IV. Specific Disclosure Requirements

EIGA mandated annual financial disclosure by all senior federal personnel, including all Members and some employees of the House. [25] The Ethics Reform Act of 1989 [26] substantially revised these provisions and condensed what had been different requirements for each branch into one uniform title covering the entire federal government. As such, Financial Disclosure Statements must disclose outside compensation, holdings, and business transactions, generally for the calendar year preceding the filing date. In all instances, filers may disclose additional information or explanation at their discretion.

The Standards Committee develops forms and instructions for financial disclosure and reviews the completed statements of House Members, officers, employees, candidates, and certain other legislative branch personnel for compliance with applicable laws. The Clerk of the House is responsible for making the forms available for public inspection. The discussion that follows focuses primarily on those requirements that apply to Members, officers, and employees of the House. The instruction booklets issued by the Standards Committee should be consulted for specific guidance when completing a Financial Disclosure Statement.

Who Must File

All Members of the House and those House employees earning “above GS- 15,” that is, at least 120% of the federal GS-15 base level salary, for at least 60 days during the calendar year must file a Financial Disclosure Statement by May 15 of each year. For 2008, the triggering salary, referred to as the “senior staff rate,” is $114,468. Employees who are paid at this rate are termed “senior” or “covered” employees. Each Member’s office must also have at least one employee who files (this individual is referred to as the “principal assistant”). Thus, if a Member has no employee on his or her personal staff who is paid at the senior staff rate, the Member must designate at least one member of his or her staff as a principal assistant to file. As the Committee first stated in its 1969 financial disclosure instructions, this person will usually be an employee whose relationship with the Member permits the person, under some circumstances, to act in the Member’s name or with the Member’s authority.

An individual who qualifies as a candidate for the House must file within 30 days of becoming a candidate, or on or before May 15, whichever is later, but in any event at least 30 days before any election (including a primary) in which that individual is seeking office. Individuals who do not qualify as candidates until within 30 days of the election must file as soon as they do qualify. An individual seeking office qualifies as a candidate for financial disclosure purposes by raising or spending more than $5,000 for his or her campaign.[27] Both the office-seeker’s own funds and contributions from third parties count towards the threshold. An individual who never raises or spends more than $5,000 has no financial disclosure obligations with the House, even if that person’s name appears on an election ballot. All individuals who do meet this definition must file each year that they continue to be candidates.

Spouse and Dependent Information

In general, reporting individuals must disclose the financial interests of their spouses and dependent children, in addition to their own.[28] Only in rare circumstances, when the financial interest of a spouse or dependent child meets all three standards listed below, may a filer omit disclosure of an asset:

1. The item is the sole interest or responsibility of the spouse or dependent child, and the reporting individual has no knowledge of the item;
2. The item was not in any way, past or present, derived from the income, assets, or activities of the reporting individual; and
3. The reporting individual neither derives, nor expects to derive, any financial or economic benefit from the item.[29]

An individual is not required to disclose financial information about a spouse from whom he or she has separated with the intention of terminating the marriage or providing for a permanent separation.[30]

Example 1. Member A sets up an account in his 10-year-old daughter’s name, into which he deposits funds that he has earmarked to pay for her college education. Member A must disclose the account.

Example 2. Member B’s husband has a stock portfolio, entirely in his own name. He uses the income from these investments to finance family vacations and other non-routine family expenses. Member B must disclose the contents of the stock portfolio.

Example 3. Member C’s wife inherits some real estate. She is the sole owner, but C will inherit the land if his wife predeceases him. C must disclose the property.

Income

The term “income,” as defined in the EIGA, is intended to be comprehensive. For reporting purposes, income is divided into two categories, “earned” and “unearned” income. Each type of income is explained more fully in this section.

Earned Income and Honoraria. “Earned” income refers to compensation derived from employment or personal efforts. Such income earned by the filer must be disclosed when it totals $200 or more from any one source in a calendar year. The source, type, and exact dollar amount of the reporting individual’s earnings must be stated.[31] A filer must report the source, but not the amount, of income earned by a spouse when that income exceeds $1,000. Earned income of a dependent child need not be reported, regardless of the amount.[32]

While Members, officers, and covered employees may not themselves receive honoraria,[33] reporting individuals must still disclose the source and amount of payments that are directed to charity in lieu of honoraria. In addition, a confidential listing of the recipient charities must be filed separately with the Standards Committee.[34] The source and exact dollar amount of spousal honoraria must be disclosed.

Assets and Unearned Income. “Unearned” income refers to income derived from property held for investment or the production of income, such as real estate, stocks, bonds, savings accounts, and retirement accounts. Any asset held for such an investment purpose must be disclosed if it either was worth more than $1,000 at the close of the calendar year or it generated income of more than $200 during the year.[35] Where the value of an item is difficult to determine, a good faith estimate of fair market value may be used.

