[House Report 107-132]
[From the U.S. Government Publishing Office]



                                                                       
107th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 1st Session                                                    107-132

======================================================================



 
         CAMPAIGN REFORM AND CITIZEN PARTICIPATION ACT OF 2001

                                _______
                                

 July 10, 2001.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

  Mr. Ney, from the Committee on House Administration, submitted the 
                               following

                              R E P O R T

                             together with

                             MINORITY VIEWS

                        [To accompany H.R. 2360]

      [Including cost estimate of the Congressional Budget Office]

  The Committee on House Administration, to whom was referred 
the bill (H.R. 2360) to amend the Federal Election Campaign Act 
of 1971 to restrict the use of non-Federal funds by national 
political parties, to revise the limitations on the amount of 
certain contributions which may be made under such Act, to 
promote the availability of information on communications made 
with respect to campaigns for Federal elections, and for other 
purposes, having considered the same, report favorably thereon 
with an amendment and recommend that the bill as amended do 
pass.
  The amendment is as follows:
  Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; TABLE OF CONTENTS.

  (a) Short Title.--This Act may be cited as the ``Campaign Reform and 
Citizen Participation Act of 2001''.
  (b) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; table of contents.

                TITLE I--SOFT MONEY OF NATIONAL PARTIES

Sec. 101. Restrictions on soft money of national political parties.

             TITLE II--MODIFICATION OF CONTRIBUTION LIMITS

Sec. 201. Increase in limits on certain contributions.
Sec. 202. Increase in limits on contributions to State parties.
Sec. 203. Treatment of contributions to national party under aggregate 
annual limit on individual contributions.
Sec. 204. Exemption of costs of volunteer campaign materials produced 
and distributed by parties from treatment as contributions and 
expenditures.
Sec. 205. Indexing.

        TITLE III--DISCLOSURE OF ELECTION-RELATED COMMUNICATIONS

Sec. 301. Disclosure of information on communications broadcast prior 
to election.
Sec. 302. Disclosure of information on targeted mass communications.

                        TITLE IV--EFFECTIVE DATE

Sec. 401. Effective date.

                TITLE I--SOFT MONEY OF NATIONAL PARTIES

SEC. 101. RESTRICTIONS ON SOFT MONEY OF NATIONAL POLITICAL PARTIES.

  Title III of the Federal Election Campaign Act of 1971 (2 U.S.C. 431 
et seq.) is amended by adding at the end the following new section:
               ``soft money of national political parties
  ``Sec. 323. (a) Prohibiting Use of Soft Money for Federal Election 
Activity.--A national committee of a political party (including a 
national congressional campaign committee of a political party) may not 
solicit, receive, or direct to another person a contribution, donation, 
or transfer of funds or any other thing of value for Federal election 
activity, or spend any funds for Federal election activity, that are 
not subject to the limitations, prohibitions, and reporting 
requirements of this Act.
  ``(b) Limit on Amount of Nonfederal Funds Provided to Party by Any 
Person for Any Purpose.--No person shall make contributions, donations, 
or transfers of funds which are not subject to the limitations and 
prohibitions of this Act to a political committee established and 
maintained by a national political party in any calendar year in an 
aggregate amount equal to or greater than $75,000.
  ``(c) Applicability.-- This subsection shall apply to any political 
committee established and maintained by a national political party, any 
officer or agent of such a committee acting on behalf of the committee, 
and any entity that is directly or indirectly established, maintained, 
or controlled by such a national committee.
  ``(d) Definitions.--
          ``(1) Federal election activity.--
                  ``(A) In general.--The term `Federal election 
                activity' means--
                          ``(i) voter registration activity during the 
                        period that begins on the date that is 120 days 
                        before the date a regularly scheduled Federal 
                        election is held and ends on the date of the 
                        election, unless the activity constitutes 
                        generic campaign activity;
                          ``(ii) voter identification or get-out-the-
                        vote activity conducted in connection with an 
                        election in which a candidate for Federal 
                        office appears on the ballot (regardless of 
                        whether a candidate for State or local office 
                        also appears on the ballot), unless the 
                        activity constitutes generic campaign activity;
                          ``(iii) any public communication that refers 
                        to or depicts a clearly identified candidate 
                        for Federal office (regardless of whether a 
                        candidate for State or local office is also 
                        mentioned or identified) and that promotes or 
                        supports a candidate for that office, or 
                        attacks or opposes a candidate for that office 
                        (regardless of whether the communication 
                        expressly advocates a vote for or against a 
                        candidate); or
                          ``(iv) any public communication made by means 
                        of any broadcast, cable, or satellite 
                        communication.
                  ``(B) Exception for certain administrative 
                activities.--The term `Federal election activity' does 
                not include any activity relating to establishment, 
                administration, or solicitation costs of a political 
                committee established and maintained by a national 
                political party, so long as the funds used to carry out 
                the activity are derived from funds or payments made to 
                the committee which are segregated and used exclusively 
                to defray the costs of such activities.
          ``(2) Generic campaign activity.--The term `generic campaign 
        activity' means any activity that does not mention, depict, or 
        otherwise promote a clearly identified Federal candidate.
          ``(3) Public communication.--The term `public communication' 
        means a communication by means of any broadcast, cable, or 
        satellite communication, newspaper, magazine, outdoor 
        advertising facility, or direct mail.
          ``(4) Direct mail.--The term `direct mail' means a mailing by 
        a commercial vendor or any mailing made from a commercial 
        list.''.

             TITLE II--MODIFICATION OF CONTRIBUTION LIMITS

SEC. 201. INCREASE IN LIMITS ON CERTAIN CONTRIBUTIONS.

  (a) Contributions by Individuals to National Parties.--Section 
315(a)(1)(B) of the Federal Election Campaign Act of 1971 (2 U.S.C. 
441a(a)(1)(B)) is amended by striking ``$20,000'' and inserting 
``$30,000''.
  (b) Contributions by Committees to National Parties.--Section 
315(a)(2)(B) of such Act (2 U.S.C. 441a(a)(2)(B)) is amended by 
striking ``$15,000'' and inserting ``$30,000''.
  (c) Aggregate Annual Limit on Contributions by Individuals.--Section 
315(a)(3) of such Act (2 U.S.C. 441a(a)(3)) is amended by striking 
``$25,000'' and inserting ``$37,500''.

SEC. 202. INCREASE IN LIMITS ON CONTRIBUTIONS TO STATE PARTIES.

  (a) Contributions by Individuals.--Section 315(a)(1) of the Federal 
Election Campaign Act of 1971 (2 U.S.C. 441a(a)(1)) is amended--
          (1) in subparagraph (B), by striking ``or'' at the end;
          (2) in subparagraph (C)--
                    (A) by inserting ``(other than a committee 
                described in subparagraph (D))'' after ``committee''; 
                and
                    (B) by striking the period at the end and inserting 
                ``; or''; and
          (3) by adding at the end the following:
          ``(D) to a political committee established and maintained by 
        a State committee of a political party in any calendar year 
        which, in the aggregate, exceed $10,000.''.
  (b) Contributions by Committees.--Section 315(a)(2) of the Federal 
Election Campaign Act of 1971 (2 U.S.C. 441a(a)(2)) is amended--
          (1) in subparagraph (B), by striking ``or'' at the end;
          (2) in subparagraph (C)--
                  (A) by inserting ``(other than a committee described 
                in subparagraph (D))'' after ``committee''; and
                  (B) by striking the period at the end and inserting 
                ``; or''; and
          (3) by adding at the end the following:
          ``(D) to a political committee established and maintained by 
        a State committee of a political party in any calendar year 
        which, in the aggregate, exceed $10,000.''.

SEC. 203. TREATMENT OF CONTRIBUTIONS TO NATIONAL PARTY UNDER AGGREGATE 
                    ANNUAL LIMIT ON INDIVIDUAL CONTRIBUTIONS.

  Section 315(a)(3) of the Federal Election Campaign Act of 1971 (2 
U.S.C. 441(a)(3)) is amended--
          (1) by striking ``(3)'' and inserting ``(3)(A)''; and
          (2) by adding at the end the following new subparagraph:
  ``(B) Subparagraph (A) shall not apply with respect to any 
contribution made to any political committee established and maintained 
by a national political party which is not the authorized political 
committee of any candidate.''.

SEC. 204. EXEMPTION OF COSTS OF VOLUNTEER CAMPAIGN MATERIALS PRODUCED 
                    AND DISTRIBUTED BY PARTIES FROM TREATMENT AS 
                    CONTRIBUTIONS AND EXPENDITURES.

  (a) Treatment as Contributions.--Section 301(8)(B)(x) of the Federal 
Election Campaign Act of 1971 (2 U.S.C. 431(8)(B)(x)) is amended by 
striking ``a State or local committee of a political party of the costs 
of'' and inserting ``a national, State, or local committee of a 
political party of the costs of producing and distributing''.
  (b) Treatment as Expenditures.--Section 301(9)(B)(viii) of the 
Federal Election Campaign Act of 1971 (2 U.S.C. 431(9)(B)(viii)) is 
amended by striking ``a State or local committee of a political party 
of the costs of'' and inserting ``a national, State, or local committee 
of a political party of the costs of producing and distributing''.

SEC. 205. INDEXING.

  Section 315(c) of the Federal Election Campaign Act of 1971 (2 U.S.C. 
441a(c)) is amended--
          (1) in paragraph (1)--
                  (A) by striking the second and third sentences;
                  (B) by inserting ``(A)'' before ``At the beginning''; 
                and
                  (C) by adding at the end the following:
  ``(B) Except as provided in subparagraph (C), in any calendar year 
after 2002--
          ``(i) a limitation established by subsections (a), (b), (d), 
        or (h) shall be increased by the percent difference determined 
        under subparagraph (A);
          ``(ii) each amount so increased shall remain in effect for 
        the calendar year; and
          ``(iii) if any amount after adjustment under clause (i) is 
        not a multiple of $100, such amount shall be rounded to the 
        nearest multiple of $100.
  ``(C) In the case of limitations under subsections (a) and (h), 
increases shall only be made in odd-numbered years and such increases 
shall remain in effect for the 2-year period beginning on the first day 
following the date of the last general election in the year preceding 
the year in which the amount is increased and ending on the date of the 
next general election.''; and
          (2) in paragraph (2)(B), by striking ``means the calendar 
        year 1974'' and inserting ``means--
                  ``(i) for purposes of subsections (b) and (d), 
                calendar year 1974; and
                  ``(ii) for purposes of subsections (a) and (h), 
                calendar year 2001''.

        TITLE III--DISCLOSURE OF ELECTION-RELATED COMMUNICATIONS

SEC. 301. DISCLOSURE OF INFORMATION ON COMMUNICATIONS BROADCAST PRIOR 
                    TO ELECTION.

  Section 304 of the Federal Election Campaign Act of 1971 (2 U.S.C. 
434), as amended by section 502(a) of the Department of Transportation 
and Related Agencies Act, 2001 (as enacted into law by reference under 
section 101(a) of Public Law 106-346), is amended by adding at the end 
the following new subsection:
  ``(e) Disclosure of Information on Certain Communications Broadcast 
Prior to Elections.--
          ``(1) In general.--Any person who makes a disbursement for a 
        communication described in paragraph (3) shall, not later than 
        24 hours after making the disbursement, file with the 
        Commission a statement containing the information required 
        under paragraph (2).
          ``(2) Contents of statement.--Each statement required to be 
        filed under this subsection shall be made under penalty of 
        perjury and shall contain the following information:
                  ``(A) The identification of the person making the 
                disbursement, of any individual or entity sharing or 
                exercising direction or control over the activities of 
                such person, and of the custodian of the books and 
                accounts of the person making the disbursement.
                  ``(B) The principal place of business and phone 
                number of the person making the disbursement, if not an 
                individual.
                  ``(C) The amount of the disbursement.
                  ``(D) The clearly identified candidate or candidates 
                to which the communication pertains and the names (if 
                known) of the candidates identified or to be identified 
                in the communication.
                  ``(E) The text of the communication involved.
          ``(3) Communications described.--
                  ``(A) In general.--A communication described in this 
                paragraph is any communication--
                          ``(i) which is disseminated to the public by 
                        means of any broadcast, cable, or satellite 
                        communication during the 120-day period ending 
                        on the date of a Federal election; and
                          ``(ii) which mentions a clearly identified 
                        candidate for such election (by name, image, or 
                        likeness).
                  ``(B) Exception.--A communication is not described in 
                this paragraph if--
                          ``(i) the communication appears in a news 
                        story, commentary, or editorial distributed 
                        through the facilities of any broadcasting 
                        station, unless such facilities are owned or 
                        controlled by any political party, political 
                        committee, or candidate; or
                          ``(ii) the communication constitutes an 
                        expenditure under this Act.
          ``(4) Coordination with other requirements.--Any requirement 
        to file a statement under this subsection shall be in addition 
        to any other reporting requirement under this Act.
          ``(5) Clarification of treatment of vendors.--A person shall 
        not be considered to have made a disbursement for a 
        communication under this subsection if the person made the 
        disbursement solely as a vendor acting pursuant to a 
        contractual agreement with the person responsible for 
        sponsoring the communication.''.

