[Federal Register Volume 59, Number 193 (Thursday, October 6, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-24623]


[[Page Unknown]]

[Federal Register: October 6, 1994]


_______________________________________________________________________

Part III





Federal Election Commission





_______________________________________________________________________



11 CFR Part 9003, et al.




Public Financing of Presidential Primary and General Election 
Candidates; Proposed Rule
FEDERAL ELECTION COMMISSION

[Notice 1994-13]

11 CFR Parts 9003, 9004, 9006, 9007, 9033, 9034, 9037, and 9038

 
Public Financing of Presidential Primary and General Election 
Candidates

agency: Federal Election Commission.

action: Notice of proposed rulemaking.

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summary: The Federal Election Commission is seeking comments on 
proposed revisions to its regulations governing publicly financed 
Presidential primary and general election candidates. These regulations 
implement the provisions of the Presidential Election Campaign Fund Act 
and the Presidential Primary Matching Payment Account Act, which 
establish eligibility requirements for Presidential candidates seeking 
public financing and indicate how funds received under the public 
financing system may be spent. They also require the Commission to 
audit publicly financed campaigns and seek repayment where appropriate. 
The proposed rules reflect the Commission's experience in administering 
this program during the 1992 election cycle and also seek to anticipate 
some questions that may arise during the 1996 Presidential election 
cycle. The Commission is requesting comments on the draft rules set out 
in this Notice, and is also seeking comments on several issues for 
which no specific regulatory language is proposed at this time. No 
final decisions have been made by the Commission on any of the proposed 
revisions in this Notice. Further information is provided in the 
supplementary information which follows.

dates: Comments must be received on or before December 5, 1994.

addresses: Comments must be in writing and addressed to: Ms. Susan E. 
Propper, Assistant General Counsel, 999 E Street, NW., Washington, DC 
20463.

for further information contact: Ms. Susan E. Propper, Assistant 
General Counsel, 999 E Street, NW., Washington, DC 20463, (202) 219-
3690 or (800) 424-9530.

supplementary information: The Commission is considering revising parts 
of its regulations governing public financing of Presidential 
campaigns, 11 CFR Parts 9001 et seq. and 9031 et seq., in order to more 
effectively administer the public financing program during the 1996 
election cycle. The Commission is publishing this Notice of Proposed 
Rulemaking to invite comments on the proposed revisions.
    The areas in which the Commission is considering possible revisions 
are described in this portion of the Notice in narrative form. Those 
revisions that would affect both primary and general election campaigns 
are described in the first section of the narrative. The revisions that 
would affect only primary or general elections, respectively, are set 
out in the next two sections. The fourth section summarizes other 
miscellaneous and technical amendments the Commission is proposing for 
the public financing rules.
    The Commission has prepared proposed regulatory language for many 
of these revisions, and included this language in the last section of 
the Notice. However, the Commission is also interested in receiving 
comments on other possible changes for which no regulatory language has 
been prepared. The narrative describes these approaches and highlights 
the issues to which commenters are encouraged to direct their 
attention. Please note that the narrative discussion is arranged by 
topic, whereas the draft rules are set out in numerical order. Readers 
should use the citations contained in the narrative to locate the 
corresponding proposed language in the draft rules.

Primary and General Election Regulations

A. Qualified Campaign Expenses

1. Negligent Handling of Public Funds
    Accounting procedures employed by the Commission make allowance for 
reasonable loss and normal spoilage of equipment leased or purchased by 
a campaign. However, the Commission has at times encountered incidents 
involving the mismanagement or negligent handling of public funds that 
do not fall into either of these categories. The proposed rules 
therefore seek to clarify how such negligence and mismanagement is 
handled in the audit process.
    The Commission is seeking comment on whether, as a precondition for 
the receipt of public funds, the candidate should agree to meet certain 
standards in handling public monies as well as in overseeing the use of 
and accounting for public funds. Such standards would be specified at 
11 CFR 9003.1(b) and 9033.1(b). If this approach is taken, the 
Commission welcomes comment on what standard(s) would be appropriate.
    The proposed rules would amend 11 CFR 9004.4(b) and 9034.4(b), to 
clarify that the cost of items that are lost or misplaced due to 
negligence of a campaign committee will be considered a non-qualified 
expense for purposes of these rules. However, the Commission recognizes 
that there are varying degrees of negligence in this area, and that 
certain factors should be considered prior to any determination that a 
repayment is required. For example, these factors could include, but 
would not be listed to, whether the committee demonstrates that it made 
careful efforts to safeguard the missing equipment; the type of 
equipment involved; the number of items that were lost; and the value 
of the lost equipment as a percentage of the total value of the 
equipment leased or owned by the committee. On this latter point, the 
Commission notes that a lost item, such as a newly-acquired vehicle, 
may involve a major investment of taxpayer funds, irrespective of the 
fact that its cost is only a small percentage of the total amount of 
equipment leased or owned by the campaign committee. The Commission 
welcomes comments on other factors that should be considered in making 
this determination.
    Another approach would be to limit the dollar amount of lost 
property that could be considered a qualified campaign expense. If a 
committee lost goods worth more than the specified amount, any amount 
over that figure would be a non-qualified campaign expense. This would 
have the advantage of not requiring the Commission to get involved in 
what could become a substantial number of negligence determinations, 
while recognizing that some loss is inevitable in large, lengthy 
campaigns. The Commission welcomes comments on this approach as well as 
on what reimbursement limit should be specified, if this were to be 
adopted.
    The Commission is also seeking comments on how lost or stolen 
uninsured items should be reflected on statements of net outstanding 
campaign obligations [``NOCO'']. If an item is lost through negligence, 
the question is whether it should continue to be treated as an asset 
for purposes of the NOCO statement to avoid increasing the committee's 
entitlement. Comments are welcome on how this should be done.
    Please note that other proposed amendments to the NOCO requirements 
are discussed under ``NOCO Statements,'' infra. A related topic, the 
treatment of insurance proceeds, is discussed under ``Gains on the Use 
of Public Funds,'' infra.
2. Closed Captioning
    In 1992, Congress amended 26 U.S.C. 9003 to add a new paragraph 
(e), stating that no publicly funded candidate may receive funding for 
either the primary or general election campaign unless the candidate 
agrees that all of his or her television commercials will be closed 
captioned or otherwise capable of being viewed by deaf and hearing 
impaired individuals. Pub. L. 102-393, section 534, 106 Stat. 1764 
(1992). Although no corresponding amendment was made to 26 U.S.C. 9033, 
section 9003(e) states that this requirement applies not only to 
candidates who are eligible to receive amounts from the Presidential 
Election Campaign Fund, but also to those eligible for funding ``under 
chapter 96'' of Title 26 of the United States Code, that is, the 
Presidential Primary Matching Payment Account Act. The Commission is 
therefore proposing to add the statutory language to the candidate and 
committee agreement requirements found at both 11 CFR 9003.1(b) and 
9033.1(b).
3. Media Reimbursements
    Section 9004.6 contains rules governing expenditures for 
transportation and other services provided to media and Secret Service 
personnel by presidential campaign committees receiving public 
financing for the general election. Section 9034.6 is a parallel 
provision governing primary committees that receive public funds from 
the matching payment account. These provisions indicate that 
expenditures for these purposes will, in most cases, be regarded as 
qualified campaign expenses subject to the overall limitations of 
sections 9003.2 and 9035.1, respectively.
    However, sections 9004.6 and 9034.6 also allow committees to accept 
limited reimbursement for these expenses from the media, and deduct any 
reimbursements received from the amount of expenditures subject to the 
overall expenditure limitation. These rules set limits on the amount of 
reimbursement that a committee can accept, and require committees to 
repay a portion of any reimbursement that exceeds those limits to the 
Treasury.
    The proposed rules seek to clarify the application of sections 
9004.6 and 9034.6 by reorganizing them without any substantive change. 
Under the proposed revisions, paragraphs (a) and (b) have been broken 
into smaller subparagraphs. Paragraph (c) has been renumbered as 
paragraph (e). Paragraph (d) has been renumbered as paragraph (c) and 
broken into smaller paragraphs, and new paragraph (d) has been inserted 
in order to clarify the interplay between two aspects of the existing 
rules: The requirement that the committee return to the media 
representative that portion of any reimbursement received that exceeds 
the actual cost of the transportation and services provided by more 
than 10%, and the requirement that the committee repay to the Treasury 
any part of the reimbursements it receives that exceeds the actual and 
administrative costs incurred by the committee. The Commission welcomes 
comments on the proposed revisions to sections 9004.6 and 9034.6.
4. Travel Expenditures
    The Commission seeks comments on modifying 11 CFR 9004.7 and 9034.7 
to address several issues regarding the cost of campaign-related travel 
using government airplanes, helicopters and other vehicles. The current 
rules contemplate that for plane flights between cities served by a 
regularly scheduled commercial airline service, the campaign must 
reimburse the appropriate governmental entity for the first class 
airfare, and that this amount is treated as a qualified campaign 
expense. New language in section 9004.7(b)(5)(i) and section 
9034.7(b)(5)(i) would specify that, for travel by airplane, the amount 
of the lowest unrestricted non-discounted first class commercial 
airfare available for the time traveled is to be used. Discounted fares 
that are subject to restrictions on the dates and times of travel, or 
restrictions on changing flights, are not comparable to the service 
provided when the campaign uses a government conveyance. Campaign 
committees are responsible for determining these amounts at the time of 
the flight to ensure that the right amount is paid to the appropriate 
government entity, and would need to maintain documentation supporting 
these amounts. The lowest unrestricted non-discounted first class 
airfare is available from several sources including travel agents and 
the Official Airline Guide.
    Questions have also arisen regarding cities that are served by 
regular air service, but first class flights are not available. In this 
case, the Commission proposes specifying that committees should use the 
lowest unrestricted non-discounted coach fare available for the time 
traveled. This approach is consistent with the valuation method 
established by the Select Committee on Ethics of the United States 
Senate for the use of private aircraft. See Interpretive Ruling No. 
412, Select Committee on Ethics, United States Senate, 101st Cong., 1st 
Sess., S. Prt. 101-18 at 251-52 (1989). It is also consistent with the 
valuation methods used by the House of Representatives' Committee on 
Standards of Official Conduct with respect to gifts of private 
transportation not associated with official travel. See, Valuation of 
Gifts of Transportation on Private Aircraft, Committee on Standards of 
Official Conduct, Letter dated June 11, 1987.
    For cities not served by regularly scheduled commercial service, 
the current rules specify that the amount to be reimbursed is the 
charter rate. The proposed revisions would clarify that the charter 
rate used should be for a comparable airplane of similar make, model 
and size. This provision would also be consistent with the approaches 
used by the Congressional Committees.
    Questions have also arisen regarding the costs of ``positioning'' 
flights that are needed to bring the government aircraft from one stop 
where it dropped off the candidate and campaign staff to another stop 
where it will pick them up to continue the trip or return to the point 
of origin. New language in sections 9004.7(b)(5)(ii) and 
9034.7(b)(5)(ii) would incorporate the Commission's policy that the 
committee should pay the costs noted above for one passenger plus fuel 
used and crew time. This approach recognizes that positioning flights 
are campaign-related, and therefore these costs are properly treated as 
qualified campaign expenses.
    Paragraphs (b)(5)(iii) in sections 9004.7 and 9034.7 would contain 
provisions regarding travel on government conveyances other than 
airplanes. For travel by helicopter or ground conveyance, the 
commercial rental rate should be paid for a comparable conveyance in 
terms of size, model and make. Additional guidance on this area can be 
found in Advisory Opinion 1992-34. Proposed sections 9004.7(b)(5)(iv) 
and 9034.7(b)(5)(iv) would continue to require payment for the use of 
accommodations paid for by a government entity. Under 11 CFR 
100.7(a)(1)(iii)(B), the committee should use the usual and normal 
charge in the market from which it ordinarily would have purchased the 
accommodations. The term ``accommodations'' includes both lodging and 
meeting rooms.
    New paragraph (B)(8) of these sections would explicitly reflect 
Commission policy that travel on corporate conveyances is governed by 
11 CFR 114.9(e).
    Finally, new language in paragraph (b)(2) of these sections would 
provide additional guidance as to when a stop will be considered 
campaign-related. Campaign activity includes soliciting, making or 
accepting contributions, and expressly advocating the nomination, 
election or defeat of any candidate. See, e.g., AOs 1994-15, 1992-6, 
and opinions cited therein. The Commission has also indicated that the 
absence of solicitations for contributions or express advocacy 
regarding candidates will not preclude a determination that an activity 
is ``campaign related.'' Id. Accordingly, the proposed rules would 
include other factors to be considered in determining whether a stop is 
campaign-related. The rules would also retain the current language 
indicating that incidental campaign-related contacts during an 
otherwise noncampaign-related stop would not cause the stop to be 
considered campaign-related.
5. Winding Down Costs; Gifts and Bonuses
    The current regulations at 11 CFR 9004.4(a)(4)(i) and 
9034.4(a)(3)(i) permit candidates to receive contributions and matching 
funds, and make disbursements, for the purpose of defraying winding 
down costs over an extended period after the candidate's date of 
ineligibility [``DOI'']. These amounts are treated as qualified 
campaign expenses, and can result in additional audit fieldwork and 
preparation of addenda to audit reports to focus on these receipts and 
disbursements.
    The Commission is proposing several ways to streamline and shorten 
the audit process, discussed below. In addition, comments are welcome 
on whether the amount that a candidate may receive for winding down 
costs should be limited to no more than a flat dollar amount, or a set 
percentage of the candidate's total expenditures during the campaign, 
or a set percentage of total matching funds certified for the 
candidate. If so, what should the amount or percentage be? If campaigns 
receive a set dollar amount, but do not use the entire amount for 
winding down costs, should they be permitted to retain the unspent 
amount? Allowing them to keep the remainder would serve as an incentive 
to complete the winding down process promptly. However, there are 
public policy reasons for requiring the remaining funds to be returned 
to the U.S. Treasury. Placing a cap on winding down expenses would 
assist the Commission's goal of streamlining, but the amount chosen 
would have to be sufficient to meet reasonable expenses incurred in 
winding down the campaign. Another option would be to establish a 
cutoff date after which winding down expenses would not longer be 
considered qualified campaign expenses. Other suggestions that would 
simplify and shorten the required audit process are encouraged. The 
proposed rules do not include language regarding these proposals.
    The Commission seeks comments on new language in section 9034.4(A) 
incorporating the current practice of permitting publicly-funded 
primary committees to treat 100% of salary, overhead and computer 
expenses incurred after the candidate's date of ineligibility (DOI) as 
exempt compliance expenses, beginning with the first full reporting 
period after DOI. See, Financial Control and Compliance Manual for 
Presidential Primary Candidates Receiving Public Financing, p. 25 
(January, 1992). Please note that this approach does not apply to 
expenses incurred during the period between DOI and the date on which a 
candidate either re-establishes eligibility or ceases to continue to 
campaign. Similarly, for general election candidates, new language 
would be added to section 9004.4(a) to allow 100% of salary and 
overhead expenses incurred after the end of the expenditure report 
period to be paid from the legal and accounting compliance fund, 
provided these expenses are solely to ensure compliance with the FECA 
and the Fund Act.
    Finally, new language in sections 9004.4(a) and 9034.4(a) would 
permit campaign committees to use federal funds to defray the costs of 
gifts or monetary bonuses for committee staff and consultants, as long 
as the gifts do not exceed $150 per individual and as long as all gifts 
and bonuses (except bonuses provided for at the outset in employment 
and consulting contracts) are limited to $20,000. This approach is 
somewhat similar to a provision included in the public funding rules 
for convention committees at 11 CFR 9008.7(a)(4)(xii). See 59 FR 33618 
(June 29, 1994). With regard to bonus arrangements provided for in 
advance in employment and consulting contracts, comments are sought on 
whether the amount of these bonuses should be restricted to a fixed 
percentage of the compensation paid as provided by the contract, or 
whether these bonuses should be subject to the overall $20,000 limit. 
Such an approach would be intended to ensure that committees do not 
give out sizable bonuses simply because they have surplus public funds 
at the end of the campaign.

