Complete Home & Office Legal Guide/Complete Home and Office Legal Guide (Chestnut) (1993).ISO/stat/fed/cfr2634b.asc

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    (2)    The source, type, and in the case of public financial
disclosure reports the actual amount or value, of gross income
from a business, distributive share of a partnership, joint
business venture income, payments from an estate or an annuity or
endowment contract, or any other items of income not otherwise
covered by paragraphs (a) or (b)(1) of this section which are
received by the filer or accrued to his benefit during the
reporting period and which exceed $200 from any one source.

    Example 1. An official rents out a portion of his
residence. He receives rental income of $600 from one individual
for four months and $1,200 from another individual for the
remaining eight months of the year covered by his incumbent
financial disclosure report. He must identify the property,
specify the type of income (rent), and if he is a public filer
indicate the category of the total amount of rent received. (He
must also disclose the asset information required by 2634.301 of
this subpart.)

    Example 2. A reporting individual has three savings
accounts with Bank A. One is in his name and earned $85 in
interest during the reporting period. One is in a joint account
with his spouse and earned $120 in interest. One is in his name
and his dependent daughter's name and earned $35 in interest.
Since the aggregate interest income from this source exceeds

$200, the official must disclose the name of the bank, the type
of income, and if he is a public filer, the category of the total
amount of interest earned from all three accounts. (He must also
disclose the accounts as assets under 2634.301 of this subpart
if, in the aggregate, they total more than $5,000 in that bank.)

    Example 3. An official has an ownership interest in a
fast-food restaurant, from which she receives $10,000 in annual
income. She must specify on her financial disclosure report the
type of income, such as partnership distributive share or gross
business income, and if she is a public filer indicate the actual
amount of such income. (Additionally, she must describe the
business and categorize its asset value, pursuant to 2634.301 of
this subpart).

[57 FR 11808, Apr. 7, 1992; 57 FR 21854, May 22, 1992]

2634.303 Purchases, sales, and exchanges.

    (a)    In general. Except as indicated in 2634.308(b) of this
subpart, each public financial disclosure report filed pursuant
to subpart B of this part shall include a brief description, the
date and value (using the categories of value in 2634.301(d) of
this subpart) of any purchase, sale, or exchange by the filer
during the reporting period, in which the amount involved in the
transaction exceeds $1,000:

    (1)    Of real property, other than a personal residence of
the filer or spouse, as defined in 2634.105(l) of this part; and

    (2)    Of stocks, bonds, commodity futures, mutual fund
shares, and other forms of securities.

    (b)    Exceptions. (1) Any transaction solely by and between
the reporting individual, his spouse, and dependent children need
not be reported under paragraph (a) of this section.

    (2)    Transactions involving Treasury bills, notes, and
bonds; money market mutual funds or accounts; and personal
savings accounts (as defined in 2634.301(c)(2) of this subpart)
need not be reported when occurring at rates, terms, and
conditions available generally to members of the public.
Likewise, transactions involving portfolio holdings of trusts and
investment funds described in 2634.310 (b) and (c) of this
subpart need not be reported.

    (3)    Any transaction which occurred at a time when the
reporting individual was not a Federal Government officer or
employee need not be reported under paragraph (a) of this
section.

    Example 1. An official sells her personal residence in
Virginia for $100,000 and purchases a personal residence in the
District of Columbia for $200,000. She need not report the sale
of the Virginia residence or the purchase of the D.C. residence.

    Example 2. An official sells his beach home in Maryland
for $50,000. Because he has rented it out for one month every
summer, it does not qualify as a personal residence. He must
disclose the sale under this section and any capital gain over
$200 realized on the sale under 2634.302 of this subpart.

    Example 3. An official sells a ranch to his dependent
daughter. The official need not report the sale because it is a
transaction between the reporting individual and a dependent
child; however, any capital gain, except for that portion
attributable to a personal residence, is required to be reported
under 2634.302 of this subpart.

    Example 4. An official sells an apartment building and
realizes a loss of $100,000. He must report the sale of the
building if the sale price of the property exceeds $1,000;
however, he need not report anything under 2634.302 of this
subpart, as the sale did not result in a capital gain.

[57 FR 11808, Apr. 7, 1992; 57 FR 21854, May 22, 1992]

2634.304 Gifts and reimbursements.

    (a)    Gifts. Except as indicated in 2634.308(b) and
2634.907(a), each financial disclosure report filed pursuant to
this part, whether public or confidential, shall contain the
identity of the source, a brief description, and in the case of
public financial disclosure reports the value, of all gifts
aggregating $250 or more in value which are received by the filer
during the reporting period from any one source. For in-kind
travel-related gifts, include a travel itinerary, dates, and
nature of expenses provided.

    (b)    Reimbursements. Except as indicated in 2634.308(b) and
2634.907(a), each financial disclosure report filed pursuant to
this part, whether public or confidential, shall contain the
identity of the source, a brief description (including a travel
itinerary, dates, and the nature of expenses provided), and in
the case of public financial disclosure reports the value, of any
travel-related reimbursements aggregating $250 or more in value,
which are received by the filer during the reporting period from
any one source.

    Note: The $250 threshold in paragraphs (a) and (b) of
this section will increase if the definition of minimal value
under the Foreign Gifts and Decorations Act ever exceeds $250.
Section 314(a) of Public Law 102 - 90 established the threshold
for financial disclosure of gifts and reimbursements as ``more
than the minimal value as established by section 7342(a)(5) of
title 5, United States Code, or $250, whichever is greater.''