The identity of the property, in addition to its category of value,[36] must be specified. Each company in which stock worth over $1,000 is held must be listed separately. Except in limited circumstances, the filer must disclose the specific contents of any investment account, private retirement account (e.g., a 401(k) or IRA), or education savings account (i.e., a “529 plan”). In other words, the EIGA requires disclosure of each asset held within such an account that meets the value or income tests described above. Disclosure of real property should include a description sufficient to permit its identification (e.g., street address or plat and map location).

Interest-bearing savings accounts valued at more than $1,000 must be disclosed only if all such accounts total more than $5,000 in value. Savings accounts include certificates of deposit, money market accounts, or any other form of deposit in a bank, savings and loan association, credit union, or similar financial institution. Non- interest-bearing checking accounts, on the other hand, need not be disclosed since they produce no income. Financial interests in United States government retirement programs (e.g., the Thrift Savings Plan) need not be reported.

Example 4. Member D has a stock portfolio, managed by a stock broker. Member D must disclose each stock in the portfolio that is worth more than $1,000 at the end of the year or generates more than $200 in income during the year.

Example 5. Member E Lists $1,200 worth of stock in Company Z on her Financial Disclosure Statement. Over the next year, the company suffers losses such that it declares no dividends during the year and E’s stock declines in value to $900 by year’s end. E need not disclose her stock in Z on her next Financial Disclosure Statement. (However, for the sake of clarity, E may wish to list her stock in Z nonetheless, indicating a value of less than $1,000, rather than delete the asset from her latest filing without explanation.)

Example 6. Member F has $10,000 invested in a money market account with a brokerage firm. The money market fund is managed by an employee of the firm who invests the fund’s assets in stocks. Individual investors like F have no control over which stocks the fund holds. F must disclose his investment in the overall fund, but he need not list the individual stocks held within the fund’s portfolio.

Example 7. Member G’s wife has an IRA worth $12,000. Member G must disclose each asset held in the IRA that is worth more than $1,000 at year end or that generated more than $200 in income during the calendar year.

The holdings of and income derived from a trust or other financial arrangement in which the reporting individual, spouse, or dependent child has a beneficial interest in principal or income generally must be disclosed. The three instances when such assets need not be disclosed are when they are held in (1) a qualified blind trust, (2) a qualified diversified trust, or (3) a trust which was not created by the beneficiary and regarding which neither the reporting individual, spouse, nor dependent child have specific knowledge of the holdings or sources of income. [37] Even for such trusts, the category of value of any unearned trust income must be reported if it exceeds $200. Both qualified blind trusts and qualified diversified trusts must be pre-approved by the Standards Committee. These instruments are discussed in greater detail later in this chapter.

Loans made by the filer on which the filer is charging interest must be disclosed, unless the borrower is the spouse, parent, sibling, or child of the filer. Personal residences not producing rental income, and personal property not held primarily for investment or the production of income (such as artwork displayed in one’s home) need not be reported.

Example 8. Member H owns a vacation home, which she uses for one month during the year. The rest of the time, she allows family members and close friends to use it at no charge. H need not disclose this property.

Example 9. Member I owns a vacation home, which he uses for one month during the year. The rest of the time, he rents it out. I must disclose this property.

Example 10. Member J’s home includes a basement apartment that he rents to a tenant for $800 a month. H must disclose this rental income, as well as the property that generated it. The “asset value” is the value of the entire home, not just the basement apartment.

Example 11. Member K owns an antique car worth $50,000. K never uses the car for commercial purposes; he uses it exclusively for his personal enjoyment. K need not disclose the car.

Transactions

The Financial Disclosure Statement must include a brief description, the date, and category of value of any purchase, sale, or exchange of real property, stocks, bonds, commodities, futures, or other forms of securities (including trust assets) that exceeds $1,000.[38] The category of value to be reported is the total purchase or sale price (or the fair market value in the case of an exchange), regardless of any capital gain or loss on the transaction.

Stock and commodity options, futures contracts, and bonds (corporate and government) are considered types of securities. As such, transactions in these items are reportable. Transactions by a partnership in which the reporting individual has an interest must be disclosed when the partnership is organized for the investment or production of income and is not actively engaged in a trade or business. These partnership transactions need only be reported, however, to the extent that the filer’s share of the transaction exceeds $1,000.

The purchase or sale of property used solely as a personal residence (including a secondary residence not used for rental purposes) of the reporting individual or spouse and transactions solely by and between the reporting individual and his or her spouse or dependent children need not be disclosed. Likewise, the opening or closing of bank accounts, the purchase or sale of certificates of deposit, and contributions to or the rollover of IRAs and other retirement plans need not be reported.