SEC. 302. DISCLOSURE OF INFORMATION ON TARGETED MASS COMMUNICATIONS.

  Section 304 of the Federal Election Campaign Act of 1971 (2 U.S.C. 
434), as amended by section 301, is further amended by adding at the 
end the following new subsection:
  ``(f) Disclosure of Information on Targeted Mass Communications.--
          ``(1) In general.--Any person who makes a disbursement for 
        targeted mass communications in an aggregate amount in excess 
        of $50,000 during any calendar year shall, within 24 hours of 
        each disclosure date, file with the Commission a statement 
        containing the information described in paragraph (2).
          ``(2) Contents of statement.--Each statement required to be 
        filed under this subsection shall be made under penalty of 
        perjury and shall contain the following information:
                  ``(A) The identification of the person making the 
                disbursement, of any individual or entity sharing or 
                exercising direction or control over the activities of 
                such person, and of the custodian of the books and 
                accounts of the person making the disbursement.
                  ``(B) The principal place of business and phone 
                number of the person making the disbursement, if not an 
                individual.
                  ``(C) The amount of each such disbursement of more 
                than $200 made by the person during the period covered 
                by the statement and the identification of the person 
                to whom the disbursement was made.
                  ``(D) The clearly identified candidate or candidates 
                to which the communication pertains and the names (if 
                known) of the candidates identified or to be identified 
                in the communication.
                  ``(E) The text of the communication involved.
          ``(3) Targeted mass communication defined.--
                  ``(A) In general.--In this subsection, the term 
                `targeted mass communication' means any communication--
                          ``(i) which is disseminated during the 120-
                        day period ending on the date of a Federal 
                        election;
                          ``(ii) which refers to or depicts a clearly 
                        identified candidate for such election (by 
                        name, image, or likeness); and
                          ``(iii) which is targeted to the relevant 
                        electorate.
                  ``(B) Targeting to relevant electorate.--
                          ``(i) Broadcast communications.--For purposes 
                        of this paragraph, a communication disseminated 
                        to the public by means of any broadcast, cable, 
                        or satellite communication which refers to or 
                        depicts a clearly identified candidate for 
                        Federal office is `targeted to the relevant 
                        electorate' if the communication is 
                        disseminated by a broadcaster whose audience 
                        includes--
                                  ``(I) a substantial number of 
                                residents of the district the candidate 
                                seeks to represent (as determined in 
                                accordance with regulations of the 
                                Commission), in the case of a candidate 
                                for Representative in, or Delegate or 
                                Resident Commissioner to, the Congress; 
                                or
                                  ``(II) a substantial number of 
                                residents of the State the candidate 
                                seeks to represent (as determined in 
                                accordance with regulations of the 
                                Commission), in the case of a candidate 
                                for Senator.
                          ``(ii) Other communications.--For purposes of 
                        this paragraph, a communication which is not 
                        described in clause (i) which refers to or 
                        depicts a clearly identified candidate for 
                        Federal office is `targeted to the relevant 
                        electorate' if--
                                  ``(I) more than 10 percent of the 
                                total number of intended recipients of 
                                the communication are members of the 
                                electorate involved with respect to 
                                such Federal office; or
                                  ``(II) more than 10 percent of the 
                                total number of members of the 
                                electorate involved with respect to 
                                such Federal office receive the 
                                communication.
                  ``(C) Exceptions.--The term `targeted mass 
                communication' does not include--
                          ``(i) a communication appearing in a news 
                        story, commentary, or editorial distributed 
                        through the facilities of any broadcasting 
                        station, newspaper, magazine, or other 
                        periodical publication, unless such facilities 
                        are owned or controlled by any political party, 
                        political committee, or candidate;
                          ``(ii) a communication made by any membership 
                        organization (including a labor organization) 
                        or corporation solely to its members, 
                        stockholders, or executive or administrative 
                        personnel, if such membership organization or 
                        corporation is not organized primarily for the 
                        purpose of influencing the nomination for 
                        election, or election, of any individual to 
                        Federal office; or
                          ``(iii) a communication which constitutes an 
                        expenditure under this Act.
          ``(4) Disclosure date.--For purposes of this subsection, the 
        term `disclosure date' means--
                  ``(A) the first date during any calendar year by 
                which a person has made disbursements for targeted mass 
                communications aggregating in excess of $50,000; and
                  ``(B) any other date during such calendar year by 
                which a person has made disbursements for targeted mass 
                communications aggregating in excess of $50,000 since 
                the most recent disclosure date for such calendar year.
          ``(5) Coordination with other requirements.--Any requirement 
        to report under this subsection shall be in addition to any 
        other reporting requirement under this Act.
          ``(6) Clarification of treatment of vendors.--A person shall 
        not be considered to have made a disbursement for a 
        communication under this subsection if the person made the 
        disbursement solely as a vendor acting pursuant to a 
        contractual agreement with the person responsible for 
        sponsoring the communication.''.

                        TITLE IV--EFFECTIVE DATE

SEC. 401. EFFECTIVE DATE.

  The amendments made by this Act shall apply with respect to elections 
occurring after December 2002.

                       Purpose of the Legislation

    The purpose of H.R. 2360 the Campaign Reform and Citizen 
Participation Act of 2001 is to modify our campaign finance 
laws in ways that will enhance citizen confidence and 
participation in our political process. The bill is crafted to 
enact reforms that will expand political participation and 
involvement by the citizenry.
    We do not believe that increased regulations and 
restrictions on political activity will make citizens more 
inclined to involve themselves in the political process. 
Rather, we fear that imposition of such restrictions will have 
the opposite effect, discouraging participation and causing 
citizens to withdraw and disengage from the process, to an even 
greater degree than they are now. For this reason, H.R. 2360 
takes a different approach than that embodied in such 
legislation as S. 27 (the McCain-Feingold bill), H.R. 380 (the 
Shays-Meehan bill introduced in January 2001) and H.R. 2356 
(the modified Shays-Meehan bill introduced on June 28, 2001 and 
reported unfavorably by this committee on the same day).
    To a large extent, those who advocate a more stringent 
regulatory approach are responding to an illusory and self-
perpetuating ``crisis.'' Public concerns about corruption or 
appearance of corruption are reinforced by reform proponents 
who incessantly assert the prevalence of such corruption, but 
without specific substantiation. Indeed, the record compiled 
and examined by this Committee does not contain even one single 
instance or example of the alleged corruption sought to be 
remedied by this legislation. Also, reform proponents point to 
the amount of time legislators are required to spend raising 
campaign funds, and argue that additional regulations are 
needed to reduce this burden. In so arguing, they fail to 
acknowledge that the contribution limits imposed by prior 
reform advocates in 1974, and never adjusted for inflation in 
the 27 years since, require Members to spend ever-increasing 
time with the numerous solicitations required for funding under 
these outdated limits.
    As defined by the regulation proponents, the threshold test 
of what constitutes reform legislation has been the inclusion 
of a soft money ban. The term ``soft money,'' which has become 
part of the political lexicon, refers to funds that are not 
subject to the contribution or expenditure limits of the 
Federal Election Campaign Act (FECA). The assertion that these 
funds are `unregulated' is not accurate, but such contentions 
have caused a negative connotation to be associated with the 
term by advocates of additional regulations. Regulation 
proponents have historically claimed that a ``ban'' on soft 
money is the linchpin of any legitimate reform effort.
    The purported bans that have been put forth in the past, 
and were again put forth in H.R. 380 and S. 27 at the start of 
the 107th Congress, were never really bans on soft money, in 
that they sought only to ban soft money donations to political 
parties, but did not seek to limit soft money expenditures 
(except for the issue ad restrictions). As drafted, these bills 
would have prevented a labor union, for example, from making 
contributions from its treasury funds to a political party. The 
bills would not, however, have prevented a labor union from 
spending such treasury funds, or ``soft money,'' on voter 
registration and get out the vote activities aimed at the 
union's members and their families. Such activities are 
explicitly excluded from the definitions of contribution and 
expenditure contained in federal law, and are therefore 
unregulated and unlimited. 2 U.S.C. 441b(b)(2)(B). As such, 
these types of activities are financed with so called soft 
dollars, yet the legislation touted as a ``ban'' on soft 
dollars would not stop any use of these funds in this way.
    In the past, therefore, the proposed ban has been limited 
to banning soft money contributions to party committees without 
restricting soft money expenditures by the donors. The 
justification for the ban on soft money donations has been 
that, through these large, unlimited donations, ``special 
interest'' groups are able to exert improper influence over the 
policy process. Thus to reduce the influence of these groups, 
reform proponents argue, the donations to party committees must 
be restricted.
    Proponents of this view apparently fail to recognize that 
by depriving the political parties of the use of such funds, 
while leaving unions and corporations free to use identical 
funds however they wish, the power of the very special 
interests they seek to diminish will actually be enhanced. Just 
as nature abhors a vacuum, so does political power. If the 
power or influence of one group is reduced, the power of other 
groups will expand to fill the void. By making the political 
parties the only group in American political life to have no 
access to corporate and labor union funding, while leaving 
other special interests unencumbered in their use of such 
funds, the inevitable result will the decrease of the parties 
power and stature, coupled with a concomitant increase in the 
power and stature of the very special interest groups these 
regulation proponents seek to curtail. This reflects a failure 
of the regulation proponents to understand the unique role of 
the parties in our political process.
    H.R. 2360, the compromise legislation reported favorably by 
the Committee, is designed to address the appearance of 
corruption generated by the donation of unlimited sums to the 
parties, without debilitating our political parties by 
rendering them uniquely incapable of having access to funds for 
beneficial and constructive activities. The principal complaint 
about soft money donations is that they are unlimited and 
unregulated by the FECA. H.R. 2360 answers this complaint by 
limiting and regulating these donations. In addition to 
regulating the amount of the donations, H.R. 2360 specifies 
additional limits on the permissible uses of such funds, beyond 
the existing law, and precludes their usage for defined federal 
election activities.
    While S. 27 as introduced and H.R. 380 banned soft money 
donations, S. 27 as amended and as reported to the House now 
permits soft money donations to the state and local parties. 
Likewise, H.R. 2356 also permits such donations to the state 
and local parties. As such, these bills now fail to ban even 
donations of soft money. In this regard, the principle 
difference between H.R. 2360 and H.R. 2356 is that, while the 
former permits the national parties to raise these funds, the 
latter allows only the state and local parties to do so. We do 
not believe that the national parties should be prohibited from 
raising such funds for party building activities, generic voter 
registration, voter education and get out the vote activities. 
Education and mobilization of voters by political parties 
should be enhanced and encouraged, not restricted and 
forbidden.