B. Documentation and Reporting

1. Documentation of Disbursements
    Sections 9003.5(b)(1)(i) and 9033.11(b)(1)(i) set forth the 
documentation required for disbursements in excess of $200. Although a 
canceled check, negotiated by the payee, is required in most 
situations, it is not currently required if the committee presents a 
receipted bill from the payee stating the purpose of the disbursement. 
The proposed rules would change the documentation requirements so that 
committees must provide canceled checks negotiated by the payees for 
all disbursements over $200. This change would assist the Commission's 
audit staff in verifying that public funds are spent on qualified 
campaign expenses. Committees should already have canceled checks in 
their possession, so production would not be burdensome. Please note 
that, as in the past, the proposed rules would require that 
documentation in addition to the committee's check be provided for 
disbursements exceeding $200.
2. Alphabetized Schedules
    The proposed rules include two new sections, 11 CFR 9006.3 and 
9037.4, which would require that presidential campaign committee 
reports containing schedules generated from computerized files, list in 
alphabetical order the sources of the receipts, the payees and 
creditors. For individuals, including contributors, the list must be in 
alphabetical order by surname. However, presidential campaign 
committees would not be required to computerize their records if they 
do not wish to do so. The new provision is intended to remedy 
situations in which committees maintain computerized records of 
contributors or payees in alphabetical order, but file schedules with 
the order of the names scrambled. That practice makes it very 
difficult, if not impossible, to locate particular names on the 
committee's reports if the schedules are voluminous, thereby thwarting 
the public disclosure purposes of the Federal Election Campaign Act, 2 
U.S.C. 431 et seq. [``FECA''] and making it more difficult to monitor 
compliance with the contribution limits.

C. Audits

1. Sampling and Disgorgement
    The Commission has a statutory obligation to complete the audits of 
publicly funded committees in a thorough and timely manner. In the 
past, the resources required to conduct reviews of the contributions 
received by presidential committees contributed to the Commission's 
difficulty in fulfilling that obligation.
    Beginning with the 1992 election cycle, however, the Commission 
began to make more extensive use of statistical sampling for audits of 
contributions received by publicly financed presidential primary 
election committees, and to use the sample results to quantify, in 
whole or in part, the dollar value of any related audit findings. While 
the Commission continues to conduct a limited non-sample review of 
contributions received by these committees, most audit testing of 
contributions and supporting documentation is now done on a sample 
basis. The Commission is now proposing that new paragraph (f) be added 
to 11 CFR 9007.1 and 9038.1 to incorporate these procedures.
    The Commission notes that this approach would apply in a general 
election only to contributions raised due to a deficiency in the 
Presidential Election Campaign Fund, or to contributions raised by new 
or minor party candidates. See 26 U.S.C. 9003(c)(2), 9006(c); 11 CFR 
9003.2(b)(2), 9003.3(b).
    The use of statistical sampling is legally acceptable for 
projecting certain components of a large universe, such as excessive 
and prohibited contributions. See, e.g., Chavez County Home Health 
Service v. Sullivan, 931 F.2d 904 D.C. Cir. 1991) (sampling audit used 
to recoup Medicaid overpayments to health care providers); Michigan 
Dep't of Education v. U.S. Dep't of Education, 875 F.2d 1196 (6th Cir. 
1989) (sampling of 259 out of 66,368 total payment authorizations 
upheld as proper basis for determining amount of misexpended federal 
funds in vocational-rehabilitative program); Georgia v. Califano, 446 
F. Supp. 404 (N.D. Ga. 1977) (Medicaid overpayments).
    The statistical sampling technique currently employed in this 
process, known as Dollar Unit Sampling, Probability Proportional to 
Size, or Combined Attribute Variable Sampling, is widely accepted in 
the auditing profession. This plan is discussed in the American 
Institute of Certified Public Accounts' Audit and Accounting Guide 
entitled Audit Sampling, and is the only sampling plan capable of 
producing dollar projections supported by the audit software package 
IDEA, which is marketed by the American Institute of Certified Public 
Accountants. This same technique has been used by the Commission since 
1980 to determine the amount of committees' matching fund payments.
    The Commission is using this sampling plan to evaluate committees' 
compliance with contribution prohibitions and limitations, itemization 
of contributions, omission of disclosure information and receipts 
documentation. See 2 U.S.C. 432(c), 434(b), 441a, 441b, 441c, 441e, 
441g. For example, the Commission projects the total amount of 
excessive or prohibited contributions based on apparent excessive or 
prohibited contributions identified in a sample of a committee's 
contributions. This projection becomes the basis, in whole or in part, 
of the audit finding.
    The Commission informs the committee which items serve as the basis 
for the sample, and the committee responds only to the specific sample 
items used to make the projection. If the committee shows that any 
errors found among the sample items were not excessive or prohibited 
contributions, timely refunded, reattributed or redesignated, or for 
some other reason were not errors, a new projection is made, based on 
the reduced number of errors in the sample.
    The Commission is further proposing to clarify at new paragraphs 
9007.1(f)(3) and 9038.1(f)(3) that the amount of any excessive or 
prohibited contributions that are not refunded, reattributed or 
redesignated in a timely manner shall be paid to the United States 
Treasury. Committees have 30 days from the date of receipt in which to 
refund prohibited contributions, and 60 days in which to seek the 
reattribution, redesignation or refund of excessive contributions. 11 
CFR 103.3(b) (1), (2) and (3). A committee's failure to take action on 
these contributions, as well as attempts to cure them outside of the 
specified time periods, would cause these contributions to be treated 
as in violation of the FECA.
    The equitable doctrine of disgorgement supports the payment to the 
Treasury under these circumstances. See generally, United States v. 
Bonanno Organized Crime Family of La Cosa Nostra, 683 F. Supp. 1411 
(E.D.N.Y. 1988), aff'd 879 F.2d 20 (2d Cir. 1989) (disgorgement an 
appropriate, non-punitive remedy to deprive wrongdoers of their ill-
gotten gains and to deter future violations). A payment to the Treasury 
is an equitable remedy for contributions that have been accepted in 
violation of 2 U.S.C. 441a and 441b, and is also consistent with past 
Commission practice. See Matter Under Review [``MUR''] 1704 (based upon 
preliminary estimates, Commission directed respondents to pay $350,000 
to the United States Treasury for contributions that would have 
exceeded section 441a limits); Plaintiff's Motion to Effectuate 
Judgment, FEC v. Populist Party, No. 92-0674 (HHG) (D.D.C. filed May 4, 
1993).
    Moreover, this proposed payment is analogous to, and consistent 
with, the requirement at 11 CFR 9038.6 that stale-dated checks be paid 
to the Treasury. This issue arose after the 1984 election cycle, and 
the rule was promulgated as a means to codify the Commission practice 
of requiring disgorgement, which was implemented during that cycle. 
See, e.g., 52 FR 20864, 20874 (June 3, 1987).
    Disgorgement eliminates the need for the Commission to monitor a 
committee's refunds of excessive or prohibited contributions. In 
addition, it is easier for a committee to make one payment to the 
Treasury, as opposed to refunding multiple contributions. Finally, this 
is a practical approach in those situations where it is difficult to 
discern the original contributors.
2. Further Streamlining the Audit Process
    The Commission is seeking comments and suggestions on ways to 
further reduce the amount of time it takes to audit publicly funded 
presidential committees, to make repayment determinations, and to 
complete the enforcement process for these committees. The Commission's 
responsibility for conducting a thorough audit and examination of 
qualified campaign expenses is set out at 26 U.S.C. 9007(a) and 
9038(a). The Commission has an additional responsibility to conduct 
adjudications as to whether any portion of the public funds received 
should be subject to a repayment. 26 U.S.C. 9007(b) and 9038(b). The 
public financing statutes at 26 U.S.C. 9007(c) and 9038(c) specify a 
three year time period in which the Commission will notify publicly 
funded committees of repayment determinations. Separate enforcement 
procedures are prescribed under 2 U.S.C. 437g.
    The Commission has taken several actions to help insure that the 
audit and repayment processes are completed as expeditiously as 
possible. For example, the 1991 revisions to the public financing 
regulations eased compliance with the state-by-state allocation rules 
set forth at 11 CFR 106.2, and implemented improved use of subpoenas in 
presidential audits. See 56 FR 35899-900, 35903-04 (July 29, 1991). In 
addition, as noted above, the Commission has begun to use generally 
accepted sampling procedures in conducting these audits, and has 
instituted a policy that limits a committee to one extension of time in 
which to respond to the Interim and Final Audit Reports [``IAR'' and 
``FAR'']. These actions are having the desired effect, in that the 
Commission is currently on schedule, or ahead of schedule, with respect 
to nearly all 1992 audits.
    Given this situation, one approach would be to wait until after the 
new rules and procedures have been in place for an entire presidential 
election cycle before evaluating what additional streamlining methods 
are warranted, if any. In the alternative, the Commission welcomes 
suggestions for further streamlining these processes, and seeks 
comments on several possible changes that are explained below.
    The Commission notes that it is important to ensure that whatever 
streamlining measures are adopted do not adversely affect the 
statutorily required audit process, the committees' due process rights 
when repayment determinations are made, or the Commission's ability to 
effectively conduct subsequent enforcement actions.
    As for modifications to the actual audit and repayment processes, 
the Commission is first considering whether the committee's oral 
presentation should be held at an earlier point. Currently a committee 
may request the opportunity to make an oral presentation if the 
committee submits written materials disputing the initial repayment 
determination contained in the FAR. 11 CFR 9007.2(c)(3), 9038.2(c)(3). 
Please note that the Commission is not considering adding a second 
hearing to the audit and repayment processes, but only whether the 
current hearing should be held at a different point.
    The Commission recognizes that some committees might prefer to make 
this presentation earlier in the process. Moving up the hearing could 
also help the Commission resolve issues at an earlier date. However, it 
is unclear whether advancing the hearing would in and of itself shorten 
either the audit or repayment process.
    The Commission's experience has been that many issues are resolved 
or narrowed as the audit progresses and the amount of the repayment is 
further refined. Hence, an earlier date could result in a longer, less 
manageable hearing on more issues. To date, the Commission has averaged 
only five oral hearings per cycle, because sufficient issues were 
resolved in or before the FAR in the other audits to make a hearing 
unnecessary. The earlier in the process a hearing is held, the more 
likely it is that a committee will request one. This approach could 
thus slow down, rather than speed up, the audit process.
    The Commission also seeks comments on whether to shorten the time 
between various stages of the audit, repayment, and enforcement 
processes, or to eliminate some of these stages. For example, the IAR 
currently includes a preliminary repayment calculation, while the FAR 
includes an initial repayment determination. 11 CFR 9007.1(c), (d); 
9038.1(c), (d). The Commission issues the final repayment determination 
following consideration of the initial repayment determination in the 
FAR, along with, inter alia, information contained in the committee's 
written response or presented at the hearing, if one is held. 11 CFR 
9007.2(c)(4), 9038.2(c)(4).
    One alternative would be to include the initial repayment 
determination in the IAR, and include the final repayment determination 
and statement of reasons in the FAR. The committee would then respond 
to the IAR with a written statement and could request the opportunity 
to make an oral presentation, as is now done following the FAR. This 
hearing and related documentation would serve as the basis for the FAR.
    The committee would continue to have the right to petition for a 
rehearing, in accordance with 11 CFR 9007.5 and 9038.5, but would 
exercise this right following the FAR/final repayment determination, 
rather than after the later, separately-issued final repayment 
determination that occurs under the present rules. Please note that 
including the initial repayment determination in the IAR would not 
change the rule that issuance of an IAR serves as notification of 
repayment determinations. See 11 CFR 9007.2(a)(2) and 9038.2(a)(2).
    A variation of this approach would be to provide a staff draft of 
the IAR to the committee at the same time it is sent to the Commission, 
much in the manner that the Commission currently provides a probable 
cause to believe brief to respondents pursuant to 2 U.S.C. 437g(a)(3). 
The committee could provide a written response to the staff-prepared 
IAR and request a hearing before the Commission. The hearing and 
additional materials submitted would serve as the basis for the 
Commission's adoption of the FAR. The Commission would subsequently 
issue the final repayment determination and statement of reasons.
    While this approach could take less time, committees might prefer 
to know when they are preparing their responses whether the Commission 
agrees with the staff's analysis of the issues presented. This would 
not be possible if the committee received the staff draft of the IAR at 
the same time it was sent to the Commission. Also, the staff draft 
could not contain an interim repayment determination, as that must be 
approved by the Commission.
    The Commission is also concerned with how confidentiality 
requirements could impact on these proposed revisions. When committee 
activities raise both repayment and enforcement issues, the current 
confidentiality provisions require that matters already determined by 
the Commission to warrant enforcement action not be made public during 
the Commission's discussion of the initial repayment determination. For 
example, the publicly released FAR does not discuss the referral of 
specific matters for enforcement under 2 U.S.C. 437g. See 11 CFR 
9007.1(e)(2), 9038.1(e)(2).
    Regardless of what other changes might be made, the Commission is 
considering whether the IAR should be made public at the time it is 
sent to the committee. If this were done, the Commission's ``sunshine'' 
rules might require a public discussion of the IAR, unless the document 
met other criteria requiring closed discussion under 11 CFR 2.4.
    The Commission recognizes that committees may prefer that the 
preliminary repayment calculation, which is now contained in the IAR, 
not be publicly released, because the amount of the requested repayment 
may be substantially altered prior to the issuance of the FAR or the 
final repayment determination. On the other hand, publicly releasing 
the IAR could encourage committees to address issues at an earlier 
point, rather than waiting until the later stages of the audit and 
repayment processes, as now sometimes occurs. If the decision is made 
to release the IAR, the revised rules would note that the repayment 
sought could be adjusted upwards or downwards, based on any subsequent 
information.
    Finally, the Commission is considering whether, in those audits 
that lead to enforcement actions, the enforcement process should begin 
at an earlier point, such as by making reason to believe findings when 
the IAR is issued. This would permit the investigation to proceed 
concurrently with the audit and repayment processes, so that the final 
repayment determination and statement of reasons could be issued when 
the enforcement matter is concluded.
    The Commission already has begun to initiate enforcement actions at 
an earlier point, in appropriate cases. However, it may prove 
difficult, if not impossible, to formulate a specific policy that would 
apply equitably to all audits as to when the enforcement process should 
begin and when it should be completed. The Commission would not want 
the completion of the audit and repayment processes to be delayed 
because the enforcement action is still underway. Also, in some 
situations, it may not be possible for the Commission to open an 
enforcement matter before it issues a final repayment determination, if 
that determination constitutes the Commission's earliest analysis of 
whether certain actions may constitute violations. Thus the current 
case-by-case approach may prove to be the best alternative.
3. Administrative Record
    The Commission also has prepared new sections 9007.7 and 9038.7 to 
explain which documents constitute the administrative record for 
purposes of judicial review of final determinations regarding candidate 
certification, eligibility, ineligibility, and repayment. For example, 
the administrative record includes documents and other supporting 
evidence on which the Commission's decision is based such as the 
candidate agreement, matching fund submissions, Interim Audit Report, 
NOCO statement, the Final Audit Report, transcript of the committee's 
oral presentation, the final repayment determination, statements of 
reasons, and the certifications of Commission votes. On the other hand, 
the Commission has never considered the administrative record to 
include documents in the files of individual Commissioners, or 
documents in FEC employees' files which do not constitute a basis for 
the Commission's decisions. It would also not be appropriate to include 
in the administrative record transcripts or tapes of Commission 
discussions of audit or repayment matters. Although these materials may 
sometimes be made available under the Freedom of Information and 
Government in the Sunshine Acts, they do not provide an adequate 
explanation of the reasons for the Commission's decisions because they 
represent pre-decisional discussions. Documents properly subject to 
privileges such as an attorney-client privilege, or items constituting 
attorney work product, would also not be made part of the 
administrative record. The Commission welcomes comments regarding the 
types of documents and materials that should or should not be 
considered part of the administrative record.