    (c)    Exclusions. Reports need not contain any information
about gifts and reimbursements to which the provisions of this
section would otherwise apply which are received from relatives
(see 2634.105(o)) or during a period in which the filer was not
an officer or employee of the Federal Government. Additionally,
any food, lodging, or entertainment received as ``personal
hospitality of any individual,'' as defined in 2634.105(k), need
not be reported. See also exclusions specified in the definitions
of gift and reimbursement, at 2634.105(h) and (n).

    (d)    Aggregation exception. Any gift or reimbursement with
a fair market value of $100 or less need not be aggregated for
purposes of the reporting rules of this section. However, the
acceptance of gifts, whether or not reportable, is subject to the
restrictions imposed by Executive Order 12674, as modified by
Executive Order 12731, and the implementing regulations on
standards of ethical conduct.

    Note: The aggregation exception for gifts or
reimbursements with a fair market value of $100 or less will
increase if the definition of minimal value under the Foreign
Gifts and Decorations Act ever exceeds $250. Section 314(a) of
Public Law 102 - 90 established the aggregation exception for
``any gift with a fair market value of $100 or less, as adjusted
at the same time and by the same percentage as the minimal value
is adjusted'' above $250 pursuant to 5 U.S.C. 7342(a)(5).

    Example 1. An official accepts a print, a pen and pencil
set, and a letter opener from a community service organization he
has worked with solely in his private capacity. He determines, in
accordance with paragraph
(e)    of this section, that these gifts are valued as follows:

    Gift 1 -- Print: $150

    Gift 2 -- Pen and pencil set: $105

    Gift 3 -- Letter opener: $20

    The official must disclose Gifts 1 and 2, since together
they aggregate $250 or more in value from the same source. Gift 3
need not be aggregated, because its value does not exceed $100.

    Example 2. An official receives the following gifts from
a single source:

    1.    Dinner for two at a local restaurant -- $120.

    2.    Round-trip taxi fare to meet donor at the restaurant --
$25.

    3.    Dinner at donor's city residence -- (value uncertain).

    4.    Round-trip airline transportation and hotel
accommodations to visit Epcot Center in Florida - $400.

    5.    Weekend at donor's country home, including duck hunting
and tennis match
--    (value uncertain).

    The official need only disclose Gift 4. Gift 1 falls
within the exception in 2634.105(h) for food and beverages not
consumed in connection with a gift of overnight lodging. Gifts 3
and 5 need not be disclosed because they fall within the
exception for personal hospitality of an individual.  Gift 2 need
not be aggregated and reported, because its value does not exceed
$100.

    Example 3. An official receives free tickets from an
outside source for himself and his spouse to attend an awards
banquet at a local club. The value of each ticket is $130. Even
though this is a gift which exceeds the $250 threshold amount for
disclosure, the official need not report it, because of the
exception in 2634.105(h) for food and beverages not consumed in
connection with a gift of overnight lodging.

    Note: Prior to accepting this gift of tickets, the
individual should consult ethics officials at his agency to
determine whether standards of conduct rules will permit
acceptance, depending on whether or not the donor is a prohibited
source and the exact nature of the event.

    Example 4. An official is asked to speak at an
out-of-town meeting on a matter which is unrelated to her
official duties and her agency. The round-trip airfare exceeds
$250. If the official pays for the ticket and is then reimbursed
by the organization to which she spoke, she must disclose this
reimbursement under paragraph (b) of this section. If the
organization simply provided the ticket, that must be disclosed
as a gift under paragraph
(a)    of this section.

    (e)    Valuation of gifts and reimbursements. The value to be
assigned to a gift or reimbursement is its fair market value. For
most reimbursements, this will be the amount actually received.
For gifts, the value should be determined in one of the following
manners:

    (1)    If the gift has been newly purchased or is readily
available in the market, the value shall be its retail price. The
filer need not contact the donor, but may contact a retail
establishment selling similar items to determine the present cost
in the market.

    (2)    If the item is not readily available in the market,
such as a piece of art, a handmade item, or an antique, the filer
may make a good faith estimate of the value of the item.

    (3)    The term readily available in the market means that an
item generally is available for retail purchase in the
metropolitan area nearest to the official's residence.

    Example 1. Items such as a pen and pencil set, letter
opener, leather case or engraved pen are generally available in
the market and can be determined by contacting stores which sell
like items and ascertaining the retail price of each.

    Example 2. The value of a dinner at a restaurant can
either be the actual cost of the reported dinners or the
approximate value, based on the posted fare of the restaurant.
The filer need not ask to see the check.

    Note: The market value of a ticket entitling the holder
to attend an event which includes food, refreshments,
entertainment or other benefits is the face value of the ticket,
which may exceed the actual cost of the food and other benefits.

    (f)    Waiver rule in the case of certain gifts -- (1) In
general. In unusual cases, a gift as defined in 2634.105(h) need
not be aggregated under this section by public filers, if the
Director of the Office of Government Ethics receives a written
request for and issues a waiver, after determining that:

    (i)    Both the basis of the relationship between the grantor
and the grantee and the motivation behind the gift are entirely
personal; and

    (ii) No countervailing public purpose requires public
disclosure of the nature, source, and value of the gift.

    (2)    Public disclosure of waiver request. If approved, the
cover letter requesting the waiver shall be subject to the public
disclosure requirements in 2634.603 of this part.