                       Summary of the Legislation


            BAN ON SOFT MONEY FOR FEDERAL ELECTION ACTIVITY

    H.R. 2360 prohibits the national party committees from 
raising funds for federal election activities that are not 
subject to the limitations and reporting requirements of 
federal law. Federal election activity includes federal 
candidate specific voter registration drives in the last 120 
days before a federal election and voter identification and get 
out the vote drives in connection with federal elections. 
Generic activities that do not mention or promote a clearly 
identified federal candidate do not constitute federal election 
activities under the bill. This preserves the ability of the 
national parties to engage in such generic activities. The 
national parties, including the national senatorial and 
congressional committees, are each permitted to raise funds to 
support such activities, subject to an annual maximum 
contribution per person of $75,000 per committee.
    The bill also prevents the national parties from using such 
dollars on issue advocacy that refers to or depicts a clearly 
identified federal candidate. Parties are permitted to use such 
funds for fundraising and overhead expenses.
    These restrictions on how the parties can use soft dollars 
are unique, in that unions and corporations face no similar 
restrictions on how they can use such funds. We are not 
convinced that even these restrictions are fair or necessary, 
but they have been included to mollify concerns about the 
presence of union and corporate funds in federal campaigns (a 
concern that for some reason is noticeably absent when these 
soft dollars are spent directly by these union and corporate 
entities in election years). Permitting the parties to use 
these funds on the described activities puts them on a par with 
unions and corporations at least in terms of a party's ability 
to raise funds and pay for voter mobilization and education 
programs. If the parties ability to do such things were done 
away with, as some desire, they would be placed in the unique 
position of having to pay for everything with ``hard dollars'', 
money subjected to federal limits and prohibitions. For 
example, while a union or corporation would still be permitted 
to use soft dollars to raise hard dollars for a political 
action committee, the party would have to use hard dollars to 
raise hard dollars. There is no public policy rationale that 
justifies hamstringing the parties in this fashion versus 
special interest groups. H.R. 2360 would permit the parties to 
continue to play their vitally important role in our political 
process.

                          CONTRIBUTION LIMITS

    The contribution limits imposed by the Federal Election 
Campaign Act Amendments in 1974 have not been adjusted since to 
account for inflation. As a result, the $1,000 contribution 
limit imposed in 1974 is worth approximately $350 in 2001 
dollars. H.R. 2360 would be a first step toward rectifying this 
problem in the future by applying prospective indexing to all 
contribution limits.
    Additionally, the bill modestly increases some contribution 
limits for donations to the parties. The aggregate individual 
contribution limits are also raised from $25,000 per year to 
$37,500. To strengthen and enhance the productive role of our 
political parties, we exempt contributions to the national 
party committees from the aggregate limits.
    These modifications are consistent with our belief that 
reform should enhance, not diminish, the role our political 
parties play.

                    IMPROVE AND EXPEDITE DISCLOSURE

    We believe that people have the right to know who is 
communicating with them about elections. We do not want to 
restrict the right of any American to speak out on matters of 
public concern, but we do believe that those who make such 
communications should be required to disclose their identity. 
Again, this is a reform measure geared toward enhancing debate 
and communication, not limiting it. H.R. 2360 would accomplish 
this goal in the future by requiring disclosure to the Federal 
Election Commission of the name and principal place of business 
of the person making the disbursement for such communications. 
The amount spent and the text of the communication must also be 
disclosed. These disclosure requirements apply to broadcast 
communications that refer to or depict a clearly identified 
candidate within 120 days of an election. The disclosure must 
be made within 24 hours of the disbursement of payment for the 
communication.
    In addition to the broadcast communication disclosure 
requirements, H.R. 2360 requires disclosure of the source of 
all targeted mass communications that exceed, in the aggregate, 
$50,000. This disclosure requirement would encompass such 
communications as mass mailings and phone banks.
    Attached as Appendix A to this report is the testimony 
submitted by Republican National Committee Chairman James 
Gilmore at the Committee's June 28, 2001 hearing. The testimony 
details how our political parties function, and demonstrates 
why the Shays-Meehan bill (H.R. 2356) would be devastating to 
the parties.
    Appendix B is a letter from Democratic National Committee 
Chairman Terence McAuliffe.

                       SECTION BY SECTION SUMMARY


                Title I--Soft Money of National Parties

Sec. 101. Restrictions on soft money of national political parties

     For federal election activities: prohibits 
national political party committees (including officers and 
agents acting in their behalf and entities they directly or 
indirectly establish, maintain, or control) from soliciting, 
receiving, directing, or transferring funds that are not 
subject to regulation by federal election law.
     For non-federal election activities: imposes a 
limit of $75,000 per calendar year on the amount any person may 
donate or transfer to a national party committee, that is not 
subject to regulation under federal election law.
     Defines federal election activity to include: (a) 
voter registration drives in the last 120 days of a federal 
election, unless for generic activity; (b) voter identification 
or get-out-the-vote (GOTV) drives in an election with at least 
one federal candidate on the ballot, unless for generic 
activity; (c) any public communication (by broadcast, cable, 
satellite, newspaper, magazine, outdoor advertising facility, 
or direct mail) that refers to or depicts a clearly identified 
federal candidate and that supports, promotes, attacks, or 
opposes a candidate for that office, regardless of whether it 
expressly advocates a vote for or against a candidate; or (d) 
any public communication made by broadcast, cable, or 
satellite.
     Defines generic activity as activity that does not 
mention, depict, or otherwise promote a clearly identified 
federal candidate.
     Exempts costs of administering and soliciting 
funds for national party committees from consideration as 
federal election activity, if the funds are designated 
exclusively for such uses and are segregated accordingly.

             Title II--Modification of Contribution Limits

Sec. 201. Increase in limits on certain contributions

     Increases limit on contributions by individuals to 
national party committees to $30,000 per year.
     Increases limit on contributions from PACs 
(multicandidate political committees) to national party 
committees to $30,000 per year.
     Increases aggregate limit on contributions by 
individuals to federal candidates, PACs, and parties to $37,500 
per year.

Sec. 202. Increase in limits on contributions to state parties

     Increases limit on contributions by individuals 
and by PACs (multicandidate committees) to $10,000 per year.

Sec. 203. Repeal application to national party contributions of 
        aggregate annual limit on individual contributions

     Exempts contributions by individuals to national 
party committees from counting toward the annual aggregate 
limit on individuals' federal election contributions.

Sec. 204. Exemption of costs of campaign materials produced and 
        distributed by parties from treatment as contributions and 
        expenditures

     Exempts from definition of contribution and 
expenditure: any party committee's costs of producing and 
distributing grassroots materials (pins, bumper stickers, 
handbills, brochures, posters, party tabloids, and yard signs) 
in connection with volunteer activities, thus extending the 
law's current exemption for state and local parties to national 
parties as well.

Sec. 205. Indexing

     Provides for future indexing for inflation of all 
contribution limits in every odd-numbered year beginning in 
2003, with 2001 as the base year and all adjusted amounts 
rounded to the nearest $100.

        Title III--Disclosure of Election-Related Communications

Sec. 301. Disclosure of information on communications broadcast prior 
        to election

     Requires disclosure to FEC concerning any 
broadcast, cable, or satellite communication disseminated 
within 120 days of a federal election and which mentions a 
clearly identified federal candidate, by name, image, or 
likeness.
     Requires statement to be made within 24 hours 
after the disbursement is made for the communication.
     Requires statement to include: identification of 
the person making the disbursement, any entity sharing or 
exercising control or direction over the activity, and of the 
custodian of the books and accounts; the principal place of 
business of the person making the disbursement (if not an 
individual); the disbursement amount; the identity of 
candidates identified or those to whom the communication 
pertains; and the text of the communication.
     Exempts: (a) broadcast news stories and 
commentaries; (b) expenditures as defined by federal election 
law; and (c) payments by vendors acting solely pursuant to a 
contractual agreement with the person sponsoring the 
communication.

Sec. 302. Disclosure of information on targeted mass communications

     Requires disclosure to FEC concerning targeted 
mass communications in excess of an aggregate of $50,000 per 
year.
     Defines a targeted mass communication as a 
communication disseminated within 120 days of a federal 
election and which refers to or depicts a clearly identified 
federal candidate by name, image, or likeness, and which is 
targeted to the relevant electorate.
     Considers a broadcast communication to be targeted 
if the broadcaster's audience includes a substantial number of 
residents of the district (in the case of a House race) or 
state (in the case of a Senate race) where the election is 
being held, as determined by FEC regulations. Other types of 
communications will be deemed to be targeted: (a) if more than 
10% of the intended recipients are members of the electorate 
involved in that election; or (b) if more than 10% of the total 
electorate involved in the election receives the communication.
     Requires the first disclosure statement to be made 
within 24 hours after the $50,000 threshold is exceeded and 
within 24 hours of each subsequent disbursement in excess of 
$50,000.
     Requires statements to include: identification of 
the person making the disbursement, any entity sharing or 
exercising control or direction over the activity, and of the 
custodian of the books and accounts; the principal place of 
business of the person making the disbursement (if not an 
individual); the amount of each disbursement of more than $200 
and identity of the recipient; the identity of candidates 
identified or those to whom the communication pertains; and the 
text of the communication.
     Exempts: (a) broadcast news stories and 
commentaries; (b) communications by a membership organization 
(including a union) or a corporation solely to its members, 
stockholders, or executive and administrative personnel, if the 
entity is not organized primarily for purposes of influencing 
federal elections; (c) expenditures as defined by federal 
election law; and (d) payments by vendors acting solely 
pursuant to a contractual agreement with the person sponsoring 
the communication.

                        Title IV--Effective Date

Sec 401. Effective date

     These amendments shall take effect with respect to 
elections occurring after December 2002.

               Committee Consideration of the Legislation


                       INTRODUCTION AND REFFERAL

    On June 28, 2001, Mr. Ney, Mr. Wynn, Mr. Ehlers, Mr. Mica, 
Mr. Reynolds, Mr. Sweeney, Mr. LaTourette, Mr. Peterson, Mr. 
Hobson, Ms. Dunn, Mr. Cunningham, Mr. Taylor, Mr. Traficant, 
Ms. Pryce, Mr. Blunt, Mr. Ballenger, Mr. Norwood introduced 
H.R. 2360, which was referred to the Committee on House 
Administration.

                                HEARINGS

    The Committee on House Administration held five hearings on 
Campaign Finance Reform over four months in 2001.
    On March 17, 2001, the Committee held the first hearing on 
Campaign Finance Reform. This hearing was a field hearing, held 
in Phoenix, Arizona. Members present: Mr. Ney, Mr. Ehlers, Mr. 
Mica, Mr. Linder, Mr. Doolittle. Witnesses: Eleanor Eisenberg, 
Executive Director, Arizona Civil Liberties Union; Lynn Wardle, 
Professor, J. Reuben Clarke Law School, Brigham Young 
University; Ann Eschinger, President, Arizona League of Women 
Voters; Landis Aiden, Citizen Activist; Senator Scott 
Bundgaard, Arizona State Legislature; Dennis Burke, Executive 
Director, Arizona Good Government Association; Joseph F. Yuhas, 
Executive Director, Arizona Restaurant Association; Lee Ann 
Elliott, Former Chairperson of the Federal Election Commission.
    On May 1, 2001, the Committee held its second hearing on 
Campaign Finance Reform. Members present: Mr. Ney, Mr. Ehlers, 
Mr. Linder, Mr. Hoyer, Mr. Fattah, Mr. Davis Witnesses: Mr. 
Gephardt, Mr. DeLay, Mr. Shays, Mr. Meehan, Senator Hagel, 
Senator McConnell, Senator Feingold.
    On June 14, 2001, the Committee held its third hearing on 
Campaign Finance Reform. Members present were: Mr. Ney, Mr. 
Mica, Mr. Linder, Mr. Reynolds, Mr. Hoyer and Mr. Davis. 
Witnesses: James Bopp, Jr., Bopp, James Madison Center for Free 
Speech; Cleta Mitchell, Foley & Lardner; Joel M. Gora, 
Professor, Brooklyn Law School, former Associate Legal 
Director, American Civil Liberties Union; Laurence Gold, 
Associate General Counsel, AFL-CIO; E. Joshua Rosenkranz, 
President & CEO, Brennan Center for Justice; Donald J. Simon, 
General Counsel, Common Cause.
    On June 21, 2001, the Committee held its fourth hearing on 
Campaign Finance Reform. Members present: Mr. Ney, Mr. Ehlers, 
Mr. Linder and Mr. Hoyer. Witnesses: Mr. Hutchinson testified 
on H.R. 1150, Mr. Wynn, Mr. Price (NC) testified on H.R. 156, 
Mr. Terry testified on H.R. 1039, Ms. Mink testified on H.R. 
289, Mr. Linder testified on H.R. 1080, Mr. Moore testified on 
H.R. 365, Mr. Doolittle testified on H.R. 1444, Mr. Tierney 
testified on H.R. 1637, Mr. Faleomavaega testified on H.R. 
1447. Mr Linder introduced the written testimony of Phil Kent, 
President, Southeastern Legal Foundation.
    On June 28, 2001, the Committee held its fifth hearing on 
Campaign Finance Reform. Members present: Mr. Ney, Mr. Ehlers, 
Mr. Mica, Mr. Linder, Mr. Doolittle, Mr. Reynolds, Mr. Hoyer, 
Mr. Fattah, Mr. Davis. Witnesses: Mr. Petri testified on H.R. 
150 and H.R. 151, Mr. Bereuter testified on H.R. 35, Mr. Shaw 
testified on H.R. 1516, Mr. English testified on H.R. 1445, Mr. 
Calvert testified on H.R. 2122, Mr. Barr and Mr. Gonzalez.