D. Applicability of the Debt Collection Act to the Certification 
Process

    The Debt Collection Act, 31 U.S.C. 3701 et seq. [``DCA''], at 
section 3716, authorizes the practice of administrative offset, whereby 
amounts owed to the Government may be deducted from amounts due from 
the Government to a debtor if certain requirements are met. This means, 
for example, that the Commission could obtain repayments from certain 
publicly funded campaigns that have failed to make timely restitution 
of improperly-utilized public funds, if that candidate qualified for 
public funding in a future election cycle.
    One of the DCA's requirements is that, before an agency can utilize 
this procedure, it must have prescribed regulations describing how this 
will be done. However, the DCA has other ramifications both for public 
funding, and for the Commission's enforcement process under the FECA. 
For example, in some situations, section 3717 of the DCA would require 
charging interest, penalties and processing and handling costs on 
overdue debts. This could include both overdue repayments and overdue 
civil penalties.
    The Commission has an ongoing rulemaking that would revise various 
FECA enforcement procedures, and is planning to publish an additional 
Notice in connection with that rulemaking to seek comments on how the 
DCA might be utilized in both the FECA and the public funding context. 
Comments received in response to that Notice will serve as the basis 
for deciding whether to amend the public funding rules to provide for 
administrative offset, interest and other charges.
    The Commission is also seeking comment on the related question of 
whether, absent implementation of the DCA, it would be appropriate to 
assess interest on late repayments (those made after 90 days following 
notice of the Commission's repayment determination) and during 
extensions of time on repayment determinations, especially those that 
exceed the 90-day period established at 11 CFR 9007.2(d)(1) and 
9038.2(d)(1).
    While the presidential fund Acts contain no language on interest 
assessment, federal common law holds that interest may be assessed on 
debts owed the government, even without a statutory provision granting 
that power. Robinson v. Watts Detective Agency, 685 F.2d 729, 741 (1st 
Cir. 1982). In particular, a statute is not necessary to compel payment 
of interest where equitable principles allow this. Young v. Godbe, 82 
U.S. 562, 565 (1872).
    In the absence of charges for delinquent payments, debtors have 
little or no incentive to make timely payments. Without this 
requirement, debtors may be more likely to pay their private sector 
debts first, as these generally accrue interest, and their government 
debts last.
    The Commission has already established the precedent that it may 
assess interest when a presidential committee seeks a stay of a 
repayment determination pending appeal. 11 CFR 9007.5(c)(4), 
9038.5(c)(4). One reason cited by the Commission for taking this action 
was to protect the Treasury ``by helping to ensure that the repayment 
challenge is a serious one and not a dilatory tactic.'' Agenda Document
#86-118, Proposed Revision of Title 26 Regulations (Nov. 26, 1986). 
Another was that, if the candidate is earning interest on the disputed 
repayment amount, the Treasury and not the candidate should receive the 
benefit if the Commission's repayment determination is upheld. Id. Both 
reasons are equally applicable to this discussion.
    Another argument in support of collecting interest is that, by 
agreeing to certain conditions, including an audit and appropriate 
repayment, the presidential committees have established a contractual 
relationship with the Commission under which interest assessment 
becomes appropriate. See West Virginia v. United States, 479 U.S. 305, 
310 (1987). Also, if a debtor-creditor relationship is established, 
``interest is allowed as a means of compensating a creditor for loss of 
use of his money.'' United States v. United Drill and Tool Corporation, 
183 F.2d 998, 999 (D.C. Cir. 1950). Such a relationship exists in this 
context in that, prior to the receipt of public funds, the candidate 
must agree to repay unexpended funds, money determined to be spent in 
an unqualified manner, and amounts received in excess of entitlement. 
11 CFR 9003.1(b)(6), 9033.1(b)(7).
    If the Commission decides to expand the current interest assessment 
policy, it would seem appropriate that the same interest computation 
formula be utilized across the board. Under current 11 CFR 9007.5(c)(4) 
and 9038.5(c)(4), the interest assessed is the greater of that 
calculated using the formula set forth at 28 U.S.C. 1961 (a) and (b) 
for computing interest on money judgments in federal civil cases, or 
the amount actually earned on the set-aside funds in controversy. The 
Commission welcomes comments on whether this or some other approach 
should be taken, should additional regulations be promulgated.
    Please note that there is no specific language in the regulatory 
text that addresses this situation. The Commission welcomes comments on 
any aspect of this proposal.

Primary elections

A. Eligibility for Matching Payments; Amount of Entitlement

1. Complete Contributor Identifications
    Treasurers of political committees, including authorized committees 
of Presidential candidates, are required by 2 U.S.C. 432(i) and 434(b) 
to use their best efforts to obtain, maintain and report the name, 
address, occupation and employer of all contributors who give over $200 
per calendar year. The Commission recently issued revised rules 
regarding this reporting obligation. See 58 FR 57725 (Oct. 27, 1993). 
During that rulemaking, two commenters suggested revising 11 CFR 9036.2 
so that Presidential primary candidates would only receive matching 
funds for contributions exceeding $200 containing complete contributor 
information. While full contributor identifications are required for 
such contributions in threshold submissions under 11 CFR 9036.1(b), 
they are not currently required under 11 CFR 9036.2(b)(1)(v) for 
additional submissions for matching funds. Accordingly, comments are 
requested on whether to delete section 9036.2(b)(1)(v), thereby 
requiring complete contributor information for all matchable 
contributions exceeding $200. In the alternative, comments are sought 
on only matching these contributions if committees can provide evidence 
demonstrating they made their best efforts to obtain the information. 
Please note that neither of these alternatives is included in the 
proposed regulations which follow.
2. NOCO Statements
    Section 9034.5(a) of the regulations requires the candidate to 
submit a statement of net outstanding campaign obligations [``NOCO''] 
within 15 days of his or her date of ineligibility. Section 
9034.5(f)(1) also requires the candidate to submit a revised statement 
of net outstanding campaign obligations with each subsequent matching 
payment request. These NOCO statements provide the Commission with an 
indication of the campaign's financial status. The Commission uses 
these statements to determine whether the candidate is entitled to 
receive any additional matching funds.
    In some circumstances, the NOCO statements do not provide adequate 
information about the candidate's remaining obligations. For example, 
many NOCO statements list the candidate's estimated necessary winding 
down costs as a single lump sum, making it difficult for the Commission 
to review the cost estimate to determine whether the candidate is 
entitled to receive the entire estimated amount. In addition, because 
several weeks now elapse between submission of the NOCO statement and 
certification of the matching payments due to changes in the Treasury 
Department's payment policy, the certification often does not reflect 
the true financial status of the committee at the time of 
certification. The candidate's financial situation invariably changes 
during this period, and any change in the committee's net outstanding 
campaign obligations should result in a change in the committee's 
entitlement.
    The proposed rule seeks to address these problems. Section 
9034.5(b) would be amended to require a breakdown of the estimated 
winding down costs listed on the NOCO statement by category and time 
period. This breakdown would include estimates of quarterly or monthly 
costs for office space rental, staff salaries, office supplies, 
equipment rental, telephone expenses, postage and other mailing costs, 
printing, and storage from the date of the NOCO statement until the 
expected termination of the committee's political activity.
    The proposed rule would also require a candidate who submits a 
matching payment request and accompanying NOCO statement after his or 
her date of ineligibility to submit an additional revised NOCO 
statement. This statement would be due just before the certification 
date, on a date that would be published by the Commission with the 
dates for matching fund submissions and matching payment 
certifications. The candidate would be required to prepare the 
statement so that it reflects the financial status of the campaign 
three business days before the statement's due date. The Commission 
would then use this statement to determine whether the amount of 
matching payments to be certified should be adjusted to reflect a 
committee's changed financial situation. This would ensure that the 
amount certified accurately reflects the committee's financial 
situation at the time of certification. The Commission welcomes 
comments on these proposed rules.

B. Qualified Campaign Expenses

1. Funding General Election Expenses with Primary Funds
    The Presidential Election Campaign Fund Act, the Presidential 
Primary Matching Payment Account Act, and Commission regulations 
require that publicly funded presidential candidates use primary 
election funds only for expenses incurred in connection with primary 
elections, and that they use general election funds only for general 
election expenses. 26 U.S.C. 9002(11), 9032(9); 11 CFR 9002.11, 9032.9. 
These requirements are tied to the overall primary and general election 
expenditure limits set forth at 2 U.S.C. 441a (b) and (c), and at 26 
U.S.C. 9004(b) and 9034(b). See also 11 CFR 9004.1, 9004.3(b), 
9034.1(d). Therefore, once a primary candidate is the clear and 
projected winner of the primary election process and begins to campaign 
by addressing issues and comparability with other projected general 
election candidates, certain costs incurred prior to the candidate's 
primary election date of ineligibility are considered general election 
expenses that are reimbursable by the general election committee.
    The Commission is seeking comments on whether the pertinent rules 
should provide more specific guidance on how certain expenditures might 
be characterized. Questions have arisen in recent election cycles as to 
whether certain primary funding was in fact used to benefit the general 
election. As additional states choose to hold their state nominating 
conventions or primary elections early in the election cycle, the major 
parties' selection of a nominee is increasingly likely to be decided 
long before the convention. Once a candidate has secured enough 
delegates to win the nomination, the focus of the campaign may turn in 
large part to the general election. However, the Commission realizes 
that it can be difficult to distinguish between legitimate primary 
campaign activity, such as that which is designed to lock up delegates, 
or is related to the primary outcomes or pre-convention preparation, 
from activity that is geared towards the general election.
    The Commission is considering several alternatives that would 
provide additional guidance to presidential campaign committees on how 
such expenditures are treated. The Commission welcomes comments on any 
of these approaches, as well as suggestions on other ways available to 
deal with this situation.
    One question concerns depreciation of primary committee assets in 
this situation. Section 9034.5(c)(1) currently permits a standard 40% 
depreciation of capital assets held by a primary campaign committee, 
except for items acquired after the committee's DOI. A higher 
depreciation is allowed for a particular item if the committee 
demonstrates through documentation that the asset's fair market value 
is lower.
    Under certain circumstances, however, the 40% figure may be overly 
generous. For example, if the primary committee purchases a $20,000 
computer system shortly before the primary election DOI and then sells 
it to the general election committee, allowing the primary campaign to 
assume a 40% depreciation would result in a nearly $8,000 subsidy from 
the primary to the general election committee. The Commission is 
therefore proposing that paragraph 9034.5(c)(1) be amended to clarify 
that a higher, lower, or no depreciation may be claimed in appropriate 
cases.
    Current 11 CFR 9034.4(b)(3) states that expenses incurred after a 
candidate's primary election DOI are not considered qualified campaign 
expenses, except for certain winding down costs and costs incurred in 
continuing to campaign. See 11 CFR 9034.4(a)(3). The Commission is 
considering whether this language should be expanded to clarify that, 
consistent with 26 U.S.C. 9002(11)(B) and 11 CFR 9002.11(b), goods 
received prior to the DOI that are used for the general election, and 
pre-DOI services that provide a benefit to the general election 
campaign, are considered qualified campaign expenses for the general 
election and not for the primary election.
    One approach would be to allocate the cost of each capital asset 
between the primary and the general election, based on when the asset 
was acquired and the time the committee began to focus on the general 
election. This could be difficult to administer, however, requiring as 
it would an asset-by-asset determination.
    Another approach would be to include a presumption in section 
9034.4(b)(3) that capital assets purchased during a certain period 
before the first day of the candidate's party's national nominating 
convention are general election assets. Section 9034.4(b)(3) of the 
proposed rules would set a presumed cutoff date of 60 days before the 
start of the candidate's party's national nominating convention. 
However, the Commission is requesting comments on whether some other 
cutoff point would better serve this purpose, as well as whether a 
uniform cutoff date, such as June 15 preceding the national nominating 
convention, would be more appropriate. If so, what date should be 
selected? If a more flexible approach is desirable, how should the 
applicable timeframe be computed? Should it be the date of the 
candidate's party's last state primary election?
    Whatever approach is adopted, the presumption would be rebuttable 
based on each candidate's particular circumstances. If a candidate 
could demonstrate that he or she was still largely involved in 
campaigning for the nomination after the presumptive cutoff date, that 
date could be moved back. In the case of a brokered convention, several 
candidates might be found to have focused nearly exclusively on 
securing the nomination until the date during the convention on which 
one in fact did so. Conversely, a candidate who became the clear and 
projected nominee of a party early in the presidential election year 
might be found to have made expenditures in connection with the general 
election well in advance of the designated cutoff date.
    In determining how expenditures made as of a certain date should be 
characterized, the Commission might consider such information as how 
many delegates the candidate has, the number of candidates who received 
votes in each of the candidate's party's most recent state primary 
elections or other state nominating procedures, the relative 
percentages received by each candidate in these proceedings, and 
whether the candidate had begun to focus on issues raised by other 
projected general election candidates and his or her comparability with 
such candidates. The Commission welcomes suggestions of other factors 
that could prove helpful in making this determination.
    Another question involves local campaign offices that continue to 
operate after a state's primary election or other nominating procedure 
is over, when the office is no longer focused on securing the 
nomination in that state. The Commission is proposing a rebuttable 
presumption that a local campaign office that remains open more than 30 
days after a state's primary election, or the close of any other 
nomination process in that state, is operating in support of the 
general election campaign. The Commission welcomes comments on this 
approach, as well as suggestions for others that would result in a fair 
attribution of these expenditures.
    This situation becomes more complicated when applied to supplies 
and materials. The Commission is therefore seeking comments on how such 
items should be treated. One approach would be to require an inventory 
of everything on hand, including campaign materials but perhaps 
excluding items below a certain threshold amount, as of the DOI. These 
items would then be sold to the general election at cost. If there was 
no inventory, everything purchased or delivered in the last 60 days 
before the DOI would be presumed to be a general election expense. The 
Commission notes that this approach could be difficult to verify, since 
the inventory would be at a point in time which could not be recreated. 
Nevertheless, it is important that primary election funds not be used 
to subsidize the general election.
    Finally, the Commission welcomes comments on how other foods and/or 
services, such as campaign-related travel and media expenses, should be 
treated in this context. For example, if a candidate travels to a state 
where the primary has already been held, some of the travel could be 
for fundraising to help obtain the nomination, but some or all might be 
for general election purposes.
    Nothing in this NPRM is intended to revise the Commission's 
``continuing to campaign'' rules set forth at 11 CFR 9034.4(a)(3)(ii). 
These rules allow a candidate who is no longer eligible for matching 
funds but is still seeking the nomination to use post-DOI contributions 
to pursue his or her primary campaign--a different situation than that 
addressed in this proposal.
    The Commission recognizes that, under unusual circumstances, a 
candidate who appears to have been eliminated early in the election 
cycle may later secure the nomination. As is currently true, these 
special situations would be evaluated on a case-by-case basis.
    Conversely, a candidate who appears to have secured the nomination 
early in the campaign may in fact fail to obtain it, and thus not 
qualify for general election funding. The Commission is less concerned 
with this possibility, as the focus of this portion of the rulemaking 
is on how certain expenditures should be treated by those candidates 
who go on to become the convention's nominee.
2. Convention Expenses of Ineligible Candidates
    The Commission is seeking comments on whether expenses incurred by 
losing primary election candidates in attending their party's national 
nominating convention should be considered a qualified campaign expense 
under 11 CFR 9032.9. Such attendance could provide a defeated candidate 
the opportunity to continue to fundraise, perhaps to campaign for the 
vice presidential nomination, and to maintain contact with his or her 
pledged convention delegates.
    The Commission notes, however, that qualified campaign expenses are 
defined in the Presidential Primary Matching Payment Account Act at 26 
U.S.C. 9032(9)(A) as those ``incurred by a candidate, or by his 
authorized committee, in connection with his campaign for nomination 
for election.'' This definition seemingly does not apply to those no 
longer seeking the presidential nomination. Also, the term 
``candidate'' is defined as ``an individual who seeks nomination for 
election to be President of the United States,'' and thus does not on 
its face include those seeking the vice presidential nomination. 26 
U.S.C. 9032(2). Further, in recent years presidential candidates have 
increasingly announced their vice presidential selections in advance 
(at times well in advance) of the national convention. Finally, under 
11 CFR 9034.1(b), candidates can already count fundraising expenses 
incurred following their Date of Ineligibility (DOI), including those 
incurred at a national nominating convention, as qualified campaign 
expenses.
    The Commission is also concerned about potential practical problems 
with this approach. For example, if a candidate's DOI occurs early in 
the election cycle, there will be a substantial gap between the DOI and 
the date of the convention. The purpose of the 10% rule (26 U.S.C. 
9033(c)(1)(B); 11 CFR 9033.5(b)), under which a candidate becomes 
ineligible for additional funding on the 30th day following the date of 
the second consecutive primary election in which he or she receives 
less than 10% of the popular vote, is to discontinue funding of 
candidates who have not received substantial support following their 
initial establishment of eligibility. See 122 Congressional Record 
S.3787 (daily ed. March 18, 1976) (remarks of Sen. Taft).
    A related concern is that, under these circumstances, the 
Commission may be well along in the audit of a candidate's campaign by 
the time the convention opens. Providing an additional matching fund 
period to such candidates could substantially complicate the audit 
process.
    If this approach were to be adopted, the Commission welcomes 
comments on who should be covered by the new provision, and during what 
timeframe it should apply. Should this be limited to expenses incurred 
by the candidate, or the candidate and his or her immediate family, or 
should it also include campaign staff? If the latter, should such staff 
be limited, either by number or position held in the campaign? The 
Commission notes that, where a number of candidates sought the 
nomination, the expenses of these candidates, their families, and 
accompanying campaign staff could be substantial.
    Please note that the draft rules that follow do not include any 
specific regulatory language on this point.