    (3)    Procedure. A public filer seeking a waiver under this
paragraph shall submit a request to the Office of Government
Ethics, through his agency. The request shall be made by a cover
letter which identifies the filer and his position and which
states that a waiver is requested under this section. On an
enclosure to the cover letter, the filer shall set forth:

    (i)    The identity and occupation of the donor;

    (ii) A statement that the relationship between the donor
and the filer is entirely personal in nature; and

    (iii) A statement that neither the donor nor any person
or organization who employs the donor or whom the donor
represents, conducts or seeks business with, engages in
activities regulated by, or is directly affected by action taken
by, the agency employing the filer. If the proceding statement
cannot be made without qualification, the filer shall indicate
those qualifications, along with a statement demonstrating that
he plays no role in any official action which might directly
affect the donor or any organization for which the donor works or
serves as a representative.

[57 FR 11808, Apr. 7, 1992; 57 FR 62605, Dec. 31, 1992]

2634.305 Liabilities.

    (a)    In general. Each financial disclosure report filed
pursuant to this part, whether public or confidential, shall
identify and include a brief description of the filer's
liabilities over $10,000 owed to any creditor at any time during
the reporting period, and the name of the creditors to whom such
liabilities are owed. For public financial disclosure reports,
the report shall designate the category of value of the
liabilities in accordance with 2634.301(d) of this subpart, using
the greatest amount owed to the creditor during the period.

    (b)    Exceptions. The following are not required to be
reported under paragraph (a) of this section:

    (1)    Personal liabilities owed to a spouse or to the
parent, brother, sister, or child of the filer, spouse, or
dependent child;

    (2)    Any mortgage secured by a personal residence of the
filer or his spouse;

    (3)    Any loan secured by a personal motor vehicle,
household furniture, or appliances, provided that the loan does
not exceed the purchase price of the item which secures it; and

    (4)    Any revolving charge account with an outstanding
liability which does not exceed $10,000 at the close of the
reporting period.

    Example. An incumbent official has the following debts
outstanding at the end of the calendar year:

    1.    Mortgage on personal residence -- $80,000.

    2.    Mortgage on rental property -- $50,000.

    3.    VISA Card -- $1,000.

    4.    Master Card -- $11,000.

    5.    Loan balance of $15,000, secured by family automobile
purchased for $16,200.

    6.    Loan balance of $10,500, secured by antique furniture
purchased for $8,000.

    7.    Loan from parents -- $20,000.

    The loans indicated in items 2, 4, and 6 must be
disclosed. Loan 1 is exempt from disclosure under paragraph
(b)(2) of this section because it is secured by the personal
residence. Loan 3 need not be disclosed under paragraph (b)(4) of
this section because it is considered to be a revolving charge
account with an outstanding liability that does not exceed
$10,000 at the end of the reporting period. Loan 5 need not be
disclosed under paragraph (b)(3) of this section because it is
secured by a personal motor vehicle which was purchased for more
than the value of the loan. Loan 7 need not be disclosed because
the creditors are persons specified in paragraph (b)(1) of this
section.

2634.306 Agreements and arrangements.

    Each financial disclosure report filed pursuant to this
part, whether public or confidential, shall identify the parties
to and the date of, and shall briefly describe the terms of, any
agreement or arrangement of the filer in existence at any time
during the reporting period with respect to:

    (a)    Future employment;

    (b)    A leave of absence from employment during the period
of the reporting individual's Government service;

    (c)    Continuation of payments by a former employer other
than the United States Government; and

    (d)    Continuing participation in an employee welfare or
benefit plan maintained by a former employer.

2634.307 Outside positions.

    (a)    In general. Each financial disclosure report filed
pursuant to this part, whether public or confidential, shall
identify all positions held at any time by the filer during the
reporting period, as an officer, director, trustee, general
partner, proprietor, representative, executor, employee, or
consultant of any corporation, company, firm, partnership, trust,
or other business enterprise, any nonprofit organization, any
labor organization, or any educational or other institution other
than the United States.

    (b)    Exceptions. The following need not be reported under
paragraph
(a)    of this section:

    (1)    Positions held in any religious, social, fraternal, or
political entity; and

    (2)    Positions solely of an honorary nature, such as those
with an emeritus designation.

[57 FR 11808, Apr. 7, 1992; 57 FR 21854, May 22, 1992]

2634.308 Reporting periods and contents of public financial
disclosure reports.

    (a)    Incumbents. Each public financial disclosure report
filed pursuant to 2634.201(a) shall include on the standard form
prescribed by
the Office of Government Ethics consistent with subpart F of this
part and in accordance with instructions issued by that Office, a
full and complete statement of the information required to be
reported according to the provisions of subpart C of this part,
for the preceding calendar year (or for any portion of that year
not already covered by a new entrant or nominee report filed
under paragraph (b) or (c) of 2634.201), and, in the case of
2634.306 and 2634.307, for the additional period up to the date
of filing.

    (b)    New entrants, nominees, and candidates. Each public
financial disclosure report filed pursuant to 2634.201(b), (c),
or (d) shall include, on the standard form prescribed by the
Office of Government Ethics consistent with subpart F of this
part and in accordance with instructions issued by that Office, a
full and complete statement of the information required to be
reported according to the provisions of subpart C of this part,
except for 2634.303 (relating to purchases, sales, and exchanges
of certain property) and 2634.304 (relating to gifts and
reimbursements). The following special rules apply:

    (1)    Interests in property. For purposes of 2634.301 of
this subpart, the report shall include all interests in property
specified by that section which are held on or after a date which
is fewer than thirty-one days before the date on which the report
is filed.

    (2)    Income. For puposes of 2634.302 of this subpart, the
report shall include all income items specified by that section
which are received or accrued during the period beginning on
January 1 of the preceding calendar year and ending on the date
on which the report is filed, except as otherwise provided by
2634.606 relating to updated disclosure for nominees.

    (3)    Liabilities. For purposes of 2634.305 of this subpart,
the report shall include all liabilities specified by that
section which are owed during the period beginning on January 1
of the preceding calendar year and ending fewer than thirty-one
days before the date on which the report is filed.

