[Federal Register Volume 60, Number 116 (Friday, June 16, 1995)]
[Rules and Regulations]
[Pages 31854-31888]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-14667]




[[Page 31853]]

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Part IV





Federal Election Commission





_______________________________________________________________________



11 CFR Part 106, et al.



Public Financing of Presidential Primary and General Election 
Candidates; Final Rule

  Federal Register / Vol. 60, No. 116 / Friday, June 16, 1995 / Rules 
and Regulations  

[[Page 31854]]


FEDERAL ELECTION COMMISSION

[Notice 1995-9]

11 CFR Parts 106, 9002, 9003, 9004, 9006, 9007, 9008, 9032, 9033, 
9034, 9036, 9037, 9038, and 9039


Public Financing of Presidential Primary and General Election 
Candidates

AGENCY: Federal Election Commission.

ACTION: Final rule and transmittal of regulations to Congress.

-----------------------------------------------------------------------

SUMMARY: The Commission has revised its regulations governing public 
financing of presidential primary and general election candidates. 
These regulations implement provisions of the Presidential Election 
Campaign Fund Act [``Fund Act''] and the Presidential Primary Matching 
Payment Account Act [``Matching Payment Act'']. The revised rules 
reflect the Commission's experience in administering these programs 
during the 1992 election cycle, and are intended to anticipate 
questions that may arise during the 1996 presidential election cycle.

DATES: Further action, including the publication of a document in the 
Federal Register announcing the effective date, will be taken after 
these regulations have been before Congress for 30 legislative days 
pursuant to 2 U.S.C. 438(d) and 26 U.S.C. 9009(c) and 9039(c).

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 publishing today the final 
text of revisions to its regulations at 11 CFR Parts 106, 9002, 9003, 
9004, 9006, 9007, 9008, 9032, 9033, 9034, 9036, 9037, 9038 and 9039 
governing public financing of presidential campaigns. On October 6, 
1994, the Commission issued a Notice of Proposed Rulemaking [``NPRM''] 
in which it sought comments on proposed revisions to the public 
financing regulations. 59 FR 51006 (October 6, 1994). Subsequently, the 
Commission extended the comment period to provide the regulated 
community with additional time to comment on the proposed rules. 59 FR 
64351 (December 14, 1994). The Commission received written comments 
from Hervey W. Herron, Common Cause, the Center for Responsive 
Politics, Public Citizen, the White House Counsel's office, the 
Republican National Committee, Huckaby and Associates, the Democratic 
National Committee and Lyn Utrecht of Oldaker, Ryan & Leonard in 
response to the Notice. The Commission held a public hearing on 
February 15, 1995, at which four witnesses presented testimony on the 
issues raised in the NPRM.
    The Commission also received two Petitions for Rulemaking that 
addressed related issues. See Notice of Availability on Petition for 
Rulemaking filed by the Center for Responsive Politics [``CRP''], 59 FR 
14795 (March 30, 1994); Notice of Availability on Petition for 
Rulemaking filed by Anthony F. Essaye and William Josephson, 59 FR 
63274 (December 8, 1994). In addition to the comments noted above, the 
Commission received comments from the Internal Revenue Service, Public 
Citizen, Common Cause and a joint comment from the Republican National 
Committee and the Democratic National Committee in response to the CRP 
Rulemaking Petition. The Commission received comments from the Internal 
Revenue Service and the Republican National Committee in response to 
the Essaye/Josephson Petition.
    The CRP Petition for Rulemaking sought the abolishment of the 
general election legal and accounting compliance fund [``GELAC''] and 
is discussed in connection with 11 CFR 9003.3, below. The Essaye/
Josephson petition asked the Commission whether expenses incurred in 
connection with the meeting of the Electoral College are covered by the 
Fund Act or the Federal Election Campaign Act [``FECA''], 2 U.S.C. 431 
et seq. This is a complex question that the Commission believes 
deserves further consideration. Therefore, the issue has been dropped 
from this rulemaking and will be addressed in a separate rulemaking 
document.
    Sections 9009(c) and 9039(c) of Title 26, United States Code, and 2 
U.S.C. 438(d) require that any rules or regulations prescribed by the 
Commission to carry out the provisions of Title 26 of the United States 
Code be transmitted to the Speaker of the House of Representatives and 
the President of the Senate 30 legislative days before they are finally 
promulgated. These regulations were transmitted to Congress on June 12, 
1995.
Explanation and Justification

    The Commission has revised several aspects of its regulations 
governing publicly-financed presidential primary and general election 
candidates. A detailed, section by section analysis of these changes 
appears below. The document then discusses some additional proposals 
that were considered in the course of this rulemaking that were not 
ultimately incorporated into the final rules.

Part 106--Allocations of Candidate and Committee Activities

Section 106.2  State Allocation of Expenditures Incurred by Authorized 
Committees of Presidential Primary Candidates Receiving Matching Funds

    The Commission is adding a sentence to paragraph (a)(1) of this 
section to reflect the new attribution of certain expenditures between 
the primary and the general election limits. See discussion of 11 CFR 
9034.4(e), below. The new sentence states that expenditures required to 
be allocated to the primary election under these new requirements shall 
also be allocated to particular states in accordance with 11 CFR 106.2.

Part 9002--Definitions

Section 9002.11  Qualified Campaign Expense

    The Commission is adding a conforming amendment to paragraph (c) of 
this section to reflect the new attribution of certain expenditures 
between the primary and the general election limits. The amendment 
notes that certain expenditures formerly covered by this paragraph will 
now be attributed under these new guidelines. See discussion of 11 CFR 
9034.4(e), below.

Part 9003--Eligibility for Payments

Section 9003.1  Candidate and Committee Agreements

    The new rules contain a number of changes in section 9003.1. In the 
interests of clarity, the Commission is adding a comma in the last 
sentence of paragraph (b)(4), which relates to candidate and committee 
agreements to furnish certain documentation to the Commission. The 
rules also slightly reword paragraph (b)(9) to more clearly indicate 
that candidates must agree to pay any civil penalties arising from 
violations of the FECA, whether provided for in a conciliation 
agreement or imposed in a judicial proceeding.
    Paragraph (b)(10) has been added to require that, as a precondition 
of their receiving public funds, presidential candidates agree that 
they will prepare all of their television commercials with closed 
captioning or so that they are otherwise capable of being viewed by 
deaf and hearing impaired individuals. Congress added this requirement 
to 26 U.S.C. Sec. 9003(e) when it enacted section 354 of the 
Legislative Branch 

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Appropriations Act of 1992, Pub. L. No. 102-393, 106 Stat. 1764 (1992).
    One commenter requested that committees be allowed to pay the costs 
of closed captioning with funds from their general election legal and 
accounting compliance fund. However, the Commission views this not as a 
compliance cost, but rather as a means for committees to get their 
message out to those who otherwise would not hear it. Thus it is a 
qualified campaign expense.

Section 9003.3  Allowable Contributions

    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 in presidential 
campaigns. Specifically, the petitioner sought 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 Commission published a Notice of Availability on March 30, 
1994, seeking statements in support of or in opposition to the 
Petition. 59 FR 14794 (March 30, 1994). The Commission received four 
comments in response to the Petition. Two comments were supportive, 
while one opposed the reversal of the Commission's longstanding 
policies regarding legal and accounting costs. The Commission 
subsequently incorporated the Petition into this rulemaking, and sought 
further comment on a number of options. The Commission received seven 
additional comments on the issues raised in the Petition.
    The petitioner argued that the Commission's rules allowing private 
contributions of up to $1,000 for the GELAC undermine the ability of 
the public financing laws to achieve the objective of eliminating the 
corrupting influence of large contributions in presidential elections. 
The Commission's reasons for establishing the GELAC are explained below 
and in the 1980 Explanation and Justification, 45 FR 43371 (June 27, 
1980). The decision to allow the GELAC to accept contributions up to 
$1,000 is based on the structure of the FECA. As the Supreme Court 
recognized in Buckley v. Valeo, 424 U.S. 1, 58 (1976), Congress created 
contribution limits to combat the reality or appearance of improper 
influence. Nevertheless, through the NPRM, the Commission sought 
evidence either supporting or refuting the petitioner's claim that the 
privately-funded GELAC undermines the public financing regime by 
allowing the actuality and the appearance of improper influence in 
presidential elections. No evidence was presented.
    As explained more fully below, the Commission has decided not to 
eliminate the GELAC. The Commission agrees with the commenters who felt 
that the separate fund for compliance has worked well since the GELAC 
rules were promulgated in 1980. To repeal them would force presidential 
campaigns to devote some of their public funds for compliance expenses, 
instead of using public monies for campaign expenses. One commenter 
noted that in the absence of a GELAC, committees would face 
extraordinary pressure to minimize the amount spent on compliance so as 
to devote as much money as possible to campaigning. Reducing compliance 
funds may very well reduce committees' abilities to keep good records, 
thereby increasing the difficulty and duration of post-election audits. 
Section 431(9)(B)(vii) of the FECA recognizes an exception for the cost 
of certain legal and accounting compliance services that is not 
recognized for other types of costs. The elimination of monetary 
contributions of $1,000 or less for compliance purposes could force 
some committees to turn to much larger in-kind donations of legal and 
accounting services to ensure that their compliance obligations are 
satisfied. See 2. U.S.C. Sec. 431 (8)(B)(ix) and (9)(B)(vii). The GELAC 
is also used to make repayments, which would still need to be funded 
from private sources if the campaign had no public funds remaining to 
pay those amounts.
    The Petition for Rulemaking also charged that these regulations 
permit evasion of the prohibition on accepting contributions to defray 
qualified campaign expenses established by the Fund Act. 26 U.S.C. 
Sec. 9003(b). Furthermore, the Petition claims that the Commission's 
regulations violate the spending limits established by the FECA. 2 
U.S.C. Sec. 441a.
    The Commission is not persuaded that the creation and operation of 
the GELAC is beyond its statutory authority or inconsistent with the 
public funding regime established by the Fund Act and the FECA. The 
regulations first establishing a separate GELAC were duly promulgated 
pursuant to 2 U.S.C. Sec. 437d(a)(8) and 26 U.S.C. Sec. 9009(b) for the 
practical reasons explained above. They were transmitted to Congress on 
June 13, 1980, together with the Explanation and Justification, for the 
required legislative review period. They became effective on September 
5, 1980, after neither House of Congress disapproved them under 26 
U.S.C. Sec. 9009(c)(2). This is, as the Supreme Court has noted, an 
``indication that Congress does not look unfavorably'' upon the 
Commission's construction of the Act. FEC v. Democratic Senatorial 
Campaign Committee, 454 U.S. 27, 34 (1981). See also, e.g., Sibbach v. 
Wilson, 312 U.S. 1, 16 (1941) (``That no adverse action was taken by 
Congress indicates, at least, that no transgression of legislative 
policy was found''). Subsequently, in legislative recommendations to 
Congress, the Commission has identified funding for compliance 
activities as an area Congress may wish to clarify, but Congress has 
not done so to date.
    Consequently, the revised rules follow the previous provisions by 
retaining sections 100.8(b)(15) (last two sentences), 106.2(b)(2)(iii) 
(last sentence), 9002.11(b)(5), 9003.3, and 9035.1(c)(1). For the 
reasons set forth, the Petition for Rulemaking filed by the Center for 
Responsive Politics is denied.
    Comments were also requested on several alternative revisions to 
the GELAC. For example, the NPRM raised the possibility of limiting the 
amount raised and spent for compliance to a fixed percentage of the 
general election spending limit. Although one commenter supported 
limiting the GELAC to 10% of the general election spending limit, or 
less, several others believed a limit would be artificial, unworkable 
and unfair, particularly since several factors make compliance costs 
unpredictable. Hence, to some extent, these costs cannot be controlled 
by the committee or known in advance. Other commenters opposed limiting 
the GELAC because they believed limits would not overcome fundamental 
defects in the current GELAC rules, and that the rules should be 
repealed.
    The Commission agrees that compliance costs can be unpredictable, 
and therefore concludes that limiting the amount or percentage of the 
GELAC is not advisable.
    The NPRM also expressed concern that fundraising activities for the 
GELAC could be used to generate electoral support for the candidate's 
campaign. Accordingly, the NPRM sought comments 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.
    In response, the petitioner and two commenters questioned the 
appropriateness of allowing fundraising costs for the GELAC to be paid 
for by the GELAC on the grounds these 

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expenses are campaign expenses that should be paid by the general 
election campaign and subject to the spending limits. On the other 
hand, several witnesses and commenters pointed out that effective 
fundraising necessarily involves setting forth what the candidate 
stands for. Some felt it is not appropriate to use public funds to 
raise private contributions that are used solely for legal and 
accounting compliance purposes.
    The Commission has concluded that the rules regarding fundraising 
for the GELAC should remain largely unchanged. The Commission's audit 
and enforcement processes provide the appropriate mechanisms for 
ensuring that GELAC fundraising activities (or any other type of 
expenses paid from GELAC funds) do not involve campaigning for the 
candidate's election.
    However, changes are being made regarding the information to be 
disclosed in solicitations to prospective contributors. Former section 
9003.3(a)(1)(i)(A) required solicitations to clearly state that the 
contributions are solicited for the GELAC. The NPRM proposed adding 
language to let contributors know that their money would be used solely 
for legal and accounting costs. Those supporting the Petition for 
Rulemaking did not believe the proposed change would resolve the 
problems they perceived. Others noted that if the required language is 
lengthy enough, nobody will read it. Hence, the final rules have been 
modified to require committees to tell contributors that federal law 
prohibits the use of private contributions to pay a publicly-funded 
general election candidate's campaign expenses. This new language more 
clearly conveys to contributors that their contributions to the GELAC 
will only be used to ensure compliance with the law. The GELAC 
solicitation must also indicate how contributors should make out their 
checks, so as to avoid potential confusion regarding the contributor's 
intent.
    Please note that the provisions regarding redesignations and 
transfers of primary funds to the GELAC in paragraphs (a)(1)(ii)-(iv) 
have been reorganized for clarity. In addition, new language has been 
added to resolve questions regarding depositing designated and 
undesignated contributions in the GELAC. Paragraph (a)(1)(i)(C) states 
that contributions must be designated in writing for the GELAC to be 
deposited directly into the GELAC. All contributions not designated in 
writing for the GELAC must be deposited initially in a primary election 
account and reported as such. An explanation of the term ``designated 
in writing'' for the GELAC is being added as new paragraph (a)(1)(vi). 
Please note that 11 CFR 110.1(b)(4) covers designations for a 
presidential primary election. Contributions made out to the 
candidate's name or the primary committee, unless properly designated 
in writing for the compliance fund, cannot be deposited in it, and can 
be transferred to it only if they are properly redesignated by the 
contributor for the GELAC. Undesignated contributions cannot be 
deposited in the GELAC, regardless of when they are made or received, 
and can be transferred to it only if the committee receives a proper 
GELAC redesignation from the contributor. An exception to the 
redesignation requirement exists for leftover primary contributions 
made during the matching payment period; they may be transferred to the 
GELAC without securing redesignations if they exceed the amount needed 
to pay remaining net outstanding campaign obligations for the primary 
and any repayments. In addition, the revised rules permit contributions 
made after the date of nomination, but not designated in writing for 
the GELAC, to be redesignated for the GELAC only if they are not needed 
to pay remaining net outstanding campaign obligations from the primary 
campaign. The rules also specify that contributions designated in 
writing or redesignated for the GELAC cannot be matched.
    Current paragraphs (a)(2)(i) (A) through (H) of section 9003.3 set 
forth the permissible uses of GELAC funds. The Petition for Rulemaking, 
and several commenters, 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. Other commenters and one witness urged the Commission 
to retain this provision, given the alternative of requiring campaigns 
to pay these costs from their limited campaign funds, even though 
transporting Secret Service and National Security staff does little to 
further the campaign.
    This provision has been retained in the final rules because the 
limits on the amounts that can be reimbursed for transporting the 
Secret Service and National Security staff may be less than the actual 
cost to the campaign, and because the campaign must transport security 
personnel who do not provide a campaign-related benefit. However, GELAC 
funds may not be used to pay transition costs (costs incurred by the 
President-elect in preparation for the assumption of his or her 
official duties which are not provided for under the Presidential 
Transition Act of 1963) (cf. AO 1980-97); legal defense fund expenses 
(expenses incurred in a judicial, civil, criminal, administrative, 
state, federal, or Congressional investigation, inquiry or proceeding 
not related to the Presidential campaign) (cf. AO 1979-37); or legal 
expenses not related to ensuring compliance with the FECA and the Fund 
Act, such as contract litigation.
    In addition, the Commission has reduced 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). Some expressed concern that 
this allocation demonstrated the impossibility of separating compliance 
expenses from campaign expenses, thereby necessitating repeal of the 
GELAC rules. One commenter argued that the allowance should be reduced 
to 10%. On the other hand, others urged the Commission to increase the 
allowance to 80% or 90% to more accurately reflect the burden of 
compliance.
    The Commission believes that a reduction from 70% to 50% accurately 
reflects the increased usage of computers for non-compliance campaign-
related activities such as scheduling of campaign-related events, 
electronic communications, word processing, office automation, 
maintaining political databases, etc. Moreover, campaign committees 
must incur computer costs to perform basic accounting purposes 
irrespective of the need to comply with the campaign financing laws. 
Please note, however, that committees may still deduct a higher amount 
if they can show that their computer-related compliance costs are 
higher.
    Section 9003.3(a)(2)(iv) has been 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 pursuant to 2 U.S.C. 
Sec. 439a if all GELAC expenses have been paid. Two commenters argued 
that this allows wealthy donors to evade the primary contribution 
limits and results in corruption of the public financing system. As 
explained above, the Commission believes that this provision is in 
keeping with the purpose and structure of the public funding statutes 
and notes that Congress did not disapprove of the Commission's 
regulations on transfers of surplus GELAC funds.