C. Audits

1. Calculation of Repayment Ratio
    Under section 9038.2(b)(2), committees are required to repay 
amounts received from the matching payment account that are used for 
non-qualified campaign expenses. The amount of any repayment sought 
under section 9038.2(b)(2) bears the same ratio to the total amount of 
non-qualified campaign expenses as the amount of matching funds 
certified to the candidate bears to the candidate's total deposits, as 
of the candidate's date of ineligibility. Repayment determinations 
under this section include all non-qualified campaign expenses paid 
between the committee's date of inception and the point when committee 
accounts no longer contain matching funds. Thus, the repayment amount 
is calculated by multiplying the total non-qualified campaign expenses 
by the repayment ratio, as determined on the candidate's date of 
ineligibility.
    However, this section does not serve its intended purpose when 
applied to a candidate that receives a significant amount of matching 
payments after his or her date of ineligibility. Section 9038.2(b)(2) 
does not take into account private contributions received by the 
candidate after his or her date of ineligibility. Consequently, when 
this section is applied to a candidate that receives a significant 
amount of private contributions after that date, it generates a 
repayment amount that does not accurately reflect the ratio of matching 
payments to private contributions actually received by that candidate 
during the courts of the campaign.
    Similarly, section 9038.2(b)(2) is inconsistent with the statute 
when applied to a candidate who does not receive matching payments 
until after his or her date of ineligibility. Section 9038(b)(2) of the 
Matching Payment Account Act requires a candidate who uses public funds 
for non-qualified campaign expenses to repay a portion of the public 
funds he or she received to the Treasury. However, when section 
9038.2(b)(2) of the regulations is applied to a candidate who does not 
receive matching payments until after his or her date of ineligibility, 
the rule arguably generates a repayment ratio of zero even if the 
candidate incurred numerous non-qualified campaign expenses. Thus, 
under the regulations, the candidate would not be required to repay any 
of those funds, even though the statute specifically requires repayment 
in this situation.
    Section 9038.2(b)(2)(iii) of the proposed rules contains two 
proposed revisions that would address these situations. The first 
proposal would change the date for determining the candidate's 
repayment ratio from the date of ineligibility to 90 days after the 
date of ineligibility. A ratio determined on the later date would take 
into account most of the post-DOI private contributions received by the 
candidate. As a result, the ratio will more accurately reflect the 
amount of matching payments and private contributions actually 
received. This approach would also produce an accurate repayment ratio 
and repayment amount for those candidates that do not receive any 
matching payments until after their date of ineligibility. As a result, 
this proposed revision would address both of the situations described 
above.
    The second proposal, which is set out in paragraph (A) of this 
section, would take a narrower approach. Under this proposal, the 
Commission would treat all matching funds certified in response to 
matching payment submissions received as of the candidate's date of 
ineligibility as though they were certified as of the candidate's date 
of ineligibility. Treating these funds as though they were certified 
pre-DOI would allow the Commission to use these funds to calculate the 
repayment ratio, resulting in a ratio of an amount greater than zero 
that reflects the mix of public funds and private contributions 
actually received. The Commission could then use this ratio to 
determine the amount that the candidate is required to repay under 
section 9038(b)(2) of the statute.
    The Commission welcomes comments on which approach would be 
preferable. Please note that, if the first approach is adopted, 
paragraph (A) will be unnecessary, and therefore will not be included 
in the final rules. If paragraph (A) is adopted, the candidate's 
repayment ratio will continue to be determined as of the candidate's 
date of ineligibility, as it is under the current rules.
    In an effort to improve clarity, the proposed rules would also 
break this section down in to separate paragraphs. The Commission 
welcomes comments on the proposed changes to section 9038.2(b)(2).

D. Part 9039 Investigations

1. Commission Actions Following Part 9039 Investigations
    The Commission's review and investigatory authority for 
administering the matching fund program is set forth at 26 U.S.C. 
9039(b). In carrying out these responsibilities, the Commission must 
perform a continuing review of candidate and committee reports and 
submissions, and other relevant information. The implementing 
regulations are found at 11 CFR part 9039.
    For the most part the Commission's review is routine, carried out 
in accordance with the eligibility, audit and repayment procedures 
contained elsewhere in the regulations. 26 U.S.C. 9039(b) and its 
implementing regulations provide authority to conduct audits and 
investigations outside of the audits required under 26 U.S.C. 9038 and 
11 CFR part 9038. Most of these cases have involved issues relating to 
a candidate's continuing eligibility or the amount of his or her 
entitlement during the course of the campaign, although they could also 
involve a post-election inquiry.
    Section 9039.3 of the regulations describes how examinations, 
audits and investigations are conducted in these inquiries. The 
Commission is considering whether to provide in the final rules a 
fuller explanation of actions that may be taken at the conclusion of 
any such action. Please note that there is no specific language in the 
text of the proposed rules on this point.
    Under this approach, if the Commission decided to take no further 
action in a 9039 case, the candidate(s) and committee(s) involved would 
be so notified. If the Commission decided that there was a sufficient 
basis to take further action, such action would follow as closely as 
possible the procedures already in place for comparable situations. See 
e.g., 11 CFR 9033.10. For example, a post election inquiry could lead 
to either an additional repayment determination, in which case the 
procedures set forth at 11 CFR 9038.2 for making and challenging 
repayment determinations would apply, or a 2 U.S.C. 437g enforcement 
action.
    The Commission welcomes comments on these proposed amendments to 11 
CFR part 9039.

General Elections

A. General Election Legal and Accounting Compliance Costs

    On March 1, 1994, the Commission received a Petition for Rulemaking 
from the Center for Responsive Politics requesting that the Commission 
repeal its rules providing for the use of privately-financed general 
election legal and accounting compliance funds [``GELAC''] in 
Presidential campaigns. Specifically, the petitioner seeks repeal of 11 
CFR 100.8(b)(15) (last two sentences), 106.2(b)(2)(iii) (last 
sentence), 9002.11(b)(5), 9003.3(a), and 9035.1(c)(1). The petition 
argues that the Commission's rules undermine the ability of the public 
financing laws to achieve the objective of reducing the influence of 
large contributions in Presidential elections. It charges that these 
regulations permit evasion of the prohibition on accepting 
contributions to defray qualified campaign expenses established by the 
Presidential Election Campaign Fund Act. 26 U.S.C. 9003(b). 
Furthermore, the petition claims that the Commission's regulations 
violate the spending limits established by the FECA. 2 U.S.C. 441a.
    On March 30, 1994, the Commission published a Notice of 
Availability seeking statements in support of or in opposition to the 
petition. 59 FR 14794 (March 30, 1994). In response to the Notice, four 
statements have been received from the Internal Revenue Service, Public 
Citizen, Common Cause, and a joint comment from the Democratic National 
Committee and the Republican National Committee. Two were supportive 
while one opposed the reversal of the Commission's long standing 
policies regarding legal and accounting costs. The Internal Revenue 
Service found no conflict with the Internal Code or the Regulations 
thereunder.
    The Commission is continuing to consider the petition as part of 
this rulemaking and seeks further comment on abolishing the GELAC. The 
Commission is also seeking evidence either supporting or refuting the 
petitioner's claim that the privately-funded GELAC undermines the 
public financing of general election campaigns by allowing the 
actuality and the appearance of improper influence in Presidential 
elections. Absent evidence supporting the petitioner's claim, the 
Commission would be reluctant to completely eliminate the GELAC because 
Presidential campaigns would need to devote some of their public funds 
for compliance expenses, instead of using public moneys for campaign 
expenses. The result could be significant difficulty in complying with 
the public financing statutes and the FECA. The GELAC is also used to 
make repayments, which would need to be funded from other sources. 
Moreover, the elimination of monetary contributions of $1000 or less 
for compliance purposes could force some committees to turn to much 
larger in-kind donation of legal and accounting services to ensure that 
their compliance obligations are satisfied. See 2 U.S.C. 431(8)(B)(ix) 
and (9)(B)(vii).
    Accordingly, comments are requested on several alternative 
revisions to the GELAC. For example, should the amount raised and spent 
for compliance costs be limited to a fixed percentage of the general 
election spending limit? If so, what amount or percentage would be 
sufficient to ensure that adequate amounts are available for meeting 
compliance obligations? Please note that this approach is not included 
in the proposed rules which Follow.
    The petitioners and one commenter also challenge the 
appropriateness of allowing fundraising costs for the GELAC to be paid 
for by the GELAC on the ground these expenses are campaign expenses 
that should be subject to the spending limits. The current rules permit 
fundraising costs to be paid by the GELAC because it would not be 
appropriate to sue public funds to solicit private contributions that 
are used solely for legal and accounting compliance purposes. However, 
the Commission is concerned that fundraising activities for the GELAC 
could be used to generate electoral support for the candidate's 
campaign, and if so, should be treated as qualified campaign expenses. 
Accordingly, comments are sought on whether to continue to permit the 
GELAC to pay the entire amount of these costs, or whether a fixed 
percentage of GELAC fundraising costs should be paid by the general 
election campaign committee. Splitting the costs would recognize that 
solicitations and other activities conducted to raised GELAC funds have 
a campaign-related component. Comments are sought as to the appropriate 
percentage that should be paid from general election funds. Please note 
that this approach is not included in the proposed rules which follow.
    The Commission is also considering modifying section 
9003.3(a)(1)(i)(A), which currently requires solicitations to clearly 
state that the contributions are solicited for the GELAC. A new 
sentence would also require solicitations to state that contributions 
to the GELAC may not be used for campaign purposes.
    Please note that the provisions regarding predesignations and 
transfer of primary funds to the GELAC in paragraphs (a)(1) (ii)-(iv) 
would be reorganized.
    Current paragraphs (a)(2)(i) (A) through (H) of section 9003.3 set 
forth the permissible sues of GELAC funds. The Petition for Rulemaking 
urged the Commission to delete current paragraph (H) allowing GELAC 
funds to be used to pay unreimbursed costs of providing transportation 
for the Secret Service and national security staff. Although this 
provisions is included in the attached proposed rules, the Commission 
seeks further comment on whether it is appropriate to use GELAC funds 
for this purpose. Please note that GELAC funds may not be used to pay 
transition costs (cf. AO 1980-97); legal defense fund expenses (cf. AO 
1979-37); legal expenses not related to ensuring compliance, such as 
contract litigation or electoral college expenses; and winding down 
expenses that are not for legal and accounting compliance purposes.
    In addition, the Commission proposes reducing from 70% to 50% the 
standard amount that the GELAC may pay for computer-related costs, and 
the corresponding exclusion from the spending limits. See 11 CFR 9003.3 
(a)(2)(ii)(A), (b)(6) and (c)(6). The GELAC is relatively small in 
comparison to the publicly funded general election account. Much of the 
computer costs are for basic accounting purposes, which the campaign 
committee would need to perform regardless of the need to comply with 
the campaign financing laws. Please note, however, that committees 
would still be able to deduct a higher amount if they can show that 
their computer-related compliance costs are higher.
    Section 9003.3(a)(2)(iv) would be modified slightly to clarify that 
funds remaining in the GELAC may only be used to pay debts remaining 
from the primary or for other lawful purposes if all GELAC expenses 
have been paid. Finally the Commission is proposing to revise two 
citations contained in 11 CFR 9003.3(a)(2)(iii). The first sentence of 
this paragraph currently refers to paragraphs 9003.3(a)(2)(i) (A) 
through (E). This would be updated to read, ``11 CFR 9003.3(a)(2)(i) 
(A) through (F) and (H).'' Also, the citation to paragraph 
9003.3(a)(2)(i)(F) in the second sentence should instead refer 
paragraph 9003.3(a)(2)(i)(G).

B. Gains on the Use of Public Funds

    Section 9004.5 of the Commission's regulations allows a committee 
to invest public funds or use them in other ways to generate income, 
provided that an amount equal to the net income derived from those 
investments, minus any taxes paid, is repaid to the Treasury. Section 
9007.2(b)(4) also lists the receipt of any income as a result of 
investment or other use of payments from the fund pursuant to 11 CFR 
9004.5 as one of the basis for requiring repayment. These provisions 
seek to ensure that any income received through these use of public 
funds benefits the public financing system.
    The proposed rules would indicate that section 9004.5 applies to 
any use of public funds that results in come to the committee, 
regardless of whether the committee engaged in that use with the 
intention of generating income. The proposed rules also contain a 
conforming amendment to section 9007.2(b)(4), which would indicate that 
income on investment or other use of payments from the Fund must be 
repaid to the Treasury. The Comission notes that if a committee loses 
an item that is insured, and the insurance proceeds exceeds the cost of 
replacing the item, such excess would be considered income for the 
purposes of proposed sections 9004.5 and 9007.2(b)(4).
    These provisions are not meant to require repayment of income that 
qualifies as exempt function income under section 527(c)(3) of the 
Internal Revenue Code, 26 U.S.C. 527(c)(3), such as receipts from 
fundraising activities. The Commission welcomes comments on these 
proposed revisions.

Miscellaneous and Technical Amendments

    In the interests of clarity, the Commission is proposing to add a 
comma in the last sentence of 11 CFR 9003.1(b)(4), and in the second 
sentence of 11 CFR 9033.1(b)(5). Both paragraphs concern candidate and 
committee agreements to furnish certain documentation to the 
Commission.
    Current 11 CFR 9033.4(b) states that, in evaluating a candidate's 
matching funds submission, the Commission may consider other relevant 
information in its possession, including but not limited to past 
actions of the candidate in an earlier campaign. This provision was 
held to exceed the Commission's statutory authority in LaRouche v. FEC, 
996 F.2d 1263 (D.C. Cir. 1993), cert. denied 114 S. Ct. 550. The 
Commission is therefore proposing to delete this paragraph from the 
rule.

Conclusion

    The Commission welcomes comments on the foregoing proposed 
amendments to the public financing regulations, the issues raised in 
this notice, and on other aspects of the public financing process that 
could be addressed in these regulations. No final decision has been 
made by the Commission concerning any of the proposals contained in 
this Notice.

Certification of No Effect Pursuant to 5 U.S.C. Section 605(b) 
(Regulatory Flexibility Act)

    The attached proposed rules, if promulgated, will not have a 
significant economic impact on a substantial number of small entities. 
The basis for this certification is that few, if any, small entities 
will be affected by these proposed rules. Further, any small entities 
affected are already required to comply with the requirements of the 
Presidential Election Campaign Fund Act and the Presidential Primary 
Matching Payment Account Act in these areas.

List of Subjects

11 CFR Parts 9003-9004

    Campaign funds, Elections, Political candidates.

11 CFR Parts 9006-9007

    Administrative practice and procedure, Campaign funds, Elections, 
Political candidates, Reporting requirements.

11 CFR Parts 9033-9034

    Campaign funds, Elections, Political candidates.

11 CFR Parts 9037-9038

    Administrative practice and procedure, Campaign funds, Political 
candidates.

    For the reasons set out in the preamble, it is proposed to amend 
subchapters E and F of chapter I of title 11 of the Code of Federal 
Regulations as follows:

PART 9003--ELIGIBILITY FOR PAYMENTS

    1. The authority citation for Part 9003 would continue to read as 
follows:

    Authority: 26 U.S.C. 9003 and 9009(b).

    2. In Sec. 9003.1, the introductory text of paragraph (b) would be 
republished, paragraph (b)(4) would be revised, and new paragraph 
(b)(10) would be added, to read as follows:


Sec. 9003.1  Candidate and committee agreements.

* * * * *
    (b) Conditions. The candidates shall:
* * * * *
    (4) Agree that they and their authorized committee(s) will keep and 
furnish to the Commission all documentation relating to receipts and 
disbursements (including all books and bank records for all accounts), 
all documentation required by this subchapter (including those required 
to be maintained under 11 CFR 9003.5), and other information that the 
Commission may request. If the Candidate or the candidate's authorized 
committee maintains or uses computerized information containing any of 
the categories of data listed in 11 CFR 9003.6(a), the committee will 
provide computerized magnetic media, such as magnetic tapes or magnetic 
diskettes, containing the computerized information at the times 
specified in 11 CFR 9007.1(b)(1) that meets the requirements of 11 CFR 
9003.6(b). Upon request, documentation explaining the computer system's 
software capabilities shall be provided, and such personnel as are 
necessary to explain the operation of the computer system's software 
and the computerized information prepared or maintained by the 
committee shall also be made available.
* * * * *
    (10) Agree that any television commercial prepared or distributed 
by the candidate will be prepared in a manner which ensures that the 
commercial contains or is accompanied by closed captioning of the oral 
content of the commercial to be broadcast in line 21 of the vertical 
blanking interval, or is capable of being viewed by deaf and hearing 
impaired individuals via any comparable successor technology to line 21 
of the vertical blanking interval.
    3. Section 9003.3 would be revised to read as follows:


Sec. 9003.3  Allowable Contributions.