    (4)    Agreements and arrangements. For purposes of 2634.306
of this subpart, the report shall include only those agreements
and arrangements which still exist at the time of filing.

    (5)    Outside positions. For purposes of 2634.307 of this
subpart, the report shall include all such positions held during
the preceding two calendar years and the current calendar year up
to the date of filing.

    (6)    Certain sources of compensation. Except in the case of
the President, the Vice President, or a candidate referred to in
2634.201(d), the report shall also identify the filer's sources
of compensation which exceed $5,000 during either of the
preceding two calendar years or during the current calendar year
up to the date of filing, and shall briefly describe the nature
of the duties performed or services rendered by the reporting
individual for each such source of compensation. Information need
not be reported, however, which is considered confidential as a
result of a privileged relationship, established by law, between
the reporting individual and any person. The report also need not
contain any information with respect to any person for whom
services were provided by any firm or association of which the
reporting individual was a member, partner, or employee, unless
such individual was directly involved in the provision of such
services.

    Example. A nominee who is a partner or employee of a law
firm and who has worked on a matter involving a client from which
the firm received over $5,000 in fees during a calendar year must
report the name of the client only if the value of the services
rendered by the nominee exceeded $5,000.  The name of the client
would not normally be considered confidential.

    (c)    Termination reports. Each public financial disclosure
report filed under 2634.201(e) shall include, on the standard
form prescribed by the Office of Government Ethics consistent
with subpart F of this part and in accordance with instructions
issued by that Office, a full and complete statement of the
information required to be reported according to the provisions
of subpart C of this part, for the period beginning on the last
date covered by the most recent public financial disclosure
report filed by the reporting individual under this part, or on
January 1 of the preceding calendar year, whichever is later, and
ending on the date on which the filer's employment terminates.

2634.309 Spouses and dependent children.

    (a)    Special disclosure rules. Each report required by the
provisions of either subpart B or subpart I of this part shall
also include the following information with respect to the spouse
or dependent children of the reporting individual:

    (1)    Income. For purposes of 2634.302 of this subpart:

    (i)    With respect to a spouse, the source but not the
amount of items of earned income (other than honoraria) which
exceed $1,000 from any one source; and if items of earned income
are derived from a spouse's self-employment in a business or
profession, the nature of the business or profession but not the
amount of the earned income;

    (ii) With respect to a spouse, the source, and for a
public financial disclosure report the actual amount or value, of
any honoraria received by or accrued to the spouse (or payments
made or to be made to charity on the spouse's behalf in lieu of
honoraria) which exceed $200 from any one source, and the date on
which the services were provided; and

    (iii) With respect to a spouse or dependent child, the
type and source, and for a public financial disclosure report the
amount or value (category or actual amount, in accordance with
2634.302 of this subpart), of all other income exceeding $200
from any one source, such as investment income from interests in
property (if the property itself is reportable according to
2634.301 of this subpart).

    Example 1. The spouse of a filer is employed as a teller
at Bank X and earns $23,000 per year. The report must disclose
that the spouse is employed by Bank X. The amount of the spouse's
earnings need not be disclosed, either on a public or
confidential financial disclosure report.

    Example 2. The spouse of a reporting individual is
self-employed as a pediatrician. The report must disclose that he
is a physician, but need not disclose the amount of income,
either on a public or confidential financial disclosure report.

    (2)    Gifts and reimbursements. For purposes of 2634.304 of
this subpart, gifts and reimbursements received by a spouse or
dependent child which are not received totally independent of
their relationship to the filer.

    (3)    Interests in property, transactions, and liabilities.
For purposes of 2634.301, 2634.303 (applicable only to public
filers), and 2634.305 of this subpart, all information concerning
property interests, transactions, or liabilities referred to by
those sections of a spouse or dependent child, unless the
following three conditions are satisfied:

    (i)    The filer certifies that the item represents the
spouse's or dependent child's sole financial interest or
responsibility, and that the filer has no specific knowledge
regarding that item;

    (ii) The item is not in any way, past or present, derived
from the income, assets or activities of the filer; and

    (iii) The filer neither derives, nor expects to derive,
any financial or economic benefit from the item.

    Note: One who prepares a joint tax return with his spouse
will normally derive a financial or economic benefit from assets
held by the spouse, and will also be charged with knowledge of
such items; therefore he could not avail himself of this
exception. Likewise, a trust for the education of one's minor
child normally will convey a financial benefit to the parent. If
so, the assets of the trust would be reportable on a financial
disclosure statement.

    (b)    Exception. For reports filed as a new entrant,
nominee, or candidate under 2634.201(b), (c), or (d), or as a new
entrant under 2634.908(b), no information regarding gifts and
reimbursements or transactions is required for a spouse or
dependent child.

    (c)    Divorce and separation. A reporting individual need
not report any information about:

    (1)    A spouse living separate and apart from the reporting
individual with the intention of terminating the marriage or
providing for permanent separation;

    (2)    A former spouse or a spouse from whom the reporting
individual is permanently separated; or

    (3)    Any income or obligations of the reporting individual
arising from dissolution of the reporting individual's marriage
or permanent separation from a spouse.

2634.310 Trusts, estates, and investment funds.

    (a)    In general. (1) Except as otherwise provided in this
section, each financial disclosure report shall include the
information required by this subpart or subpart I of this part
about the holdings of and income from the holdings of any trust,
estate, investment fund or other financial arrangement from which
income is received by, or with respect to which a beneficial
interest in principal or income is held by, the filer, his
spouse, or dependent child.