                                 MARKUP

    On Thursday June 28, 2001, the Committee met to markup H.R. 
2360 and H.R. 2356. The Committee favorably reported H.R. 2360, 
as amended, by a recorded vote (5-3), a quorum being present.

             Matters Required Under The Rules of The House


                         COMMITTEE RECORD VOTES

    Clause 3(b) of House rule XII requires the results of each 
record vote on an amendment or motion to report, together with 
the names of those voting for and against, to be printed in the 
committee report.

Amendment No. 1

    Offered by Mr. Ney. The first vote during the markup came 
on the amendment in the nature of a substitute offered by Mr. 
Ney.
    The amendment in the nature of a substitute bans soft money 
to the parties from raising or using soft money for federal 
election activities, including broadcast issue advertising. 
However, the amendment would permit the parties to continue to 
raise and use soft money for generic voter registration and get 
out the vote activities. The parties would also preserve the 
right to use such funds for fundraising and overhead expenses. 
The amendment was approved by a recorded vote (5-2-1) a quorum 
being present.

------------------------------------------------------------------------
                 Member                     Yes         No      Present
------------------------------------------------------------------------
Mr. Ney................................         X   .........  .........
Mr. Mica...............................         X   .........  .........
Mr. Linder.............................         X   .........  .........
Mr. Doolittle..........................         X   .........  .........
Mr. Reynolds...........................         X   .........  .........
Mr. Hoyer..............................  .........         X   .........
Mr. Fattah.............................  .........  .........         X
Mr. Davis..............................  .........         X   .........
                                        --------------------------------
      Total............................         5          2          1
------------------------------------------------------------------------

    The Committee then voted to report H.R. 2360 favorably, as 
amended. The vote to report favorably was approved by recorded 
vote (5-3).

------------------------------------------------------------------------
                 Member                     Yes         No      Present
------------------------------------------------------------------------
Mr. Ney................................         X   .........  .........
Mr. Mica...............................         X   .........  .........
Mr. Linder.............................         X   .........  .........
Mr. Doolittle..........................         X   .........  .........
Mr. Reynolds...........................         X   .........  .........
Mr. Hoyer..............................  .........         X   .........
Mr. Fattah.............................  .........         X   .........
Mr. Davis..............................  .........         X   .........
                                        --------------------------------
      Total............................         5          3   .........
------------------------------------------------------------------------

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee states that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

        Oversight Findings of Committee on House Administration

    The Committee states, with respect to clause 3(c)(4) of 
rule XII of the Rules of the House of Representatives, that the 
Committee on Government Reform and Oversight did not submit 
findings or recommendations based on investigations under 
clause 4(c)(2) of rule X of the Rules of the House of 
Representatives.

                        Constitutional Authority

    In compliance with clause 3(d)(1) of rule XIII, the 
Committee states that Article 1, Section 4 of the U.S. 
Constitution grants Congress the authority to make laws 
governing the time, place and manner of holding Federal 
elections.

                            Federal Mandates

    The Committee states, with respect to section 423 of the 
Congressional Budget Act of 1974, that the bill does not 
include any significant Federal mandate.

                        Preemption Clarification

    Section 423 of the Congressional Budget Act of 1974 
requires the report of any committee on a bill or joint 
resolution to include a committee statement on the extent to 
which the bill or joint resolution is intended to preempt state 
or local law.

                        Committee Cost Estimate

    Clause 3(c)(2) of rule XII requires each committee report 
that accompanies a measure providing new budget authority, new 
spending authority, or changing revenues or tax expenditures to 
contain a cost estimate, as required by section 308(a)(1) of 
the Congressional Budget Act of 1974, as amended and, when 
practicable with respect to estimates of new budget authority, 
a comparison of the total estimated funding level for the 
relevant program (or programs) to the appropriate levels under 
current law.
    Clause 3(d)(2) of rule XIII requires committees to include 
their own cost estimates in certain committee reports, which 
include, when practicable, a comparison of the total estimated 
funding level for the relevant program (or programs) with the 
appropriate levels under current law.
    The Committee adopts as its own the cost estimate prepared 
by the Director of the Congressional adopts as its own the cost 
estimate prepared by the Director of the Congressional Budget 
Office, pursuant to section 403 of the Congressional Budget Act 
of 1974.

               Congressional Budget Office Cost Estimate

    In compliance with clause 3(c)(2) of rule XIII of the Rules 
of the House of Representatives, the Committee sets forth, with 
respect to the bill, the following estimate and comparison 
prepared by the Director of the Congressional Budget Office 
under section 403 of the Congressional Budget Act of 1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                      Washington, DC, July 9, 2001.
Hon. Bob Ney,
Chairman, Committee on House Administration,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2360, the Campaign 
Finance Reform and Grassroots Citizen Participation Act of 
2001.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Mark 
Grabowicz (for federal costs) and Paige Piper/Bach (for the 
private-sector impact).
            Sincerely,
                                          Barry B. Anderson
                                    (for Dan L. Crippen, Director).
    Enclosure.

H.R. 2360--Campaign Finance Reform and Grassroots Citizen Participation 
        Act of 2001

    Summary: H.R. 2360 would make numerous amendments to the 
Federal Campaign Act of 1971. For elections occurring after 
December 2002, the bill would:
     Raise the amounts that individuals can contribute 
each year.
     Place restrictions on the solicitation and use of 
so-called ``soft-money'' by national political parties, and
     Require additional filings by political committees 
with the Federal Election Commission (FEC) for certain 
expenditures.
    CBO estimates that implementing H.R. 2360 would cost about 
$2 million annually, subject to the availability of 
appropriated funds, to cover administrative and compliance 
costs of the FEC. Enacting the bill would not affect direct 
spending or receipts, so pay-as-you-go procedures would not 
apply.
    H.R. 2360 contains no intergovernmental mandates as defined 
in the Unfunded Mandates Reform Act (UMRA) would not affect the 
budgets of state, local, or tribal governments. H.R. 2360 would 
impose private-sector mandates, as defined by UMRA, but CBO 
estimates that the cost direct costs of those mandates would 
fall below the annual threshold established by UMRA ($113 
million in 2001, adjusted annually for inflation).
    Estimated cost to the Federal Government: Based on 
information from the FEC, CBO estimates that the commission 
would spend $1 million to $2 million in fiscal year 2002 to 
reconfigure its information systems to handle the anticipated 
increase in workload from accepting and processing more 
campaign contribution filings, to write new regulations 
implementing the bill's provisions, and to print and mail 
information to candidates and election committees about the new 
requirements.
    After 2002, the FEC would need to ensure compliance with 
the bill's provisions and investigate possible violations. 
Beginning in fiscal year 2003, CBO estimates that implementing 
H.R. 2360 would cost about $2 million a year, mainly for 
additional enforcement and litigation staff. All additional 
spending by the FEC would be subject to the availability of 
appropriated funds.
    Pay-as-you-go considerations: None.
    Estimated impact on State, local, and tribal governments: 
H.R. 2360 contains no intergovernmental mandates as defined in 
UMRA and would not affect the budgets of state, local, or 
tribal governments.
    Estimated impact of the private sectors: H.R. 2360 would 
impose new private-sector mandates on national political party 
committees, contributors to such committees, and persons who 
pay for certain election-related communications. The bill would 
prohibit national party committees from using soft money for 
local election activities. (Soft money is those funds raised by 
national parties from sources and in amounts that are not 
subject to regulation under the Federal Election Campaign Act.) 
The national party committees would have to compile and track 
soft money contributions by source and by spending activity. 
Since the national party committees currently perform such 
administrative bookkeeping for funds raised and spent in 
accordance with the Federal Election Campaign Act, CBO 
estimates that the additional costs for the national party 
committees to perform such functions for soft money would be 
minimal. The bill would impose a private-sector mandate on 
individuals and organizations by limiting soft money donations 
to national party committees to $75,000 per year. CBO estimates 
that the cost for individuals and organizations to comply with 
the soft money limitation would be minimal.
    The bill also would impose private-sector mandates on 
individuals and organizations who make disbursements within 120 
days of a federal election for:
     Certain broadcast communications that mention a 
clearly identified candidate, or
     Communications made through any form of mass media 
and targeted to voters in excess of $50,000 per year.
    The bill would require such entities to report certain 
information to the FEC within 24 hours. Based on information 
from the FEC, CBO estimates that the cost of filing this 
information would be small. CBO estimates, therefore, that the 
direct costs of the mandates would fall below the annual 
threshold established by UMRA for private-sector mandates ($113 
million in 2001, adjusted annually for inflation).
    Estimate prepared by: Federal costs: Mark Grabowicz; impact 
on State, local, and tribal governments: Susan Sieg Tompkins; 
impact on the private sector: Paige Piper/Bach.
    Estimated approved by: Peter H. Fontaine, Deputy Assistant 
Director for Budget Analysis.

         Changes in Existing Law Made by the Bill, as Reported

  In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italic, existing law in which no change is 
proposed is shown in roman):

                 FEDERAL ELECTION CAMPAIGN ACT OF 1971

           *       *       *       *       *       *       *



            TITLE III--DISCLOSURE OF FEDERAL CAMPAIGN FUNDS

           *       *       *       *       *       *       *



                              definitions

  Sec. 301. When used in this Act:
  (1)  * * *

           *       *       *       *       *       *       *

  (8)(A)  * * *
  (B) The term ``contribution'' does not include--
          (i)  * * *

           *       *       *       *       *       *       *

          (x) the payment by [a State or local committee of a 
        political party of the costs of] a national, State, or 
        local committee of a political party of the costs of 
        producing and distributing campaign materials (such as 
        pins, bumper stickers, handbills, brochures, posters, 
        party tabloids, and yard signs) used by such committee 
        in connection with volunteer activities on behalf of 
        nominees of such party: Provided, That--
                    (1)  * * *

           *       *       *       *       *       *       *

  (9)(A)  * * *
  (B) The term ``expenditure'' does not include--
          (i)  * * *

           *       *       *       *       *       *       *

          (viii) the payment by [a State or local committee of 
        a political party of the costs of] a national, State, 
        or local committee of a political party of the costs of 
        producing and distributing campaign materials (such as 
        pins, bumper stickers, handbills, brochures, posters, 
        party tabloids, and yard signs) used by such committee 
        in connection with volunteer activities on behalf of 
        nominees of such party: Provided, That--
                  (1)  * * *