    (a) Legal and accounting compliance fund--major party candidates.
    (1) Sources.
    (i) A major party candidate may accept contributions to a legal and 
accounting compliance fund if such contributions are received and 
disbursed in accordance with this section. A legal and accounting 
compliance fund may be established by such candidate prior to being 
nominated or selected as the candidate of a political party for the 
Office of President or Vice President of the United States.
    (A) All solicitations for contributions to this fund shall clearly 
state that such contributions will be used by this fund solely for 
legal and accounting services to ensure compliance with Federal law. 
Such solicitations shall also state that contributions to the fund will 
not be used for the candidate's election.
    (B) Contributions to this fund shall be subject to the limitations 
and prohibitions of 11 CFR Parts 110, 114, and 115.
    (ii)(A) Contributions made during the matching payment period that 
do not exceed the contributor's limit for the primary election may be 
redesignated and deposited in the legal and accounting compliance fund 
before the nomination only if--
    (1) The contributions represent funds in excess of any amount 
needed to pay remaining primary expenses;
    (2) The redesignations are received within 60 days of the 
Treasurer's receipt of the contributions;
    (3) The requirements of 11 CFR 110.1(b)(5) and (l) regarding 
redesignations are satisfied; and
    (4) The contributions have not been submitted for matching.
    (B) All contributions redesignated and deposited pursuant to 
paragraph (a)(1)(ii)(A) of this section shall be subject to the 
contribution limitations applicable for the general election, pursuant 
to 11 CFR 110.1(b)(2)(i).
    (iii) Fund received during the matching payment period that are 
remaining in a candidate's primary election account after the 
nomination may be transferred to the legal and accounting compliance 
fund without regard to the contribution limitations of 11 CFR Part 110 
and used for any purpose permitted under this section, only if the 
funds are in excess of any amount needed to pay remaining net 
outstanding campaign obligations under 11 CFR 9034.1(b) and any amount 
required to be reimbursed to the Presidential Primary Matching Payment 
Account under 11 CFR 9038.2. The excess funds so transferred may 
include contributions made before the beginning of the expenditure 
report period, which contributions do not exceed the contributor's 
limit for the primary election. Such contributions need not be 
redesignated by the contributors for the legal and accounting 
compliance fund.
    (iv) Contributions that are made after the beginning of the 
expenditure report period but which are designated for the primary 
election may be redesignated for the legal and accounting compliance 
fund and transferred to or deposited in such fund if--
    (A) The candidate obtains the contributor's redesignation in 
accordance with 11 CFR 110.1;
    (B) The funds are in excess of any amount needed to pay remaining 
net outstanding campaign obligation under 11 CFR 9034.1(b) and any 
amount required to be reimbursed to the Presidential Primary Matching 
Payment Account under 11 CFR 9038.2; and
    (C) The contributions have not been submitted for matching.
    (v) Contributions made with respect to the primary election that 
exceed the contributor's limit for the primary election may be 
redesignated for the legal and accounting compliance fund and 
transferred to or deposited in such fund if the candidate obtains the 
contributor's redesignation in accordance with 11 CFR 110.1.
    (2) Uses.
    (i) Contributions to the legal and accounting compliance fund shall 
be used only for the following purposes:
    (A) To defray the cost of legal and accounting services provided 
solely to ensure compliance with 2 U.S.C. 431 et seq. and 26 U.S.C. 
9001 et seq. in accordance with paragraph (a)(2)(ii) of this section;
    (B) To defray in accordance with paragraph (a)(2)(ii)(A) of this 
section, that portion of expenditures for payroll, overhead, and 
computer services related to ensuring compliance with 2 U.S.C. 431 et 
seq. and 26 U.S.C. 9001 et seq.;
    (C) To defray any civil or criminal penalties imposed pursuant to 2 
U.S.C. 437g or 26 U.S.C. 9012;
    (D) To make repayments under 11 CFR 9007.2;
    (E) To defray the cost of soliciting contributions to the legal and 
accounting compliance fund;
    (F) To defray the cost of producing, delivering and explaining the 
computerized information and materials provided pursuant to 11 CFR 
9003.6 and explaining the operation of the computer system's software;
    (G) To make a loan to an account established pursuant to 11 CFR 
9003.4 to defray qualified campaign expenses incurred prior to the 
expenditure report period or prior to receipt of federal funds, 
provided that the amounts so loaned are restored to the legal and 
accounting compliance fund; and
    (H) To defray unreimbursed costs incurred in providing 
transportation and services for the Secret Service and national 
security staff pursuant to 11 CFR 9004.6.
    (ii) (A) Expenditures for payroll (including payroll taxes), 
overhead and computer services, a portion of which are related to 
ensuring compliance with title 2 of the United States Code and chapter 
95 of title 26 of the United States Code, shall be initially paid from 
the candidate's federal fund account under 11 CFR 9005.2 and may be 
later reimbursed by the compliance fund. For purposes of paragraph 
(a)(2)(i)(B) of this section, a candidate may use contributions to the 
compliance fund to reimburse his or her federal fund account an amount 
equal to 10% of the payroll and overhead expenditures of his or her 
national campaign headquarters and state offices. Overhead expenditures 
include, but are not limited to rent, utilities, office equipment, 
furniture, supplies and all telephone charges except for telephone 
charges related to a special use such as voter registration and get out 
the vote efforts. In addition, a candidate may use contributions to the 
compliance fund to reimburse his or her federal fund account an amount 
equal to 50% of the costs (other than payroll) associated with computer 
services. Such costs include but are not limited to rental and 
maintenance of computer equipment, data entry services not performed by 
committee personnel, and related supplies. If the candidate wishes to 
claim a larger compliance exemption for payroll or overhead 
expenditures, the candidate shall establish allocation percentages for 
each individual who spends all or a portion of his or her time to 
perform duties which are considered necessary to ensure compliance with 
title 2 of the United States Code or chapter 95 of title 26 of the 
United States Code. The candidate shall keep detailed records to 
support the derivation of each percentage. Such records shall indicate 
which duties are considered compliance and the percentage of time each 
person spends on such activity. If the candidate wishes to claim a 
larger compliance exemption for costs associated with computer 
services, the candidates shall establish allocation percentages for 
each computer function that is considered necessary, in whole or in 
part, to ensure compliance within 2 U.S.C. 431 et seq., and 26 U.S.C. 
9001 et seq. The allocation shall be based on a reasonable estimate of 
the costs associated with each computer function, such as the costs for 
data entry services performed by persons other than committee personnel 
and processing time. The candidate shall keep detailed records to 
support such calculations. The records shall indicate which computer 
functions are considered compliance-related and shall reflect which 
costs are associated with each computer function. The Commission's 
Financial Control and Compliance Manual for General Election Candidates 
Receiving Public Funding contains some accepted alternative allocation 
methods for determining the amount of salaries and overhead 
expenditures that may be considered exempt compliance costs.
    (B) Reimbursement from the compliance fund may be made to the 
separate account maintained for federal funds under 11 CFR 9005.2 for 
legal and accounting compliance services disbursements that are 
initially paid from the separate federal funds account. Such 
reimbursement must be made prior to any final repayment determination 
by the Commission pursuant to 11 CFR 9007.2. Any amounts so reimbursed 
to the federal fund account may not subsequently be transferred back to 
the legal and accounting compliance fund.
    (iii) Amounts paid from this account for the purposes permitted by 
paragraphs (a)(2)(i) (A) through (F) and (H) of this section shall not 
be subject to the expenditure limits of 2 U.S.C. 221a(b) and 11 CFR 
110.8. (See also 11 CFR 100.8(b)(15).) When the proceeds of loans made 
in accordance with paragraph (a)(2)(i)(G) of this section are expended 
on qualified campaign expenses, such expenditures shall count against 
the candidate's expenditure limit.
    (iv) Contributions to or funds deposited in the legal and 
accounting compliance fund may not be used to retire debts remaining 
from the Presidential primaries, except that, if after payment of all 
expenses set out in paragraph (a)(2)(i) of this section, there are 
excess campaign funds, such funds may be used for any purpose permitted 
under 2 U.S.C. 439a and 11 CFR Part 113, including payment of primary 
election debts.
    (3) Deposit and disclosure.
    (i) Amounts received pursuant to paragraph (a)(1) of this section 
shall be deposited and maintained in an account separate from that 
described in 11 CFR 9005.2 and shall not be commingled with any money 
paid to the candidate by the Secretary pursuant to 11 CFR 9005.2.
    (ii) The receipts to and disbursements from this account shall be 
reported in a separate report in accordance with 11 CFR 9006.1(b)(2). 
All contributions made to this account shall be recorded in accordance 
with 11 CFR 102.9. Disbursements made from this account shall be 
documented in the same manner provided in 11 CFR 9003.5.
    (b) Contributions to defray qualified campaign expenses--major 
party candidates.
    (1) A major party candidate or his or her authorized committee(s) 
may solicit contributions to defray qualified campaign expenses to the 
extent necessary to make up any deficiency in payments received from 
the Fund due to the application of 11 CFR 9005.2(b).
    (2) Such contributions must either be deposited in a separate 
account or be deposited with federal funds received under 11 CFR 
9005.2. Disbursements from this account shall be made only to defray 
qualified campaign expenses and to defray the cost of soliciting 
contributions to such account. All disbursements from this account 
shall be documented in accordance with 11 CFR 9003.5 and shall be 
reported in accordance with 11 CFR 9006.1.
    (3) A candidate may make transfers to this account from his or her 
legal and accounting compliance fund.
    (4) The contributions received under this section shall be subject 
to the limitations and prohibitions of 11 CFR Parts 110, 114 and 115 
and shall be aggregated with all contributions made by the same persons 
to the candidate's legal and accounting compliance fund under paragraph 
(a) of this section for the purposes of such limitations.
    (5) Any costs incurred for soliciting contributions to this account 
shall not be considered expenditures to the extent that the aggregate 
of such costs does not exceed 20 percent of the expenditure limitation 
under 11 CFR 9003.2(a)(1). These costs shall, however, be reported as 
disbursements in accordance with 11 CFR Part 104 and 11 CFR 9006.1. For 
purposes of this section, a candidate may exclude from the expenditure 
limitation an amount equal to 10% of the payroll (including payroll 
taxes) and overhead expenditures of his or her national campaign 
headquarters and state offices as exempt fundraising costs.
    (6) Any costs incurred for legal and accounting services which are 
provided solely to ensure compliance with 2 U.S.C. 431 et seq. and 26 
U.S.C. 9001 et seq. shall not count against the candidate's expenditure 
limitation. Such costs include the cost of producing, delivering and 
explaining the computerized information and materials provided pursuant 
to 11 CFR 9003.6 and explaining the operation of the computer system's 
software. For purposes of this section, a candidate may exclude from 
the expenditure limitation an amount equal to 10% of the employee 
payroll (including payroll taxes) and overhead expenditures of his or 
her national campaign headquarters and state offices. In addition, a 
candidate may exclude from the expenditure limitation an amount equal 
to 50% of the costs (other than payroll) associated with computer 
services.
    (i) For purposes of this paragraph, overhead costs include, but are 
not limited to, rent, utilities, office equipment, furniture, supplies 
and all telephone charges except for telephone charges related to a 
special use such as voter registration and get out the vote efforts.
    (ii) For purposes of this paragraph, costs associated with computer 
services include, but are not limited to, rental and maintenance of 
computer equipment, data entry services not performed by committee 
personnel, and related supplies.
    (7) If the candidate wishes to claim a larger compliance or 
fundraising exemption under paragraph (b)(5) or (b)(6) of this section 
for employee payroll and overhead expenditures, the candidate shall 
establish allocation percentages for each individual who spends all or 
a portion of his or her time to perform duties which are considered 
compliance or fundraising. The candidate shall keep detailed records to 
support the derivation of each percentage. Such records shall indicate 
which duties are considered compliance or fundraising and the 
percentage of time each person spends on such activity.
    (8) If the candidate wishes to claim a larger compliance exemption 
under paragraph (b)(6) of this section for costs associated with 
computer services, the candidate shall establish allocation percentages 
for each computer function that is considered necessary, in whole or in 
part, to ensure compliance with 2 U.S.C. 431 et seq. and 26 U.S.C. 9001 
et seq. The allocation shall be based on a reasonable estimate of the 
costs associated with each computer function, such as the costs for 
data entry services performed by other than committee personnel and 
processing time. The candidate shall keep detailed records to support 
such calculations. The records shall indicate which computer functions 
are considered compliance-related and shall reflect which costs are 
associated with each computer function.
    (9) The Commission's Financial Control and Compliance Manual for 
General Election Candidates Receiving Public Funding contains some 
accepted alternative allocation methods for determining the amount of 
salaries and overhead expenditures that may be considered exempt 
compliance costs or exempt fundraising costs.
    (c) Contributions to defray qualified campaign expenses--minor and 
new party candidates.
    (1) A minor or new party candidate may solicit contributions to 
defray qualified campaign expenses which exceed the amount received by 
such candidate from the Fund, subject to the limits of 11 CFR 
9003.2(b).
    (2) The contributions received under this section shall be subject 
to the limitations and prohibitions of 11 CFR Parts 110, 114 and 115.
    (3) Such contributions must either be deposited in a separate 
account or be deposited with federal funds received under 11 CFR 
9005.2. Disbursements from this account shall be made only for the 
following purposes:
    (i) To defray qualified campaign expenses;
    (ii) To make repayments under 11 CFR 9007.2;
    (iii) To defray the cost of soliciting contributions to such 
account;
    (iv) To defray the cost of legal and accounting services provided 
solely to ensure compliance with 2 U.S.C. 431 et seq. and 26 U.S.C. 
9001 et seq;
    (v) To defray the cost of producing, delivering and explaining the 
computerized information and materials provided pursuant to 11 CFR 
9003.6 and explaining the operation of the computer system's software.
    (4) All disbursements from this account shall be documented in 
accordance with 11 CFR 9003.5 and shall be reported in accordance with 
11 CFR Part 104 and 9006.1.
    (5) Any costs incurred for soliciting contributions to this account 
shall not be considered expenditures to the extent that the aggregate 
of such costs does not exceed 20 percent of the expenditure limitation 
under 11 CFR 9003.2(a)(1). These costs shall, however, be reported as 
disbursements in accordance with 11 CFR Part 104 and 9006.1. For 
purposes of this section, a candidate may exclude from the expenditure 
limitation an amount equal to 10% of the payroll (including payroll 
taxes) and overhead expenditures of his or her national campaign 
headquarters and state offices as exempt fundraising costs.
    (6) Any costs incurred for legal and accounting services which are 
provided solely to ensure compliance with 2 U.S.C. 431 et seq. and 26 
U.S.C. 9001 et seq. shall not count against the candidate's expenditure 
limitation. For purposes of this section, a candidate may exclude from 
the expenditure limitation an amount equal to 10% of the employee 
payroll (including payroll taxes) and overhead expenditures of his or 
her national campaign headquarters and state offices. In addition, a 
candidate may exclude from the expenditure limitation an amount equal 
to 50% of the costs (other than payroll) associated with computer 
services.
    (i) For purposes of this paragraph, overhead costs include, but are 
not limited to, rent, utilities, office equipment, furniture, supplies 
and all telephone charges except for telephone charges related to a 
special use such as voter registration and get out the vote efforts.
    (ii) For purposes of this paragraph, costs associated with computer 
services include but are not limited to, rental and maintenance of 
computer equipment, data entry services not performed by committee 
personnel, and related supplies.
    (7) If the candidate wishes to claim a larger compliance or 
fundraising exemption under paragraph (c)(6) of this section for 
payroll and overhead expenditures, the candidate shall establish 
allocation percentages for each individual who spends all or a portion 
of his or her time to perform duties which are considered compliance or 
fundraising. The candidate shall keep detailed records to support the 
derivation of each percentage. Such records shall indicate which duties 
are considered compliance or fundraising and the percentage of time 
each person spends on such activity.
    (8) If the candidate wishes to claim a larger compliance exemption 
under paragraph (c)(6) of this section for costs associated with 
computer services, the candidate shall establish allocation percentages 
for each computer function that is considered necessary, in whole or in 
part, to ensure compliance with 2 U.S.C. 431 et seq. and 26 U.S.C. 9001 
et seq. The allocation shall be based on a reasonable estimate of the 
costs associated with each computer function, such as the costs for 
data entry services performed by other than committee personnel and 
processing time. The candidate shall keep detailed records to support 
such calculations. The records shall indicate which computer functions 
are considered compliance-related and shall reflect which costs are 
associated with each computer function.
    (9) The candidate shall keep and maintain a separate record of 
disbursements made to defray exempt legal and accounting costs under 
paragraphs (c)(6) and (7) of this section and shall report such 
disbursements in accordance with 11 CFR Part 104 and 11 CFR 9006.1.
    (10) The Commission's Financial Control and Compliance Manual for 
General Election Candidates Receiving Public Funding contains some 
accepted alternative allocation methods for determining the amount of 
salaries and overhead expenditures that may be considered exempt 
compliance costs or exempt fundraising costs.
    4. Section 9003.5 would be revised to read as follows:


Sec. 9003.5  Documentation of disbursements.

