-Annual Statements) every six months until you formally terminate.

Part D: Net Debts Outstanding (The "In the Red" Trap)

You cannot close your committee if you owe money.

Fundraising After the Election

If you have debt, you are allowed to keep fundraising after the election, but only up to the amount of your "Net Debts Outstanding."

• Calculation: (Total Unpaid Bills) + (Estimated Cost to Fundraise/Admin) - (Cash on Hand) = Amount You Can Raise.
• Limits: Donors are still subject to the contribution limits of the election that just finished. If a donor maxed out during the election, they cannot give you more money to pay off debt.

The "Zombie" Committee: If you cannot raise the money to pay your debts, your committee stays open. You must keep filing Form 460s indefinitely (potentially for years) showing the debt.

• Tip: Vendors sometimes settle debts for less than the full amount. If a vendor forgives a debt, it is considered a contribution. If this forgiveness pushes the vendor over the contribution limit, it is a violation. Consult the FPPC for debt settlement rules.

Part E: How to Terminate (The Exit Strategy)

Termination is not automatic. You must actively file papers to tell the Secretary of State you are done.

The 3 Conditions for Termination

You can only terminate if:

1. Zero Cash: You have ceased receiving contributions and making expenditures, and your bank balance is $0.
2. Zero Debt: You have no remaining debts (or you have discharged them legally).
3. Filings Complete: You have filed all required campaign statements.

The Procedure

To close the committee, file these two forms simultaneously:

1. Form 460 (The Final Report):
   • Report how you spent the last of your money (e.g., "transfer to new committee" or "refund to donors").
   • Ensure the "Ending Cash Balance" on the Summary Page is zero.
   • Check the "Termination" box on the cover page.
2. Form 410 (Statement of Organization):
   • Check the "Termination" box.
   • Enter the "Date of Termination" (the date your bank account hit zero).
   • ID Number: Make sure you include your Committee ID.

Where to File: Send the original Form 410 and Form 460 to the Secretary of State. If you are a local candidate, send copies to your local filing officer as well.

Action Plan: Post-Election Checklist

FAQ: Common Questions

Q: I lost and I have $500 left. Can I just keep it? A: No. You must dispose of it legally (charity, refund, etc.) to close the committee. If you keep the committee open, you must pay the $50 annual fee to the Secretary of State, which will eat up that $500 quickly.

Q: I have a $5,000 loan I made to my campaign. Can I just close the committee? A: Not if you want to be repaid. To close, you must "forgive" the loan you made to yourself. Report the loan forgiveness on the Form 460, reducing the debt to zero, then terminate.

Q: I forgot to terminate and it's been 3 years. What do I do? A: You likely owe $150+ in back fees to the Secretary of State. You must file all missing Semi-Annual (Form 460) statements up to the present day, pay the fees, and then file the termination paperwork.

Q: Can I use surplus funds to pay for my victory party? A: Yes, if the party occurs before the funds technically become "surplus" (i.e., within the 90-day window). After that, a party might be considered personal use or an impermissible expenditure.