    (2)    No information, however, is required about a nonvested
beneficial interest in the principal or income of an estate or
trust. A vested interest is a present right or title to property,
which carries with it an existing right of alienation, even
though the right to possession or enjoyment may be postponed to
some uncertain time in the future. This includes a future
interest when one has a right, defeasible or indefeasible, to the
immediate possession or enjoyment of the property, upon the
ceasing of another's interest. Accordingly, it is not the
uncertainty of the time of enjoyment in the future, but the
uncertainty of the right of enjoyment (title and alienation),
which differentiates a ``vested'' and a ``nonvested'' interest.

    (b)    Qualified trusts and excepted trusts. (1) A filer
should not report information about the holdings of or income
from holdings of, any qualified blind trust (as defined in
2634.403) or any qualified diversified trust (as defined in
2634.404). For a qualified blind trust, a public financial
disclosure report shall disclose the category of the aggregate
amount of the trust's income attributable to the beneficial
interest of the filer, his spouse, or dependent child in the
trust. For a qualified diversified trust, a public financial
disclosure report shall disclose the category of the aggregate
amount of income with respect to such a trust which is actually
received by the filer, his spouse, or dependent child, or applied
for the benefit of any of them.

    (2)    In the case of an excepted trust, a filer should
indicate the general nature of its holdings, to the extent known,
but will not otherwise need to report information about the
trust's holdings or income from holdings. The category of the
aggregate amount of income from an excepted trust which is
received by or accrued to the benefit of the filer, his spouse,
or dependent child shall be reported on public financial
disclosure reports. For purposes of this part, the term
``excepted trust'' means a trust:

    (i)    Which was not created directly by the filer, spouse,
or dependent child; and

    (ii) The holdings or sources of income of which the
filer, spouse, or dependent child have no specific knowledge
through a report, disclosure, or constructive receipt, whether
intended or inadvertent.

    (c)    Excepted investment funds. (1) No information is
required under paragraph (a) of this section about the underlying
holdings of or income from underlying holdings of an excepted
investment fund as defined in paragraph (c)(2) of this section,
except that the fund itself shall be identified as an interest in
property and/or a source of income. Public financial disclosure
reports must also disclose the category of value of the fund
interest held; aggregate amount of income from the fund which is
received by or accrued to the benefit of the filer, his spouse,
or dependent child; and value of any transactions involving
shares or units of the fund.

    (2)    For purposes of financial disclosure reports filed
under the provisions of this part, an ``excepted investment
fund'' means a widely held investment fund (whether a mutual
fund, regulated investment company, common trust fund maintained
by a bank or similar financial institution, pension or deferred
compensation plan, or any other investment fund), if:

(i)(A) The fund is publicly traded or available; or

    (B)    The assets of the fund are widely diversified; and

    (ii) The filer neither exercises control over nor has the
ability to exercise control over the financial interests held by
the fund.

    (3)    A fund is widely diversified if it holds no more than
5% of the value of its portfolio in the securities of any one
issuer (other than the United States Government) and no more than
20% in any particular economic or geographic sector.

[57 FR 11808, Apr. 7, 1992; 57 FR 21854, May 22, 1992]

2634.311 Special rules.

    (a)    Political campaign funds. Political campaign funds,
including campaign receipts and expenditures, need not be
included in any report filed under this part. However, if the
individual has authority to exercise control over the fund's
assets for personal use rather than campaign or political
purposes, that portion of the fund over which such authority
exists must be reported.

    (b)    Certificates of Divestiture. Each public financial
disclosure report required by the provisions of this part shall
identify those sales which have occurred pursuant to a
Certificate of Divestiture during the period covered by such
report. See subpart J of this part for the rules relating to the
issuance of such Certificates.

    (c)    Reporting standards. (1) In lieu of entering data on a
schedule of the report form designated by the Office of
Government Ethics, a filer may attach to the reporting form a
copy of a brokerage report, bank statement, or other material,
which, in a clear and concise fashion, readily discloses all
information which the filer would otherwise have been required to
enter on the schedule.

    (2)    In lieu of reporting the category of amount or value
of any item listed in any public financial disclosure report
filed pursuant to this part, a filer may report the actual dollar
amount of such item.

Subpart D -- Qualified Trusts

Source: 57 FR 11814, Apr. 7, 1992, unless otherwise noted.

2634.401 General considerations.

    (a)    Statutory standards governing qualified trusts -- (1)
Types of qualified trusts and their relationshp to conflict of
interest laws. The Ethics in Government Act of 1978 created, and
provided special public financial disclosure requirements for,
two types of qualified trusts, It was envisioned that the use of
those trusts by Government employees would reduce the real and
apparent conflicts of interest which might arise between the
financial interests held by those employees (or attributable to
them) and their official responsibilities.

    (i)    Interested party means a Government employee, his
spouse, any minor or dependent child, and their representatives
in any case in which the employee, spouse, or child has a
beneficial interest in the principal or income of a trust
proposed for certification or certified.

    (ii) Qualified blind trust. The most universally
adaptable qualified trust is the qualified blind trust, defined
in 2634.403 of this subpart. A trust is considered to be
``blind'' only with regard to those trust assets about which no
interested party has knowledge. When an interested party
originally places assets in trust, that party still possesses
knowledge about those assets. Those original assets remain
financial interests of the Government official for purposes of 18
U.S.C. 208 or for any other Federal conflict of interest statutes
or regulations, until the trustee notifies the official either
that a particular original asset has been disposed of or that the
asset's value is less than $1000. If the trustee sells or
disposes of original trust assets and then uses the proceeds to
acquire new trust holdings, or if the trustee reinvests trust
income to acquire new trust holdings, a ``blind'' trust exists
for those new holdings because the interested parties possess no
information about the newly acquired assets. The holdings of a
``blind'' trust are not classified as financial interests of the
Government official for purposes of 18 U.S.C. 208 or for any
other Federal conflict of interest statutes or regulations.