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    Finally, two citations contained in 11 CFR 9003.3(a)(2)(iii) are 
being revised. The first sentence of this paragraph referred to 
paragraphs 9003.3(a)(2)(i) (A) through (E). This is being updated to 
read, ``11 CFR 9003.3(a)(2)(i) (A) through (F) and (H).'' Also, the 
previous citation to paragraph 9003.3(a)(2)(i)(F) in the second 
sentence has been changed to refer to paragraph 9003.3(a)(2)(i)(G). 
Portions of paragraphs (b) and (c) of section 9003.3 have been replaced 
with language indicating that certain provisions in paragraph (a) apply 
to minor party candidates and situations where major party candidates 
do not receive full public funding.
    Finally, the Commission is deleting the reference to final 
repayment determinations contained in former paragraph (a)(2)(ii)(B), 
now paragraph (a)(2)(ii)(G), as that term does not appear in the 
revised repayment process. See discussion of 11 CFR 9007.2, below.
Section 9003.4  Expenses Incurred Prior to the Beginning of the 
Expenditure Report Period or Prior to Receipt of Federal Funds

    Former paragraph (a) of this section stated that certain 
expenditures for polling could be considered qualified campaign 
expenses for the general election, regardless of when the results of 
the polling were received. However, the Commission has now decided that 
polling expenditures should be attributed to the primary or the general 
election limits based on when the results are received. See discussion 
of 11 CFR 9034.4(e)(2), above.
    The reference to polling in this paragraph has therefore been 
deleted. The Commission is adding new language referring readers to the 
new provisions at 11 CFR 9034.4(e)(2), to better alert them to this 
change.

Section 9003.5  Documentation of Disbursements

    Section 9003.5(b)(1)(i) sets forth the documentation required for 
disbursements in excess of $200. Under the previous rules, a canceled 
check, negotiated by the payee, was required in most situations, but 
not when the committee presented a receipted bill from the payee 
stating the purpose of the disbursement. The revised rules in this 
section require committees to provide canceled checks negotiated by the 
payees for all disbursements over $200. One witness opposed these 
changes, and urged more flexibility in the requirements for 
documentation. However, this change will 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. New paragraph 
(b)(1)(iv) indicates that the purpose of the disbursement must be noted 
on the check if it is not included in the accompanying documentation. 
Please note that, as in the past, the revised rules require that 
documentation in addition to the committee's check be provided for 
disbursements exceeding $200.
    Paragraph (b)(3) of this section has also been changed to include 
individuals who are advanced $1000 or less for travel and subsistence 
in the definition of payee. The $500 limit in the previous rules was 
raised to reflect current prices.

Part 9004--Entitlement of Eligible Candidates to Payments; Use of 
Payments

Section 9004.4  Use of Payments

Winding Down Costs; Gifts and Bonuses

    New paragraph (a)(5) of section 9004.4 addresses the use of public 
funds to pay for gifts and bonuses for campaign staff and consultants. 
It generally follows new language in section 9034.4, which is discussed 
below. New language is being added to section 9004.4(a) to allow the 
GELAC to pay 100% of salary and overhead expenses incurred after the 
end of the expenditure report period. These expenses are presumed to be 
solely to ensure compliance with the FECA and the Fund Act.
    One commenter questioned why computer expenses were not included in 
the proposed language when they were included in the corresponding 
primary regulations. The rules have been revised to recognize that the 
GELAC may pay 100% of computer expenses incurred after the end of the 
expenditure report period.

Responsibility for Lost or Damaged Equipment

    Accounting procedures employed by the Commission make allowance for 
reasonable loss and normal damage of equipment leased or purchased by a 
campaign. However, the Commission has at times encountered incidents 
involving lost or damaged equipment that do not fall into these 
categories. The Notice of Proposed Rulemaking therefore sought to 
clarify how such situations should be handled in the audit process.
    The Commission first sought 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 have 
been specified at 11 CFR 9003.1(b). However, the Commission now 
believes the question of liability for lost or damaged equipment is 
best handled by amending 11 CFR 9004.4(b) to clarify that the cost of 
lost or misplaced items may be considered a nonqualified campaign 
expense for purposes of these rules.
    The Commission recognizes that there are varying degrees of 
responsibility in this area. The new rules therefore state that certain 
factors should be considered prior to any determination that a 
repayment is required. In particular, whether the committee 
demonstrates that it made careful efforts to safeguard the missing 
equipment would be of primary importance in this regard. Whether the 
committee sought or obtained insurance, the type of equipment involved 
and the number and value of items that were lost will also be among the 
factors considered in making this determination. However, the 
Commission has dropped as a stated factor the value of the lost 
equipment as a percentage of the total value of the equipment leased or 
owned by the committee, as the loss of even a small percentage of a 
committee's equipment can involve a sizeable amount of public funding.
    One commenter argued that the phrase ``used for any purpose other 
than * * * to defray [  ] qualified campaign expenses'' in 26 U.S.C. 
Secs. 9007(b)(4) and 9038(b)(2), stating the reasons for which the 
Commission can require a repayment, connotes intentional conduct, so 
the Commission is barred from ever requiring a repayment for lost or 
misplaced items. While the word ``purpose'' can connote ``intent,'' the 
Commission does not believe the two are synonymous in this context.
    The Commission routinely determines that funds have been ``used for 
the purpose'' of nonqualified campaign expenses, regardless of the 
specific intent behind particular disbursements. Barring the Commission 
from inquiring into such situations would run counter to its long-
standing practice in this area, and would also be inconsistent with the 
responsibility to ensure that public funds are properly used.
    One commenter proposed a number of safeguards a committee could 
adopt to help ensure that losses are kept to a minimum. These include 
(1) maintaining a written inventory of equipment, (2) establishing and 
disseminating written procedures for handling of equipment by the 
staff, (3) maintaining and implementing security 

[[Page 31858]]
procedures that limit access to the premises on which equipment is used 
and ensuring that equipment cannot be removed from the premises without 
appropriate written authorizations, (4) limiting use of vehicles to 
designated individuals, (5) maintaining a check-out system for portable 
equipment such as cellular telephones, and making individuals 
personally liable for return of the equipment, (6) obtaining insurance 
where economically prudent in accordance with the standards of the 
insurance industry, (7) establishing a procedure for reconciling 
inventory of equipment, in accordance with recognized accounting 
standards, when offices are closed, and (8) establishing procedures for 
handling of funds, including the handling of cash and writing of 
checks, that generally conform to recognized standards for internal 
controls established by the American Institute of Certified Public 
Accountants.
    These are sound business practices that, if followed, should 
greatly reduce the possibility of loss. The Commission plans to 
recommend in the Financial Control and Compliance Manuals prepared in 
connection with the 1996 Presidential election that committees 
implement these or comparable standards.
    This commenter further argued that, if a committee could 
demonstrate ``substantial compliance'' with these guidelines, the 
Commission should avoid an ``item by item'' examination of lost or 
misplaced items. While committees that follow these standards should 
have little problem with loss, the fact that they have done so should 
not preclude the Commission from ever challenging a loss, especially 
where costly items are involved.
    The Notice sought comment on another approach, that of limiting 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 nonqualified 
campaign expense. This would have the advantage of focusing the 
Commission's resources on only the more serious instances, while 
recognizing that some loss is inevitable in large, lengthy campaigns.
    The Commission believes this approach has merit, but feels it is 
inappropriate to include an actual dollar figure in the text of the 
rules. Rather, the Commission may address this matter in the context of 
the confidential materiality thresholds established in connection with 
each audit cycle.

Conforming Amendment

    The Commission is moving paragraph (c) of 11 CFR 9004.4 to new 11 
CFR 9007.2(a)(4). This paragraph, which deals with permissible sources 
of repayments, is more properly located in the section dealing with 
repayments.
Section 9004.5  Investment of Public Funds

    Section 9004.5 of the existing 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 paid 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 bases for requiring committees to make payments to 
the Treasury.
    The final rules revise section 9004.5 to clarify that the payment 
requirement applies to any use of public funds that results in income 
to the committee, regardless of whether the committee engaged in that 
use with the intention of generating income. The final rules also 
contain a conforming amendment to the introductory language of section 
9007.2(b)(4), clarifying that the receipt of income from any use of 
payments from the Fund is a basis for requiring payment to the 
Treasury. The Commission received no comments on these provisions.
    These revisions ensure that any income received through the use of 
pubic funds benefits the pubic financing system. If a committee loses 
an item that is insured, and the insurance proceeds exceed the cost of 
replacing the item, such excess will be considered income under 
sections 9004.5 and 9007.2(b)(4). However, these rules are not meant to 
require payment 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 permitted under 
11 CFR 9003.3.

Section 9004.6  Expenditures for Transportation Made Available to Media 
Personnel; Reimbursements

    Section 9004.6 of the existing rules has been reorganized for 
clarification purposes with only minor substantive changes. The revised 
version operates largely the same as the existing rule. Generally, 
expenditures for transportation and other services provided to media 
representatives, Secret Service personnel, and national security staff 
will be qualified campaign expenses and, with the exception of costs 
related to Secret Service and national security personnel, will count 
toward the overall expenditure limits in section 9003.2. However, 
committees may seek reimbursement for these expenses, and may deduct 
reimbursements received from media representatives from the amount 
subject to the spending limit, in accordance with paragraph (c) of the 
revised rule.
    Paragraph (b) limits the amount of reimbursement a committee can 
seek from a media representative to 110% of that representative's pro 
rata share of the actual costs of the transportation and services made 
available. Any reimbursement received in excess of that amount must be 
returned to the media representative under paragraph (d)(1). Paragraph 
(b)(2) sets out the formula for determining a media representative's 
pro rata share of the costs of transportation and services made 
available.
    Paragraph (c) states that the committee may deduct the 
reimbursements received from media representatives from the amount of 
expenditures subject to the overall limitation. The rule limits the 
amount of this deduction to the actual cost of the transportation and 
services provided to media representatives. However, the rule also 
allows the committee to deduct an additional amount of the 
reimbursements received from media representatives, representing the 
administrative costs of providing these services and seeking 
reimbursement for them. Generally, this deduction is limited to 3% of 
the actual cost of the transportation and services provided to the 
media representatives. However, the committee may deduct an amount in 
excess of 3% if it can document the total amount of administrative 
costs actually incurred.
    Paragraph (c)(2) clarifies that ``administrative costs'' includes 
all costs incurred by the committee in providing these services and 
seeking reimbursement for them. Thus, any costs that are not part of 
the actual cost of the transportation and services made available are 
administrative costs, regardless of whether they are incurred directly 
by the committee or by an independent contractor hired to make travel 
arrangements and/or seek reimbursements. If the committee uses a 
contractor, and the contractor charges the committee a fee for 
providing these services, the fee charged is part of administrative 
costs. The contractor's expenses and fees are not part of the actual 
costs for which the committee may seek reimbursement under paragraph 
(b)(1). Likewise, if the committee accepts credit card payments 

[[Page 31859]]
from media representatives, any credit card fee, commission or discount 
is an administrative cost.
    Paragraph (d) requires the committee to return any reimbursement 
received in excess of 110% of the actual pro rata cost of the 
transportation and services made available to the media representative 
providing the reimbursement. In addition, any amount in excess of the 
amount deductible under paragraph (c) that has not been returned to a 
media representative must be paid to the Treasury. For example, if a 
representative's pro rata cost is $1,000, the committee can bill the 
representative for $1,100. Assuming the committee claims the standard 
3% to cover its administrative costs, it can deduct up to $1,030 from 
the amount of expenditures subject to the limit. Any reimbursement 
received in excess of $1,100 must be returned to the media 
representative. Any portion of the remaining amount that exceeds the 
$1,030 that can be deducted from the spending limit must be paid to the 
Treasury.
    Paragraph (e) requires the committee to report disbursements made 
in providing these services as expenditures under 11 CFR 104.3(b)(2), 
and to report any reimbursements received as offsets to operating 
expenditures under 11 CFR 104.3(a)(3)(ix).
    The final rule contains two changes to the existing rule that 
reflect current practice. Generally, a media representative's pro rata 
share of the actual cost of transportation and services made available 
is determined by dividing the total costs of the services provided by 
the total number of persons to whom the services are made available. 
However, the new rule contains a special formula for determining the 
pro rata cost of transportation on a government conveyance to a city 
not served by regularly scheduled commercial airline service. See 11 
CFR 9004.7(b)(5)(i)(C). Committees should not include national security 
staff in the total number of persons to whom the services were made 
available when determining pro rata cost in this situation. This 
formula places incumbent candidates on an equal footing with 
challengers, who are not required to transport national security 
personnel. See discussion of section 9004.7, below.
    The new rule also clarifies that the administrative costs incurred 
by the committee in providing these services and seeking reimbursement 
for them must be included in the amount reported as an expenditure 
under paragraph (e).
    Two commenters expressed general support for the Commission's 
efforts to reorganize this section. However, they also urged the 
Commission to treat billed out unreimbursed media transportation 
expenses the same as unreimbursed expenses associated with transporting 
Secret Service and national security personnel, by excluding these 
expenses from the spending limit and allowing the use of GELAC funds to 
reimburse the committee for these expenses.
    The Commission has not adopted these recommendations because 
committees are now better able to recover the full cost of providing 
these services to media representatives than they were in the past. 
Committees can require media representatives to provide advance payment 
through the use of a credit card. If a representative fails to pay, the 
committee may, if it chooses, deny the representative access to the 
services being provided.
    A review of one 1992 general election committee, and its associated 
primary committee, clearly demonstrates that this policy does not 
impose a financial burden. The two committees sought reimbursement from 
media representatives for a combined total of about $7 million in 
transportation expenses. Both committees collected more than 99% of the 
amount they billed. Since the rules allow the committees to bill the 
representatives for 110% of actual cost, they received about $7.5 
million in reimbursements. Each committee received more than 109% of 
the cost of the services they provided. Thus, notwithstanding the 
failure of some representatives to provide reimbursement, the 
committees received payments substantially in excess of the costs they 
incurred.
    In contrast, the amount of reimbursement received from Secret 
Service and national security personnel is limited by the rules of 
other federal agencies, not the FEC, and in some cases is not enough to 
cover the costs of transporting these persons. Allowing committees to 
use GELAC funds to cover the unreimbursed amounts ensures that 
transporting these persons does not deplete the public fund.
    Consequently, the Commission has decided to continue its current 
policy of including unreimbursed media transportation expenses in the 
amount subject to the spending limit. It has also decided not to allow 
committees to pay these unreimbursed expenses with GELAC funds.

