What would be quite interesting is if a candidate doesn't pay employment taxes, spends his or her full allotment of "clean money," and later on gets audited and has to pay the taxes. Doesn't that violate the city spending cap?

Indeed, what if he or she is sued after the election by a campaign worker for back pay, and loses the case? If that pushes the candidate over the spending limit, what then?

Shouldn't the candidate have to pay taxes on money received from the city? It is a big pile of free money I would think it needed to be taxed.

Pages 9-10 of the City's Participating Candidate info packet says:

"When the candidate later files their Request for Certification with the Auditor, the candidate will need to provide the Auditor with their Committee's Federal Employer Tax Identification number so that the Auditor may set up the Committee in the City Accounting System. See the Campaign Finance Manual and IRS website (www.irs.gov) for more information about obtaining this number and other reporting requirements."

Page 8 of State Campaign Finance Manual:

"The Elections Division does not interpret federal or state tax law. All committees should carefully review their tax reporting requirements and
seek appropriate legal and tax advice."

Yes, I forgot about Tri Met. I paid that one too... it's on the Oregon quarterly report. Unemployment too.

This is clearly an issue for all campaigns and candidates, not just clean money candidates.

Whether a particular campaign worker needs to be paid as an employee versus a contract really is a case by case question depending on the nature of their job duties, the level of oversight being provided, etc. Many many high level campaigns pay their managers on a contract basis, so if there's a problem here, it's a problem shared with campaigns all across the country.

Emily,
I think you're right. I think it is a big probablem for many, many campaigns. The independent contractor tests are stringent, and most of the campaign workers I am familiar with would not meet them.

I got a reply from Andrew Carlstrom in the auditor's office. He forwarded my e mail to all the candidates in the current city election. They can get themselves squared up if they move fast... the first quarter 941 and state report is due April 30th. None of them got any money in 2007, so they wouldn't have any payroll from the fourth quarter of last year.

I also heard from Jim Middaugh. He has been doing the proper withholdings for his folks.

The publicly funded candidates have to remember that they must deposit the employer side of FICA and medicare and tri met and unemployment. They need to factor that in when calculating their capped expenditures.

I'd be happy to talk with any of them about what they need to do. I did it during my campaign and I've been managing a small payroll for over twenty years.

We have been doing the proper withholdings as well. Given that Charles operates a large payroll at his non-profit this was a no-brainer for us.

Yes, it's not difficult if you are already used to processing a payroll. I'll bet you dollars to donuts though that there was no withholdings on some of the big lump sums we've been hearing about.

OK, so now I'm curious. What happens with both VOE rules or the IRS if a city council candidate paid staff in 2007 (not contractors but actual staff) with seed money and didn't pay taxes on that? And yes, there is a candidate that did that on multiple occasions.

curious,
Nothing, unless somebody files an IRS complaint.

If a complaint is filed and the IRS looks into it, the employer (campaign) will be assesed for the back taxes including penalties and interest. You'd need a CPA to tell you for sure about the non-withheld FICA and Medicare, I don't know if the employee has to cough that up or if the employer gets nailed for both sides.

If a COP publicly financed candidate pays their staff as contractors, and spends up to their limit, and then the IRS rules that they weren't contractors, the campaign will have to come up with the FICA and Medicare. That would result in their spending more than the cap (because they didn't budget for it), and they would get disqualified from public financing... unless the "flexible rules" are quickly changed to cover them somehow.

Oh... they need to remember Tri Met and Unemployment also.