    (iii) Qualified diversified trust. The second type of
qualified trust established by the Act is the qualified
diversified trust, defined in 2634.404 of this subpart. Among
other requirements, a trust is considered to be ``diversified''
if it can be demonstrated, to the satisfaction of the Director of
the Office of Government Ethics, pursuant to 2634.404(b), that
the trust assets comprise a widely diversified portfolio of
readily marketable securities, and do not initially include the
securities of any entities having substantial activities in the
same area as the Government official's primary area of
responsiblity. The trust holdings are never classified as
financial interests of the Government official for purposes of 18
U.S.C. 208 or for any other Federal conflict of interest statutes
or regulations.

    (2)    Independence of trustees and other fiduciaries. Under
the Act and 2634.406 of this subpart, those entities that are
authorized by the Act or by the trust instrument to manage the
assets of, and to control and administer, either a qualified
blind or a qualified diversified trust must be independent, in
fact and in appearance, from those parties who hold beneficial
interests in the trust.

    (i)    The independence of trustees is facilitated by
limiting the entities which may serve in this capacity to certain
financial institutions.

    (ii) In addition to the trustee, the Act extends the
independence requirement to other entities which manage trust
assets or administer the trust, including officers and employees
of the trustee, any other entity designated in the trust
instrument to perform fiduciary duties on behalf of the trust,
and the officers and employees of any other entity that is
involved in the management or control of the trust, such as
investment counsel, investment advisers, accountants, or tax
preparers and their assistants.

    (iii) Those entities governed by the Act will be
considered ``independent'' for purposes of this subpart if, among
other requirements, the entities are not affiliated with,
associated with, related to, or subject to the control or
influence of, any of the parties that hold a beneficial interest
in the trust.

    (3)    Communications betweeen trust administrators and
interested parties. For purposes of Federal ethics laws, the most
important feature of those qualified trusts that are recognized
under the Act is the separation which those trusts foster between
parties with beneficial interests in the trust and entities which
manage trust assets and administer the trust instrument. Once a
qualified trust has been certified, the beneficiaries and their
representatives are expressly prohibited from commenting directly
to the trustee about matters relating to asset management and
trust holdings, or to trust administration and activities.
Likewise, the trustee must make investment decisions for the
trust without consulting, or being controlled by, interested
parties, and the trustee is prohibited from informing interested
parties directly about trust activities, except to the limited
extent required under the Act. The Act requires the trustee to
provide trust beneficiaries with certain standard periodic
reports. Beyond receipt of these standard reports, trust
beneficiaries are prohibited from actively attempting to obtain,
and from passively but knowningly obtaining, directly or
indirectly, any additional information which the Act prohibits
beneficiaries from obtaining, including information about trust
holdings and activities.  Finally, instruments creating qualified
trusts must require interested parties and trustees to make all
permissible communications relating to the trust and to its
assets in writing, with the prior written approval of the
Director of the Office of Government Ethics. Sections 2634.403 -
2634.405 and 2634.407 of this subpart contain standards
implementing these restrictions.

    (4)    Trust and beneficiary taxes. For tax purposes, because
a trust is a separate entity distinct from its beneficiaries, a
trustee must file an annual fiduciary tax return for the trust
(IRS Form 1041). In addition, the trust beneficiaries must report
income received from the trust on their individual tax returns.
The Act establishes special filing procedures to be used by the
trustee and trust beneficiaries in order to maintain the
substantive separation between trust beneficiaries and trust
administration.  For beneficiaries of qualified blind trusts, the
trustee sends a Schedule K
-    1 form summarizing trust income in appropriate categories to
enable the beneficiaries to file individual tax returns. For
beneficiaries of qualified diversified trusts, the statute
requires the trustee to file the individual tax returns on behalf
of the trust beneficiaries. The beneficiaries must transmit to
the trustee materials concerning taxable transactions and
occurrences outside of the trust, pursuant to the requirements in
each trust instrument which detail this procedure.

    (b)    Policy considerations and objectives underlying the
qualified trust program. (1) Prior to enactment of the Act's
qualified trust provisions, there was no accepted definition of a
properly formulated blind or diversified trust. However, there
was general agreement that the use of blind or diversified trusts
often reduced the potential for conflicts of interest. If
Government employees do not know the exact identity, nature, and
extent of their financial interests, then the employees cannot be
influenced in the performance of their official duties by those
interests. Their official actions, under these circumstances,
should be free from collateral attack arising out of real or
apparent conflicts of interest. Therefore, the most significant
objective to be achieved through the use of a blind trust is the
lack of knowledge, or actual ``blindness,'' by a Government
official with respect to the holdings in his trust. The same goal
may be achieved through the use of a diversified trust, if that
trust holds securities from different issuers in different
economic sectors, and if the trust's interest in any one issuer
is limited. Under these conditions, it is unlikely that official
actions taken by the Government employee who holds a beneficial
interest in the trust would affect individual securities to such
a degree that the overall value of the trust's portfolio would be
materially enhanced. Thus, wide diversification is tantamount to
actual ``blindness.''

    (2)    Because, for the trusts certified under the provisions
of this subpart D, the Government official is or will become
blind to the identity and nature of his actual trust holdings,
the reporting requirements of section 102(f)(1) of the Act and
subparts C or I of this part, which generally require Government
filers to disclose the contents of a trust's portfolio, do not
apply. See 2634.310 of this part. Further, as discussed in
paragraphs (a)(1) (ii) and (iii) of this section, 18 U.S.C. 208
and other Federal conflict of interest laws do not generally
apply to the holdings of qualified trusts, except in the case of
the original assets transferred to a qualified blind trust until
notice that a particular original asset has been disposed of or
that the asset's value is below $1,000.