    (a) Burden of proof. Each candidate shall have the burden of 
proving the disbursements made by the candidate or his or her 
authorized committee(s) or persons authorized to make expenditures on 
behalf of the candidate or authorized committee(s) are qualified 
campaign expenses as defined in 11 CFR 9002.11. The candidate and his 
or her authorized committee(s) shall obtain and furnish to the 
Commission on request any evidence regarding qualified campaign 
expenses made by the candidate, his or her authorized committees and 
agents or persons authorized to make expenditures on behalf of the 
candidate or committee(s) as provided in paragraph (b) of this section.
    (b) Documentation required.
    (1) For disbursements in excess of $200 to a payee, the candidate 
shall present a canceled check negotiated by the payee that states the 
purpose of the disbursement and either:
    (i) A receipted bill from the payee that states the purpose of the 
disbursement; or
    (ii) If such a receipt is not available,
    (A) One of the following documents generated by the payee: a bill, 
invoice, or voucher that states the purpose of the disbursement; or
    (B) Where the documents specified in paragraph (b)(1)(ii)(A) of 
this section are not available, a voucher or contemporaneous memorandum 
from the candidate or the committee that states the purpose of the 
disbursement; or
    (iii) Where the supporting documentation required in paragraphs 
(b)(1) (i) or (ii) of this section is not available, the candidate or 
committee may present collateral evidence to document the qualified 
campaign expense. Such collateral evidence may include, but is not 
limited to:
    (A) Evidence demonstrating that the expenditure is part of an 
identifiable program or project which is otherwise sufficiently 
documented such as a disbursement which is one of a number of 
documented disbursements relating to a campaign mailing or to the 
operation of a campaign office; and
    (B) Evidence that the disbursement is covered by a pre-established 
written campaign committee policy, such as a daily travel expense 
policy.
    (2) For all disbursements of $200 or less, the candidate shall 
present:
    (i) A record disclosing the full name and mailing address of the 
payee, and the amount, date and purpose of the disbursement, if made 
from a petty cash fund; or
    (ii) A canceled check negotiated by the payee that states the full 
name and mailing address of the payee, and the amount, date and purpose 
of the disbursement.
    (3) For purposes of this section:
    (i) ``Payee'' means the person who provides the goods or services 
to the candidate or committee in return for the disbursement; except 
that an individual will be considered a payee under this section if he 
or she receives $500 or less advanced for travel and/or subsistence and 
if the individual is the recipient of the goods or services purchased.
    (ii) ``Purpose'' means the full name and mailing address of the 
payee, the date and amount of the disbursement, and a brief description 
of the goods or services purchased.
    (c) Retention of records. The candidate shall retain records with 
respect to each disbursement and receipt, including bank records, 
vouchers, worksheets, receipts, bills and accounts, journals, ledgers, 
fundraising solicitation material, accounting systems documentation, 
and any related materials documenting campaign receipts and 
disbursements, for a period of three years pursuant to 11 CFR 102.9(c), 
and shall present these records to the Commission on request.
    (d) List of capital and other assets.
    (1) Capital assets. The candidate or committee shall maintain a 
list of all capital assets whose purchase price exceeded $2,000 when 
acquired by the campaign. The list shall include a brief description of 
each capital asset, the purchase price, the date it was acquired, the 
method of disposition and the amount received in disposition. For 
purposes of this section, ``capital asset'' shall be defined in 
accordance with 11 CFR 9004.9(d)(1).
    (2) Other assets. The candidate or committee shall maintain a list 
of other assets acquired for use in fundraising or as collateral for 
campaign loans, if the aggregate value of such assets exceeds $5,000. 
The list shall include a brief description of each such asset, the fair 
market value of each asset, the method of disposition and the amount 
received in disposition. The fair market value of other assets shall be 
determined in accordance with 11 CFR 9004.9(d)(2).

PART 9004--ENTITLEMENT OF ELIGIBLE CANDIDATES TO PAYMENTS; USE OF 
PAYMENTS

    5. The authority citation for Part 9004 would continue to read as 
follows:

    Authority: 26 U.S.C. 9004 and 9009(b).

    6. In section 9004.4 paragraph (a) would be revised, paragraph 
(b)(1) would be republished, and paragraph (b)(8) would be added, to 
read as follows:


Sec. 9004.4  Use of payments.

    (a) Qualified campaign expenses. An eligible candidate shall use 
payments received under 11 CFR Part 9005 only for the following 
purposes:
    (1) To defray qualified campaign expenses;
    (2) To repay loans that meet the requirements of 11 CFR 100.7(a)(1) 
or 100.7(b)(11) or to otherwise restore funds (other than contributions 
received pursuant to 11 CFR 9003.3(b) and expended to defray qualified 
campaign expenses) used to defray qualified campaign expenses;
    (3) To restore funds expended in accordance with 11 CFR 9003.4 for 
qualified campaign expenses incurred by the candidate prior to the 
beginning of the expenditure report period.
    (4) Winding down costs. The following costs shall be considered 
qualified campaign expenses:
    (i) Costs associated with the termination of the candidate's 
general election campaign such as complying with the post-election 
requirements of the Act and other necessary administrative costs 
associated with winding down the campaign, including office space 
rental, staff salaries, and office supplies; or
    (ii) Costs incurred by the candidate prior to the end of the 
expenditure report period for which written arrangement or commitment 
was made on or before the close of the expenditure report period.
    (iii) 100% of salary and overhead expenses incurred after the end 
of the expenditure report period may be paid from a legal and 
accounting compliance fund established pursuant to 11 CFR 9003.3, 
provided that these expenses are solely to ensure compliance with 2 
U.S.C. 431 et seq. and 26 U.S.C. 9001 et seq.
    (5) Gifts and monetary bonuses. Gifts and monetary bonuses for 
committee employees, consultants and volunteers in recognition for 
campaign-related activities or services shall be considered qualified 
campaign expenses, provided that the gifts do not exceed $150 total per 
individual, and provided that the total for all gifts and monetary 
bonuses (except bonus arrangements provided for in advance in an 
employment or consulting contract) does not exceed $20,000
    (b) Non-qualified campaign expenses--
    (1) General. The following are examples of disbursements that are 
not qualified campaign expenses.
* * * * *
    (8) Negligent Handling of Public Funds. The cost of items that are 
lost or misplaced due to negligence shall not be considered a qualified 
campaign expense. Factors in making this determination shall include, 
but not be limited to, whether the committee demonstrates that it made 
conscientious efforts to safeguard the missing equipment; the type of 
equipment involved; the number of items that were lost; and the value 
of the lost equipment as a percentage of the total value of the 
equipment leased or owned by the committee.
* * * * *
    7. Section 9004.5 would be revised to read as follows:


Sec. 9004.5  Investment of public funds; other uses resulting in 
income.

    Investment of public funds or any other use of public funds that 
results in income is permissible, provided that an amount equal to all 
net income derived from such a use, less Federal, State and local taxes 
paid on such income, shall be repaid to the Secretary. Any net loss 
from an investment or other use of public funds will be considered a 
non-qualified campaign expense and an amount equal to the amount of 
such loss shall be paid to the United States Treasury as provided under 
11 CFR 9007.2(b)(2)(i).
    8. Section 9004.6 would be revised to read as follows:


Sec. 9004.6  Expenditures for transportation and services made 
available to media personnel; reimbursements.

    (a) General.
    (1) Expenditures by an authorized committee for transportation, 
ground services or facilities (including air travel, ground 
transportation, housing, meals, telephone service, typewriters) made 
available to media personnel, Secret Service personnel or national 
security staff will be considered qualified campaign expenses, and, 
except for costs relating to Secret Service personnel or national 
security staff, will be subject to the overall expenditure limitations 
of 11 CFR 9003.2(a)(1) and (b)(1).
    (2) Subject to the limitations in paragraphs (b) and (c) of this 
section, committees may seek reimbursement for these expenses and may 
deduct any amounts received as reimbursements from the amount of 
expenditures subject to the overall expenditure limitations of 11 CFR 
9003.2(a)(1) and (b)(1). Expenses for which the committee receives no 
reimbursement will be considered qualified campaign expenses, and, with 
the exception of those expenses relating to Secret Service personnel 
and national security staff, will be subject to the overall expenditure 
limitation.
    (b) Reimbursement limits.
    (1) The committee may seek reimbursement of the expenses described 
in paragraph (a)(1) of this section from the media representatives to 
whom those services were provided. The amount sought shall not exceed 
the media representative's pro rata share, or a reasonable estimate of 
the media representative's pro rata share, of the actual cost of the 
transportation and services mad available by more than 10%. Any 
reimbursement received in excess of 110% of the actual pro rata cost of 
the transportation and services made available shall be disposed of in 
accordance with paragraph (d) of this section. For the purposes of this 
section:
    (i) A media representative's pro rata share shall be calculated by 
dividing the total actual cost of the transportation and services by 
the total number of individuals to whom such transportation and 
services are made available. For purposes of this calculation, the 
total number of individuals shall include committee staff, media 
personnel, Secret Service personnel, national security staff and any 
other individuals to whom such transportation and services are made 
available; and
    (ii) ``Administrative costs'' shall include all costs incurred by 
the committee for making travel arrangements and for seeking 
reimbursement, whether performed by committee staff or independent 
contractors.
    (c) Deduction of reimbursements from expenditures subject to the 
overall expenditure limitation. The committee may deduct from the 
amount of expenditures subject to the overall expenditure limitation:
    (1) The amount of reimbursements received in payment for the 
transportation and services described in paragraph (a) of this section, 
up to the actual cost of transportation and services provided; and
    (2) An amount of reimbursements received representing the 
administrative costs incurred by the committee in providing these 
services and seeking reimbursement for them, equal to:
    (i) Three percent of the actual cost of transportation and services 
provided under this section; or
    (ii) An amount in excess of 3% representing the administrative 
costs actually incurred by the committee, provided that the committee 
is able to document that it incurred these higher administrative costs.
    (d) Disposal of excess reimbursements. If the committee receives 
reimbursements in excess of the amount deductible under paragraph (c) 
of this section, it shall dispose of the excess amount in the following 
manner:
    (1) Any reimbursement received in excess of 110% of the actual pro 
rata cost of the transportation and services made available to a media 
representative shall be returned to the media representative.
    (2) Any amount in excess of the amount deductible under paragraph 
(c) of this section that is not required to be returned to the media 
representative under paragraph (d)(1) shall be repaid to the Treasury.
    (e) Reporting. The total amount paid by an authorized committee for 
the cost of transportation or for ground services and facilities shall 
be reported as an expenditure in accordance with 11 CFR 104.3(b)(2)(i). 
Any reimbursement received by such committee for transportation or 
ground services and facilities shall be reported in accordance with 11 
CFR 104.3(a)(3)(ix).
    9. Section 9004.7 would be revised to read as follows:


Sec. 9004.7  Allocation of travel expenditures.

    (a) Notwithstanding the provisions of 11 CFR 106.3, expenditures 
for travel relating to a Presidential or Vice Presidential candidate's 
campaign by any individual, including a candidate, shall, pursuant to 
the provisions of paragraph (b) of this section, be qualified campaign 
expenses and be reported by the candidate's authorized committee(s) as 
expenditures.
    (b)(1) For a trip which is entirely campaign-related, the total 
cost of the trip shall be a qualified campaign expense and a reportable 
expenditure.
    (2) For a trip which includes campaign-related and non-campaign 
related stops, that portion of the cost of the trip allocable to 
campaign activity shall be a qualified campaign expense and a 
reportable expenditure. Such portion shall be determined by calculating 
what the trip would have cost from the point of origin of the trip to 
the first campaign-related stop and from the stop through each 
subsequent campaign-related stop to the point of origin. If any 
campaign activity, other than incidental contacts, is conducted at a 
stop, that stop shall be considered campaign-related. Campaign activity 
includes soliciting, making, or accepting contributions, and expressly 
advocating the election or defeat of any candidate. Other factors, 
including the setting, timing and statements or expressions of the 
purpose of an event, the substance of the remarks or speech made, and 
the audience, will also be considered in determining whether a stop is 
campaign-related.
    (3) For each trip, an itinerary shall be prepared and such 
itinerary shall be made available for Commission inspection.
    (4) For trips by government conveyance or by charter, a list of all 
passengers on such trip, along with a designation of which passengers 
are and which are not campaign-related, shall be made available for 
Commission inspection.
    (5)(i) If any individual, including, candidate, uses a government 
airplane for campaign-related travel, the candidate's authorized 
committee shall pay the appropriate government entity an amount equal 
to:
    (A) The lowest unrestricted and non-discounted first class 
commercial air fare available for the time traveled, in the case of 
travel to a city served by a regularly scheduled commercial airline 
service; or
    (B) The lowest unrestricted and non-discounted coach commercial air 
fare available for the time traveled, in the case of travel to a city 
served by regularly scheduled coach airline service, but not regularly 
scheduled first class airline service; or
    (C) The commercial charter rate for a comparable airplane (in terms 
of size, model and make), in the case of travel to a city not served by 
a regularly scheduled commercial airline service.
    (ii) If a government airplane is flown to a campaign-related stop 
where it will pick up passengers, or from a campaign-related stop where 
it left off passengers, the candidate's authorized committee shall pay 
the appropriate government entity an amount equal to the amount 
required under paragraph (b)(5)(i) of this section for one passenger 
plus costs for fuel and crew.
    (iii) If any individual, including a candidate, uses a government 
conveyance, other than an airplane, for campaign-related travel, the 
candidate's authorized committee shall pay the appropriate government 
entity an amount equal to the commercial rental rate for a comparable 
conveyance, in terms of size, model and make.
    (iv) If any individual, including a candidate, uses accommodations, 
including lodging and meeting rooms, during campaign-related travel, 
and the accommodations are paid for by a government entity, the 
candidate's authorized committee shall pay the appropriate government 
entity an amount equal to the usual and normal charge for the 
accommodations, and shall maintain documentation supporting the amount 
paid.
    (v) For travel by airplane, the committee shall maintain 
documentation of the lowest unrestricted nondiscounted air fare 
available for the time traveled, including the airline or travel 
service providing that fare. For travel by other conveyances, the 
committee shall maintain documentation of the commercial rental rate 
for a comparable conveyance, including the provider of the conveyance 
and the size, model and make of the conveyance. For travel under 
paragraph (b)(5)(ii) of this section, the committee shall maintain 
documentation of fuel and crew costs.
    (6) Travel expenses of a candidate's spouse and family when 
accompanying the candidate on campaign-related travel may be treated as 
qualified campaign expenses and reportable expenditures. If the spouse 
or family members conduct campaign-related activities, their travel 
expenses shall be qualified campaign expenses and reportable 
expenditures.
    (7) If any individual, including a candidate, incurs expenses for 
campaign-related travel, other than by use of government conveyance or 
accommodations, an amount equal to that portion of the actual cost of 
the conveyance or accommodations which is allocable to all passengers, 
including the candidate, who are traveling for campaign purposes shall 
be a qualified campaign expense and shall be reported by the committee 
as an expenditure.
    (i) If the trip is by charter, the actual cost for each passenger 
shall be determined by dividing the total operating cost for the 
charter by the total number of passengers transported. The amount which 
is a qualified campaign expense and a reportable expenditure shall be 
calculated in accordance with the formula set forth at 11 CFR 
9004.7(b)(2) on the basis of the actual cost per passenger multiplied 
by the number of passengers traveling for campaign purposes.
    (ii) If the trip is by non-charter commercial transportation, the 
actual cost shall be calculated in accordance with the formula set 
forth at 11 CFR 9004.7(b)(2) on the basis of the commercial fare. Such 
actual cost shall be a qualified campaign expense and a reportable 
expenditure.
    (8) Travel on corporate airplanes and other corporate conveyances 
is governed by 11 CFR 114.9(e).

PART 9006--REPORTS AND RECORDKEEPING

    10. The authority citation for Part 9006 would continue to read as 
follows:

    Authority: 2 U.S.C. 434 and 26 U.S.C. 9006(b).

