AN ACT to restrict the use of Contributions to candidates and candidates' campaign funds to those related to campaigns and office‑holding duties; to prohibit personal use of contributions by candidates and candidate campaign committees; and to strengthen reporting requirements to prevent violations.

The General Assembly of North Carolina enacts:

SECTION 1.  Article 22A of Chapter 163 of the General Statutes is amended by adding a new section to read:
"§ 163‑278.16B. Use of contributions for certain purposes.
(a)	A candidate or candidate campaign committee may use contributions only for the following purposes:
(1)	Expenditures resulting from the campaign for public office by the candidate or candidate's campaign committee. 
(2)	Expenditures resulting from holding public office.
(3)	Contributions to an organization described in section 170(c) of the Internal Revenue Code of 1986 (26 U.S.C. § 170(c)), provided that the candidate or the candidate's spouse, children, parents, brothers, or sisters are not employed by the organization.
(4)	Contributions to a national, State, or district or county committee of a political party or a caucus of the political party. 
(5)	Contributions to another candidate or candidate's campaign committee.
(6)	To return all or a portion of a contribution to the contributor.
(7)	Payment of any penalties against the candidate or candidate's campaign committee for violation of this Article imposed by a board of elections or a court of competent jurisdiction.
(8)	Payment to the Escheat Fund established by Chapter 116B of the General Statutes.
(b)	As used in this section, the term 'candidate campaign committee' means the same as in G.S. 163‑278.38Z(3).
(c)	Contributions made to a candidate or candidate campaign committee do not become a part of the personal estate of the individual candidate. A candidate or the candidate who directs the candidate campaign committee may file with the board a written designation of those funds that directs to which of the permitted uses in subsection (a) of this section they shall be paid in the event of the death or incapacity of the candidate. After the payment of permitted outstanding debts of the account, the candidate's filed written designation shall control. If the candidate files no such written designation, the funds after payment of permitted outstanding debts shall be distributed in accordance with subdivision (a)(8) of this section."
SECTION 2.  G.S. 163‑278.8(e) reads as rewritten:
"(e)	All expenditures for media expenses shall be made by a verifiable form of payment. The State Board of Elections shall prescribe methods to ensure an audit trail for every expenditure so that the identity of each payee can be determined. All media expenditures in any amount shall be accounted for and reported individually and separately with specific descriptions to provide a reasonable understanding of the expenditure."
SECTION 3.  G.S. 163‑278.8(f) reads as rewritten:
"(f)	All expenditures for nonmedia expenses (except postage) of more than fifty dollars ($50.00) shall be made by a verifiable form of payment. The State Board of Elections shall prescribe methods to ensure an audit trail for every expenditure so that the identity of each payee can be determined. All expenditures for nonmedia expenses of fifty dollars ($50.00) or less may be made by check or by cash payment. All nonmedia expenditures of more than fifty dollars ($50.00) shall be accounted for and reported individually and separately with a specific description to provide a reasonable understanding of the expenditure, but expenditures of fifty dollars ($50.00) or less may be accounted for and reported in an aggregated amount, but in that case the treasurer shall account for and report that the treasurer made expenditures of fifty dollars ($50.00) or less each, the amounts, dates, and the purposes for which made. In the case of a nonmedia expenditure required to be accounted for individually and separately with a specific description to provide a reasonable understanding of the expenditure by this subsection, if the expenditure was to an individual, the report shall list the name and address of the individual."
SECTION 4.  G.S. 163‑278.11(a)(2) reads as rewritten:
"(2)	Expenditures. – A list of all expenditures required under G.S. 163‑278.8 made by or on behalf of a candidate, political committee, or referendum committee. The statement shall list the name and complete mailing address of each payee, the amount paid, the purpose, and the date such payment was made. The total sum of all expenditures to date shall be plainly exhibited. Forms for required reports shall be prescribed by the Board. In accounting for all expenditures in accordance with G.S. 163‑278.8(e) and G.S. 163‑278.8(f), the payee shall be the individual or person to whom the candidate, political committee, or referendum committee is obligated to make the expenditure. If the expenditure is to a financial institution for revolving credit or a reimbursement for a payment to a financial institution for revolving credit, the statement shall also include a specific itemization of the goods and services purchased with the revolving credit. If the obligation is for more than one good or service, the statement shall include a specific itemization of the obligation so as to provide a reasonable understanding of the obligation."
SECTION 5.  G.S. 163‑278.27(a) reads as rewritten:
"(a)	Any individual, candidate, political committee, referendum committee, treasurer, person or media who intentionally violates the applicable provisions of G.S. 163‑278.7, 163‑278.8, 163‑278.9, 163‑278.10, 163‑278.11, 163‑278.12, 163‑278.13, 163‑278.13B, 163‑278.14, 163‑278.16, 163‑278.16B, 163‑278.17, 163‑278.18, 163‑278.19, 163‑278.20, 163‑278.39, 163‑278.40A, 163‑278.40B, 163‑278.40C, 163‑278.40D or 163‑278.40E is guilty of a Class 2 misdemeanor. The statute of limitations shall run from the day the last report is due to be filed with the appropriate board of elections for the election cycle for which the violation occurred."
SECTION 6.  Sections 1 and 5 of this act become effective October 1, 2006, and apply to all candidates and candidate campaign committees with active accounts with the State Board of Elections or a county board of elections on or after that date.  Sections 2, 3, and 4 of this act become effective January 1, 2007, and apply to all political committees and referendum committees with active accounts with the State Board of Elections or a county board of elections on or after that date. The remainder of this act becomes effective January 1, 2007.
In the General Assembly read three times and ratified this the 13th day of July, 2006.

	_____________________________________
		 Beverly E. Perdue
	 President of the Senate

	_____________________________________
		 James B. Black
	 Speaker of the House of Representatives

	_____________________________________
		 Michael F. Easley
	 Governor

Approved __________.m. this ______________ day of ___________________, 2006