Example 12. Member L sells stock in Company Z for $5,000, realizing a $700 capital loss. L must report the $5,000 sale as a transaction. L may add that the sale represents a loss if she so chooses, but this information is not required.

Example 13. Member M has a 25% interest in a partnership that buys and sells real estate for investment purposes. The partnership buys a piece of property for $400,000. M must disclose the partnership’s purchase, in the category of value reflecting his $100,000 share of the transaction.

Information regarding asset transactions is not required of congressional candidates or new employees.

Liabilities

Personal obligations aggregating over $10,000 owed to one creditor at any time during the calendar year, regardless of repayment terms or interest rates, must be listed.[39] The identity (name of the creditor), type, and amount of the liability must be stated. Except for revolving charge accounts (i.e., credit cards), the largest amount owed during the calendar year is the value to be reported. For revolving charge accounts, the year-end balance is used; if the account balance declines by the year’s end to $10,000 or less, no reporting is required.

Just as personal liabilities owed to a reporting individual by certain relatives need not be reported as assets, liabilities owed by a reporting individual to a spouse, parent, sibling, or child of the filer or of the filer’s spouse need not be listed. Mortgages and home equity loans secured by a personal residence (including secondary residences not used for rental purposes) as well as personal loans secured by motor vehicles, household furniture, or appliances need not be disclosed as long as the indebtedness does not exceed the purchase price of the item. Filers also need not report contingent liabilities, such as that of a guarantor, endorser, or surety; liabilities of a business in which the reporting individual has an interest; loans secured by the cash value of a life insurance policy; and tax deficiencies.

Gifts

EIGA requires disclosure of gifts received during the year, from someone other than a relative, whose aggregate value exceeds “minimal value,” as defined in the statute. For 2008, “minimal value” is $335, but gifts valued below $134 need not be counted towards this limit. [40] Gifts valued below “minimal value” need not be reported. However, because the House gift rule (House Rule 25, clause 5) limits the value of gifts that Members, officers, and employees of the House may accept in a calendar year from any source other than a relative or fellow Member,[41] few gifts exceeding this dollar amount are acceptable.

Notwithstanding the limitations on gift acceptance, there are gifts valued in excess of $335 which a House Member, officer, or employee may accept that exceed the reporting threshold and for which disclosure must therefore be made on a Financial Disclosure Statement. Examples of such gifts include gifts provided on the basis of personal friendship, contributions to a legal expense fund, and commemorative items that exceed the reporting threshold. As a general matter, in each of these instances, the recipient must first seek written approval from the Committee prior to accepting such a gift.

Example 14. Member N obtains written permission from the Committee to accept from a personal friend $500 in travel expenses to attend their college reunion. Member N must report the gift.

The rule contains a number of exceptions to the reporting requirement. Gifts from relatives, personal hospitality, and local meals need not be disclosed. “Personal hospitality” means hospitality extended for a non-business purpose by an individual, at the individual’s residence or other property. A “local meal” means a meal unconnected with a travel package, at which the host is present. Gifts to a spouse or dependent child that are totally independent of the recipient’s relationship with the reporting individual are exempt from both the gift rule and the disclosure statute. If not totally independent, gifts from third parties to a spouse or dependent child are treated the same as gifts to the reporting individual. However, simultaneous gifts to the reporting individual and his or her spouse or dependent child may be treated as separate gifts for the purpose of determining whether the $122 aggregation threshold has been reached.

Example 15. Member O receives from her father a gift of $10,000. O need not disclose the gift because it is from a relative.

The statute requires disclosure only of gifts received while the filer was a Member or employee of the House. Thus, no information regarding gifts is required from filers who are congressional candidates or new House employees.

Travel Reimbursements

Travel-related expenses provided by nongovernmental sources for activities such as speaking engagements, conferences, or fact-finding events are not considered gifts, but they must be reported when they total more than $335 in value from one source in a year. These expenses include those reimbursed to the reporting individual as well as those paid directly by the sponsoring organization. Unlike with gifts, all travel expenses count towards the $335 limit; there is no $134 minimum threshold. For reimbursements and gifts of travel, the Financial Disclosure Statement must list the source, travel itinerary, inclusive dates, and nature of expenses provided, but the dollar value of the travel need not be listed. Travel paid for by a private source must be disclosed, even if unrelated to the traveler’s congressional duties. Travel paid for by a foreign government under the Mutual Educational and Cultural Exchange Act (often referred to as “MECEA”)[42] must also be reported.

Example 16. Member P gives a speech in Chicago at a meeting of a trade association which pays airfare, food, and lodging for P and his wife to attend. The expenses for Mr. and Mrs. P exceed $335. P must disclose the source, dates, and nature of the expenses, but he need not report any dollar amounts.

