Reprinted from Roll
Call (March 1, 2011)
Q: I have a question about whether Members of the House can hold
outside jobs while in office. Although I have never been politically active, I
was so disappointed by the results of the last election in our district that I
am considering throwing my hat in the ring next year. Before doing so, I want to
make sure I understand what the financial implications of actually being elected
would be. I have a large family that is dependent on the income I receive as a
senior manager at a large multinational corporation. Joining the House would
result in a substantial pay cut. The only way that I could pull it off, I think,
is if I kept my outside job on a part-time basis. Would this be permissible?
What if I deferred the income until after leaving the House?
A: Unfortunately for you, there are strict limits on the outside
earned income that Members may receive while serving in the House of
Representatives. The House first imposed these restrictions in 1977, at the
recommendation of a House commission. The commission listed three reasons for
the restrictions. First, outside earned income creates a potential conflict of
interest because a Member’s outside employer might exert pressure over the
Member by, for example, cutting off the Member’s salary. Second, there is a
“time conflict.” Earning outside income can prevent a Member from devoting his
or her full time and attention to official duties. And third, the appearance of
Members “cashing in” on their positions of influence, even where there is no
actual impropriety, undermines public trust in government.
In 1989, the House approved even stricter limits on outside earned income.
The House task force that recommended the stricter limits cited reasons similar
to those cited by the House commission in 1977.
So, what are the current restrictions? One group of restrictions limits the
type of outside jobs that Members may hold. For example, a Member may not hold a
job that includes providing services involving a fiduciary relationship. A
Member also may not hold a paid position as a board member of an association,
corporation, or similar entity. The House Ethics Committee has said these types
of positions would raise inherent conflicts of interest between a Member’s
official duties and obligations to the outside entity.
Perhaps more significant for you, however, is the limit on the amount of
income that Members can earn from outside jobs. The law sets the annual limit on
outside income at 15 percent of the rate of pay for Executive Schedule level II
in a given year. In 2011, that rate is $179,700, which means that the annual
limit on outside earned income for Members is $26,955. Unearned income, such as
returns on investments, does not count against this limit.
In determining whether income should count against this limit, it is helpful
to review a 1978 House Ethics Committee advisory opinion, which is still largely
applicable today. The opinion says that two things must be true for the amount
to be counted against the outside earned income limit in a given year. First, it
must fall within the definition of “outside earned income.” And second, it must
be attributable to that year.
House rules define outside earned income as “wages, salaries, fees, and other
amounts received or to be received as compensation for personal services
actually rendered.” As for the attributable year, the advisory opinion says that
the correct year is not necessarily the one in which a Member receives the
income. Rather, it is the one in which a Member’s right to receive it becomes
certain — in other words, the year in which it is earned. This means that a
Member who earns outside income while in office cannot evade the limit by
deferring the income until after retiring from Congress.
Moreover, the advisory opinion warns, income may not be recharacterized in
order to circumvent the income limit. If a Member receives compensation from an
employer that is attributable to services that the Member provides, the Member
cannot evade the limit simply by characterizing the compensation as a
partnership share, dividends or interest. In short, income that is not a return
on equity is usually considered earned income and is therefore subject to the
limit. Income that is genuinely a return on equity, however, does not count as
All of this means that, even if elected to Congress, you could continue to
receive investment income. In addition, at least in theory, you could maintain
certain part-time jobs while a Member of the House. However, you could not be
paid more than roughly $26,000 per year. And income from the job would count in
the year you earned it even if you deferred receipt of the income to a future
But, even setting all of that aside, there is one more thing to consider.
Time. While I have never been a Member of Congress myself, it might be wise to
consult a current or former Member or staffer about the feasibility of keeping
an outside job while in office. With official duties, campaign activities and
all of the rest, the limit on outside earned income might not be the only
barrier to employment while in office.
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