    (c)    Qualified trust provisions of the regulation. This
subpart D prescribes standards which implement the statutory
requirements and policy objectives underlying the Act's qualified
blind and diversified trust provisions. The Office of Government
Ethics will apply the standards of this subpart to specific
cases.

    (1)    Classification as a qualified trust. In order to be
classified as a qualified trust for purposes of the Act, blind
and diversified trusts must satisfy the following three
requirements:

    (i)    The trust document must conform to announced
standards. As provided under 2634.403(b) for blind trusts and
2634.404(c) for diversified trusts, the trust document must
conform to the model trust instruments which are drafted and
distributed by the Office of Government Ethics for use by
interested parties when drafting their trust arrangements.  Prior
to certifying a trust under 2634.405 of this subpart, as
discussed in paragraph (c)(1)(iii) of this section, the Office of
Government Ethics must approve every proposed trust document. In
addition to other required provisions, the trust instrument must
contain language which implements the communications restrictions
discussed in paragraph (a)(3) of this section. By requiring
interested parties, trustees, and other signatories to the trust
instrument to include communications provisions, these
regulations compel the signatories diligently to safeguard
against inadvertent disclosures of precluded information to the
interested parties.

    (ii) Truly independent fiduciaries. As discussed in
paragraph (a)(2) of this section, the fiduciaries in charge of
administering and managing the assets of a qualified trust must
be actually and apparently independent of the parties who hold
beneficial interests in the trust, and of their representatives.
To ensure such independence, 2634.406 of this subpart limits the
range of permissible fiduciaries. Before a trust may be
classified as a qualified blind or diversified trust, the
Director of the Office of Government Ethics must conclude, in his
judgment, that the trust fiduciaries named in the trust
instrument satisfy the standards for independence contained in
2634.406 of this subpart.

    (iii) Certification by the Office of Government Ethics.
Before a trust may be classified as a qualified blind or
diversified trust, the Director of the Office of Government
Ethics must certify, in accordance with the standards and
procedures established in 2634.405 of this subpart, that the
trust meets the requirements of section 102(f) of the Act and of
this subpart, that certification is in the public interest, and
that certification is consistent with the policies established by
these provisions and by other applicable laws and regulations.
This certification is essential so that the Office can ensure, in
advance that the proposed trust arrangement satisfies the
established standards.

    (2)    Certification of pre-existing trusts. Normally, those
trusts certified as qualified trusts by the Director of the
Office of Government Ethics under 2634.405 of this subpart are
newly created trust arrangements, formulated in accordance with
established standards by representatives of the interested
parties in consultation with the Office of Government Ethics.
However, the Director may certify a pre-existing trust as a
qualified blind or qualified diversified trust under 2634.403
(blind) or 2634.404 (diversified) if he determines that such
action is appropriate and is sufficient to ensure compliance with
applicable laws and regulations. The pre-existing trust proposed
for certification must meet both the generally applicable trust
requirements, and several special requirements contained in
2634.405(c) of this subpart, including that all of the parties to
the original trust agree to administer the trust in accordance
with the requirements of this subpart. The pre-existing trust may
be certified only if all of the conditions of this subpart are
fulfilled, and if the requisite confidentially can be assured
with respect to the trust.

    (3)    Reporting requirements. Once a trust is classified as
a qualified blind or qualified diversified trust in the manner
discussed under paragraph (c)(1) of this section, 2634.310(b)
applies less inclusive financial disclosure requirements to the
trust assets.

    (4)    Sanctions and enforcement. Section 2634.702 provides
civil sanctions which apply to any Government official or trust
fiduciary who violates his obligations under the Act, its
implementing regulations, or the trust instrument. In addition,
the Office of Government Ethics has authority under the Act to
impose appropriate administrative or other sanctions.  Subpart E
of this part delineates the procedure which must be followed with
respect to the revocation of trust certificates and trustee
approvals.

    (d)    Drafting and implementation of the qualified trust
instrument.
(1)    The overview of the qualified trust program contained in this
section cannot anticipate every concern or question, or discuss
every scenario which might arise in the course of formulating and
implementing a qualified trust instrument. The Office of
Government Ethics should be contacted by an interested party or
by his professional representatives if the Act, the implementing
regulations, and the trust instrument itself do not provide
guidance in a particular instance.

    (2)    No trust will be considered ``qualified'' for purposes
of the Act until the Office of Government Ethics certifies the
trust prior to execution. The Office of Government Ethics makes
available to attorneys model trust agreements for use in drafting
proposed trust agreements which are to be submitted to the Office
for certification. Attorneys are cautioned to consider each model
provision in light of the circumstances presented by the
particular case, and to modify provisions to the extent that such
modifications are necessary or appropriate. Attorneys should not
rely uncritically upon the language of the model agreements.
However, many of the model provisions implement the minimum
requirements which must be contained in any trust instrument
certified by the Office. Certificates of Independence for
fiduciaries must be executed in the form indicated in appendix A
of this part.

    (3)    The Office of Government Ethics does not draft trust
instruments for use in individual cases. However, its staff is
always willing to cooperate with attorneys and to make its
experience available to them in developing appropriate trust
instruments which satisfy applicable Federal laws, Executive
orders and regulations. If the use of a qualified trust is
contemplated in a particular case, it is strongly recommended
that the interested parties or their representatives contact the
Office of Government Ethics as early as possible.