Example 17. Member Q’s wife works for a law firm that holds an annual retreat at an out-of-state resort for all of its employees. Each employee is allowed to bring his or her spouse, at the firm’s expense. Q attends the retreat with his wife. If the cost of Q’s attendance exceeds $335, he must report the trip on his statement, even though his attendance was unrelated to his official duties.

Travel reported on federal campaign filings, such as Federal Election Commission reports, need not be disclosed on a Financial Disclosure Statement, nor need travel provided on an official basis by federal, state, or local government entity. Travel provided by a foreign government pursuant to the Foreign Gifts and Decorations Act[43] is disclosed on a separate form for that purpose, and thus need not be disclosed on a Financial Disclosure Statement.

The statute requires disclosure only of travel taken while the filer was a Member or employee of the House. Thus, no information regarding travel is required from congressional candidates or new House employees.

Positions

Individuals must disclose any nongovernmental positions, whether or not compensated, that they currently hold, unless the Statement is the first one filed with the House. On an individual’s first Statement, the individual must disclose all positions they currently hold as well as those held in the previous two years.[44] Included are such positions as officer, director, trustee, partner, proprietor, representative, employee, or consultant of any corporation, company, firm, partnership, or other business enterprise, any nonprofit organization, any labor organization, or any educational or other institution. Positions held in a religious, social, fraternal, or political entity, and positions solely of an honorary nature need not be disclosed.

The title or nature of each position and the name of the organization should be stated. Only positions held by the reporting individual need to be disclosed, not those held by a spouse or dependent child.

Agreements

Any agreements or arrangements of the reporting individual concerning future employment, leave of absence during government service, continuation of payments from a private source, deferred compensation plans, or continued participation in an employee benefit or welfare plan of a former private employer must be disclosed.[45] The parties, dates, and terms should be reported by Members, officers, and employees. This information is not required of a candidate, or of the spouse or dependent children of a filer.

Continued payments or benefits from a former employer would include, for example, interest in or contributions to a pension fund, profit-sharing plan, or life and health insurance; buyout agreements; and severance payments. A deferred compensation plan would include an arrangement for the delayed payment of amounts due for services rendered by a reporting individual. Deferred compensation is not subject to outside earned income limitations, but it is reportable.

Only agreements to which the reporting individual is a party need be disclosed, not those of a spouse or dependent child.

Compensation in Excess of $5,000 Paid by One Source

New officers and employees and candidates must disclose any compensation in excess of $5,000 received from a single source other than the United States.[46] Reporting individuals need disclose only their own compensation in this section, not that received by their spouses or children. The information must cover two calendar years.

Specifically, a reporting individual who was a member or partner of a firm or association that provided services (such as legal, architectural, or accounting services) must disclose the clients or customers of that firm or association to whom he or she directly provided services. The clients or customers of a filer who was the sole proprietor of a business or professional practice must be disclosed in the same manner. The nature of the duties performed only need be described generally. Thus, a client name (which may be a company name, if the client is a corporation) and “legal services” would be sufficient for services rendered by an attorney. The amount of compensation also need not be disclosed.

Trusts

A reporting individual must usually provide the same information for trust assets and income as for other items, with three exceptions. The first exception from reporting is for trusts that were not created by the reporting individual, his spouse, or dependent, when none of the three has specific knowledge of the holdings or the sources of income of the trust. The other exceptions are for qualified blind trusts and qualified diversified trusts.[47]

In a qualified blind trust, an official places financial assets under the exclusive control of an independent party. All assets or holdings transferred to a trust at the time of its creation or any time thereafter must be identified, valued, and publicly disclosed. Eventually, through the sale of existing assets and the acquisition of new ones, the identity of specific assets owned by the trust will be unknown to the official and will thus be eliminated as a factor in influencing official decision-making.

A qualified blind trust must satisfy a number of requirements, including the following:

• The trustee must be an independent financial institution, lawyer, certified public accountant, broker, or investment advisor;
• There may be no restrictions on the disposal of the trust assets;
• The trust instrument must limit communications between the trustee and interested parties; and
• The trust instrument and the trustee must be approved by the Standards Committee.

The third exception from trust disclosure is for a qualified diversified trust, an arrangement not generally well suited to use in the legislative branch because of the breadth of legislators’ official duties. Such a trust must meet the following requirements:

• The trust must consist of a diversified portfolio of readily marketable securities;
• The trust assets may not consist of securities of entities having substantial activities in the area of primary responsibility of the reporting individual;
• The trust instrument must prohibit the trustee from publicly disclosing or informing any interested party of the sale of any security;
• The trustee must have power of attorney to prepare the personal income tax returns of the individual and any other returns that may contain information pertaining to the trust; and
• The trustee as well as the trust instrument must be approved in advance by the Standards Committee.