Section 9004.7  Allocation of Travel Expenditures

    The NPRM sought comments on modifying 11 CFR 9004.7 to address 
several issues regarding the cost of campaign-related travel using 
government airplanes, helicopters and other vehicles. Please note that 
these rules apply to travel on federal government conveyances, and 
state or other government conveyances. The rules contemplate that for 
plane flights between cites 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) specifies 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. Several 
commenters and witnesses supported this new language.
    Under section 9004.7(b)(5)(v), campaign committees are responsible 
for determining the first class fare at the time of the flight to 
ensure that the right amount is paid to the appropriate government 
entity, and to ensure that they maintain documentation supporting these 
amounts. The lowest unrestricted non-discounted first class airfare is 
available from several sources including travel agents, and on-line 
services. Unfortunately, it is not possible to specify a single source 
for this information.
    Questions also arose regarding cities that are served by regular 
air service, but first class flights are not available. In this case, 
the revised rules specify 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 

[[Page 31860]]
Standards of Official Conduct, Letter dated June 11, 1987. Several 
witnesses and commenters supported this approach.
    For cities not served by regularly scheduled commercial service, 
the rules continue to specify that the amount to be reimbursed is the 
charter rate. The NPRM had proposed using the charter rate for a 
comparable airplane of similar make, model and size. Although that 
would be consistent with the approaches used by the Congressional 
Ethics Committees, several commenters and witnesses noted that there 
are no aircraft comparable to Air Force I and Air Force II, which are 
specially designed in terms of communications equipment and security. 
It was also pointed out that the Commission's proposals diverged from 
the approach taken in AO 1984-48 and the rules in 11 CFR 106.3(e).
    It is not feasible to follow precisely the same approach as 11 CFR 
106.3(e) because that rule governs non-presidential candidates who are 
not accompanied by the Secret Service. Accordingly, the final rules 
have been revised to indicate that the charter rate may be used for an 
aircraft sufficient in size to accommodate the campaign-related 
travelers, including the candidate, plus the news media and the Secret 
Service. Under this approach, campaigns having the use of government 
aircraft will incur approximately the same cost as campaigns that must 
charter a plane sufficient to hold campaign staff, media and Secret 
Service personnel.
    The revised regulations address several questions that have arisen 
regarding the costs of ``positioning'' flights 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 
section 9004.7(b)(5)(ii) incorporates the Commission's previous 
practice regarding positioning flights. Thus, committees must pay the 
appropriate government entity for the greater of the amount billed by 
the government entity or the applicable fare for one passenger. This 
approach recognizes that positioning flights are campaign-related, and 
therefore these costs are properly treated as qualified campaign 
expenses. Several commenters and witnesses argued there should be no 
charge for positioning flights because commercial airlines do not 
charge to bring their planes to the city of departure. However, this 
argument fails to reflect the fact that charter services do build these 
costs into their price structures. Several commenters also noted that 
the Commission has not previously required committees to pay the costs 
of fuel and crew time for positioning flight. The proposed language 
regarding the payment for fuel and crew costs has been deleted from the 
final rules because it would be burdensome for committees to absorb 
these costs.
    Paragraph (b)(5)(iii) in section 9004.7 contains provisions 
regarding travel on federal or state government conveyances other than 
airplanes. For travel by helicopter or ground conveyance, the 
commercial rental rate should be paid for a conveyance sufficient in 
size to hold those traveling on behalf of the campaign, plus media 
representatives plus Secret Service personnel. This paragraph has been 
modified from the language previously included in the NPRM because 
there is no conveyance comparable in terms of security and 
communications to those used by the President and Vice President. 
Additional guidance on this area can be found in Advisory Opinion 1992-
34. Please note that in the case of a presidential candidate who is 
also a state official, the equivalent rental conveyance does not need 
to be able to hold state police or other state security officers.
    Section 9004.7(b)(5)(iv) continues 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 section 9004.7 explicitly reflects 
Commission policy that travel on corporate conveyances is governed by 
11 CFR 114.9(e). One witness suggested changing section 114.9(e) to 
include the lowest unrestricted nondiscounted coach fare for travel on 
corporate aircraft between cities where there is no first class 
service. Such a change is beyond the scope of this rulemaking.
    Finally, new language in paragraph (b)(2) provides additional 
guidance as to when a stop will be considered campaign-related. It 
follows the Commission's previous decisions in AOs 1994-15 and 1992-6 
that campaign activity includes soliciting, making or accepting 
contributions, and expressly advocating the nomination, election or 
defeat of the candidate. See, e.g., AOs 1994-15, 1992-6, and opinions 
cited therein. In these opinions, the Commission 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. Hence, the revised rules include other factors the 
Commission has considered in determining whether a stop is campaign-
related. Please note that this section continues to provide that 
incidental campaign-related contacts during an otherwise noncampaign-
related stop do not cause the stop to be considered campaign-related.
    While several witnesses and commenters favored inclusion of express 
advocacy and contribution solicitations as tests of whether a stop is 
campaign-related, some felt that the additional factors were 
subjective, workable, failed to provide sufficient guidance, and 
exceeded the Commission's authority given the language in Buckley, 424 
U.S. at 79-80, equating ``expenditure'' with express advocacy, not mere 
issue advocacy. Several suggested creating a rebuttable presumption 
that a stop is not campaign-related in the absence of express advocacy 
or the solicitation, making or acceptance of contributions. The 
difficulty with this type of narrow interpretation of Buckley is that 
if a stop is not campaign-related because there is no express advocacy 
of the candidate's selection or defeat, then the costs of the stop 
cannot be considered qualified campaign expenses, and cannot be paid 
for from public funds.
    Please note that paragraphs (b)(2) and (b)(3) of this section have 
been revised to indicate what should be shown on the itinerary, and to 
indicate what the official manifest created by the government or 
charter company must be made available for Commission inspection.

Section 9004.9  Net Outstanding Qualified Campaign Expenses

    The NPRM sought comments on a proposal to require primary 
committees to include a categorical breakdown of their estimated 
winding down costs when submitting a NOCO statement. The Commission 
proposed this change in order to obtain more useful information about 
the committee's remaining obligations.
    The Commission has decided to require this breakdown, and has 
incorporated it into paragraph 9034.5(b) of the primary regulations, 
which are discussed in detail below. In addition, the Commission has 
decided to require general election candidates to submit this 
information with the statements of net outstanding qualified campaign 
expenses [``NOQCE''] they submit after the general election. Under 
paragraph 9004.9(a) of the final rules, a general 

[[Page 31861]]
election committee must include a breakdown of the estimated winding 
down costs listed on the NOQCE statement by category and time period. 
The committee must provide estimates of quarterly or monthly expenses 
from the date of the NOQCE statement until the expected termination of 
the committee's political activity. These estimates must be broken down 
into amounts for office space rental, staff salaries, legal expenses, 
accounting expenses, office supplies, equipment rental, telephone 
expenses, postage and other mailing costs, printing, and storage.
    Requiring this breakdown will assist the Commission in ensuring 
that public funds are used only for qualified campaign expenses. It 
will also ensure that candidates who are eligible for post-election 
funding receive the amount to which they are entitled.
    The Commission is also amending paragraph (d)(1) of this section to 
provide for a straight 40% depreciation of capital assets that 
committees include on their post-election statements of net outstanding 
qualified campaign expenses. Previously, committees could claim a 
higher depreciation under certain circumstances. This amendment 
conforms to the Commission's policy of adopting ``bright line'' rules 
where feasible throughout the public funding process. The changes to 
this section generally follow those to 11 CFR 9034.5(c)(1), discussed 
below.

Part 9006--Reports and Recordkeeping

Section 9006.3  Alphabetized Schedules

    The final rules include new section 9006.3, which requires 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 are not required to 
computerize their records if they do not wish to do so. The new 
provision is intended to remedy situations in which, for example, 
committees maintain computerized records of contributors 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 
FECA and making it more difficult to monitor compliance. 
Alphabetization of lists of contributors is required for contributions 
to minor and new party candidates. Lists of contributors to the GELAC 
must also be alphabetized. In the event of a deficiency in the 
Presidential Election Campaign Fund, where private contributions may be 
accepted by major party candidates, alphabetical lists of contributors 
are also required. Unless there is a deficiency in the Fund, major 
party candidate who accept public funding for the general election may 
not accept private contributions.
    There was no consensus among the witnesses and commenters on this 
proposal. While some supported it because it furthers full public 
disclosure, others opposed it on the grounds that it could increase 
computer costs and increase reliance on computer-driven accounting 
systems. The Commission notes that committees able to demonstrate such 
increased computer costs may claim a higher exemption for compliance 
expenses. One witness stated that accounting software does not 
currently alphabetize disbursements, debts or obligations, and 
suggested that committees indicate on their reports whether 
disbursements are listed by date of invoice, check number or date of 
payment. However, Commission inquiries indicate that commercial 
spreadsheet packages sort data in many different ways, including 
alphabetically. Given that most presidential campaigns use a variation 
of commercially available software, it should not be difficult for them 
to use standard database management software to alphabetize the 
information included on disclosure reports.
Part 9007--Examinations and Audits; Repayments

Section 9007.1  Audits

Further Streamlining the Audit Process

    As noted in the NPRM, the Commission took several actions in the 
1990-91 review of the public funding rules that have substantially 
shortened the audit process. These included easing compliance with the 
state-by-state allocation rules set forth at 11 CFR 106.2, and 
clarifying the use of subpoenas in presidential audits. See 56 FR 
35899-900, 35903-04 (July 29, 1991).
    The NPRM sought comments on other changes that might further 
streamline this process. These included publicly releasing the Interim 
Audit Report (``IAR''), moving up the committee's oral presentation to 
some earlier point in the process, and compressing or eliminating some 
stages of the process.
    Most of the commenters who addressed this issue opposed further 
changes to the audit process at this time. They noted that, in part 
because of changes in the last cycle, the Commission was able to 
approve all Final Audit Reports for the 1992 presidential elections 
substantially faster than in earlier cycles. They also noted that 
issues tend to fall away as the process continues, and argued that the 
size of the audits and the number of issues involved justify the length 
of the current process.
    Nevertheless, the Commission believes that it is appropriate to 
further condense the audit process. This will result in more timely 
audits and a more efficient use of Commission and committee resources.
    Accordingly, the Commission is compressing the audit process by 
eliminating the current IAR. Briefly, the revised process entails an 
expanded exit conference, including a written Exit Conference 
Memorandum (``ECM'') prepared by Commission staff and presented to the 
committee at the exit conference; an opportunity for the committee to 
respond to the ECM; an audit report that contains the Commission's 
repayment determination; the opportunity for an administrative review 
of that determination, including the opportunity to request an oral 
hearing; and a post-review repayment determination and accompanying 
statement of reasons. These stages are discussed in greater detail 
below.
    Former 11 CFR 9007.1(b)(2)(iii) provided for an exit conference at 
which Commission staff discussed preliminary findings and 
recommendations with committee representatives. The revised paragraph 
states that Commission staff will in addition prepare a written ECM 
that discusses these findings and recommendations, and provide a copy 
of the ECM to committee representatives at the exit conference. The 
listing of potential subjects to be addressed at the exit conference 
includes those formerly listed with regard to the IAR, but deletes 
references to Commission findings and enforcement actions, as the 
Commission will not have made any findings or instituted any 
enforcement actions at this point of the process.
    Revised paragraph (c) gives the candidate and his or her authorized 
committee 60 calendar days following the exit conference to submit in 
writing legal and factual materials disputing or commenting on the 
findings presented in the ECM. The candidate should also provide any 
additional documentation requested by Commission staff during this 
period. The language in former 11 CFR 9007.1(c) regarding preparation 
of an IAR has been deleted, as the IAR is not longer part of the audit 
process.

[[Page 31862]]

    Revised paragraph (d) contains many of the procedural provisions 
formerly found in 11 CFR 9007.1(c), which discussed preparation of the 
IAR. This paragraph has been renamed ``Preparation of audit report,'' 
and refers to the report prepared following consideration of written 
materials submitted in response to the ECM. Revised paragraph (d)(1) 
notes that this report may address issues other than those discussed at 
the exit conference. This report also contains the repayment 
determination made by the Commission pursuant to 11 CFR 9007.2(c)(1).
    In addition, former 11 CFR 9007.1(e)(2) has been moved to new 
paragraph (d)(2). The language has been revised to conform with the 
Commission's practice of issuing audit reports in their entirety, 
including all matters noted in the audit process. Former 11 CFR 
9007.1(e)(4) has been moved to new paragraph (d)(3), and the language 
revised to clarify that addenda to the audit report may include 
additional repayment determination(s).
    Revised paragraph (e), which discusses the public release of the 
audit report, corresponds to former 11 CFR 9007.1(e) (1) and (3), and 
has been slightly reworded to conform to the new procedures.

Sampling

    The Commission is also adding new paragraph (f) to 11 CFR 9007.1 to 
incorporate sampling and disgorgement procedures that were adopted for 
use during the 1992 presidential election cycle.
    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, 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 notes that this approach will apply in a general 
election only to contributions that need to be raised due to a 
deficiency in the Presidential Election Campaign Fund, to the GELAC, or 
to contributions raised by new or minor party candidates. See 26 U.S.C. 
Secs. 9003(c)(2), 9006(c); 11 CFR 9003.2 (a)(2) and (b)(2), 9003.3 (b) 
and (c).
    Some commenters argued that the Commission does not have the 
statutory authority to use statistical sampling in conducting its 
audits. However, the Commission has been given broad authority to audit 
publicly-funded presidential and vice presidential campaigns, see 26 
U.S.C. Sec. 9007(a), which authority includes the right to utilize 
generally accepted auditing standards in conducting these audits.
    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).
    Most of these cases require the agency to demonstrate that it is 
infeasible to conduct a 100% review. See, e.g., Chavez, 931 F.2d at 
916. While the Commission was able to conduct a more extensive review 
in the past, the increasing volume of records to be checked has now 
made this impossible. An accountant who testified at the Commission's 
public hearing stated that the Commission had no option but to use 
sampling, because of the large number of records involved in 
presidential campaign audits--a recent campaign with which he had been 
worked had involved over 200,000 contributions and tens of thousands of 
disbursements. These figures are not unusual in presidential campaign 
audits.
    One commenter argued that these cases, which involve recoupment of 
government overpaid funds, should not be used to justify the use of 
sampling to determine excessive and illegal contributions which come 
from private sources. However, for statistical purposes there is no 
distinction between these two situations.
    Some commenters also questioned the validity of the statistical 
sampling technique currently employed in this process. However, the 
fact that the technique may be used in dissimilar programs, or programs 
seeking other types of information, does not mean that it is not 
appropriate for use in this context.
    There is substantial judicial precedent to the effect that, when 
considering a challenge to individual accounting rules, the reviewing 
court must defer to agency expertise. In A.T.&T. Co. v. United States, 
299 U.S. 232 (1936), the Supreme Court stated that before it would 
overrule an agency's decision to use a certain accounting system, that 
system ``must appear to be so entirely at odds with fundamental 
principles of correct accounting as to be the expression of whim rather 
than an exercise of judgment.'' Id. at 236-37. See also 
Transcontinental Gas Pipe Line Corp. v. Federal Power Commission, 518 
F.2d 459, 465 (D.C. Cir. 1975).
    The statistical sampling method used for the Commission's matching 
fund submission process was designed and recommended by Ernst and 
Whinney (now Ernst and Young), one of the world's largest accounting 
firms. The Commission believes that this method works equally well in 
evaluating excessive and illegal contributions. In addition, in 1979 
the Commission's Audit Division wrote to Arthur Andersen & Company, 
asking whether it would be appropriate to use statistical sampling to 
determine both matching fund eligibility and nonqualified campaign 
expenses. They responded that this would be appropriate in both 
situations. The Commission soon afterwards began to use statistical 
sampling in making matching fund determinations, but has not yet done 
so to determine nonqualified campaign expenses. However, if statistical 
sampling can be used to extrapolate the amount of nonqualified campaign 
expenses, it would seem equally capable of extrapolating the number of 
excessive and illegal contributions.
    One commenter who supported this approach requested that the 
Commission advise committees in advance what records will be reviewed 
on a full 100% basis. The Commission believes it is inappropriate to 
divulge this kind of information in advance. Also, this can vary from 
committee to committee.
    In its letter endorsing the use of statistical sampling to 
determine the amount of nonqualified campaign expenses, Arthur Andersen 
& Company recommended ``that the resulting repayment determination [the 
repayment determination based on the sample] not be deemed as final 
until the committee being audited has been provided with the 
opportunity to 

[[Page 31863]]
furnish additional support that might indicate that a modification of 
the sample results would be appropriate.'' The Commission follows this 
recommendation in projecting excessive and illegal contributions.
    The Commission's projection of the total amount of excessive or 
prohibited contributions based on apparent excessive or prohibited 
contributions identified in a sample of a committee's contributions is 
only a preliminary finding. The Commission informs the committee which 
items served as the basis for the sample projection, and the committee 
responds 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; were 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. A witness at the Commission's hearing on these rules endorsed 
the use of sampling in this context in part because of this opportunity 
to work with Commission auditors and obtain a lower projection if the 
committee provides additional information to reduce the number of 
errors found in the sample.