    (4)    Prior to trust certification, prospective trustees or
their representatives should schedule with the staff of the
Office of Government Ethics an appointment for an orientation to
the specialized requirements and procedures which have been
established by the Act and the regulations with respect to
qualified trust administration.

2634.402 Special notice for advice-and-consent nominees.

    (a)    In general. In any case in which the establishment of
a qualified diversified trust is contemplated with respect to a
reporting individual whose nomination is being considered by a
Senate committee, that individual shall inform the committee of
the intention to establish a qualified diversified trust at the
time of filing a financial disclosure report with the committee.

    (b)    Applicability. The rule of this section is not
applicable to members of the uniformed services or Foreign
Service officers. The special notice requirement of this section
shall not preclude an individual from seeking the certification
of a qualified blind trust or qualified diversified trust after
the Senate has given its advice and consent to a nomination.

2634.403 Qualified blind trusts.

    (a)    Definition. A qualified blind trust is a trust in
which the filer, his spouse, or his minor or dependent child has
a beneficial interest, which is certified pursuant to 2634.405 of
this subpart by the Director of the Office of Government Ethics,
and which includes in the trust instrument in the provisions
required by paragraph (b) of this section, and has an independent
trustee as defined in 2634.406 of this subpart. See section
102(f)(3) of the Act.

    (b)    Required provisions. The instrument which establishes
a blind trust must adhere substantively to model drafts
circulated by the Office of Government Ethics, and must provide
that:

    (1)    The primary purpose of the blind trust is to confer on
the independent trustee and any other designated fiduciary the
sole responsibility to administer the trust and to manage trust
assets without the participation by, or the knowledge of, any
interested party. This includes the duty to decide when and to
what extent the original assets of the trust are to be sold or
disposed of and in what investments the proceeds of sale are to
be reinvested;

    (2)    The trustee and any other designated fiduciary in the
exercise of their authority and discretion to manage and control
the assets of the trust shall not consult or notify any
interested party;

    (3)    None of the assets initially placed in the trust's
portfolio shall include assets the holding of which by any
interested party would be prohibited by the Act, by the
implementing regulations, or by any other applicable Federal law,
Executive order, or regulation;

    (4)    Any portfolio asset transferred to the trust by an
interested party is free of any restriction with respect to its
transfer or sale, except as fully described in schedules attached
to the trust instrument, and as approved by the Director of the
Office of Government Ethics;

    (5)    During the term of the trust, the interested parties
shall not pledge, mortgage, or otherwise encumber their interests
in the property held by the trust;

    (6)    The trustee shall promptly notify the filer and the
Director of the Office of Government Ethics when any particular
asset transferred to the trust by an interested party has been
completely disposed of or when the value of that asset is reduced
to less than $1,000;

    (7)    The trustee or his designee shall prepare the trust's
income tax return. Under no circumstances shall the trustee or
any other designated fiduciary disclose publicly, or to any
interested party, the trust's tax return, any information
relating to that return except for a summary of trust income in
categories necessary for an interested party to complete his
individual tax return, or any information which might
specifically identify current trust assets, or those assets which
have been sold or disposed of from trust holdings, other than
information relating to the sale or disposition of original trust
assets under paragraph (b)(6) of this section;

    (8)    An interested party shall not receive any report on
trust holdings and sources of trust income, except that the
trustee shall, without identifying specifically any asset or
holding:

    (i)    Report quarterly the aggregate market value of the
assets representing the interested party's interest in the trust;

    (ii) Report the net income or loss of the trust, and any
other information necessary to enable the interested party to
complete his individual income tax return; and

    (iii) Report annually, for purposes of section
102(a)(1)(B) of the Act, the aggregate amount of the trust's
income attributable to the interested party's beneficial interest
in the trust, categorized in accordance with 2634.302(b);

    (9)    There shall be no direct or indirect communication
with respect to the trust between an interested party and the
independent trustee or any other designated fiduciary with
respect to the trust unless:

    (i)    Such communication is in writing, with the prior
written approval of the Director of the Office of Government
Ethics and is filed with the Director in accordance with
2634.408(c) of this subpart; and

    (ii) It relates only:

    (A)    To the request for a distribution from the trust,
which does not specify whether the distribution shall be made in
cash or in kind;

    (B)    To the general financial interest and needs of the
interested party including, but not limited to, a preference for
maximizing current income or long-term capital appreciation;

    (C)    To notification of the trustee by the interested party
that the interested party is prohibited by subsequently
applicable statute, Executive order, or regulation from holding
an asset, and to directions to the trustee that the trust shall
not hold that asset; or

    (D)    To instructions to the trustee to sell all of an asset
which was initially placed in the trust by an interested party,
and which, in the determination of the filer creates a real or
apparent conflict due to duties subsequently assumed by the filer
(but the filer is not required to give such directions);

    Note: By the terms of paragraph (3)(C)(vi) of section
102(f) of the Act, communications which solely consist of
requests for distributions of cash or other unspecified assets of
the trust are not required to be in writing. Further, there is no
statutory mechanism for pre-screening of proposed communications.
However, experience of the Office of Government Ethics over the
years dictates the necessity of prohibiting any oral
communications between the trustee and an interested party with
respect to the trust and pre-screening all proposed written
communications, to prevent inadvertent prohibited communications
and preserve confidence in the Federal qualified trust program.
Accordingly, under its authority pursuant to paragraph (3)(D) of
section 102(f) of the Act, the Office of Government Ethics will
not approve proposed trust instruments which do not contain
language conforming to this policy, except in unusual cases where
compelling necessity is demonstrated to the Director, in his sole
discretion.