           *       *       *       *       *       *       *


                                reports

  Sec. 304. (a)  * * *

           *       *       *       *       *       *       *

  (e) Disclosure of Information on Certain Communications 
Broadcast Prior to Elections.--
          (1) In general.--Any person who makes a disbursement 
        for a communication described in paragraph (3) shall, 
        not later than 24 hours after making the disbursement, 
        file with the Commission a statement containing the 
        information required under paragraph (2).
          (2) Contents of statement.--Each statement required 
        to be filed under this subsection shall be made under 
        penalty of perjury and shall contain the following 
        information:
                  (A) The identification of the person making 
                the disbursement, of any individual or entity 
                sharing or exercising direction or control over 
                the activities of such person, and of the 
                custodian of the books and accounts of the 
                person making the disbursement.
                  (B) The principal place of business and phone 
                number of the person making the disbursement, 
                if not an individual.
                  (C) The amount of the disbursement.
                  (D) The clearly identified candidate or 
                candidates to which the communication pertains 
                and the names (if known) of the candidates 
                identified or to be identified in the 
                communication.
                  (E) The text of the communication involved.
          (3) Communications described.--
                  (A) In general.--A communication described in 
                this paragraph is any communication--
                          (i) which is disseminated to the 
                        public by means of any broadcast, 
                        cable, or satellite communication 
                        during the 120-day period ending on the 
                        date of a Federal election; and
                          (ii) which mentions a clearly 
                        identified candidate for such election 
                        (by name, image, or likeness).
                  (B) Exception.--A communication is not 
                described in this paragraph if--
                          (i) the communication appears in a 
                        news story, commentary, or editorial 
                        distributed through the facilities of 
                        any broadcasting station, unless such 
                        facilities are owned or controlled by 
                        any political party, political 
                        committee, or candidate; or
                          (ii) the communication constitutes an 
                        expenditure under this Act.
          (4) Coordination with other requirements.--Any 
        requirement to file a statement under this subsection 
        shall be in addition to any other reporting requirement 
        under this Act.
          (5) Clarification of treatment of vendors.--A person 
        shall not be considered to have made a disbursement for 
        a communication under this subsection if the person 
        made the disbursement solely as a vendor acting 
        pursuant to a contractual agreement with the person 
        responsible for sponsoring the communication.
  (f) Disclosure of Information on Targeted Mass 
Communications.--
          (1) In general.--Any person who makes a disbursement 
        for targeted mass communications in an aggregate amount 
        in excess of $50,000 during any calendar year shall, 
        within 24 hours of each disclosure date, file with the 
        Commission a statement containing the information 
        described in paragraph (2).
          (2) Contents of statement.--Each statement required 
        to be filed under this subsection shall be made under 
        penalty of perjury and shall contain the following 
        information:
                  (A) The identification of the person making 
                the disbursement, of any individual or entity 
                sharing or exercising direction or control over 
                the activities of such person, and of the 
                custodian of the books and accounts of the 
                person making the disbursement.
                  (B) The principal place of business and phone 
                number of the person making the disbursement, 
                if not an individual.
                  (C) The amount of each such disbursement of 
                more than $200 made by the person during the 
                period covered by the statement and the 
                identification of the person to whom the 
                disbursement was made.
                  (D) The clearly identified candidate or 
                candidates to which the communication pertains 
                and the names (if known) of the candidates 
                identified or to be identified in the 
                communication.
                  (E) The text of the communication involved.
          (3) Targeted mass communication defined.--
                  (A) In general.--In this subsection, the term 
                ``targeted mass communication'' means any 
                communication--
                          (i) which is disseminated during the 
                        120-day period ending on the date of a 
                        Federal election;
                          (ii) which refers to or depicts a 
                        clearly identified candidate for such 
                        election (by name, image, or likeness); 
                        and
                          (iii) which is targeted to the 
                        relevant electorate.
                  (B) Targeting to relevant electorate.--
                          (i) Broadcast communications.--For 
                        purposes of this paragraph, a 
                        communication disseminated to the 
                        public by means of any broadcast, 
                        cable, or satellite communication which 
                        refers to or depicts a clearly 
                        identified candidate for Federal office 
                        is ``targeted to the relevant 
                        electorate'' if the communication is 
                        disseminated by a broadcaster whose 
                        audience includes--
                                  (I) a substantial number of 
                                residents of the district the 
                                candidate seeks to represent 
                                (as determined in accordance 
                                with regulations of the 
                                Commission), in the case of a 
                                candidate for Representative 
                                in, or Delegate or Resident 
                                Commissioner to, the Congress; 
                                or
                                  (II) a substantial number of 
                                residents of the State the 
                                candidate seeks to represent 
                                (as determined in accordance 
                                with regulations of the 
                                Commission), in the case of a 
                                candidate for Senator.
                          (ii) Other communications.--For 
                        purposes of this paragraph, a 
                        communication which is not described in 
                        clause (i) which refers to or depicts a 
                        clearly identified candidate for 
                        Federal office is ``targeted to the 
                        relevant electorate'' if--
                                  (I) more than 10 percent of 
                                the total number of intended 
                                recipients of the communication 
                                are members of the electorate 
                                involved with respect to such 
                                Federal office; or
                                  (II) more than 10 percent of 
                                the total number of members of 
                                the electorate involved with 
                                respect to such Federal office 
                                receive the communication.
                  (C) Exceptions.--The term ``targeted mass 
                communication'' does not include--
                          (i) a communication appearing in a 
                        news story, commentary, or editorial 
                        distributed through the facilities of 
                        any broadcasting station, newspaper, 
                        magazine, or other periodical 
                        publication, unless such facilities are 
                        owned or controlled by any political 
                        party, political committee, or 
                        candidate;
                          (ii) a communication made by any 
                        membership organization (including a 
                        labor organization) or corporation 
                        solely to its members, stockholders, or 
                        executive or administrative personnel, 
                        if such membership organization or 
                        corporation is not organized primarily 
                        for the purpose of influencing the 
                        nomination for election, or election, 
                        of any individual to Federal office; or
                          (iii) a communication which 
                        constitutes an expenditure under this 
                        Act.
          (4) Disclosure date.--For purposes of this 
        subsection, the term ``disclosure date'' means--
                  (A) the first date during any calendar year 
                by which a person has made disbursements for 
                targeted mass communications aggregating in 
                excess of $50,000; and
                  (B) any other date during such calendar year 
                by which a person has made disbursements for 
                targeted mass communications aggregating in 
                excess of $50,000 since the most recent 
                disclosure date for such calendar year.
          (5) Coordination with other requirements.--Any 
        requirement to report under this subsection shall be in 
        addition to any other reporting requirement under this 
        Act.
          (6) Clarification of treatment of vendors.--A person 
        shall not be considered to have made a disbursement for 
        a communication under this subsection if the person 
        made the disbursement solely as a vendor acting 
        pursuant to a contractual agreement with the person 
        responsible for sponsoring the communication.

           *       *       *       *       *       *       *


             limitations on contributions and expenditures

  Sec. 315. (a)(1) No person shall make contributions--
          (A)  * * *
          (B) to the political committees established and 
        maintained by a national political party, which are not 
        the authorizedpolitical committees of any candidate, in 
any calendar year which, in the aggregate, exceed [$20,000] $30,000; 
[or]
          (C) to any other political committee (other than a 
        committee described in subparagraph (D)) in any 
        calendar year which, in the aggregate, exceed 
        $5,000[.]; or
          (D) to a political committee established and 
        maintained by a State committee of a political party in 
        any calendar year which, in the aggregate, exceed 
        $10,000.
  (2) No multicandidate political committee shall make 
contributions--
          (A)  * * *
          (B) to the political committees established and 
        maintained by a national political party, which are not 
        the authorized political committees of any candidate, 
        in any calendar year, which, in the aggregate, exceed 
        [$15,000] $30,000; [or]
          (C) to any other political committee (other than a 
        committee described in subparagraph (D)) in any 
        calendar year which, in the aggregate, exceed 
        $5,000[.]; or
          (D) to a political committee established and 
        maintained by a State committee of a political party in 
        any calendar year which, in the aggregate, exceed 
        $10,000.
  (3)(A) No individual shall make contributions aggregating 
more than [$25,000] $37,500 in any calendar year. For purposes 
of this paragraph, any contribution made to a candidate in a 
year other than the calendar year in which the election is held 
with respect to which such contribution is made, is considered 
to be made during the calendar year in which such election is 
held.
  (B) Subparagraph (A) shall not apply with respect to any 
contribution made to any political committee established and 
maintained by a national political party which is not the 
authorized political committee of any candidate.

           *       *       *       *       *       *       *

  (c)(1)(A) At the beginning of each calendar year (commencing 
in 1976), as there become available necessary data from the 
Bureau of Labor Statistics of the Department of Labor, the 
Secretary of Labor shall certify to the Commission and publish 
in the Federal Register the percent difference between the 
price index for the 12 months preceding the beginning of such 
calendar year and the price index for the base period. [Each 
limitation established by subsection (b) and subsection (d) 
shall be increased by such percent difference. Each amount so 
increased shall be the amount in effect for such calendar 
year.]
  (B) Except as provided in subparagraph (C), in any calendar 
year after 2002--
          (i) a limitation established by subsections (a), (b), 
        (d), or (h) shall be increased by the percent 
        difference determined under subparagraph (A);
          (ii) each amount so increased shall remain in effect 
        for the calendar year; and
          (iii) if any amount after adjustment under clause (i) 
        is not a multiple of $100, such amount shall be rounded 
        to the nearest multiple of $100.
  (C) In the case of limitations under subsections (a) and (h), 
increases shall only be made in odd-numbered years and such 
increases shall remain in effect for the 2-year period 
beginning on the first day following the date of the last 
general election in the year preceding the year in which the 
amount is increased and ending on the date of the next general 
election.
  (2) For purposes of paragraph (1)--
          (A)  * * *
          (B) the term ``base period'' [means the calendar year 
        1974] means--
                  (i) for purposes of subsections (b) and (d), 
                calendar year 1974; and
                  (ii) for purposes of subsections (a) and (h), 
                calendar year 2001.

           *       *       *       *       *       *       *



                soft money of national political parties


  Sec. 323. (a) Prohibiting Use of Soft Money for Federal 
Election Activity.--A national committee of a political party 
(including a national congressional campaign committee of a 
political party) may not solicit, receive, or direct to another 
person a contribution, donation, or transfer of funds or any 
other thing of value for Federal election activity, or spend 
any funds for Federal election activity, that are not subject 
to the limitations, prohibitions, and reporting requirements of 
this Act.
  (b) Limit on Amount of Nonfederal Funds Provided to Party by 
Any Person for Any Purpose.--No person shall make 
contributions, donations, or transfers of funds which are not 
subject to the limitations and prohibitions of this Act to a 
political committee established and maintained by a national 
political party in any calendar year in an aggregate amount 
equal to or greater than $75,000.
  (c) Applicability.-- This subsection shall apply to any 
political committee established and maintained by a national 
political party, any officer or agent of such a committee 
acting on behalf of the committee, and any entity that is 
directly or indirectly established, maintained, or controlled 
by such a national committee.
  (d) Definitions.--
          (1) Federal election activity.--
                  (A) In general.--The term ``Federal election 
                activity'' means--
                          (i) voter registration activity 
                        during the period that begins on the 
                        date that is 120 days before the date a 
                        regularly scheduled Federal election is 
                        held and ends on the date of the 
                        election, unless the activity 
                        constitutes generic campaign activity;
                          (ii) voter identification or get-out-
                        the-vote activity conducted in 
                        connection with an election in which a 
                        candidate for Federal office appears on 
                        the ballot (regardless of whether a 
                        candidate for State or local office 
                        also appears on the ballot), unless the 
                        activity constitutes generic campaign 
                        activity;
                          (iii) any public communication that 
                        refers to or depicts a clearly 
                        identified candidate for Federal office 
                        (regardless of whether a candidate for 
                        State or local office is also mentioned 
                        or identified) and that promotes or 
                        supports a candidate for that office, 
                        or attacks or opposes a candidate for 
                        that office (regardless of whether the 
                        communication expressly advocates a 
                        vote for or against a candidate); or
                          (iv) any public communication made by 
                        means of any broadcast, cable, or 
                        satellite communication.
                  (B) Exception for certain administrative 
                activities.--The term ``Federal election 
                activity'' does not include any activity 
                relating to establishment, administration, or 
                solicitation costs of a political committee 
                established and maintained by a national 
                political party, so long as the funds used to 
                carry out the activity are derived from funds 
                or payments made to the committee which are 
                segregated and used exclusively to defray the 
                costs of such activities.
          (2) Generic campaign activity.--The term ``generic 
        campaign activity'' means any activity that does not 
        mention, depict, or otherwise promote a clearly 
        identified Federal candidate.
          (3) Public communication.--The term ``public 
        communication'' means a communication by means of any 
        broadcast, cable, or satellite communication, 
        newspaper, magazine, outdoor advertising facility, or 
        direct mail.
          (4) Direct mail.--The term ``direct mail'' means a 
        mailing by a commercial vendor or any mailing made from 
        a commercial list.