Disgorgement

    The Commission is further clarifying at new paragraph 9007.1(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 obtain 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 is a failure 
to cure contributions that are in violation of the FECA. The same is 
true of attempts to cure them outside of the specified time periods.
    Courts have upheld the use of disgorgement in cases involving 
securities violations ``as a method of forcing a defendant to give up 
the amount by which he was unjustly enriched.'' SEC v. Tome, 833 F.2d 
1086, 1096 (2d Cir. 1987), citing SEC v. Commonwealth Chemical 
Securities, Inc., 574 F.2d 90, 102 (2nd Cir. 1978). Requiring repayment 
to the Treasury for contributions that have been accepted in violation 
of 2 U.S.C. Secs. 441a and 441b is consistent with this reasoning.
    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, 
although the Commission has used disgorgement in instances where a 100% 
review is conducted, this is a practical approach in those situations 
where it is difficult to discern the original contributors, e.g., where 
a 100% review is not done.
    Some commenters questioned the Commission's authority to require 
repayment to the Treasury because this is not specifically provided for 
in the public funding Acts. However, the equitable doctrine of 
disgorgement supports the payment to the Treasury under these 
circumstances. The purpose of statistical sampling would be defeated if 
a 100% review of contributions was required to determine which 
particular contributions must be refunded, reattributed or 
redesignated. On the other hand, allowing committees to refund only 
those excessive or illegal contributions uncovered in the sample could 
result in a committee's retention of substantial funds to which it was 
not legally entitled.
    Disgorgement is also consistent with past Commission practice. See 
Matter Under Review (``MUR'') 1704, where, 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 (those 
to creditors or contributors that remain outstanding after the campaign 
is over) 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 52 FR 20864, 20874 (June 3, 1987).
    One commenter argued that the stale-dated check situation should be 
distinguished from that involving excessive and illegal contributions, 
because the former involves the return of public funds to the Treasury, 
while the latter involves private contributions. Once again, however, 
the same accounting principles apply to both situations.

Section 9007.2  Repayments

Further Streamlining the Audit Process

    Section 9007.2 has been revised to reflect amendments made to 
section 9007.1. Revised paragraph (a)(2) states that the audit report 
provided to the candidate under 11 CFR 9007.1(d), which contains the 
Commission's repayment determination, will constitute notification for 
purposes of the three-year notification requirement of 26 U.S.C. 
9007(c). This approach is consistent with two recent decisions by the 
United States Court of Appeals for the District of Columbia Circuit, 
Dukakis v. Federal Election Commission, No. 93-1219 (D.C. Cir. May 5, 
1995) and Simon v. Federal Election Commission, No. 93-1252 (D.C. Cir. 
May 5, 1995).
    Paragraph (a)(2) has also been revised to conform to the statutory 
requirement that the 26 U.S.C. 9007(c) notification period ends 3 years 
after the day of the presidential election.
    Paragraph (a)(3) has been reworded to state that once the candidate 
receives notice of the Commission's repayment determination contained 
in the audit report, the candidate should give preference to the 
repayment over all other outstanding obligations of the committee, 
except for any federal taxes owed by the committee.
    The Commission is moving former 11 CFR 9004.4(c) to new paragraph 
(a)(4). This paragraph, which deals with permissible sources of 
repayments, is more properly located in the section dealing with 
repayments.
    New repayment determination procedures are set forth in revised 
paragraph (c). Revised paragraph (c)(1) largely follows the former 
language, but refers to the audit report as the source of the repayment 
determination. The last sentence of that paragraph has also been 
revised to clarify that the candidate shall repay to the United States 
Treasury the amount which the Commission has determined to be 
repayable, using procedures set forth in 11 CFR 9007.2(d).
    Revised paragraph (c)(2) sets forth the procedures necessary for a 
committee to obtain an administrative review of the repayment 
determination. Please note that this review is limited to repayment 
issues. It does not cover other issues, such as disgorgement, that will 
if necessary be handled through the enforcement process.
    Paragraph (c)(2)(i) corresponds to former 11 CFR 9007.2(c)(2) and 
addresses the submission of written materials as part of this process. 
Paragraph (c)(2)(ii) corresponds to former 11 CFR 9007.2(c)(3), 
discussing 

[[Page 31864]]
the oral hearing. The language in these paragraphs for the most part 
follows the former rules, with the following additions. The deadline 
for filing written materials seeking an administrative review of the 
repayment determination has been lengthened from 30 to 60 days. Also, 
the candidate's failure to timely raise an issue in the written 
materials presented pursuant to paragraph (c)(2)(i) will be deemed a 
waiver of the candidate's right to raise the issue at any future stage 
of the proceedings. See Robertson v. FEC, 45 F.3d 486 (D.C. Cir. 1995). 
Further, under paragraph (c)(2)(ii), a candidate who desires an oral 
hearing must, at the same time he or she presents written materials 
pursuant to paragraph (c)(2)(i), request such a hearing in writing, and 
identify in that request the repayment issues the candidate wishes to 
address at the oral hearing.
    Revised paragraph (c)(3) corresponds to former 11 CFR 9007.2(c)(4), 
and now deals with repayment determinations made after an 
administrative review. Please note that the statement regarding the 
Commission's possible consideration of new or additional information 
from other sources does not provide a means for the candidate or anyone 
acting on the candidate's behalf to make untimely submissions. Former 
11 CFR 9007.2(c)(4) has been repealed.
    Paragraphs (d), (f), (g) and (i) have been revised to conform with 
the new terminology used elsewhere in this section.

Gains On the Use of Public Funds

    As indicated in the discussion of section 9004.5, above, the final 
rules contain a conforming amendment to the introductory language of 
section 9007.2(b)(4). This amendment clarifies that receiving income 
from investment or any other use of payments from the Fund is a basis 
for requiring payment to the Treasury. The Commission will require the 
committee to pay any such income received, less taxes paid, to the 
Treasury. The revisions to sections 9004.5 and 9007.2 ensure that any 
income received through the use of public funds benefits the public 
financing system. However, as indicated above, this provision does not 
apply to income that is exempt function income under 26 U.S.C. 
Sec. 527(c)(3), such as amounts received from fundraising activities.

Interest

    The Commission sought comment in the NPRM on whether interest 
should be assessed in certain situations. Although some commenters 
opposed this idea, the Commission believes it is appropriate to assess 
interest on late repayments, and is therefore amending 11 CFR 9007.2(d) 
to provide that interest will be assessed on repayments made after the 
initial 90-day repayment period established at 11 CFR 9007.2(d)(1) or 
after the 30-day repayment period established at 11 CFR 9007.2(d)(2).
    In the absence of interest charges for late repayments, debtors 
have little or no incentive to make timely repayments. 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.
    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), cert. denied, 459 U.S. 1204 (1983). 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).
    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 in this situation.
    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).
    The interest currently assessed under 11 CFR 9007.5(c)(4) and 
9038.5(c)(4) is the greater of that calculated using the formula set 
forth at 28 U.S.C. Sec. 1961 (a) and (b) for computing interest on 
money judgments in federal civil cases, or the amount actually earned 
on the funds set aside under those sections. The Commission believes it 
is appropriate to utilize a similar approach in this situation. The 
Commission is therefore adding new paragraph 9007.2(d)(3) to provide 
that a comparable formula shall be used in assessing interest on late 
repayments under section 9007.2.
Section 9007.3  Extensions of Time

    The Commission is amending paragraph (c) to include in that 
paragraph the policy that, whenever 11 CFR Part 9007 establishes a 60-
day response period, the Commission may grant no more than one 
extension of time, which extension shall not exceed 15 days. The rules 
formerly provided for a 30 day response period. Materials provided to 
the committees prior to the audit process explained that extensions of 
time were limited to a single, 45 day extension. The rules thus 
continue the former 75-day total response period, and the initial 60-
day response period may result in fewer extension of time requests.

Section 9007.5  Petitions for Rehearings; Stays of Repayment 
Determinations

    The Commission is making conforming amendments to paragraphs (a), 
(b), (c)(1)(ii) and (c)(4), to reflect changes in terminology for the 
audit and repayment process. See discussion of 11 CFR 9007.1 and 
9007.2, above.

Section 9007.7  Administrative Record

    New section 9007.7 explains which documents constitute the 
administrative record for purposes of judicial review of final 
determinations regarding candidate certification and eligibility, and 
repayment determinations. The NPRM had included a lengthy list of 
documents that usually form the basis of the administrative record. It 
also indicated that certain items are not part of the Commission's 
decisionmaking process, and thus not part of the record on review.
    One commenter expressed concern that the Commission was trying to 
impermissibly restrict documents to be included in the administrative 
record. The comment noted that judicial review is based on the whole 
record before the 

[[Page 31865]]
agency. Similarly, another commenter stated that the administrative 
record should include all materials that form the basis of the 
Commission's decisions. Two comments suggested including workpapers on 
which the auditors relied in making their calculations and 
recommendations. During the course of the audit and repayment 
processes, it has been the Commission's practice to provide committees 
with the audit work papers they need to formulate their responses.
    The Commission agrees that the administrative record includes all 
materials it considered in making its decision, and the final rules 
have been modified to reflect this. Thus, it will generally include all 
documents circulated to the Commission (including attachments) and 
materials referenced in those documents. However, documents in the 
files of individual Commissioners, or documents in FEC employees' files 
which do not constitute a basis for the Commission's decisions, are not 
included in the record. The administrative record also does not include 
transcripts or tapes of Commission discussions of audit or repayment 
matters. See, Common Cause v. Federal Election Commission, 676 F. Supp. 
286, 289 and n.3 (D.D.C. 1986). 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, are also excluded from the administrative record.
    The new rules indicate that documents and materials timely 
submitted by publicly-funded committees for Commission consideration 
are a part of the administrative record. Materials will also be 
considered timely submitted if they are received within an extension of 
time granted by the Commission. It is important that committees avail 
themselves of the opportunity to submit documents and other materials 
in a timely fashion, as they will be deemed to have admitted all 
specific findings and conclusions contained in an audit report or a 
repayment determination unless they specifically contest those findings 
and conclusions and provide supporting evidence and legal arguments at 
the appropriate time. When submitting evidentiary materials, committees 
should keep in mind that statements of counsel that are not supported 
by personal knowledge do not constitute evidence. Committees may 
include in their submissions the audit work papers with which they have 
been provided. They need not include transcripts or tapes of their oral 
presentation to the Commission regarding repayment determinations, as 
those materials are already a part of the record.

Section 9008.12  Repayments

    A conforming amendment has been added to paragraph (a)(2), to state 
that the audit report provided to the convention committee that 
contains the Commission's repayment determination will constitute 
notification for purposes of the three-year notification requirement of 
26 U.S.C. 9008(h).
    The Commission's rules governing public financing of national 
nominating conventions provide at 11 CFR 9008.11 that audits of 
convention committees follow the procedures for audits of presidential 
campaign committees set forth at 11 CFR 9007.1 and 9038.1. The former 
language contained a reference to the IAR, which is no longer a part of 
these procedures.

Part 9032--Definitions

Section 9032.9  Qualified Campaign Expenses

    The Commission is adding a conforming amendment to paragraph (c) of 
this section to reflect the new attribution of certain expenditures 
between the primary and the general election limits. The amendment 
notes that certain expenditures formerly covered by this paragraph will 
not be attributed under these new guidelines. See discussion of 11 CFR 
9034.4(e), below.
Part 9033--Eligibility for Payments

Section 9033.1  Candidate and Committee Agreements

    In the interests of clarity, the Commission is adding a comma in 
the second sentence of 11 CFR 9033.1(b)(5). Paragraph (b)(5) concerns 
candidate and committee agreements to furnish certain documentation to 
the Commission.
    A conforming amendment has been added to paragraph 9033.1(b)(7), 
clarifying that the same candidate and committee responsibilities that 
attach to an audit and examination made pursuant to 11 CFR part 9038 
also attach to part 9039 investigations, under appropriate 
circumstances. See discussion of part 9039, below.
    The final rules slightly reword paragraph (b)(11) of this section 
to more clearly indicate that candidates must agree to pay any civil 
penalties arising from violations of the FECA, whether provided for in 
a conciliation agreement or imposed in a judicial proceeding.
    New paragraph 9033.1(b)(12) has been added to require presidential 
primary candidates to include closed captioning in the preparation of 
their television commercials, as a precondition of their receiving 
public funds. This amendment corresponds to new paragraph 
9003.1(b)(10), discussed above. The Legislative Branch Appropriations 
Act of 1992 does not specifically amend 26 U.S.C. Sec. 9033, which sets 
out the eligibility requirements for presidential primary candidates. 
However, the Appropriations Act does state that the closed captioning 
requirement inserted in 26 U.S.C. Sec. 9003(e) applies both to general 
election candidates and to candidates who are eligible for funding 
``under chapter 96'' of Title 26 of the United States Code, that is, 
the Matching Payment Act. The Commission is therefore amending 11 CFR 
9033.1(b) to reflect this new requirement.

Section 9033.4  Matching Payment Eligibility Threshold Requirements

    Former 11 CFR 9033.4(b) stated that, in evaluating a candidate's 
matching fund submission, the Commission could 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 deleting this paragraph from the rule.

Section 9033.11  Documentation of Disbursements

    Revised section 9033.11 follows revised section 9003.5.