    11. Section 9006.3 would be added to read as follows:


Sec. 9006.3  Alphabetized schedules.

    If the authorized committee(s) of a candidate file a schedule of 
itemized receipts, disbursements, or debts and obligations pursuant to 
11 CFR 104.3 that was generated directly or indirectly from 
computerized files or records, the schedule shall list in alphabetical 
order the sources of the receipts, the payees or the creditors, as 
appropriate. Such schedule shall list all individuals, including 
contributors, payees, and creditors in alphabetical order by surname.

PART 9007--EXAMINATIONS AND AUDITS; REPAYMENTS

    12. The authority citation for Part 9007 would continue to read as 
follows:

    Authority: 26 U.S.C. 9007 and 9009(b).

    13. In section 9007.1, new paragraph (f) would be added, to read as 
follows:


Sec. 9007.1  Audits.

* * * * *
    (f)(1) Sampling. In conducting an audit of contributions pursuant 
to this section, the Commission may utilize generally accepted sampling 
techniques to quantify, in whole or in part, the dollar value of 
related audit findings. A projection of the total amount of violations 
based on apparent violations identified in such a sample may become the 
basis, in whole or in part, of any audit finding.
    (2) A committee in responding to a sample-based finding concerning 
excessive or prohibited contributions shall respond only to the 
specific sample items used to make the projection. If the committee 
demonstrates that any errors found among the sample items were not 
excessive or prohibited contributions; were timely refunded, 
reattributed or redesignated pursuant to 11 CFR 103.3(b)(1), (2) and 
(3); or for some other reason were not errors; the Commission shall 
make a new projection based on the reduced number of errors in the 
sample.
    (3) The committee shall submit a check to the United States 
Treasury for the total amount of any contributions not refunded, 
reattributed or redesignated in a timely manner in accordance with 11 
CFR 103.3(b)(1), (2) or (3).
    14. In section 9007.2, the introductory language of paragraph (b) 
would be republished, and paragraph (b)(4) would be revised, to read as 
follows:


Sec. 9007.2  Repayments.

* * * * *
    (b) Bases for repayment. The Commission may determine that an 
eligible candidate of a political party who has received payments from 
the fund must repay the United States Treasury under any of the 
circumstances described below.
* * * * *
    (4) Income on investment or other use of payments from the Fund. If 
the Commission determines that a candidate received any income as a 
result of an investment or other use of payments from the fund pursuant 
to 11 CFR 9004.5, it shall so notify the candidate, and such candidate 
shall pay to the United States Treasury an amount equal to the amount 
determined to be income, less any Federal, State or local taxes on such 
income.
* * * * *
    15. Section 9007.7 would be added to read as follows:


Sec. 9007.7  Administrative record.

    (a) The Commission's administrative record for final determinations 
under 11 CFR 9004.9, 9005.1 and 9007.2 may include the following:
    (1) Candidate and committee agreements submitted pursuant to 11 CFR 
9003.1;
    (2) Candidate and committee certifications submitted pursuant to 11 
CFR 9003.2;
    (3) Statements of Net Outstanding Qualified Campaign Expenses;
    (4) Pertinent portions of Interim and Final Audit Reports, 
including attachments and supporting evidence;
    (5) Pertinent portions of Initial and Final Repayment 
Determinations, including attachments and supporting evidence;
    (6) All certifications, notifications, and determinations made by 
the Commission pursuant to 11 CFR 9004.9 and 9005.1;
    (7) Other written correspondence or materials sent to, or received 
from, the committee, witnesses, state or federal agencies or other 
persons, including committee requests for extensions of time, pertinent 
portions of committee responses to the Initial and Final Audit Reports, 
and documentary or other evidence produced in response to a subpoena 
duces tecum;
    (8) The transcript or audio tape of any deposition taken;
    (9) The transcript or audio tape of any oral presentation conducted 
pursuant to 11 CFR 9007.2;
    (10) The certification(s) of the Commission's decision(s) regarding 
candidate certifications, eligibility determinations, and repayment 
determinations;
    (11) All additional documents and evidence identified or filed by 
the Commission as part of the administrative record relied on in 
reaching its decision(s); and
    (12) Statements of Reasons adopted by the Commission.
    (b) The Commission's administrative record for determinations under 
11 CFR 11 CFR 9004.9, 9005.1 and 9007.2 does not include any materials 
not specifically enumerated in paragraph (a) of this section, such as:
    (1) Documents and materials in the files of individual 
Commissioners or employees of the Commission that do not constitute a 
basis for the Commission's decisions because they were not circulated 
to the Commission and were not referenced in documents that were 
circulated to the Commission;
    (2) Transcripts or audio tapes of Commission discussions that are 
pre-decisional, but such transcripts or tapes may be made available 
under 11 CFR Parts 4 or 5; or
    (3) Documents properly subject to privileges such as an attorney-
client privilege, or items constituting attorney work product.
    (c) The administrative record identified in paragraph (a) of this 
section is the exclusive record for the Commission's determinations 
under 11 CFR 9004.9, 9005.1 and 9007.2

PART 9033--ELIGIBILITY FOR PAYMENTS

    16. The authority citation for Part 9003 would be revised to read 
as follows:

    Authority: 26 U.S.C. 9003(e), 9033 and 9039(b).

    17. In section 9033.1, the introductory language of paragraph (b) 
would be republished, paragraph (b)(5) would be revised, and new 
paragraph (b)(12) would be added, to read as follows:


Sec. 9033.1  Candidate and committee agreements.

* * * * *
    (b) Conditions. The candidate shall agree that:
* * * * *
    (5) The candidate and the candidate's authorized committee(s) will 
keep and furnish to the Commission all documentation relating to 
disbursements and receipts (including all books and book records for 
all accounts), all documentation required by this section (including 
those required to be maintained under 11 CFR 9033.11), and other 
information that the Commission may request. If the candidate or the 
candidate's authorized committee maintains or uses computerized 
information containing any of the categories of data listed in 11 CFR 
9033.12(a), the committee will provide computerized magnetic media, 
such as magnetic tapes or magnetic diskettes, containing the 
computerized information at the times specified in 11 CFR 9038.1(b)(1) 
that meet the requirements of 11 CFR 9033.12(b). Upon request, 
documentation explaining the computer system's software capabilities 
shall be provided, and such personnel as are necessary to explain the 
operation of the computer system's software and the computerized 
information prepared or maintained by the committee shall be made 
available.
* * * * *
    (12) Agree that any television commercial prepared or distributed 
by the candidate will be prepared in a manner which ensures that the 
commercial contains or is accompanied by closed captioning of the oral 
content of the commercial to be broadcast in line 21 of the vertical 
blanking interval, or is capable of being viewed by deaf and hearing 
impaired individuals via any comparable successor technology to line 21 
of the vertical blanking interval.


Sec. 9033.4  [Amended]

    18. In section 9033.4, paragraph (b) would be removed, and 
paragraph (c) would be redesignated as paragraph (b).
    19. Section 9033.11 would be revised to read as follows:


Sec. 9033.11  Documentation of disbursements.

    (a) Burden of proof. Each candidate shall have the burden of 
proving that disbursements made by the candidate or his or her 
authorized committee(s) or persons authorized to make expenditures on 
behalf of the candidate or authorized committee(s) are qualified 
campaign expenses as defined in 11 CFR 9032.9. The candidate and his or 
her authorized committee(s) shall obtain and furnish to the Commission 
on request any evidence regarding qualified campaign expenses made by 
the candidate, his or her authorized committees and agents or persons 
authorized to make expenditures on behalf of the candidate or 
committee(s) as provided in paragraph (b) of this section.
    (b) Documentation required.
    (1) For disbursements in excess of $200 to a payee, the candidate 
shall present a canceled check negotiated by the payee that states the 
purpose of the disbursement and either:
    (i) A receipted bill from the payee that states the purpose of the 
disbursement; or
    (ii) If a receipt is not available,
    (A) One of the following documents generated by the payee: A bill, 
invoice, or voucher that states the purpose of the disbursement; or
    (B) Where the documents specified in paragraph (b)(1)(ii)(A) of 
this section are not available, a voucher or contemporaneous memorandum 
from the candidate or the committee that states the purpose of the 
disbursement; or
    (iii) Where the supporting documentation required in paragraphs 
(b)(1)(i) or (ii) of this section is not available, the candidate or 
committee may present collateral evidence to document the qualified 
campaign expense. Such collateral evidence may include, but is not 
limited to:
    (A) Evidence demonstrating that the expenditure is part of an 
identifiable program or project which is otherwise sufficiently 
documented such as a disbursement which is one of a number of 
documented disbursements relating to a campaign mailing or to the 
operation of a campaign office;
    (B) Evidence that the disbursement is covered by a pre-established 
written campaign committee policy, such as a daily travel expense 
policy.
    (2) For all disbursements of $200 or less, the candidate shall 
present:
    (i) A record disclosing the full name and mailing address of the 
payee, and the amount, date and purpose of the disbursement, if made 
from a petty cash fund; or
    (ii) A canceled check negotiated by the payee that states the 
identification of the payee, and the amount, date and purpose of the 
disbursement.
    (3) For purposes of this section,
    (i) ``Payee'' means the person who provides the goods or services 
to the candidate or committee in return for the disbursement; except 
that an individual will be considered a payee under this section if he 
or she receives $500 or less advanced for travel and/or subsistence and 
if he or she is the recipient of the goods or services purchased.
    (ii) ``Purpose'' means the full name and mailing address of the 
payee, the date and amount of the disbursement, and a description of 
the goods or services purchased.
    (c) Retention of records. The candidate shall retain records, with 
respect to each disbursement and receipt, including bank records, 
vouchers, worksheets, receipts, bills and accounts, journals, ledgers, 
fundraising solicitation material, accounting systems documentation, 
matching fund submissions, and any related materials documenting 
campaign receipts and disbursements, for a period of three years 
pursuant to 11 CFR 102.9(c), and shall present these records to the 
Commission on request.
    (d) List of capital and other assets.
    (1) Capital assets. The candidate or committee shall maintain a 
list of all capital assets whose purchase price exceeded $2000 when 
acquired by the campaign. The list shall include a brief description of 
each capital asset, the purchase price, the date it was acquired, the 
method of disposition and the amount received in disposition. For 
purposes of this section, ``capital asset'' shall be defined in 
accordance with 11 CFR 9034.5(c)(1).
    (2) Other assets. The candidate or committee shall maintain a list 
of other assets acquired for use in fundraising or as collateral for 
campaign loans, if the aggregate value of such assets exceeds $5000. 
The list shall include a brief description of each such asset, the fair 
market value of each asset, the method of disposition and the amount 
received in disposition. The fair market value of other assets shall be 
determined in accordance with 11 CFR 9034.5(c)(2).

PART 9034--ENTITLEMENTS

    20. The authority citation for Part 9034 would continue to read as 
follows:

    Authority: 26 U.S.C. 9034 and 9039(b).

    21. In section 9034.4, paragraph (a) would be revised, paragraph 
(b)(1) would be republished, paragraph (b)(3) would be revised, and 
paragraph (b)(8) would be added, to read as follows:


Sec. 9034.4  Use of contributions and matching payments.

    (a) Qualified campaign expenses--
    (1) General. Except as provided in paragraph (b)(3) of this 
section, all contributions received by an individual from the date he 
or she becomes a candidate and all matching payments received by the 
candidate shall be used only to defray qualified campaign expenses or 
to repay loans or otherwise restore funds (other than contributions 
which were received and expended to defray qualified campaign 
expenses), which were used to defray qualified campaign expenses.
    (2) Testing the waters. Even though incurred prior to the date an 
individual becomes a candidate, payments made in accordance with 11 CFR 
100.8(b)(1) for the purpose of determining whether an individual should 
become a candidate shall be considered qualified campaign expenses if 
the individual subsequently becomes a candidate and shall count against 
that candidate's limits under 2 U.S.C. 441a(b).
    (3) Winding down costs.
    (i) Costs associated with the termination of political activity, 
such as the costs of complying with the post election requirements of 
the Act and other necessary administrative costs associated with 
winding down the campaign, including office space rental, staff 
salaries, and office supplies shall be considered qualified campaign 
expenses. A candidate may receive and use matching funds for these 
purposes either after he or she has notified the Commission in writing 
of his or her withdrawal from the campaign for nomination or after the 
date of the party's nominating convention, if he or she has not 
withdrawn before the convention.
    (ii) If the candidate has become ineligible due to the operation of 
11 CFR 9033.5(b),he or she may only receive matching funds to defray 
costs incurred before the candidate's date of ineligibility, for goods 
and services to be received before the date of ineligibility and for 
which written arrangement or commitment was made on or before the 
candidate's date of ineligibility, until the candidate is eligible to 
receive winding down costs under paragraph (a)(3)(i) of this section.
    (iii) For purposes of the expenditure limitations set forth in 11 
CFR 9035.1, 100% of salary, overhead and computer expenses incurred 
after a candidate's date of ineligibility may be treated as exempt 
legal and accounting compliance expenses beginning with the first full 
reporting period after the candidate's date of ineligibility. For 
candidates who continue to campaign or re-establish eligibility, this 
paragraph shall not apply to expenses incurred during the period 
between the date of ineligibility and the date on which the candidate 
either re-establishes eligibility or ceases to continue to campaign.
    (4) Taxes. Federal income taxes paid by the committee on non-exempt 
function income, such as interest, dividends and sale of property, 
shall be considered qualified campaign expenses. These expenses shall 
not, however, count against the state or overall expenditure limits of 
11 CFR 9035.1(a).
    (5) Gifts and monetary bonuses. Gifts and monetary bonuses for 
committee employees, consultants and volunteers in recognition for 
campaign-related activities or services shall be considered qualified 
campaign expenses, provided that the gifts do not exceed $150 total per 
individual, and provided that the total for all gifts and monetary 
bonuses (except bonus arrangements provided for in advance in an 
employment or consulting contract) does not exceed $20,000.
    (b) Non-qualified campaign expenses--
    (1) General. The following are examples of disbursements that are 
not qualified campaign expenses.
* * * * *
    (3) Post-ineligibility expenditures. Any expenses incurred after a 
candidate's date of ineligibility, as determined under 11 CFR 9033.5, 
are not qualified campaign expenses except to the extent permitted 
under 11 CFR 9034.4(a)(3). Any expenses incurred before the candidate's 
date of ineligibility for goods and services to be received after the 
candidate's date of ineligibility are not qualified campaign expenses. 
In addition, any expenses incurred before the candidate's date of 
ineligibility for goods and services to be received after the 
candidate's date of ineligibility, or for property, services, or 
facilities used to benefit the candidate's general election campaign, 
are not qualified campaign expenses. For purposes of this paragraph, it 
is presumed that capital assets delivered within 60 days of the first 
day of the candidate's party's national nominating convention are 
general election assets; and that a local campaign office that remains 
open more than 30 days after a state's primary election or the close of 
any other nomination process in that state is operating in support of 
the general election campaign.
* * * * *
    (8) Negligent Handling of Public Funds. The cost of items that are 
lost or misplaced due to negligence shall not be considered a qualified 
campaign expense. Factors in making this determination shall include, 
but not be limited to, whether the committee demonstrates that it made 
conscientious efforts to safeguard the missing equipment; the type of 
equipment involved; the number of items that were lost; and the value 
of the lost equipment as a percentage of the total value of the 
equipment leased or owned by the committee.
* * * * *
    22. Section 9034.5 would be amended by revising paragraphs (b), 
(c)(1), and (f) to read as follows:


Sec. 9034.5  Net outstanding campaign obligations.