           *       *       *       *       *       *       *

                               APPENDIX A

                              ----------                              


   Testimony of Governor James S. Gilmore, III, Chairman, Republican 
                           National Committee

    Thank you for providing the Republican National Committee 
(``RNC'') with the opportunity to provide testimony on the 
impact of the Supreme Court's recent decision in Federal 
Election Commission v. Colorado Republican Federal Campaign 
Committee, 533 U.S. ______ (2001) (hereinafter Colorado II) on 
the current campaign finance system, and to comment on the 
competing campaign finance reform measures currently being 
considered by the U.S. House of Representatives.
    As the House of Representatives turns to campaign finance 
reform, the touchstone of its deliberations should be extent to 
which the competing legislative measures would enhance, rather 
than impair, the critical grassroots, activities of political 
parties, including voter education initiatives, voter 
registration drives, absentee ballot programs, and get-out-the-
vote efforts. One thing is abundantly clear: The McCain-
Feingold bill in the Senate, and its companion Shays-Meehan 
measure in the House, would drive a stake through the heart of 
grassroots voter education and registration efforts. More 
American should vote, not less. On this basis alone, the House 
should reject Shays-Meehan, and should insist that any 
meaningful campaign finance reform encourage and stimulate 
these essential party-sponsored grassroots activities that are 
critical to broadening voter participation and involvement in 
the American political process. The RNC also remains 
steadfastly opposed to the censorship of gag-order provisions 
in the Shays-Meehan bill that are a clear violation of our 
First Amendment rights as Americans.

                          summary of testimony

    First, the Supreme Court's narrow 5 to 4 majority opinion 
in Colorado II merely affirmed the status quo. The limit on 
coordinated expenditures upheld by the Court has been in place 
for the past quarter-century. Significantly, the Colorado II 
ruling in no way restricts or even concerns the legal status of 
non-federal or so-called ``soft money'' donations to political 
parties.\1\ Soft money, in fact, is not even referenced in the 
Court's opinion. Although Colorado II does not concern soft 
money, the Court nevertheless sent a strong signal to Congress 
that the McCain-Feingold and Shays-Meehan bills would not pass 
constitutional muster if they ever became law, because the 
Court emphasized and reaffirmed that political parties have a 
fundamental constitutional right to spend non-coordinated 
money. The Court also made clear that Congress cannot, 
consistent with the Constitution, hold out political parties 
for disfavored treatment as these two wills seeks to do.
---------------------------------------------------------------------------
    \1\ ``Soft money'' is generally defined as money that does not fall 
under the limits and prohibitions of the Federal Election Campaign Act 
of 1971, as amended (2 U.S.C. Sec. 431 et seq.) (``FECA'' or ``the 
Act''). All soft money is regulated and spent in connection with state 
and local electoral activity consistent with relevant state law. By 
definition, ``soft money'' may not be used ``for the purpose of 
influencing any election for federal office.'' 2 U.S.C. Sec. 431.
---------------------------------------------------------------------------
    Second, McCain-Feingold and Shays-Meehan would cripple both 
political parties' grassroots voter education and mobilization 
activities, would federalize all elections, and would leave 
such activities in the hands of unaccountable special-interest 
groups. When Congress last amended the federal election laws in 
1979, there was broad consensus that generic party-building 
programs were good for democracy, were increasingly being 
threatened by federal regulations and restrictions, and needed 
to be encourage and strengthened. Accordingly, the 1979 
amendments made clear that political parties can and should be 
involved in grassroots voter education and get-out-the-vote 
activities. McCain-Feingold and Shays-Meehan seek to roll back 
the 1979 amendments and would cause a dramatic reduction in 
grassroots involvement. This misguided approach cuts at the 
very heart of participation in American democracy and should be 
squarely rejected.

                     the colorado ii court decision

I. Colorado II merely reaffirms the status quo regarding coordinated 
        expenditure limits
    The Federal Election Campaign Act of 1971, as amended (2 
U.S.C. Sec. 431 et seq.) (hereinafter ``the Act'' or ``FECA''), 
included in the definition of ``contribution,'' ``expenditures 
made by any person in cooperation, consultation, or concert, 
with, or at the request or suggestion of, a candidate, his 
authorized political committee, or their agents.'' 2 U.S.C. 
Sec. 441(a)(7)(B)(i). This treatment of coordinated 
expenditures as contributions to the candidate with they are 
coordinated--whether made by a political party or anyone else--
has been part of the regulatory regime for nearly thirty years. 
In this regard, Colorado II is a status quo decision.
    While the RNC continues to believe strongly that any limits 
on political party coordinated expenditures are 
unconstitutional, the RNC will continue to operate within the 
coordinated limits as it has done for the past three decades. 
However, for those thatseek to pursue avenues of assault on the 
constitutional rights of political parties, many aspects of the 
Colorado II ruling are very troubling.

II. The Colorado II majority and dissent agree that political parties 
        may not be discriminated against

    All nine Justices held in Colorado II that Congress may not 
place political parties in a disfavored position vis-a-vis 
other participants in the political process. First, Justice 
Souter's majority opinion reaffirmed the conclusion in Colorado 
Republican Federal Campaign Comm. v. Federal Election Comm'n, 
518 U.S. 604 (1966) (Colorado I), that there is

        no reason to see * * * [political party independent] 
        expenditures as more likely to serve or be seen as 
        instruments of corruption than independent expenditures 
        by anyone else. So there * * * [is] no justification 
        for subjecting party election spending across the board 
        to the kinds of limits previously invalidated when 
        applied to individuals and nonparty groups.

Colorado II Slip Op. at 8.\2\ Justice Souter later concluded 
that ``[a] party is not, therefore, in a unique position. It is 
in the same position as some individuals and PACs, as to whom 
coordinated spending limits have already been held valid * * * 
Id. at 20.
---------------------------------------------------------------------------
    \2\ In Colorado I, the Court ruled that political parties have a 
fundamental constitutional right to engage in unlimited independent 
expenditures on behalf of their candidates. The Court stressed that 
``[t]he independent expression of a political party's views is `core' 
First Amendment activity no less than is the independent expression of 
individuals, candidates, or other political committees.'' 518 U.S. at 
616.
---------------------------------------------------------------------------
    Going further, the dissenting opinion in Colorado II, 
authored by Justice Thomas, stressed that political parties are 
entitled to more constitutional protection than other political 
actors, noting that the majority ``offers no explanation for 
why political parties should be treated the same as individuals 
and political committees.'' Dissent Slip Op. at 10. See also 
id. at 5 (``The source of the `contribution' at issue [in this 
case] is a political party, not an individual or a political 
committee * * * Restricting contributions by individuals and 
political committees may, under Buckley [v. Valeo], entail only 
a `marginal restriction,' * * * but the same cannot be said 
about limitations on political parties.'') (internal citations 
omitted).
    Taken together, the majority and dissenting opinions in 
Colorado II lead to the inescapable conclusion that the 
baseline of Supreme Court consensus is that political parties, 
at the very least, must be treated the same as other political 
actors. Moreover, at least four Justices believe that the 
Constitution requires placing political parties in a favored 
position--with greater First Amendment proteciton--than other 
political actors.

III. Colorado II calls into question key features of McCain-Feingold

    The concept from Colorado II that political parties may not 
be treated worse than other political actors has major 
implications for two provisions of the current McCain-Feingold 
bill--namely, the so-called ``ban'' on soft money and the issue 
advocacy provisions.
            A. McCain-Feingold bans soft money only to national 
                    political parties
    Notwithstanding the rhetoric from supporters of McCain-
Feingold that their bill, and only their bill, ``bans'' soft 
money, the fact of the matter is that McCain-Feingold does not 
ban all soft money, but instead selectively bans only national 
political parties from raising and spending soft money. Left 
untouched, however, are the hundreds of millions of soft 
dollars spent directly by corporations and labor unions every 
election cycle. For example, in the recent special election in 
Virginia's Fourth Congressional District, labor unions used 
100% soft money to mail attack pieces against Republican (and 
now Congressman) Randy Forbes. Under a McCain-Feingold regime, 
corporations and unions would still be able to spend soft money 
to mail such attack pieces. In addition, labor unions often 
send field staff around the country to conduct grassroots voter 
mobilization in hotly contested Congressional districts. Again, 
under McCain-Feingold, corporations and unions would still be 
able to spend 100% soft money to fund these electoral 
activities.
    In a show of breathtaking hypocrisy, the campaign finance 
reform industry has spent over $70 million in soft money 
running advertisements and lobbying to pass their pet 
``reform'' projects (primarily in support of the McCain-
Feingold bill).\3\ Under McCain-Feingold, groups like Common 
Cause and the Brennan Center would still be able to spend 
unlimited amounts of soft money attacking and attempting to 
restrict the speech of political parties, yet the RNC and state 
Republican parties could not legally spend any soft money to 
defend the policy and political views of members of the 
Republican Party.
---------------------------------------------------------------------------
    \3\ See ``Who's Buying Campaign Finance `Reform,' '' ACU Foundation 
Election Law Enforcement Project, p. ix. (March 2001) (``Since 1996, 
the campaign finance reform `campaign' has raised and spent more than 
$73 million: $67 million by national organizations and at least $6 
million at the state and local level.'')
---------------------------------------------------------------------------
    Whether or not one likes and supports the goals of national 
political parties like the RNC, the Democratic National 
Committee (``DNC''), the Green Party, or any other political 
party, what is indisputable in the wake of Colorado II is that 
Congress may not constitutionally put political parties in a 
disfavored position vis-a-vis other political actors. McCain-
Feingold unambiguously tells political parties that they, and 
they alone among political actors (including corporations, 
unions, PACs, and ``reform'' think tanks), can be silenced and 
prevented from using soft money for grassroots get-out-the-
vote, voter registration, voter education, and lobbying 
activities. Such invidious discrimination has no place in 
America and cannot be squared with the First Amendment.
            B. Issue advertisements by political parties face 
                    extraordinary restriction under McCain-Feingold
    It is almost beyond question that government restrictions 
on issue advocacy are unconstitutional. Federal courts have 
consistently struck down attempts to ban or restrict issue 
advertising,\4\ and even the McCain-Feingold bill's own 
sponsors gave the provision a ``no confidence'' vote by 
insisting that the issue advocacy provision of their bill be 
severable, so that when the issue advertising restrictions are 
inevitably struck down, the rest of the legislation is not 
invalidated.
---------------------------------------------------------------------------
    \4\ See e.g., Right to Life of Michigan, Inc. v. Miller, 23 F. 
Supp. 2d 766 (W.D. Mich. 1998), and Planned Parenthood Affiliates of 
Michigan, Inc. v. Miller, 21 F. Supp. 2d 740 (E.D. Mich. 1998) (both 
ruling that issue advertisements enjoy more, not less, constitutional 
protection the closer they are in time to an election). See also 
Buckley v. Veleo, 424 U.S. 1 (1976); FEC v. Christian Action Network, 
110 F.3d 1049, 1051 (4th Cir. 1997) (``That is, the Court [in Buckley] 
held that the Federal Election Campaign Act could be applied 
consistently with the First Amendment only if it were limited to 
expenditures for communications that literally include words which in 
and of themselves advocate the election or defeat of a candidate * * * 
The Court adopted the bright-line limitation that it did in Buckley in 
order to protect our cherished right to political speech free from 
government censorship. Recognizing that `the distinction between 
discussions of issues and candidates [on the one hand] and advocacy of 
election or defeat of candidates [on the other hand] may often dissolve 
in practical application,' id. [Buckley] at 42, 9 S.Ct. at 646, the 
Court concluded, plain and simple, that absent the bright-line 
limitation, the distinction between issue discussion (in the context of 
electoral politics--and candidate advocacy would be sufficiently in 
distinct that the right of citizens to engage in the vigorous 
discussion of issues of public interest without fear of official 
reprisal would be intolerably chilled.'' (emphasis in original); 
Faucher v. FEC, 928 F.2d 468, 472 (1st Cir. 1991).
---------------------------------------------------------------------------
    Now, in the wake of Colorado II's reaffirmation of the 
principle that political parties cannot be placed in a 
disfavored position, it is clear that the discriminatory 
McCain-Feingold scheme, which restricts issue advertisements 
for some entities, but then adds even more onerous restrictions 
for issue advertisements by political parties, is patently 
unconstitutional. Revealingly, if the McCain-Feingold 
legislation were in effect this summer, a special interest 
group like Common Cause could use soft money to run as many 
television advertisements as it wants supporting Senators 
McCain and Feingold's legislation. By contrast, the RNC and DNC 
would be completely banned from using that same type of money 
to run the same type of advertisements supporting or opposing 
the legislation. Little wonder, then, that McCain-Feingold has 
been described as the ultimate in incumbent protection 
legislation.

 the impact of mc cain-feingold type legislation on critical political 
                            party activities

    When considering any modification to the federal campaign 
finance system, it is crucial that we keep the following 
fundamentals in mind. First, no legislation should be passed 
that in any way impairs the free speech rights of anyone in 
America. Second, we should recognize the unique value of 
strengthening political parties as the major mechanism by which 
individuals come together and participate in the political 
process. By these key standards, the McCain-Feingold bill in 
the Senate, and the Shays-Meehan legislation in the House, fail 
miserably and should be rejected.