Part 9034--Entitlements

Section 9034.4  Use of Contributions and Matching Payments

Winding Down Costs

    The regulations at 11 CFR 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.
    As part of an effort to streamline and shorten the audit process, 
the 

[[Page 31866]]
Commission sought comment on ways to reduce the winding down time for 
campaigns. The NPRM suggested limiting the amount that a candidate may 
receive for winding down costs to no more than a specified dollar 
amount, or a fixed percentage of the candidate's total expenditures 
during the campaign, or a fixed percentage of total matching funds 
certified for the candidate. The NPRM questioned whether campaigns that 
receive a pre-established dollar amount, but do not use the entire 
amount for winding down costs, should be permitted to retain the 
unspent amount. Alternatively, comments were sought on establishing a 
cutoff date after which winding down expenses would no longer be 
considered qualified campaign expenses.
    Several commenters and witnesses opposed limiting wind down costs. 
They felt that basic fairness requires campaigns to have the resources 
necessary to respond during the audit process and to defend themselves 
against enforcement proceedings. It was also pointed out that during 
this period, campaigns need to be able to verify the proper payment of 
remaining bills, and that it would be a waste of federal funds if they 
were hampered in identifying incorrect bills.
    The Commission agrees that it would be quite difficult to select an 
amount or time frame sufficient to meet reasonable expenses incurred in 
winding down the campaign. A limit on the amount of public funds 
available for winding down would provide the same difficulties as a 
restriction on the total funds to be used for wind down. Consequently, 
the final rules contain no new restrictions on the amount spent on 
winding down or the time taken. Thus, the Commission will continue to 
review the committee's wind down costs on a case by case basis.

Post-DOI Expenses as Exempt Compliance Expenses

    New language in section 9034.4(a) incorporates the current practice 
of permitting publicly-funded primary committees to treat 100% of 
salary, overhead and computer expenses incurred after the candidate's 
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). Two witnesses and one commenter urged adoption of 
this provision. Please note that this regulation 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.

Gifts and Bonuses

    New language in section 9034.4(a) and section 9004.4(a) permits 
campaign committees to use federal funds to defray the costs of gifts 
for committee staff, volunteers and consultants, as long as the gifts 
do not exceed $150 per individual and as long as all gifts do not 
exceed $20,000. This approach received a favorable response from one 
witness and one commenter. It 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 a 
written contract, the NPRM sought comments 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. A number of commenters 
and witnesses opposed these suggestions on the grounds that bonus 
decisions should remain within the discretion of the committees; 
primary campaigns may not know at the outset how much will be available 
for bonuses; and campaigns may choose not to enter into written 
employment contracts. Some felt these proposals were more feasible for 
general election committees than for primary campaigns because the 
party nominees know at the outset what their funding level will be for 
the general election. It was also suggested that all bonuses be paid 
within ten days of a committee's date of ineligibility.
    The final rules have been revised to require that for general 
election campaigns, bonus arrangements must be provided for prior to 
the date of the general election in a written contract, and must be 
paid during the expenditure report period, which ends thirty days after 
the general election. Similarly, primary campaigns must make bonus 
arrangements in advance and must pay bonuses no later than thirty days 
after the candidate's DOI. These time frames allow ample time for 
campaigns to make decisions regarding bonuses.

Lost or Damaged Equipment

    The Commission is adding new paragraph (b)(8) to section 9034.4 to 
clarify that the cost of lost or damaged items may be considered a 
nonqualified expense for purposes of these rules. This change parallels 
new paragraph 9004.4(b)(8), and is discussed in more detail in 
connection with section 9004.4, above.

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. 9035(a). See also 11 CFR 110.8(a), 9035.1(a)(1).
    Questions have arisen in recent election cycles as to whether 
certain expenses charged to primary committees were in fact used to 
benefit the general election. 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, it can be difficult to 
distinguish between primary campaign activity, such as that designed to 
lock up delegates or otherwise related to the outcome of the primary 
campaign, and convention preparation, from activity that is geared 
towards winning the general election.
    The NPRM sought general suggestions on how best to address this 
situation. For example, it suggested that certain expenditures within a 
set time frame before the date of the candidate's nomination might be 
subject to higher scrutiny. In addition, the Notice contained specific 
proposals on how to treat capital assets, certain goods and services, 
and supplies and materials in this context; and sought comments on how 
other expenditures, such as those for campaign related travel and media 
expenses, should be attributed.
    Most of the commenters who addressed this issue favored a ``bright 
line'' cut-off date between primary and general election expenses, 
which would give committees clear guidance as to which expenses will be 
attributed to the primary election and which to the general election. 
Some suggested that this date be set as the candidate's date of 
ineligibility. Moreover, most comments opposed any guidelines or 
presumptions that would require a ``case-by-case'' determination of how 
certain expenditures should be characterized.
    The Commission recognizes that it can be difficult to select a 
single ``bright 

[[Page 31867]]
line'' date appropriate for all campaigns under all circumstances. 
Also, the adoption of ``bright line'' rules could in certain instances 
result in the primary committee's subsidizing the general election 
committee, or vice versa. Nevertheless, the Commission believes this 
approach is appropriate with regard to certain specific types of 
expenditures that may benefit both the primary and the general 
election. These include expenditures for polling; state or national 
offices; campaign materials; media production costs; campaign 
communications; and campaign-related travel costs (see also 11 CFR 
9034.5, depreciation of capital assets, discussed below).
    The Commission recognizes that there could be situations in which 
this approach does not accurately reflect the relative impact of 
particular expenditures. However, these differences should balance 
themselves out over the course of a lengthy campaign. In addition, a 
major factor in the Commission's decision is the desire to complete the 
audits more quickly and using fewer agency resources. It can be 
extremely time- and labor-intensive for both the Commission and the 
committees to examine thousands of individual expenditures, especially 
where, as here, both the timing and the purpose of each expenditure is 
at issue. Accordingly, the Commission is adding a new paragraph (e) to 
this section partially deal with this situation.
    The introductory language to this paragraph notes that these rules 
apply only to campaigns of candidates who receive public funding in 
both the primary and the general election. Paragraph (e)(1) states the 
general rule that any expenditure for goods or services that are used 
exclusively for either the primary or the general election campaign 
shall be attributed to the limits applicable to that election.
    Please note that primary expenditures are also attributable to the 
state allocation limits set forth in 11 CFR 106.2. Also, any 
expenditures that are attributed to the general election limits shall 
be paid for with general election funds.
    Paragraph (e)(2) states that polling expenses shall be attributed 
according to when the results of the poll are received. If the results 
are received on or before the date of the candidate's nomination, the 
expenses will be considered primary election expenses. If partial 
results are received both before and after the date of the candidate's 
nomination, the costs shall be allocated between the primary and the 
general election limits based on the percentage of results received 
during each such period.
    A conforming amendment is also being made to 11 CFR 9003.4(a) (see 
discussion above). That paragraph formerly stated that certain polling 
expenses could count against the general election limit regardless of 
when the results of the polling were received.
    Paragraph (e)(3) addresses overhead expenditures and payroll costs 
incurred in connection with state or national campaign offices, and 
attributes these according to when usage of the office occurs. For 
usage on or before the date of the candidate's nomination, these 
expenses are attributed to the primary election, except for periods 
when the office is used only by persons working exclusively on general 
election campaign preparations. The definition of ``overhead 
expenditures'' set forth in 11 CFR 106.2(b)(2)(iii)(D) is incorporated 
by reference into this paragraph.
    Paragraph (e)(4) addresses campaign materials, including bumper 
stickers, campaign brochures, buttons, pens and similar items, that are 
purchased by the primary campaign and later transferred to the general 
election campaign. Any such materials that are used in the general 
election shall be attributed to the general election limits. Materials 
transferred to the general election committee but not used in the 
general election shall be attributed to the primary election limits.
    Paragraph (e)(5) states that 50% of production costs for media 
communications that are broadcast or published both before and after 
the date of the candidate's nomination shall be attributed to the 
primary election limits, and 50% to the general election limits. Please 
note that distribution costs, including such costs as air time and 
advertising space in newspapers, must be paid for 100% by the primary 
or general election campaign depending on when the communication is 
broadcast or distributed.
    The Commission notes that the pre- and post-nomination 
communications need not be identical for this attribution ratio to 
apply. Obvious changes include such matters as stating that the 
communication was ``paid for by '' the candidate's general rather than 
primary election campaign committee; and references to the candidate as 
the party's actual, rather than potential, nominee. However, there are 
also situations where a communication is substantially unchanged, 
except for a portion targeted to, for example, specific constituent 
groups or different parts of the country. The Commission also intends 
to apply the 50/50 attribution ratio to these communications.
    Paragraph (e)(6) addresses campaign communications, including 
solicitations, that are not used in both the primary and the general 
election. In the past questions have arisen as to whether a per-DOI 
communication was intended to influence the general election, or vice 
versa (e.g., thank you letters for primary contributions sent after the 
date of the candidate's nomination).
    Paragraph (e)(6)(i) states that the costs of a solicitation shall 
be attributed to the primary election or to the General Election Legal 
and Accounting Compliance Fund, depending on for which purpose the 
solicitation is made.
    While candidates may not accept private contributions to cover 
expenses incurred to benefit the general election campaign, they may 
solicit contributions for the GELAC. The rule states that, if a 
candidate solicits funds for both the primary election and for the 
GELAC in a single communication, 50% of the cost of the solicitation 
shall be attributed to the primary election, and 50% to the GELAC. 
Consequently, the primary committee must pay 50% of the solicitation 
costs, and the GELAC must pay 50%.
    Occasionally a committee will solicit contributions to retire a 
primary election debt, and receive more money in response to the 
solicitation than is needed to pay off the debt. Under 11 CFR 
9003.3(a)(1)(iv)(C), the committee may transfer such excess 
contributions to the GELAC if proper redesignations are obtained. If a 
committee chooses to seek redesignations, the cost of the solicitation 
shall be attributed to the primary limits, while any redesignation 
costs shall be paid by the GELAC.
    Paragraph (e)(6)(ii) states that the costs of a communication that 
does not include a solicitation shall be attributed to the primary or 
general election limits based on the date on which the communication is 
broadcast, published or mailed.
    Paragraph (e)(7) states that expenditures for campaign-related 
transportation, food and lodging by any individual, including a 
candidate, shall be attributed according to when the travel occurs. If 
the travel occurs on or before the date of the candidate's nomination, 
the cost is a primary election expense, except that the costs of travel 
by a person who is working exclusively on general election campaign 
preparations shall be considered a general election expense even if the 
travel occurs before the candidate's nomination. Travel both to 

[[Page 31868]]
and from the convention shall be a primary expense.

Sources of Repayment

    The rule set out in current paragraph 9034.4(c) has been moved to 
new paragraph 9038.2(a)(4). Paragraph 9034.4(c) has been removed and 
reserved for future use. This change generally follows the conforming 
amendment discussed in connection with section 9004.4, above.

Section 9034.5  Net Outstanding Campaign Obligations

NOCO Statements

    The final rules make a number of changes in the requirements for 
submission of NOCO statements set out in section 9034.5. Paragraph (b) 
is amended to require committees submitting NOCO statements to include 
a breakdown of the estimated winding down costs listed on the statement 
by category and time period. The committee must provide estimates of 
quarterly or monthly expenses from the date of the NOCO statement until 
the expected termination of the committee's political activity. These 
estimates must be broken down into amounts for office space rental, 
staff salaries, legal expenses, accounting expenses, office supplies, 
equipment rental, telephone expenses, postage and other mailing costs, 
printing, and storage.
    One commenter noted that it can be difficult to estimate winding 
down costs until well into the audit process, because the committee 
continues to receive bills, and also because it is not clear what 
issues will arise until the audit is underway.
    The Commission recognizes that the winding down figures on a 
committee's NOCO statements are, by necessity, estimates of anticipated 
expenses. However the Commission has decided to require a breakdown of 
these expenses in order to obtain more meaningful information than is 
obtained under the existing rule. Currently, many NOCO statements list 
the candidate's estimated necessary winding down costs as a single lump 
sum. Requiring the breakdown will help the Commission determine whether 
the candidate is entitled to receive the entire estimated amount.
    The final rules also revise the schedule for submission of revised 
NOCO statements. Under the current rules, candidates are required to 
submit a revised NOCO statement with each matching payment request 
submitted after DOI. The proposed rules would have required candidates 
to submit an additional revised NOCO statement just before the date 
when matching fund payments will be certified, on a date to be 
published by the Commission. The additional statement would be used to 
ensure that the amount of matching funds certified accurately reflects 
the committee's financial situation at the time of certification. One 
commenter thought this additional requirement would be burdensome and 
will not solve the problem identified in the NPRM.
    The Commission believes that requiring two revised NOCO statements 
for each matching payment submission is unnecessary. Consequently, the 
final rules change the Commission's current policy of requiring 
candidates to submit a revised NOCO statement at the time of each post-
DOI matching payment submission. Instead, the final rules require the 
candidate to submit a certification that his or her remaining net 
outstanding campaign obligations equal to or exceed the amount 
submitted for matching. If the candidate so certifies, the Commission 
will process the matching payment submission.
    The candidate must then submit a revised NOCO statement just before 
the next regularly scheduled payment date, on a date to be determined 
and published by the Commission in the Federal Register. The statement 
must reflect the financial status of the campaign as of the close of 
business three business days before the due date, and must also contain 
a brief explanation of each change in the committee's assets and 
obligations from the most recent NOCO statement. This will allow the 
Commission to adjust the committee's certification to reflect any 
change in the committee's financial position that occurs after 
submission of the initial matching payment request. Thus, the amount 
certified will be closer to the committee's actual entitlement, 
reducing the need to seek subsequent repayment.
    This revised schedule is set out in paragraphs 9034.5(f) (1) and 
(2) of the final rules. Paragraph 9034.5(f)(2) of the former rules has 
been renumbered as paragraph (f)(3), without revision.
    The Commission notes that, while the additional information 
required should increase the accuracy of the matching fund 
certifications, as under the current practice, the Commission will not 
approve NOCO statements when they are submitted. Thus, although the new 
rules will often reduce the size of a committee's repayment, the 
Commission will continue to seek repayment under appropriate 
circumstances.

Capital Assets

    The Commission is amending paragraph (c)(1) of this section to 
provide for a standard 40% depreciation of capital assets that are 
received by a primary campaign committee prior to the candidate's DOI 
and subsequently sold to the general campaign committee or to another 
entity.
    The former rule set forth the 40% depreciation allowance, but 
allowed a higher depreciation for particular item if the committee 
demonstrated through documentation that the asset's fair market value 
was lower. However, there was no corresponding provision for the 
Commission to document a higher fair market value. The NPRM proposed 
that the 40% figure be subject to both increase and decrease, under 
appropriate circumstances. Most of those who commented on this issue 
opposed this change, which the Commission had proposed to more 
accurately reflect its experience in dealing with this situation.
    Consistent with its approach to other expenditures that can be 
attributed to both the primary and the general election limits (see 
discussion of 11 CFR 9034.4(e), above), the Commission is adopting a 
``bright line'' 40% depreciation figure for capital assets that are 
used in both the primary and the general election campaigns. While the 
Commission recognizes that there may be instances in which the 40% 
figure is too low, there are also situations in which that figure may 
be too high. The Commission believes that in many instances there 
differences will balance themselves out over the course of a lengthy 
campaign. Also, given the number of capital assets involved in a 
typical campaign, it can be time- and labor-intensive for both the 
Commission and the committee to handle these on a case-by-case basis.
    Please note that the term ``capital asset'' includes components of 
a system used as a whole and purchased at the same time at a cost 
exceeding $2000, even if individual system components cost less than 
$2000.

Section 9034.6  Expenditures for Transportation and Services Made 
Available to Media Personnel; Reimbursements

    Section 9034.6 has been reorganized with minor substantive changes. 
These revisions are the same as those made to section 9004.6, the 
parallel provision for general election committees. See the discussion 
of section 9004.6, above.