* * * * *
    (b) Liabilities.
    (1) The amount submitted as the total of outstanding campaign 
obligations under paragraph (a)(1) of this section shall not include 
any accounts payable for nonqualified campaign expenses nor any amounts 
determined or anticipated to be required a repayment under 11 CFR part 
9038 or any amounts paid to secure a surety bond under 11 CFR 9038.5.
    (2) The amount submitted as estimated necessary winding down costs 
under paragraph (a)(1) of this section shall be broken down by expenses 
category and quarterly or monthly time period. This breakdown shall 
include estimated costs for office space rental, staff salaries, office 
supplies, equipment rental, telephone expenses, postage and other 
mailing costs, printing and storage. The breakdown shall estimate the 
costs that will be incurred in each category from the time the 
statement is submitted until the expected termination of the 
committee's political activity.
    (c)(1) Capital assets, For purposes of this section, the term 
capital asset means any property used in the operation of the campaign 
whose purchase price exceeded $2000 when acquired by the committee. 
Property that must be valued as capital assets under this section 
includes, but is not limited to, office equipment, furniture, vehicles 
and fixtures acquired for use in the operation of the candidate's 
campaign, but does not include property defined as ``other assets'' 
under 11 CFR 9034.5(c)(2). A list of all capital assets shall be 
maintained by the Committee in accordance with 11 CFR 9033.11(d). The 
fair market value of capital assets may be considered to be the total 
original cost of such items when acquired less than 40%, to account for 
depreciation, except that items acquired after the date of 
ineligibility must be valued at their fair market value on the date 
acquired. If the candidate wishes to claim a higher depreciation 
percentage for an item, he or she must list that capital asset on the 
statement separately and demonstrate, through documentation, the fair 
market value of each such asset. The Commission may disallow all or 
some portion of the 40% depreciation if the asset was obtained by the 
primary committee for use in the general election, or falls within a 
presumption stated in 11 CFR 9034.4(b)(3).
* * * * *
    (f)(1) The candidate shall submit a revised statement of net 
outstanding campaign obligations with each submission for matching fund 
payments filed after the candidate's date of ineligibility. the revised 
statement shall reflect the financial status of the campaign as of the 
close of business on the last business day preceding the date of 
submission for matching funds. The revised statement shall also contain 
a brief explanation of each change in the committee's assets and 
obligations from the previous statement.
    (2) A candidate who makes a submission described in paragraph 
(f)(1) of this section shall also submit an additional revised 
statement of net outstanding campaign obligations. This additional 
statement shall be due on a date to be determined and published by the 
Commission, which will be before the next regularly scheduled payment 
date. This statement shall reflect the financial status of the campaign 
as of the close of business three business days before the due date of 
the statement. The revised statement shall also contain a brief 
explanation of each change in the committee's assets and obligations 
from the previous statement.
    (3) After a candidate's date of ineligibility, if the candidate 
does not receive the entire amount of matching funds on a regularly 
scheduled payment date due to a shortfall in the matching payment 
account, the candidate shall also submit a revised statement of net 
outstanding campaign obligations. The revised statement shall be filed 
on a date to be determined and published by the Commission, which will 
be before the next regularly scheduled payment date.
    23. Section 9034.6 would be revised to read as follows:


Sec. 9034.6  Expenditures for transportation and services made 
available to media personnel; Reimbursements.

    (a) General.
    (1) Expenditures by an authorized committee for transportation, 
ground services or facilities (including air travel, ground 
transportation, housing, meals, telephone service, typewriters) made 
available to media personnel, Secret Service personnel or national 
security staff will be considered qualified campaign expenses, and, 
except for costs relating to Secret Service personnel or national 
security staff, will be subject to the overall expenditure limitation 
of 11 CFR 9035.1(a).
    (2) Subject to the limitations in paragraphs (b) and (c) of this 
section, committees may seek reimbursement for these expenses and may 
deduct any amounts received as reimbursements from the amount of 
expenditures subject to the overall expenditure limitation of 11 CFR 
9035.1(a). Expenses for which the committee receives no reimbursement 
will be considered qualified campaign expenses, and, with the exception 
of those expenses relating to Secret Service personnel and national 
security staff, will be subject to the overall expenditure limitation.
    (b) Reimbursement limits.
    (1) The committee may seek reimbursement of the expenses described 
in paragraph (a)(1) of this section from the media representatives to 
whom those services were provided. The amount sought shall not exceed 
the media representative's pro rata share, or a reasonable estimate of 
the media representative's pro rata share, of the actual cost of the 
transportation and services made available by more than 10%. Any 
reimbursement received in excess of 110% of the actual pro rata cost of 
the transportation and services made available shall be disposed of in 
accordance with paragraph (d) of this section. For the purposes of this 
section:
    (i) A media representative's pro rata share shall be calculated by 
dividing the total actual cost of the transportation and services by 
the total number of individuals to whom such transportation and 
services are made available. For purposes of this calculation, the 
total number of individuals shall include committee staff, media 
personnel, Secret Service personnel, national security staff and any 
other individuals to whom such transportation and services are made 
available; and
    (ii) ``Administrative costs'' shall include all costs incurred by 
the committee for making travel arrangements and for seeking 
reimbursement, whether performed by committee staff or independent 
contractors.
    (c) Deduction of reimbursements from expenditures subject to the 
overall expenditure limitation. The committee may deduct from the 
amount of expenditures subject to the overall expenditure limitation of 
11 CFR 9035.1(a):
    (1) The amount of reimbursements received in payment for the 
transportation and services described in paragraph (a) of this section, 
up to the actual cost of transportation and services provided; and
    (2) An amount of reimbursements received representing the 
administrative costs incurred by the committee in providing these 
services and seeking reimbursement for them, equal to:
    (i) Three percent of the actual cost of transportation and services 
provided under this section; or
    (ii) An amount in excess of 3% representing the administrative 
costs actually incurred by the committee, provided that the committee 
is able to document that it incurred these higher administrative costs.
    (d) Disposal of excess reimbursements. If the committee receives 
reimbursements in excess of the amount deductible under paragraph (c) 
of this section, it shall dispose of the excess amount in the following 
manner:
    (1) Any reimbursement received in excess of 110% of the actual pro 
rata cost of the transportation and services made available to a media 
representative shall be returned to the media representative.
    (2) Any amount in excess of the amount deductible under paragraph 
(c) of this section that is not required to be returned to the media 
representative under paragraph (d)(1) shall be repaid to the Treasury.
    (e) Reporting. The total amount paid by an authorized committee for 
the cost of transportation or for ground services and facilities shall 
be reported as an expenditure in accordance with 11 CFR 104.3(b)(2)(i). 
Any reimbursement received by such committee for transportation or 
ground services and facilities shall be reported in accordance with 11 
CFR 104.3(a)(3)(ix).
    24. Section 9034.7 would be revised to read as follows:


Sec. 9034.7  Allocation of Travel Expenditures.

    (a) Notwithstanding the provisions of 11 CFR 106.3, expenditures 
for travel relating to the office of President by any individual, 
including a candidate, shall, pursuant to the provisions of paragraph 
(b) of this section, be qualified campaign expenses and be reported by 
the candidate's authorized committee(s) as expenditures.
    (b) (1) For a trip which is entirely campaign-related, the total 
cost of the trip shall be a qualified campaign expense and a reportable 
expenditure.
    (2) For a trip which includes campaign-related and non-campaign 
related stops, that portion of the cost of the trip allocable to 
campaign activity shall be a qualified campaign expense and a 
reportable expenditure. Such portion shall be determined by calculating 
what the trip would have cost from the point of origin of the trip to 
the first campaign-related stop and from that stop through each 
subsequent campaign-related stop, back to the point of origin. If any 
campaign activity, other than incidental contacts, is conducted at a 
stop, that stop shall be considered campaign-related. Campaign activity 
includes soliciting, making, or accepting contributions, and expressly 
advocating the election or defeat of any candidate. Other factors, 
including the setting, timing and statements or expressions of the 
purpose of an event, the substance of the remarks or speech made, and 
the audience, will also be considered in determining whether a stop is 
campaign-related.
    (3) For each trip, an itinerary shall be prepared and such 
itinerary shall be made available for Commission inspection.
    (4) For trips by government conveyance or by charter, a list of all 
passengers on such trip, along with a designation of which passengers 
are and which are not campaign-related, shall be made available for 
Commission inspection.
    (5) (i) If any individual, including a candidate, uses a government 
airplane for campaign-related travel, the candidate's authorized 
committee shall pay the appropriate government entity an amount equal 
to:
    (A) The lowest unrestricted and non-discounted first class 
commercial air fare available for the time traveled, in the case of 
travel to a city served by a regularly scheduled commercial airline 
service; or
    (B) The lowest unrestricted and non-discounted coach commercial air 
fare available for the time traveled, in the case of travel to a city 
served by regularly scheduled coach airline service, but not regularly 
scheduled first class airline service; or
    (C) The commercial charter rate for a comparable airplane (in terms 
of size, model and make), in the case of travel to a city not served by 
a regularly scheduled commercial airline service.
    (ii) If a government airplane is flown to a campaign-related stop 
where it will pick up passengers, or from a campaign-related stop where 
it left off passengers, the candidates's authorized committee shall pay 
the appropriate government entity an amount equal to the amount 
required under paragraph (b)(5)(i) of this section for one passenger 
plus costs for fuel and crew.
    (iii) If any individual, including a candidate, uses a government 
conveyance, other than an airplane, for campaign-related travel, the 
candidate's authorized committee shall pay the appropriate government 
entity an amount equal to the commercial rental rate for a comparable 
conveyance, in terms of size, model and make.
    (iv) If any individual, including a candidate, uses accommodations, 
including lodging and meeting rooms, during campaign-related travel, 
and the accommodations are paid for by a government entity, the 
candidate's authorized committee shall pay the appropriate government 
entity an amount equal to the usual and normal charge for the 
accommodations, and shall maintain documentation supporting the amount 
paid.
    (v) For travel by airplane, the committee shall maintain 
documentation for the lowest unrestricted nondiscounted air fare 
available for the time traveled, including the airline or travel 
service providing that fare. For travel by other conveyances, the 
committee shall maintain documentation of the commercial rental rate 
for a comparable conveyance, including the provider of the conveyance 
and the size, model and make of the conveyance. For travel under 
paragraph (b)(5)(ii) of this section, the committee shall maintain 
documentation of fuel and crew costs.
    (6) Travel expenses of a candidate's spouse and family when 
accompanying the candidate on campaign-related travel may be treated as 
qualified campaign expenses and reportable expenditures. If the spouse 
or family members conduct campaign-related activities, their travel 
expenses will be treated as qualified campaign expenses and reportable 
expenditures.
    (7) If any individual, including a candidate, incurs expenses for 
campaign-related travel, other than by use of government conveyance or 
accommodations, an amount equal to that portion of the actual cost of 
the conveyance or accommodations which is allocable to all passengers, 
including the candidate, who are traveling for campaign purposes will 
be a qualified campaign expense and shall be reported by the committee 
as an expenditure.
    (i) If the trip is by charter, the actual cost for each passenger 
shall be determined by dividing the total operating cost for the 
charter by the total number of passengers transported. The amount which 
is a qualified campaign expense and a reportable expenditure shall be 
calculated in accordance with the formula set forth at 11 CFR 
9034.7(b)(2) on the basis of the actual cost per passenger multiplied 
by the number of passengers traveling for campaign purposes.
    (ii) If the trip is by non-charter commercial transportation, the 
actual cost shall be calculated in accordance with the formula set 
forth at 11 CFR 9034.7(b)(2) on the basis of the commercial fare. Such 
actual cost shall be a qualified campaign expense and a reportable 
expenditure.
    (8) Travel on corporate airplanes and other corporate conveyances 
is governed by 11 CFR 114.9(e).

PART 9037--PAYMENTS AND REPORTING

    25. The authority citation for Part 9037 would continue to read as 
follows:

    Authority: 26 U.S.C. 9037 and 9039(b).

    Section 9037.4 would be added to read as follows:


Sec. 9037.4  Alphabetized schedules.

    If the authorized committee(s) of a candidate file a schedule of 
itemized receipts, disbursements or debts and obligations pursuant to 
11 CFR 104.3 that was generated directly or indirectly from 
computerized files or records, the schedule shall list in alphabetical 
order the sources of he receipts, the payees, or the creditors, as 
appropriate. Such schedule shall list all individuals, including 
contributors, payees and creditors, in alphabetical order by surname.

PART 9038--EXAMINATIONS AND AUDITS

    27. The authority citation for part 9038 would continue to read as 
follows:

    Authority: 26 U.S.C. 9038 and 9039(b).

    28. In section 9038.1, new paragraph (f) would be added, to read as 
follows:


Sec. 9038.1  Audit.

* * * * *
    (f)(1) Sampling. In conducting an audit of contributions pursuant 
to this section, the Commission may utilize generally accepted sampling 
techniques to quantify, in whole or in part, the dollar value of 
related audit findings. A projection of the total amount of violations 
based on apparent violations identified in such a sample may become the 
basis, in whole or in part, or any audit finding.
    (2) A committee in responding to a sample-based finding concerning 
excessive or prohibited contributions shall respond only to the 
specific sample items used to make the projection. If the committee 
demonstrates that any errors found among the sample items were not 
excessive or prohibited contributions; were timely refunded, 
reattributed or redesignated pursuant to 11 CFR 103.3(b) (1), (2) and 
(3); or for some other reason were not errors; the Commission shall 
make a new projection based on the reduced number of errors in the 
sample.
    (3) The committee shall submit a check to the United States 
Treasury for the total amount of any contributions not refunded, 
reattributed or redesignated in a timely manner in accordance with 11 
CFR 103.3(b) (1), (2) or (3).
    29. In section 9038.2, the introductory language of paragraph 
(b)(2) would be republished, and paragraph (b)(2)(iii) would be 
revised, to read as follows:


Sec. 9038.2  Repayments.

* * * * *
    (b) Bases for repayment * * *
    (2) Use of funds for non-qualified campaign expenses. * * *
    (iii) The amount of any repayment sought under this section shall 
bear the same ratio to the total amount determined to have been used 
for non-qualified campaign expenses as the amount of matching funds 
certified to the candidate bears to the candidate's total deposits, as 
of 90 days after the candidate's date of ineligibility. For the 
purposes of this paragraph--
    (A) All matching funds certified in response to matching payment 
submissions received by the Commission as of the candidate's date of 
ineligibility will be treated as though they were certified as of the 
date of ineligibility;
    (B) Total deposits is defined in accordance with 11 CFR 
9038.3(c)(2); and
    (C) In seeking repayment for non-qualified campaign expenses from 
committees that have received matching fund payments after the 
candidate's date of ineligibility, the Commission will review committee 
expenditures to determine at what point committee accounts no longer 
contain matching funds. In doing this, the Commission will review 
committee expenditures from the date of the last matching fund payment 
to the candidate, using the assumption that the last payment has been 
expended on a last-in, first-out basis.
* * * * *
    30. Section 9038.7 would be added to read as follows:


Sec. 9038.7  Administrative record.

    (a) The Commission's administrative record for final determinations 
under 11 CFR Part 9033 and Secs. 9034.5, 9036.5 and 9038.2 may include 
the following:
    (1) Candidate and committee agreements submitted pursuant to 11 CFR 
9033.1;
    (2) Candidate and committee certifications submitted pursuant to 11 
CFR 9033.2;
    (3) Threshold submissions and additional submissions for matching 
fund payments;
    (4) Statements of Net Outstanding Campaign Obligations;
    (5) Pertinent portions of Interim and Final Audit Reports, 
including attachments and supporting evidence;
    (6) Pertinent portions of Initial and Final Repayment 
Determinations, including attachments and supporting evidence;
    (7) All certifications, notifications, and determinations made by 
the Commission pursuant to 11 CFR Part 9033, and sections 9034.5 and 
9036.5;
    (8) Other written correspondence or materials sent to, or received 
from, the committee, witnesses, state or federal agencies or other 
persons, including committee requests for extensions of time, pertinent 
portions of committee responses to the Initial and Final Audit Reports, 
and documentary or other evidence produced in response to a subpoena 
duces tecum;
    (9) The transcript or audio tape of any deposition taken;
    (10) The transcript or audio tape of any oral presentation 
conducted pursuant to 11 CFR 9038.2;
    (11) The certification(s) of the Commission's decision(s) regarding 
candidate certifications, eligibility determinations, and repayment 
determinations;
    (12) All additional documents and evidence identified or filed by 
the Commission as part of the administrative record relied on in 
reaching its decision(s); and
    (13) Statements of Reasons adopted by the Commission.
    (b) The Commission's administrative record for determinations under 
11 CFR Part 9033 and Secs. 9034.5, 9036.5 and 9038.2 does not include 
any materials not specifically enumerated in paragraph (a) of this 
section, such as:
    (1) Documents and materials in the files of individual 
Commissioners or employees of the Commission that do not constitute a 
basis for the Commission's decisions because they were not circulated 
to the Commission and were not referenced in documents that were 
circulated to the Commission;
    (2) Transcripts or audio tapes of Commission discussions that are 
pre-decisional, but such transcripts or tapes may be made available 
under 11 CFR Parts 4 or 5; or
    (3) Documents properly subject to privileges such as an attorney-
client privilege, or items constituting attorney work product.
    (c) The administrative record identified in paragraph (a) of this 
section is the exclusive record for the Commission's determinations 
under 11 CFR Part 9033 and Secs. 9034.5, 9036.5 and 9038.2.

    Dated: September 30, 1994.
Trevor Potter,
Chairman.
[FR Doc. 94-24623 Filed 10-5-94; 8:45 am]
BILLING CODE 6715-01-M