I. Congressional recognition of the role of political parties

    Congress in adopting and, more importantly, in amending the 
FECA recognized the unique role party committees play in our 
political system and took affirmative steps to preserve and 
encourage political party activities at the grassroots level.
            A. Federal contributions and expenditures
    Under the FECA, additional financial resources are made 
available to party committees in conjunction with their federal 
election related activities. For example, a national party 
committee can receive up to $20,000 per year from an individual 
contributor, while political committees are permitted to 
contribute up to $15,000 per year to the national party. 
Unlimited federal transfers between and among party committees 
are also permitted under FECA.
    In addition to the direct contributions the party can make 
to its federal candidates, additional moneys can be spent on 
behalf of the party's federal candidates within certain limits 
in direct coordination with those candidates. These so-called 
``coordinated party expenditures,'' which were at issue in 
Colorado II, may not be made by any other political entity. 
Under this coordinated expenditure authority, national and 
state parties can each spend an additional 2 cents x the voting 
age population in a state for their Senate candidate. In 2000, 
for example, the national and state party, together, could have 
spent up to $1,559,420 on behalf of their U.S. Senate nominee 
in Florida and up to $178,000 for their Senate candidate in 
Nevada. The party also could have spent an additional $67,560 
for each U.S. House race.
    Currently, non-federal donations are regulated in the 
states where they are spent, not by federal law.
            B. Party grassroots activities
    Congressional recognition of the importance of political 
parties in our election process is evident, not only by this 
additional party funding and spending authority, but more 
importantly, by what parties are allowed and encouraged to do 
at the grassroots level. Political parties have the 
responsibility and have been given the financial capacity under 
current law to build grassroots support and enthusiasm within 
the electorate for their ticket and agenda, to educate voters, 
and to get-out-the-vote. In fact, except for a narrow period of 
time in the 1970s, throughout the history of our nation 
political parties have always had the ability to use soft money 
to fund grassroots activity.
    The 1976 elections were the first elections held without 
soft money. At the time, there was basic confusion as to what, 
if anything, could be done by state and local partycommittees 
under the new FECA rules, resulting in little, if any, of the 
traditional grassroots party voter education and get-out-the-vote 
efforts. In fact, the new law seemed to discourage any local party 
involvement in elections whenever a federal candidate appeared on the 
ballot.
    In 1979, out of concern that the federal campaign finance 
laws were inhibiting state and local grassroots election 
activities, Congress amended the FECA to re-enforce the ability 
of political parties to engage in grassroots efforts. Congress 
recognized that grassroots activities support the party's 
entire slate of candidates up and down the ticket. Because 
grassroots action was perceived to benefit all candidates, 
there had not been any Congressional attempt to limit party 
spending for these ticket-wide efforts to federal funds. As a 
matter of fact, the opposite was true. State parties were 
expected to pay expenses for grassroots activity out of non-
federal dollars.
    In the past, Congress has recognized the reality that 
parties do more than support federal candidates. It has 
acknowledged that ``[m]oney used to pay the costs attributable 
to state and local candidates is subject to the limits and 
prohibitions of state law.'' 5 Nothing has changed 
since the adoption of the 1979 FECA amendments to require 
``federalizing'' such voter education and get-out-the-vote 
programs.
---------------------------------------------------------------------------
    \5\ Report to accompany H.R. 5010, Committee On House 
Administration, Report No. 96-422 96th Congress 1st Session, September 
7, 1979, p.8.
---------------------------------------------------------------------------
             C. McCain-Feingold and Shays-Meehan: ``Federalize all 
                    elections''
    McCain-Feingold and Shays-Meehan would end the ability of 
parties to pay for grassroots programs with non-federal, state 
regulated funds, whenever a federal candidate is on the ballot. 
The presumption under both bills is that party spending is 
motivated solely to benefit a federal candidate. Obviously, 
from the party's perspective, that is a ludicrous presumption. 
In effect these bills federalize all elections, except in those 
five states that conduct their elections in non-federal 
election years. These bills would require national parties to 
cover all generic costs with federally regulated ``hard 
money.'' These bills would also prevent the national parties 
from transferring any non-federal funds to the states for the 
non-federal share of a state party's grassroots effort, even 
though that money meets all the legal requirements of state 
law.
    A state party's ability to spend state regulated ``soft 
dollars'' would also be restricted for any get-out-the-vote 
effort beginning four months before an election, the period 
when such activity would normally take place, even if the 
entire statewide slate were up for election, if only one 
federal candidate were also on the ballot. For example, in the 
2002 election in Ohio, a party's nominees for Governor, 
Lieutenant Governor, Attorney General, Secretary of State, 
Treasurer, as well as for the state legislature and state 
judicial races, will all be on the ballot. There will be no 
statewide federal race in Ohio in 2002; only the Congressional 
candidates seeking election in a particular district. Every 
other candidate on the ballot will be non-federal.
    If McCain-Feingold or Shays-Meehan were to become law, the 
RNC would be prohibited in 2002 from sending non-federal funds 
to the Ohio Republican Party to assist its non-federal 
Republican candidates or to assist with any portion of its get-
out-the-vote effort or voter education program, even though all 
statewide races on the ballot in Ohio that year will be non-
federal, and even though all transferred funds would be in 
compliance with Ohio state law. (All funds transferred would be 
from individuals because corporate funds are prohibited in 
Ohio). Similarly, the Ohio state Republican Party itself would 
be restricted to using federally sanctioned funds for any get-
out-the-vote drive or voter education program, even though its 
state-wide campaign effort would be 100% non-federal.

II. Political parties as coalition builders

    Political parties do not represent any single special 
interest or group, but rather are coalitions of individuals and 
entities espousing various ideas. Parties are successful in 
electing their candidates and governing with their ideas only 
if the majority of the electorate agrees with the ``party 
package.''
    What is disconcerting about McCain-Feingold and Shays-
Meehan is that these two bills either fail to understand how a 
political party functions, or if they do understand, cynically 
ignore the role of parties in the American political process. 
These bills only focus on party support for federal candidates, 
not on grassroots party-building efforts that support all of 
the party's nominees from the courthouse to the White House.
    These critical party-building efforts do not begin within 
60 or 120 days of an election, nor should they be required to 
stop within this timeframe as proposed by these misguided 
bills. Rather, party building is an ongoing party function that 
should not be artificially stifled. It involves voter 
registration efforts, communicating the party message and 
positions, absentee ballot programs, voter education 
activities, and aggressive get-out-the-vote programs. Under 
these so-called ``reform'' proposals, national parties would be 
unable to continue their current level of assistance to state 
and local party-building programs. State party activities would 
also be dramatically curtailed since most party-building 
programs are currently paid for with a portion of non-federal, 
state regulated funds. National parties would no longer be able 
to support gubernatorial candidates and legislative candidates 
with funds raised under a particular state's laws, but could 
only use federally regulated funds. Another point these so-
called ``reformers'' fail to understand--or simply ignore--is 
the fact that in some states the use of such federal funds 
would be prohibited. This would preclude any involvement by a 
national committee in any non-federal race in those states.
    It is important to keep in mind that the political parties 
are not just the parties of federal candidates, but are 
national organizations that work in concert with state and 
local affiliates sharing non-federal funds, in compliance with 
state law, to promote state and local candidates. For example, 
in the 2000 election cycle, the RNC and the Republican 
Governors Association donated $11 million to gubernatorial 
candidates and another $7million for state legislative races--
all soft money donations that were regulated by the state law where the 
donations were made. These state and local donations would be illegal 
under the soft money ban in McCain-Feingold and Shays-Meehan.
    The net effect of McCain-Feingold and Shays-Meehan would be 
the federalization of all elections and party grassroots 
activities. Some state party chairs have threatened to get out 
of the federal election business rather than have their entire 
state party-building apparatus federalized. Should that be the 
end result of campaign finance reform? Should Congress 
encourage the elimination of party grassroots efforts and force 
reliance on ``others'' to get-out-the-vote and provide the 
infrastructure to register voters, maintain absentee ballot 
programs and educate the electorate on the party's slate of 
candidates?
    The RNC agrees with Congressman Albert Wynn (D-MD), 
Chairman of the Congressional Black Caucus Task Force on 
Campaign Finance, that party grassroots voter programs should 
be enhanced, not eliminated, and that national parties should 
play a role in that process. As Congressman Wynn explained in 
his testimony before the Committee on House Administration's 
hearing on campaign finance reform on June 21, 2001:

        Pundits and academics argue that other private entities 
        can promote voter education programs as well as the 
        national parties, but I would point out that, that 
        approach puts our political system entirely in the 
        hands of--you guessed it--the same special interests, 
        [whose] influence they claim to abhor. While the 
        National Rifle Association or Planned Parenthood 
        certainly have the constitutional right and the 
        resources to mobilize voters, I think it would be a 
        great mistake if national political parties did not 
        have access to resources to educate and mobilize voters 
        as well.

Congressman Wynn further testified that:

        [T]he Florida experience has taught us two things: (1) 
        soft money used properly can mobilize minority voters 
        and increase turn-out, and; (2) that these funds can be 
        used for voter education tools, such as, sample ballots 
        to help voters avoid confusion and protect the voting 
        rights of minority voters.

 The RNC urges every Member of the House of Representatives to 
seriously study Congressman Wynn's testimony before they make a 
final decision on how they will vote on campaign finance 
reform.

III. The practical effect of McCain-Feingold and Shays-Meehan on 2000 
        party activity would have been devastating

    Do the ``reformers'' really want to eliminate party 
grassroots get-out-the-vote programs? Do we want to end party 
voter education programs, particularly in light of the problems 
that surfaced during the 2000 election? The motivation for 
banning national party ``soft money'' has been the issue ad 
controversy. Although the RNC disagrees with those arguments, 
what is lost in the debate is how dependent state parties are 
on national committees to help fund their grassroots voter 
education efforts. For example, in the 2000 election cycle, the 
RNC alone transferred over $35 million to the state parties to 
finance grassroots programs. The vast majority of this funding 
was in non-federal dollars.
    Under McCain-Feingold and Shays-Meehan, this national party 
assistance would evaporate. The state parties themselves would 
be restricted by federal law in how much non-federal funding 
could be used for grassroots voter education programs, even 
though their own state laws would place no restrictions on 
these programs. According to political scientist Raymond La 
Raja of the University of California at Berkley:

         In 1996, when parties aired all those issue ads, I 
        found that they actually doubled their spending on 
        voter mobilization programs and grass roots efforts. 
        Again, in '98, they spent as much on these as they did 
        on issue ads.\6\
---------------------------------------------------------------------------
    \6\ Raymond La Raja, ``Political Parties Under McCain-Feingold,'' 
Remarks at Forum sponsored by Campaign Finance Institute, George 
Washington University, May 17, 2001.