[[Page 31869]]


Section 9034.7  Allocation of Travel Expenditures

    The changes in section 9034.7 follow the changes to section 9004.7

Part 9036--Review of Submission and Certification of Payments by 
Commission

Section 9036.2  Additional Submissions for Matching Fund Payments

Complete Contributor Identification

    Treasurers of political committees, including authorized committees 
of presidential candidates, are required by 2 U.S.C. Secs. 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 that also contain 
complete contributor information. While full contributor 
identifications are required for such contributions in threshold 
submissions under 11 CFR 9036.1(b), they have not been required under 
11 CFR 9036.2(b)(1)(v) for additional submissions for matching funds. 
Accordingly, the Commission sought comment 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 were sought on only matching these contributions if committees 
can provide evidence demonstrating they made their best efforts to 
obtain the information.
    There was no consensus among the commenters and witnesses who 
addressed this issue. Some felt that the public has a right to complete 
disclosure of this information when its money is given to presidential 
candidates, and that there is no rational basis for the distinction 
between threshold submissions and subsequent requests for matching 
funds. They cited figures from the 1992 election cycle to argue that 
some candidates did not take the disclosure statutes seriously. Others 
pointed out that the new best efforts rules are intended to resolve 
this issue, and that it would be onerous for committees to show during 
the matching submission process that they have satisfied the new best 
efforts rules. Some felt that contributors should not be forced to 
forego their privacy rights in order to have their contributions 
matched. Hence, they argued that vigorous enforcement of the new best 
efforts rules is the appropriate course of action.
    For several reasons, the Commission has decided not to change the 
current requirements regarding matchability of contributions from 
individuals. First, the Commission has seen a significant increase in 
the reporting of occupation and employer since the best efforts 
regulations were revised. For example, a comparison of authorized 
committee reports for April-September 1992 with reports for April-
September 1994, shows the number of itemizable contributions from 
individuals which lacked information on the contributor's principal 
place of business decreased from 17% to 10%. Thus, it is premature to 
conclude that further measures are needed to enhance disclosure. 
Secondly, it is not a efficient use of Commission resources to verify 
this information during the matching fund submission process. Doing so 
would slow down an already time-constrained process. Moreover, the 
reasons for requiring occupation and employer in threshold submissions 
do not apply to additional submissions. Occupation and employer 
information are necessary for threshold submissions to ensure that 
candidates have met the eligibility requirements by having received 
matchable contributions of at least $5000 from contributors in at least 
20 states.

Use of Digital Imaging for Matching Fund Submissions

    Several questions were also raised regarding the possibility that 
committees may wish to submit contributions for matching through the 
use of digital imaging technology such as computer CD ROMs, instead of 
submitting paper photocopies of checks and deposit slips. One witness 
urged the Commission to allow committees to have this option. 
Accordingly, new language has been added to paragraph (a)(1)(vi) of 
section 9036.2 to let committees provide digital images of 
contributions, but not to require that they do so. If they choose this 
option, the Commission may require committees to supply the Commission 
with the equipment needed to read the digital data at no cost to the 
Commission. One witness stated that this was a reasonable condition. 
Given the variety of sources providing this technology, it is not 
feasible for the Commission to purchase all the equipment that 
different committees might wish to use. The new language also specifies 
that the digital information committees provide must include an image 
of each contribution received and imaged during the period covered by 
the matching fund submission, not just matchable contributions. As a 
practical matter, it may be simpler for committees to include all 
contributions on CD ROMs rather than separating out the nonmatchable 
ones. This approach will have the additional benefit of enabling the 
Commission's audit staff to begin examining contributions at an earlier 
point, which should speed up the audit process. The Commission may seek 
verification from the committee's bank or from contributors pursuant to 
11 CFR 9039 if the Commission is unable to resolve questions regarding 
the digital images submitted.
    While the Commission is approving the submission of contribution 
information using computerized digital imaging technology, it is not 
changing the requirements regarding the submission of disbursements 
documentation. Previously, the Commission has concluded that the 
retention of microfilm records satisfies the documentation requirements 
of 2 U.S.C. Sec. 432(c), and that for electronic transfers, committees 
may keep records in the form of computerized magnetic media. AOs 1994-
40 and 1993-4. However, these advisory opinions addressed fairly 
limited record retention issues, and did not address or resolve issues 
regarding the use of digital imaging technology to satisfy the 
requirements of 11 CFR 9003.5 or 9033.11.
Section 9036.5  Determination of Ineligibility Date

    A conforming amendment has been added to paragraph 9036.5(a), 
clarifying that the procedures of section 9036.5 apply to matching fund 
resubmissions made pursuant to 11 CFR part 9036 and those prompted by 
an inquiry under 11 CFR part 9039, under appropriate circumstances. See 
discussion below.

Part 9037--Payments and Reporting

Section 9037.4  Alphabetized Schedules

    The final rules include new section 9037.4, which follows new 
section 9006.3.

Part 9038--Examination and Audits

Section 9038.1  Audit

    The amendments to this section follow those made to section 9007.1, 
above.

[[Page 31870]]


Section 9038.2  Repayments

Repayment Ratio

    Section 9038.2(b)(2) of the current rules requires candidates to 
repay amounts received from the matching payment account that are used 
for non-qualified campaign expenses. The amount of the repayment is 
determined by multiplying the total amount of non-qualified campaign 
expenses by the candidate's repayment ratio. The repayment ratio is the 
ratio of matching funds received by a candidate to the candidate's 
total deposits. Under the current rules, the repayment ratio is 
determined as of the candidate's date of ineligibility.
    The new rule changes the date for determining a candidate's 
repayment ratio from the date of ineligibility to 90 days after the 
date of ineligibility. Under the new rule, the Commission will multiply 
the amount of non-qualified campaign expenses by the ratio of matching 
funds to total deposits received as of 90 days after the candidate's 
date of ineligibility, in order to determine the amount the candidate 
must repay for using matching funds for non-qualified campaign 
expenses.
    The new rule generates a repayment ratio that more accurately 
reflects the mix of public funds and private contributions received 
during the campaign, particularly for a candidate who receives 
significant amounts of private contributions after his or her date of 
ineligibility. By taking private contributions received within 90 days 
of DOI into account when determining a candidate's repayment ratio, the 
new rule will likely reduce the radio, thereby reducing the amount of 
the candidate's repayment.
    This approach is also more consistent 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 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 8038.2(b)(2) of 
the current regulations is applied to a candidate who does not receive 
matching payments until after his or her DOI, it arguably generates a 
repayment ratio of zero. Thus, it does not require the candidate to 
make a repayment, even if the candidate incurred numerous non-qualified 
campaign expenses.
    The new rule takes these post-DOI matching payments into account, 
thereby generating a ratio that is greater than zero and more 
accurately reflects the mix is greater than zero and more accurately 
reflects the mix of matching payments and private contributions 
actually received. As a result, publicly-funded candidates that incur 
non-qualified campaign expenses will be required to make a repayment, 
even if they do not receive any public funds until after their date of 
ineligibility.
    In approving this approach for the final rules, the Commission 
rejected an alternative approach set out in the NPRM. The alternative 
approach would treat all matching funds certified in response to 
matching payment submissions received before the candidate's DOI as if 
they were certified before the candidate's DOI. This would result in a 
repayment ratio of greater than zero that could be used to determine a 
repayment amount under section 9038(b)(2) of the statute. However, this 
approach would only address the zero repayment situation outlined 
above. Since determining the repayment ratio 90 days after DOI 
addresses both situations, the Commission has incorporated this 
approach into the final rules.
    In an effort to improve clarity, the final rules break the last 
three sentences of this section into two separate paragraphs. The 
Commission received no comments on this provision.

Income Derived From the Use of Surplus Public Funds

    Paragraph 9038.2(b)(4) has been revised to indicate that the 
Commission may determine that income resulting from any use of surplus 
public funds after the candidate's DOI, less taxes, paid, shall be paid 
to the Treasury. This change parallels the changes made to sections 
9004.5 and 9007.2(b)(4), discussed above.

Further Streamlining the Audit Process

    The amendments to the audit process contained in this section 
follow those made to section 9007.2(d), above.

Conforming Amendments

    A conforming amendment has been added to paragraph 9038.2(c)(1), to 
clarify that the repayment procedures followed by the Commission in 
connection with an 11 CFR part 9038 examination or audit also apply to 
an 11 CFR part 9039 examination or audit. See discussion of Part 9039, 
below.
    The amendments to paragraph (d) of this section are identical to 
those made to 11 CFR 9007.2, discussed above.

Section 9038.4  Extensions of Time

    The amendment to this section follows that made to section 9007.3, 
above.

Section 9038.5  Petitions for Rehearing; Stays of Repayment 
Determinations

    The amendments to this section follow those made to section 9007.5, 
above.

Section 9038.7  Administrative Record

    This section generally follows new section 9007.7.

Part 9039--Review and Investigation Authority

Section 9039.3  Examinations and Audits; Investigations

    The Commission's review and investigatory authority for 
administering the matching fund program is set forth at 26 U.S.C. 
Sec. 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. Regulations implementing 
these requirements 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. Section 9039(b) and its 
implementing regulations provide authority to conduct audits and 
investigations in situations other than those addressed by 26 U.S.C. 
Sec. 9038, 11 CFR part 9038, 2 U.S.C. Sec. 437g and 11 CFR part 111. To 
date, most of these situations 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 can also 
involve a post-election inquiry.
    Section 9039.3 of the regulations describes how examinations, 
audits and investments are conducted in these inquiries. However, the 
prior section did not address the actions that may be taken at the 
conclusion of any such action. The Commission is therefore adopting new 
paragraph 9039.3(b)(4) for that purpose.
    This new paragraph states that, if the Commission decides to take 
no further action in a part 9039 case, the candidates(s) and 
committee(s) involved will be so notified. If the Commission decides to 
take further action, such action will follow as closely as possible the 
procedures already in place for comparable situations. Specifically, if 
the inquiry results in an adjustments to the amount of certified 
matching funds, the procedures set forth at 11 CFR 9036.5 shall be 
followed. If the inquiry coincides with an audit undertaken pursuant to 
11 CFR 9038.1, the information obtained in the inquiry will be utilized 
as part of the repayment 

[[Page 31871]]
determination. If the inquiry results in an initial or additional 
repayment determination, whether or not this coincides with a 
Commission audit, the procedures set forth at 11 CFR 9038.2, 9038.4 and 
9038.5 shall be followed.
    The new rules also include conforming amendments to 11 CFR 
9033.1(b)(7), 9036.5(a), and 9038.2(c)(1).

Additional Issues

    The Commission considered other proposals in the course of this 
rulemaking that it did not ultimately incorporate into the final rules. 
A summary of these proposals follows.

Convention Expenses of Ineligible Candidates

    The Commission also sought comments in the NPRM 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 can provide a 
defeated candidate the opportunity to continue to fundraise and to 
maintain contact with his or her pledged convention delegates.
    The Commission has decided for several reasons not to take this 
action. Qualified campaign expenses are defined in the Matching Payment 
Act at 26 U.S.C. Sec. 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 purpose of the 10% rule set forth at 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. Allowing them to obtain additional funding at a later 
point in the process would undercut this purpose.
    Under 11 CFR 9034.1(b), candidates can already count fundraising 
expenses incurred following their DOI, including those incurred at a 
national nominating convention, as qualified campaign expenses as part 
of their winding down costs. The Commission notes, however, that only 
those expenses directly related to fundraising qualify as qualified 
campaign expenses under this section. Creating an additional window of 
eligibility during the wind down period could substantially lengthen 
and complicate the audit process.

Treating Matching Payments as an Entitlement

    One commenter urged the Commission to treat the matching payment 
program as more of an entitlement program. This commenter argued that 
the entitlement of a candidate who remains eligible for matching 
payments until the nominating convention should not be limited by the 
candidate's net outstanding campaign obligations. Instead, such a 
candidate should be entitled to receive matching funds for all 
matchable contributions received, up to fifty percent of the 
expenditure limitation. See 26 U.S.C. Sec. 9034(b), 11 CFR 9034.1(d). 
The commenter said that the Commission should match all qualifying 
contributions submitted by such a candidate for matching, up to fifty 
percent of the limitation, and then seek a ratio surplus repayment once 
all campaign obligations have been satisfied.
    However, this approach is inconsistent with the Matching Payment 
Act. Although the Act limits a candidate's overall entitlement to fifty 
percent of the expenditure limitation, the Act also further limits 
entitlement for candidates who become ineligible. Ineligible candidates 
are limited to matching payments for their net outstanding campaign 
obligations. 26 U.S.C. Sec. 9033(c)(2). See 11 CFR 9034.1(b). All 
candidates for the nomination become ineligible when the party makes 
its nomination, because they can no longer be ``seeking'' a nomination 
that has already been awarded. See 26 U.S.C. Sec. 9033(b)(2). Thus, a 
candidate's post-convention entitlement is limited to his or her NOCO, 
even if the candidate was eligible at the time the convention began.
    If the commenter's suggestion were adopted, a candidate who was 
still eligible at the time of the convention could submit a large 
matching payment request after the nomination was awarded and have that 
request fully matched, even if the campaign had no debts outstanding at 
the time the funds were certified. The funds received would be treated 
as surplus funds rather than funds received in excess of entitlement. 
Thus, the committee would only be required to repay a portion of the 
funds under the surplus repayment rules. Such a result would frustrate 
the purposes of the Matching Payment Act, which requires a full 
repayment of any funds received by a candidate who has no further 
entitlement on the date of certification. 26 U.S.C. Sec. 9038(b)(1). 
See 11 CFR 9038.2(b)(1).
    The Commission also notes that this issue is the subject of ongoing 
litigation.

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

    The attached final 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 final 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 Part 106

    Campaign funds, Political candidate, Political committee and 
parties, Reporting and recordkeeping requirements.

11 CFR Parts 9002-9004

    Campaign funds, Elections, Political candidates.

11 CFR Parts 9006-9007

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

11 CFR Part 9008

    Campaign funds, Political committees and parties, Reporting and 
recordkeeping requirements.

11 CFR Parts 9032-9034

    Campaign funds, Elections, Political candidate.
11 CFR Parts 9036-9039

    Administrative practice and procedure, Campaign funds, Political 
candidates.

    For the reasons set out in the preamble, subchapters A, E and F of 
chapter I of title 11 of the Code of Federal Regulations are amended as 
follows:

PART 106--ALLOCATIONS OF CANDIDATE AND COMMITTEE ACTIVITIES

    1. The authority citation for part 106 continues to read as 
follows:

    Authority: 2 U.S.C. 438(a)(8), 441a(b), 441a(g).

    2. Section 106.2 is amended by adding a sentence to the end of 
paragraph (a)(1), to read as follows:

[[Page 31872]]



Sec. 106.2  State allocation of expenditures incurred by authorized 
committees of presidential primary candidates receiving matching funds.

    (a) * * *
    (1) * * * Expenditures required to be allocated to the primary 
election under 11 CFR 9034.4(e) shall also be allocated to particular 
states in accordance with this section.
* * * * *

PART 9002--DEFINITIONS

    3. The authority citation for part 9002 continues to read as 
follows:

    Authority: 26 U.S.C. 9002 and 9009(b).

    4. Paragraph (c) of Sec. 9002.11 is amended by revising the first 
sentence to read as follows:


Sec. 9002.11  Qualified campaign expense.

* * * * *
    (c) Except as provided in 11 CFR 9034.4(e), expenditures incurred 
either before the beginning of the expenditure report period or after 
the last day of a candidate's eligibility will be considered qualified 
campaign expenses if they meet the provisions of 11 CFR 9004.4(a). * * 
*

PART 9003--ELIGIBILITY FOR PAYMENTS

    5. The authority citation for part 9003 continues to read as 
follows:

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

    6. In Sec. 9003.1, the introductory text of paragraph (b) is 
republished, paragraphs (b)(4) and (b)(9) are revised, and new 
paragraph (b)(10) is 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 any books, records (including 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 that meets the requirements of 11 CFR 9003.6(b) at the 
times specified in 11 CFR 9007.1(b)(1). 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.
* * * * *
    (9) Agree that they and their authorized committee(s) shall pay any 
civil penalties included in a conciliation agreement or otherwise 
imposed under 2 U.S.C. 437g against the candidates, any authorized 
committees of the candidates or any agent thereof.
    (10) Agree that any television commercial prepared or distributed 
by the candidate or the candidate's authorized committee(s) 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.
    7. Section 9003.3 is 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 general 
election legal and accounting compliance fund (``GELAC'') 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 the GELAC shall clearly 
state that Federal law prohibits private contributions from being used 
for the candidate's election and that contributions will be used solely 
for legal and accounting services to ensure compliance with Federal 
law, and shall clearly state how contribution checks should be made 
payable.
    (B) Contributions to the GELAC shall be subject to the limitations 
and prohibitions of 11 CFR parts 110, 114, and 115.
    (C) Contributions shall be deposited in the GELAC only if they are 
designated in writing for the GELAC, or transferred pursuant to 
paragraph (a)(1) (ii), (iii), (iv) or (v) of this section. Any 
contribution which otherwise could be matched pursuant to 11 CFR 9034.2 
shall not be considered designated in writing for the GELAC unless the 
contributor specifically redesignates it for the GELAC or unless it is 
accompanied by a proper designation for the GELAC. Any contribution 
that is designated in writing or redesignated for the GELAC shall not 
be matched pursuant to 11 CFR 9034.2.
    (ii)(A) Contributions made during the matching payment period that 
do not exceed the contributor's limit for the primary election may be 
redesignated for the GELAC and subsequently transferred to the GELAC 
before the nomination only if--
    (1) The contributions represent funds in excess of any amount 
needed to pay remaining primary expenses;
    (2) The contributions have not been submitted for matching;
    (3) The redesignations are received within 60 days of the 
Treasurer's receipt of the contributions; and
    (4) The requirements of 11 CFR 110.1(b) (5) and (l) regarding 
redesignation are satisfied.
    (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) Funds received during the matching payment period that are 
remaining in a candidate's primary election account after the 
nomination may be transferred to the GELAC 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 
GELAC.
    (iv) Contributions that are made after the beginning of the 
expenditure report period but which are not designated in writing for 
the GELAC may be redesignated for the GELAC and transferred to the 
GELAC only if--
    (A) 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 

[[Page 31873]]
Presidential Primary Matching Payment Account under 11 CFR 9038.2;
    (B) The contributions have not been submitted for matching; and
    (C) The candidate obtains the contributor's redesignation in 
accordance with 11 CFR 110.1.
    (v) Contributions made with respect to the primary election that 
exceed the contributor's limit for the primary election may be 
redesignated for the GELAC and transferred to the GELAC if the 
candidate obtains the contributor's redesignation for the GELAC in 
accordance with 11 CFR 110.1.
    (vi) For purposes of this section, a contribution shall be 
considered to be designated in writing for the GELAC if--
    (A) The contribution is made by check, money order, or other 
negotiable instrument which clearly indicates that it is made with 
respect to the GELAC; or
    (B) The contribution is accompanied by a writing, signed by the 
contributor, which clearly indicates that it is made with respect to 
the GELAC.
    (2) Uses. (i) Contributions to the GELAC 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 GELAC;
    (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 GELAC; 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 
GELAC 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.
    (B) 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.
    (C) 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.
    (D) In addition, a candidate may use contributions to the GELAC 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.
    (E) If the candidate wishes to claim a larger compliance exemption 
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 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.
    (F) 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.
    (G) Reimbursement from the GELAC 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 repayment determination by the Commission pursuant to 
11 CFR 9007.2. Any amounts so reimbursed to the Federal funds account 
may not subsequently be transferred back to the GELAC.
    (iii) Amounts paid from the GELAC 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. 441a(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 GELAC 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 a 
GELAC account separate from the account 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 the GELAC account shall 
be reported in a separate report in accordance with 11 CFR 
9006.1(b)(2). All contributions made to the GELAC account shall be 
recorded in accordance with 11 CFR 102.9. Disbursements made from the 
GELAC account shall be documented in the same manner provided in 11 CFR 
9003.5.
    (b) Contributions to defray qualified campaign expenses--major 
party 

[[Page 31874]]
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 may be deposited in a separate account or 
may 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 
GELAC, or from the candidate's primary election account in accordance 
with paragraph (a)(1)(iii) of this section.
    (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 GELAC 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 expendute 
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. The 
candidate may claim a larger fundraising exemption by establishing 
allocation percentages for employees using the method described in 
paragraph (a)(2)(ii)(C) of this section.
    (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. A candidate may exclude from the expenditure limitation the 
amounts described in paragraphs (a)(2)(ii) (A) and (D) of this section 
for payroll, overhead or computer costs or a larger amount under 
paragraphs (a)(2)(ii) (C) and (E) of this section.
    (7) 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 may be deposited in a separate account or 
may 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 Sec. 9006.1. 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.
    (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 the amount of payroll costs described in paragraph (b)(5) of 
this section.
    (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. A candidate may exclude from the expenditure limitation the 
amounts described in paragraphs (a)(2)(ii) (A) and (D) of this section 
for payroll, overhead or computer costs or a larger amount under 
paragraphs (a)(2)(ii) (C) and (E) of this section.
    (7) 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.
    8. Section 9003.4 is amended by revising the last sentence of 
paragraph (a), and adding a new sentence to the end of the paragraph 
(a), to read as follows:


Sec. 9003.4  Expenses incurred prior to the beginning of the 
expenditure report period or prior to receipt of Federal funds.

    (a) Permissible expenditures. (1) * * * Examples of such 
expenditures include but are not limited to: Expenditures for 
establishing financial accounting systems and expenditures for 
organizational planning. Expenditures for polling that are incurred 
before the start of the expenditure report period are attributed as 
provided in 11 CFR 9034.4(e)(2).
* * * * *
    9. Section 9003.5 is revised to read as follows:


Sec. 9003.5  Documentation of disbursements.

    (a) Burden of proof. Each candidate shall have the burden of 
providing 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 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.

[[Page 31875]]

    (1) For disbursements in excess of $200 to a payee, the candidate 
shall present a canceled check negotiated by the payee and either:
    (i) A receipted bill from the payee that states that 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; or
    (B) Evidence that the disbursement is covered by a pre-established 
written campaign committee policy, such as a dairy travel expense 
policy.
    (iv) If the purpose of the disbursement is not stated in the 
accompanying documentation, it must be indicated on the canceled check.
    (2) For all other disbursements, the candidate shall present:
    (i) A record disclosing the full name and mailing address of the 
payee, 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 $1000 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 $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 
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 $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 9004.9(d)(2).

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

    10. The authority citation for part 9004 continues to read as 
follows:

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

    11. Section 9004.4 is amended by revising paragraph (a), by adding 
new paragraph (b)(8), and by removing paragraph (c), 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 (b)(11) or to otherwise restore funds (other than 
contributions received pursuant to 11 CFR 9003.3 (b) or (c) 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, overhead and computer 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, and 
will be presumed to be 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 shall be 
considered qualified campaign expenses, provided that:
    (i) Gifts for committee employees, consultants and volunteers in 
recognition for campaign-related activities or services do not exceed 
$150 total per individual and the total of all gifts does not exceed 
$20,000; and
    (ii) All monetary bonuses for committee employees and consultants 
in recognition for campaign-related activities or services;
    (A) Are provided for pursuant to a written contract made prior to 
the date of the election; and
    (B) Are paid during the expenditure report period.
    (b) * * *
    (8) Lost or Misplaced Items. The cost of lost or misplaced items 
may be considered a nonqualified campaign expense. Factors considered 
by the commission 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; whether the 
committee sought or obtained insurance; the type of equipment involved; 
and the number and value of items that were lost.
    12. Section 9004.5 is revised to read as follows:

[[Page 31876]]



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 paid 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 repaid to the United States Treasury as provided under 11 
CFR 9007.2(b)(2)(i).
    13. Section 9004.6 is 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, and 
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 limitation in paragraphs (b) and (c) of this 
section, committees may seek reimbursement for these expenses, and may 
deduct reimbursements received from media representatives 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 amount of reimbursement sought 
from a media representative under paragraph (a)(2) of this section 
shall not exceed 110% of 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. Any 
reimbursement received in excess of this amount shall be disposed of in 
accordance with paragraph (d)(1) of this section.
    (2) For the purpose of this section, a media representative's pro 
rata share shall be calculated by dividing the total actual cost of the 
transportation and services provided 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, except that, when 
seeking reimbursement for transportation costs paid by the committee 
under 11 CFR 9004.7(b)(5)(i)(C), the total number of individuals shall 
not include national security staff.
    (c) Deducation of reimbursements from expenditures subject to the 
overall expenditure limitation. (1) The committee may deduct from the 
amount of expenditures subject to the overall expenditure limitation:
    (i) The amount of reimbursements received from media 
representatives in payment for the transportation and services 
described in paragraph (a) of this section, up to the actual cost of 
the transportation and services provided to media representatives; and
    (ii) An additional amount of the reimbursements received from media 
representatives, representing the administrative costs incurred by the 
committee in providing these services to the media representative and 
seeking reimbursement for them, equal to:
    (A) Three percent of the actual cost of transportation and services 
provided to the media representatives under this section; or
    (B) An amount in excess of 3% representing the administrative costs 
actually incurred by the committee in providing services to the media 
representatives, provided that the committee is able to document the 
total amount of administrative costs actually incurred.
    (2) For the purpose of this paragraph, ``administrative costs'' 
includes all costs incurred by the committee in making travel 
arrangements and seeking reimbursement, whether these services are 
performed by committee staff or by independent contractors.
    (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) of this section shall be paid to 
the Treasury.
    (e) Reporting. The total amount paid by an authorized committee for 
the services and facilities described in paragraph (a)(1) of this 
section, plus the administrative costs incurred by the committee in 
providing these services and facilities and seeking reimbursement for 
them, shall be reported as an expenditure in accordance with 11 CFR 
104.3(b)(2)(i). Any reimbursement received by such committee under 
paragraph (b)(1) of this section shall be reported in accordance with 
11 CFR 104.3(a)(3)(ix).
    14. Section 9004.7 is 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 the candidate. Other factors, 
including the setting, timing and statements or expressions of the 
purpose of an event, and the substance of the remarks or speech made, 
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 by the committee for Commission 
inspection. The itinerary shall show the time of arrival and departure 
and the type of events held.

[[Page 31877]]

    (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. When required to be created, a copy of the 
government's or charter company's official manifest shall also be 
maintained and made available by the committee.
    (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) In the case of travel to a city not served by a regularly 
scheduled commercial airline service, the commercial charter rate for 
an airplane sufficient in size to accommodate the campaign-related 
travelers, including the candidate, plus the news media and the Secret 
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 greater of the 
amount billed or the amount required under paragraph (b)(5)(i) of this 
section for one passenger.
    (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 conveyance 
sufficient in size to accommodate the campaign-related travelers, 
including the candidate, plus the news media and the Secret Service.
    (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, flight number 
and travel service providing that fare or the charter rate, as 
appropriate. For travel by other conveyances, the committee shall 
maintain documentation of the commercial rental rate for a conveyance 
of sufficient size, including the provider of the conveyance and the 
size, model and make of the conveyance.
    (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).
    15. Section 9004.9 is amended by revising paragraph (a)(1)(iii), 
adding paragraph (a)(4) and revising paragraph (d)(1), to read as 
follows:


Sec. 9004.9  Net outstanding qualified campaign expenses.

    (a) * * *
    (1) * * *
    (iii) An estimate of the necessary winding down costs, as defined 
under 11 CFR 9004.4(a)(4), submitted in the format required by 
paragraph (a)(4) of this section; less
* * * * *
    (4) The amount submitted as an estimate of necessary winding down 
costs under paragraph (a)(1)(iii) of this section shall be broken down 
by expense category and quarterly or monthly time period. This 
breakdown shall include estimated costs for office space rental, staff 
salaries, legal expenses, accounting expenses, 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.
* * * * *
    (d)(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 9004.9(d)(2). A list of all capital assets shall 
be maintained by the committee in accordance with 11 CFR 9003.5(d)(1). 
The fair market value of capital assets may be considered to be the 
total original cost of such items when acquired less 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.
* * * * *

PART 9006--REPORTS AND RECORDKEEPING

    16. The authority citation for part 9006 continues to read as 
follows:

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

    17. Section 9006.3 is 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 

[[Page 31878]]
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. In the case of individuals, such schedule 
shall list all contributors, payees, and creditors in alphabetical 
order by surname.

PART 9007--EXAMINATIONS AND AUDITS; REPAYMENTS

    18. The authority citation for part 9007 continues to read as 
follows:

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

    19. Section 9007.1 is amended by revising paragraphs (b)(2)(iii), 
(c), (d) and (e) and adding new paragraph (f) to read as follows:


Sec. 9007.1  Audits.

* * * * *
    (b) * * *
    (2) * * *
    (iii) Exit conference. At the conclusion of the fieldwork, 
Commission staff will hold an exit conference to discuss with committee 
representatives the staff's preliminary findings and recommendations 
which the staff anticipates it will present to the Commission for 
approval. Commission staff will prepare a written Exit Conference 
Memorandum that discusses these findings and recommendations. A copy of 
the Exit Conference Memorandum will be given to committee 
representatives at the exit conference. These preliminary staff 
findings may include an evaluation of procedures and systems employed 
by the candidate and committee to comply with applicable provisions of 
the Federal Election Campaign Act, the Presidential Election Campaign 
Fund Act and Commission regulations; the accuracy of statements and 
reports filed with the Commission by the candidate and committee; and 
preliminary calculations regarding future repayments to the United 
States Treasury. Commission staff will advise committee representatives 
at this conference of the committee's opportunity to respond to these 
proposed findings, the projected timetable regarding the issuance of 
the audit report and any repayment determination, the committee's 
opportunity for an administrative review of any repayment 
determination, and the procedures involved in Commission repayment 
determinations under 11 CFR 9007.2.
* * * * *
    (c) Committee response to the Exit Conference Memorandum. The 
candidate and his or her authorized committee may submit in writing 
within 60 calendar days after the exit conference, legal and factual 
materials disputing or commenting on the proposed findings contained in 
the Exit Conference Memorandum. In addition, the committee shall submit 
any additional documentation requested by Commission staff. Such 
materials may be submitted by counsel if the candidate so desires.
    (d) Approval and issuance of the audit report. (1) Before voting on 
whether to approve and issue an audit report, the Commission will 
consider any written legal and factual materials timely submitted by 
the candidate or his or her authorized committee in accordance with 
paragraph (c) of this section. The Commission-approved audit report may 
address issues other than those contained in the Exit Conference 
Memorandum. In addition, this report will contain a repayment 
determination made by the Commission pursuant to 11 CFR 9007.2(c)(1).
    (2) The audit report may contain issues that warrant referral to 
the Office of General Counsel for possible enforcement proceedings 
under 2 U.S.C. 437g and 11 CFR Part 111.
    (3) Addenda to the audit report may be approved and issued by the 
Commission from time to time as circumstances warrant and as additional 
information becomes available. Such addenda may be based on follow-up 
fieldwork conducted under paragraph (b)(3) of this section, and/or 
information ascertained by the Commission in the normal course of 
carrying out its supervisory responsibilities. The procedures set forth 
in paragraphs (c) and (d) (1) and (2) of this section will be followed 
in preparing such addenda. The addenda will be placed on the public 
record as set forth in paragraph (e) of this section. Such addenda may 
also include additional repayment determination(s).
    (e) Public release of audit report. (1) The Commission will 
consider the audit report in an open session agenda document. The 
Commission will provide the candidate and the committee with copies of 
any agenda document to be considered in an open session 24 hours prior 
to releasing the agenda document to the public.
    (2) Following Commission approval of the audit report, the report 
will be forwarded to the committee and released to the public. The 
Commission will provide the candidate and committee with copies of the 
audit report approved by the Commission 24 hours before releasing the 
report to the public.
    (f)(1)Sampling. In conducting an audit of contributions pursuant to 
this section, the Commission may utilize generally accepted statistical 
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 shall 
respond only to the specific sample items used to make the projection. 
If the committee demonstrates that any apparent errors found among the 
sample items were not errors, the Commission shall make a new 
projection based on the reduced number of errors in the sample.
    (3) Within 30 days of service of the Final Audit Report, the 
committee shall submit a check to the United States Treasury for the 
total amount of any excessive or prohibited contributions not refunded, 
reattributed or redesignated in a timely manner in accordance with 11 
CFR 103.3(b) (1), (2) or (3); or take any other action required by the 
Commission with respect to sample-based findings.
    20. In Sec. 9007.2, paragraphs (a) (2) and (3) are revised, 
paragraph (a)(4) added, the introductory text of paragraph (b) is 
republished, paragraph (b)(4) is revised, paragraphs (c) and (d) are 
revised, and the first two sentences of paragraph (f), the first 
sentence of paragraph (g), and paragraph (i) are revised to read as 
follows:


Sec. 9007.2  Repayments.