    The bottom line is that under McCain-Feingold and Shays-
Meehan, national party financial support for voter education 
programs would dry-up and state party grassroots efforts would 
be severely curtailed, making their limited effort almost 
irrelevant.
    Non-federal funding from the national committees to the 
state parties supports a wide array of voter outreach and 
participation initiatives, including registration drives, 
absentee ballot programs, and get-out-the-vote efforts, that 
strengthen and extend the political party system. During the 
2000 election cycle, soft money helped the GOP fund:
           Over 110 million get-out-the-vote mail and 
        issue pieces
           Over 25 million absentee ballots
           Over 65 million issue and get out the vote 
        phone calls
    A soft money ban would place at risk these basic 
organizational activities, all good government in nature, which 
the political parties can and should undertake on behalf of all 
candidates. While preventing the parties from continuing their 
mail, absentee ballot and phone programs, other entities, 
particularly corporations and unions, can continue these 
efforts unregulated under McCain-Feingold and Shays-
Meehan.7 McCain-Feingold's and Shays-Meehan's ban on 
soft money to national political parties does nothing to 
diminish the onslaught of this unregulated, unreported campaign 
activity.
---------------------------------------------------------------------------
    \7\ It is estimated that unions, in the 2000 cycle, spent an 
estimated minimum $300 million supporting candidates, virtually all to 
help Democrats, through a massive network of phone banks, literature 
drops, and get-out-the-vote efforts. Leo Troy, Professor of Labor 
Economics at Rutgers University [Robert Zausner, ``After Raising Record 
Sums, Both Sides Talk Campaign Reform,'' Philadelphia Enquirer. 
November 4, 2000].
---------------------------------------------------------------------------
    Labor unions and corporations are not alone in these types 
of endeavors. Third party special interests groups are also 
permitted to raise and spend soft money for issue advocacy 
purposes. Special interest groups spent record amounts 
candidates in 2000. In fact, of the $500 million spent on issue 
advertisements during the 2000 election cycle (the apparent 
legislative catalyst for the national party ``soft money'' ban 
and state party restriction), 68% ($347 million) was spent by 
third party special interest groups--more than twice the amount 
spent by both political parties combined.8 McCain-
Feingold and Shays-Meehan, in what is almost certainly an 
unconstitutional provisions, seek to control such activity two 
months before a general election, but these third-party groups 
will simply begin their issue advocacy earlier.
---------------------------------------------------------------------------
    \8\ See Annenberg Public Policy Center of the University of 
Pennsylvania. Issue Advertising in the 1999-2000 Election Cycle, p. 4.
---------------------------------------------------------------------------
    By contrast, all national party ``soft money'' is currently 
disclosed to the Federal Election Commission (``FEC''). All 
national parties must publicly disclose all nonfederal funds 
raised with the FEC, and the RNC reports soft money donations 
and expenditures to the FEC each month. Soft money is raised 
and spent by political parties subject to state, not federal, 
election law. Soft money is voluntarily contributed, disclosed, 
and regulated. Every penny of soft money invested by the 
national party committees in the states must be spent and 
reported in accordance with state law in the state in which it 
is spent. The consistent disingenuous reference to 
``unregulated soft money'' in the ``reformers'' rhetoric is 
simply untrue. All soft money spent by political parties is 
regulated by the state in which it is spent.
    Strong political parties, at both the national and state 
level, empowered with the capability of lawfully raise and 
spend nonfederal funds for get-out-the-vote and other party 
building purposes, are our last and best defense against the 
biased influence of third party special interest groups and the 
elite media. Money given to the parties will, out of necessity, 
be used by the parties in a broad fashion in support of the 
party and its issues as a whole. Furthermore, unlike the 
single-issue special interests, the parties are unifying 
institutions which literally cannot afford to be strictly 
ideological nor narrowly bound to specific views, because their 
interests lie in the ability of their candidates to win office 
rather than on specific ideological propositions.

IV. Conclusion

    McCain-Feingold's and Shays-Meehan's ban on soft money to 
the national parties is flawed public policy that would greatly 
undermine the existing two-party system while raising a host of 
alarming political, ideological, and constitutional issues that 
penetrate to the heart of our American system of politics.
    Given all of the above, what, one has to ask, are the 
motivations and goals of the advocates of McCain-Feingold's and 
Shays-Meehan's? The campaign finance crusaders' most common 
refrain, when justifying outlawing nonfederal contributions to 
political parties, is that there is ``too much money in 
politics,'' and that the time has come to shut down the 
``unregulated Washington soft money machine.'' While these make 
for appealing sound bites, such claims do not fare well upon 
informed review.
    Consider, for example, that in the 2000 election cycle 
Americans spent $3 billion total on all federal elections. In 
comparison, during that same period, Americans spent $4 billion 
at Starbucks, $7.46 billion going to the movies, and $6.5 
billion on video games--more than double the cost of all 
federal campaigns combined. Is anyone prepared to seriously 
argue that less money should be spent on politics than in 
buying cups of coffee?
    More importantly, how comfortable should we be at having 
the government decide how much money is ``too much money`` 
spent on politics, especially on critical party-sponsored 
grassroots voter-education activities that are often the 
difference between voters going to the polls or staying home on 
Election Day? Most people would flatly reject such a 
proposition in the abstract, yet this is precisely the 
practical consequence of the McCain-Feingold and Shays-Meehan 
schemes.
    Fair and balanced reform that promotes and encourages 
grassroots involvement in our election process is a useful 
cause for change. The McCain-Feingold and Shays-Meehan 
proposals, however, impose radical new restrictions on state 
and local political activity that would severely compromise the 
ability of ordinary Americans to come together, pool their 
resources, and participate in the political process through the 
political party of their choice. This fundamental 
constitutional right is a core national conviction upon which 
our country was founded and upon which it has thrived ever 
since. We cannot allow it to be endangered.

                               APPENDIX B

                              ----------                              

                             Democratic National Committee,
                                     Washington, DC, June 27, 2001.
Hon. Robert W. Ney,
Chairman, Committee on House Administration, House of Representatives, 
        Longworth House Office Building, Washington, DC.
    Dear Mr. Chairman: Thank you very much for your June 25 
letter inviting the Democratic National Committee to submit 
written testimony to your Committee with regard to the impact 
of the Supreme Court's decision and proposals for reform that 
may be considered by the House.
    Due to the shortness of time, we will not be able to submit 
detailed written testimony by June 28 on that subject. With 
respect to proposals for reform, as you know, the DNC strongly 
supports the McCain-Feingold legislation passed by the Senate 
and the Shays-Meehan legislation that has previously been 
passed by the House. Our attorneys have advised that they 
believed the basic provisions of these measures, banning the 
raising and spending of soft money by national party 
committees, are constitutional and will ultimately be upheld by 
the courts.
    Thank you again for your letter. If you or your staff have 
any questions about the DNC's position or if there is any other 
way we can be helpful to your Committee's deliberations, please 
contact me at 202-863-8121 or our general counsel, Joe Sandler 
at 202-479-1111.
    With kind regards,
            Sincerely yours,
                                      Terence R. McAuliffe,
                                                          Chairman.

     MINORITY VIEWS OF STENY H. HOYER, CHAKA FATTAH, AND JIM DAVIS

    True campaign finance reform aims to accomplish three 
goals:
    1. Completely end the unregulated, unlimited flow of soft 
money into the political parties;
    2. Require that political advertising that any reasonable 
viewer would say are designed to influence a federal election 
be paid for with hard money.
    3. Respect the right of organizations to communicate with 
their members about key issues affecting them.
    While H.R. 2360, the ``Campaign Reform and Citizen 
Participation Act of 2001,'' attempts to reach these goals, we 
regret to conclude that it falls short.
    To its credit, H.R. 2360 recognizes, and seeks to address, 
two key problems in our campaign finance system: (1) the 
proliferation of soft money and (2) undisclosed issue advocacy. 
Unfortunately, it is not a comprehensive effort to address 
either. Worse, it is so riddled with loopholes that rather than 
solve the problems it identifies, H.R. 2360 effectively 
legitimizes them by bringing them under the auspices of the 
Federal Election Campaign Act.
    With respect to soft money, H.R. 2360 is deficient in three 
significant ways:
    (1) H.R. 2360 fails to staunch the total flow of soft money 
because it only proposes capping soft money contributions to 
political parties at $75,000 a year, or $150,000 in an election 
cycle. In a nation where the median income for a family of four 
is approximately $59,000, we believe a cap of $75,000 is not a 
cap at all. To make matters worse, this ``cap'' would apply to 
each of three national committee in the two parties. In theory, 
a corporation, union, or wealthy individual could give as much 
as $900,000 in soft money in a two-year election cycle, 
assuming it sought to curry favor with both parties and 
contributed the maximum amount to each. Combined with H.R. 
2360's proposed increases in hard money contributions, a 
wealthy individual could contribute as much as $1,335,000 in 
hard and soft money in a two-year election cycle.
    (2) To the extent that H.R. 2360 ``caps'' soft money, it 
does so only with regard to the national political parties. To 
be sure, limiting soft money raised by national political 
parties and federal candidates may be a positive first step to 
ridding politics of unlimited, unregulated contributions. 
However, H.R. 2360 would not limit, any more rigorously than 
current law does, soft money activities that are conducted by 
state and local political parties that have an indirect but 
unmistakable impact on candidates running in federal elections.
    (3) H.R. 2360 does nothing to prevent federal officeholders 
from raising unlimited soft money for state parties to spend in 
ways that help their federal campaigns.
    These are serious inadequacies that, for example, would not 
stop a wealthy energy wholesalers or tobacco companies from 
making a soft money contributions. Rather, the corporation 
would simply redirect the contribution to a state party, 
possibly attracting less scrutiny. Under H.R. 2360, corporate 
and union contributions could still flood state and local 
parties in all 50 states. These contributions, in turn, could 
be spent on ``generic'' party state and local ``grass roots'' 
activities that boost a federal candidate's prospects.
    Failure to address soft money on the state and local 
levels, even if it is limited on the national level, will only 
preserve the loophole that has undermined faith in the federal 
campaign system, encouraging wealthy individuals and 
corporations to divert huge contributions that now go to 
national non-federal accounts to state parties. As a 
consequence, it is unlikely that H.R. 2360 would shrink the 
total volume of unregulated soft money, or neutralize its 
considerable impact federal elections. The bill merely re-
channels where special interests send these unlimited 
contributions.
    The loopholes in H.R. 2360 are not limited to soft money. 
Unlike the Shays-Meehan bill reported out of Committee on July 
28, H.R. 2360 does not seek to make special interests that 
exploit the issue ad loophole to run thinly disguised campaign 
ads play by the same rules that govern federal candidates and 
political action committees. H.R. 2360 contains no requirement 
that hard dollars be used to pay for ``sham'' issue ads, and 
requires disclosure of the advertising only when it exceeds 
$50,000 per year.
    Perhaps most troubling, however, is that H.R. 2360 purports 
to require better disclosure of issue advertising, but in fact 
fails to provide the voter the necessary information about who 
is paying for these confusing ads. While H.R. 2360 requires 
disclosure of the amount of money spent on a particular 
advertisement, unlike every other disclosure provision in the 
campaign finance system, it does not require disclosure of the 
source of funds used to pay for advertising. This is not a 
trivial problem that supporters of real reform can accept. 
Voters have significant difficulty determining how much 
credibility to lend a communication when they do not know the 
source of the communication. Without real disclosure of the 
sources of money funding sham issue ads, the ability of the 
voters to make informed decisions is severely undermined.
    For these reasons, we urge our colleagues to oppose H.R. 
2360. In the final analysis, H.R. 2360 will ratify--not 
reform--pernicious campaign fundraising practices that call 
into question the sacred trust that exists between elected 
officials and all Americans whom they are constitutionally 
charged with representing.
    In our view, Shays-Meehan is the only measure before the 
House that deserves to be called true reform because (1) it 
outlaws all soft money to the national parties; (2) requires 
all activities intended to influence federal campaigns be paid 
for with hard money; and (3) respects the right of 
organizations to communicate with their members about vital 
issues affecting them.
    We are confident our colleagues on both sides of the aisle 
will agree. If history is any guide, they will. In 1998 and 
1999, a similar Shays-Meehan bill passed 252-179 and 252-177, 
respectively. We urge our colleague to show this same strong 
bipartisan support this year and pass H.R. 2356.

                                   Steny H. Hoyer.
                                   Chaka Fattah.
                                   Jim Davis.

                                  
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