    (a) * * *
    (2) The Commission will notify the candidate of any repayment 
determinations made under this section as soon as possible, but not 
later than 3 years after the day of the presidential election. The 
Commission's issuance of the audit report to the candidate under 11 CFR 
9007.1(d) will constitute notification for purposes of this section.
    (3) Once the candidate receives notice of the Commission's 
repayment determination under this section, the candidate should give 
preference to the repayment over all other outstanding obligations of 
his or her committee, except for any federal taxes owed by the 
committee.
    (4) Repayments may be made only from the following sources: 
personal funds of the candidate (without regard to the limitations of 
11 CFR 9003.2(c)), contributions and federal funds in the committee's 
account(s), and any additional funds raised subject to the limitations 
and prohibitions of the 

[[Page 31879]]
Federal Election Campaign Act of 1971, as amended.
* * * * *
    (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 in paragraphs (b) (1) through (5) of this 
section.
* * * * *
    (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.
* * * * *
    (c) Repayment determination procedures. The Commission's repayment 
determination will be made in accordance with the procedures set forth 
at paragraphs (c)(1) through (c)(4) of this section.
    (1) Repayment determination. The Commission will provide the 
candidate with a written notice of its repayment determination(s). This 
notice will be included in the Commission's audit report prepared 
pursuant to 11 CFR 9007.1(d) and will set forth the legal and factual 
reasons for such determination(s), as well as the evidence upon which 
any such determination is based. The candidate shall repay to the 
United States Treasury in accordance with paragraph (d) of this 
section, the amount which the Commission has determined to be 
repayable.
    (2) Administrative review of repayment determination. If a 
candidate disputes the Commission's repayment determination(s), he or 
she may request an administrative review of the determination(s) as set 
forth in paragraph (c)(2)(i) of this section.
    (i) Submission of written materials. A candidate who disputes the 
Commission's repayment determination(s) shall submit in writing, within 
60 calendar days after service of the Commission's notice, legal and 
factual materials demonstrating that no repayment, or a lesser 
repayment, is required. Such materials may be submitted by counsel if 
the candidate so desires. The candidate's failure to timely raise an 
issue in written materials presented pursuant to this paragraph will be 
deemed a waiver of the candidate's right to raise the issue at any 
future stage of proceedings including any petition for review filed 
under 26 U.S.C. 9011(a).
    (ii) Oral hearing. A candidate who submits written materials 
pursuant to paragraph (c)(2)(i) of this section may at the same time 
request in writing that the Commission provide such candidate with an 
opportunity to address the Commission in open session to demonstrate 
that no repayment, or a lesser repayment, is required. The candidate 
should identify in this request the repayment issues he or she wants to 
address at the oral hearing. If the Commission decides by an 
affirmative vote of four (4) of its members to grant the candidate's 
request, it will inform the candidate of the date and time set for the 
oral hearing. At the date and time set by the Commission, the candidate 
or candidate's designated representative will be allotted an amount of 
time in which to make an oral presentation to the Commission based upon 
the legal and factual materials submitted under paragraph (c)(2)(ii) of 
this section. The candidate or representative will also have the 
opportunity to answer any questions from individual members of the 
Commission.
    (3) Repayment determination upon review. In deciding whether to 
revise any repayment determination(s) following an administrative 
review pursuant to paragraph (c)(2) of this section, the Commission 
will consider any submission made under paragraph (c)(2)(i) of this 
section and any oral hearing conducted under paragraph (c)(2)(ii) of 
this section, and may also consider any new or additional information 
from other sources. A determination following an administrative review 
that a candidate must repay a certain amount will be accompanied by a 
written statement of reasons supporting the Commission's 
determination(s). This statement will explain the legal and factual 
reasons underlying the Commission's determination(s) and will summarize 
the results of any investigation(s) upon which the determination(s) are 
based.
    (d) Repayment period. (1) Within 90 calendar days of service of the 
notice of the Commission's repayment determination(s), the candidate 
shall repay to the United States Treasury the amounts which the 
Commission has determined to be repayable. Upon application by the 
candidate, the Commission may grant an extension of up to 90 calendar 
days in which to make repayment.
    (2) If the candidate requests an administrative review of the 
Commission's repayment determination(s) under paragraph (c)(2) of this 
section, the time for repayment will be suspended until the Commission 
has concluded its administrative review of the repayment 
determination(s). Within 30 calendar days after service of the notice 
of the Commission's post-administrative review repayment 
determination(s), the candidate shall repay to the United States 
Treasury the amounts which the Commission has determined to be 
repayable. Upon application by the candidate, the Commission may grant 
an extension of up to 90 calendar days in which to make repayment.
    (3) Interest shall be assessed on all repayments made after the 
initial 90-day repayment period established at paragraph (d)(1) of this 
section or the 30-day repayment period established at paragraph (d)(2) 
of this section. The amount of interest due shall be the greater of:
    (i) An amount calculated in accordance with 28 U.S.C. 1961 (a) and 
(b); or
    (ii) The amount actually earned on the funds set aside or to be 
repaid under this section.
* * * * *
    (f) Additional repayments. Nothing in this section will prevent the 
Commission from making additional repayment determinations on one or 
more of the bases set forth at 11 CFR 9007.2(b) after it has made a 
repayment determination on any such basis. The Commission may make 
additional repayment determinations where there exist facts not used as 
the basis for any previous determination. * * *
    (g) Newly-discovered assets. If, after any repayment determination 
made under this section, a candidate or his or her authorized 
committee(s) receives or becomes aware of assets not previously 
included in any statement of net outstanding qualified campaign 
expenses submitted pursuant to 11 CFR 9004.9, the candidate or his or 
her authorized committee(s) shall promptly notify the Commission of 
such newly-discovered assets. * * *
* * * * *
    (i) Petitions for rehearing; stays pending appeal. The candidate 
may file a petition for rehearing of a repayment determination in 
accordance with 11 CFR 9007.5(a). The candidate may request a stay of a 
repayment determination in accordance with 11 CFR 9007.5(c) pending the 
candidate's appeal of that repayment determination.
    21. Section 9007.3 is amended by adding a new sentence to the end 
of paragraph (c), to read as follows:

[[Page 31880]]



Sec. 9007.3  Extensions of time.

* * * * *
    (c) * * * If a candidate seeks an extension of any 60-day response 
period under 11 CFR Part 9007, the Commission may grant no more than 
one extension to that candidate, which extension shall not exceed 15 
days.
* * * * *
    22. Section 9007.5 is amended by revising paragraphs (a), (b), 
(c)(1)(ii) and the introductory text of paragraph (c)(4) to read as 
follows:


Sec. 9007.5  Petitions for rehearing; stays of repayment 
determinations.

    (a) Petitions for rehearing. (1) Following the Commission's 
repayment determination or a final determination that a candidate is 
not entitled to all or a portion of post-election funding under 11 CFR 
9004.9(f), the candidate may file a petition for rehearing setting 
forth the relief desired and the legal and factual basis in support. To 
be considered by the Commission, petitions for rehearing must:
    (i) Be filed within 20 calendar days following service of the 
Commission's repayment determination or final determination;
    (ii) Raise new questions of law or fact that would materially alter 
the Commission's repayment determination or final determination; and
    (iii) Set forth clear and convincing grounds why such questions 
were not and could not have been presented during the original 
determination process.
    (2) If a candidate files a timely petition under this section 
challenging a Commission repayment determination, the time for 
repayment will be suspended until the Commission serves notice on the 
candidate of its determination on the petition. The time periods for 
making repayment under 11 CFR 9007.2(d) shall apply to any amounts 
determined to be repayable following the Commission's consideration of 
a petition for rehearing under this section.
    (b) Effect of failure to raise issues. The candidate's failure to 
raise an argument in a timely fashion during the original determination 
process or in a petition for rehearing under this section, as 
appropriate, shall be deemed a waiver of the candidate's right to 
present such arguments in any future stage of proceedings including any 
petition for review filed under 26 U.S.C. 9011(a). An issue is not 
timely raised in a petition for rehearing if it could have been raised 
earlier in response to the Commission's original determination.
    (c) * * *
    (1) * * *
    (ii) A request for a stay shall be made in writing and shall be 
filed within 30 calendar days after service of the Commission's 
decision on a petition for rehearing under paragraph (a) of this 
section or, if no petition for rehearing is filed, within 30 calendar 
days after service of the Commission's repayment determination under 11 
CFR 9007.2(c).
* * * * *
    (4) All stays shall require the payment of interest on the amount 
at issue. The amount of interest due shall be calculated from the date 
30 days after service of the Commission's repayment determination under 
11 CFR 9007.2(c)(4) and shall be the greater of:
* * * * *
    23. Section 9007.7 is added to read as follows:
Sec. 9007.7  Administrative record.

    (a) The Commission's administrative record for final determinations 
under 11 CFR 9004.9 and 9005.1, and for repayment determinations under 
11 CFR 9007.2, consists of all documents and materials submitted to the 
Commission for its consideration in making those determinations. The 
administrative record will include the certification of the 
Commission's vote(s), the audit report that is sent to the committee 
(for repayment determinations), the statement(s) of reasons, and the 
candidate agreement. The committee may include documents or materials 
in the administrative record by submitting them within the time periods 
set forth at 11 CFR 9004.9(f)(2)(ii), 9005.1(b)(2), 9005.1(c)(4), 
9007.1(c) and 9007.2(c)(2), as appropriate.
    (b) The Commission's administrative record for determinations under 
11 CFR 9004.9, 9005.1 and 9007.2 does not include:
    (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 other than 
transcripts or audio tapes of oral hearings pursuant to 11 CFR 
9007.2(c)(2), although 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 9008--FEDERAL FINANCING OF PRESIDENTIAL NOMINATING CONVENTIONS

    24. The authority citation for part 9008 continues to read as 
follows:

    Authority: 2 U.S.C. 437, 438(a)(6), 26 U.S.C. 9008, 9009(b).

    25. Section 9008.12 is amended by revising the last sentence of 
paragraph (a)(2) to read as follows:


Sec. 9008.12  Repayments.

    (a) * * *
    (2) * * * The Commission's issuance of an audit report to the 
committee will constitute notification for purposes of the three year 
period.
* * * * *

PART 9032--DEFINITIONS

    26. The authority citation for part 9032 continues to read as 
follows:

    Authority: 26 U.S.C. 9032 and 9039(b).

    27. Section 9032.9 is amended by revising the first sentence of 
paragraph (c) to read as follows:


Sec. 9032.9  Qualified campaign expense.

* * * * *
    (c) Except as provided in 11 CFR 9034.4(e), expenditures incurred 
either before the beginning of the expenditure report period or after 
the last day of a candidate's eligibility will be considered qualified 
campaign expenses if they meet the provisions of 11 CFR 9034.4(a). * * 
*
* * * * *

PART 9033--ELIGIBILITY FOR PAYMENTS

    28. The authority citation for part 9033 is revised to read as 
follows:

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

    29. Section 9033.1 is amended by republishing the introductory text 
of paragraph (b), by revising paragraph (b)(5), by adding a new second 
sentence to paragraph (b)(7), by revising paragraph (b)(11), and by 
adding new paragraph (b)(12), 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 

[[Page 31881]]
documentation relating to disbursements and receipts including any 
books, records (including bank 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.
* * * * *
    (7) * * *  The candidate and the candidate's authorized 
committee(s) shall also provide any material required in connection 
with an audit, investigation, or examination conducted pursuant to 11 
CFR part 9039. * * *
* * * * *
    (11) The candidate and the candidate's authorized committee(s) will 
pay an civil penalties included in a conciliation agreement or 
otherwise imposed under 2 U.S.C. 437g against the candidate, any 
authorized committees of the candidate or any agent thereof.
    (12) Any television commercial prepared or distributed by the 
candidate or the candidate's authorized committee(s) 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.
    30. Section 9033.4 is amended by removing paragraph (b) and 
redesignating paragraph (c) as paragraph (b).
    31. Section 9033.11 is 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 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; or
    (B) Evidence that the disbursement is covered by a pre-established 
written campaign committee policy, such as a daily travel expense 
policy.
    (iv) If the purpose of the disbursement is not stated in the 
accompanying documentation, it must be indicated on the canceled check.
    (2) For all other disbursements, the candidate shall present:
    (i) A record disclosing the full name and mailing address of the 
payee, 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 $1000 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 $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

    32. The authority citation for part 9034 continues to read as 
follows:

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

    33. Section 9034.4 is amended by revising paragraphs (a) and 
(b)(3), by adding new paragraph (b)(8), by removing and reserving 
paragraph (c), by revising paragraph (d)(2), and by adding new 
paragraph (e), to read as follows:

[[Page 31882]]



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 the 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 shall be 
considered qualified campaign expenses, provided that:
    (i) Gifts for committee employees, consultants and volunteers in 
recognition for campaign-related activities or services do not exceed 
$150 total per individual and the total of all gifts does not exceed 
$20,000; and
    (ii) All monetary bonuses for committee employees and consultants 
in recognition for campaign-related activities or services:
    (A) Are provided for pursuant to a written contract made prior to 
the date of ineligibility; and
    (B) Are paid no later than thirty days after the date of 
ineligibility.
    (b) * * *
    (3) General election and 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). 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.
* * * * *
    (8) Lost or misplaced items. The cost of lost or misplaced items 
may be considered a nonqualified campaign expense. Factors considered 
by the Commission 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; whether the 
committee sought or obtained insurance; the type of equipment involved; 
and the number and value of items that were lost.
    (c) [Reserved]
    (d) * * *
    (2) General election. If a candidate has received matching funds, 
all transfers from the candidate's primary election account to a legal 
and accounting compliance fund established for the general election 
must be made in accordance with 11 CFR 9003.3(a)(1).
    (e) Attribution of expenditures between the primary and the general 
election limits. The following rules apply to candidates who receive 
public funding in both the primary and the general election.
    (1) General rule. Any expenditure for goods or services that are 
used exclusively for the primary election campaign shall be attributed 
to the limits set forth at 11 CFR 9035.1. Any expenditure for goods or 
services that are used exclusively for the general election campaign 
shall be attributed to the limits set forth at 11 CFR 110.8(a)(2), as 
adjusted under 11 CFR 110.9(c).
    (2) Polling expenses. Polling expenses shall be attributed 
according to when the results of the poll are received. If the results 
are received on or before the date of the candidate's nomination, the 
expenses shall be considered primary election expenses. If results are 
received from a single poll both before and after the date of the 
candidate's nomination, the costs shall be allocated between the 
primary and the general election limits based on the percentage of 
results received during each period.
    (3) State or national campaign offices. Overhead expenditures and 
payroll costs incurred in connection with state or national campaign 
offices, shall be attributed according to when the usage occurs or the 
work is performed. For purposes of this section, overhead expenditures 
shall have the same meaning as set forth in 11 CFR 106.2(b)(2)(iii)(D). 
Expenses for usage of offices or work performed on or before the date 
of the candidate's nomination shall be attributed to the primary 
election, except for periods when the office is used only by persons 
working exclusively on general election campaign preparations.
    (4) Campaign materials. Expenditures for campaign materials, 
including bumper stickers, campaign brochures, buttons, pens and 
similar items, that are purchased by the primary election campaign 
committee and later transferred to and used by the general election 
committee shall be attributed to the general election limits. Materials 
transferred to but not used by the general election committee shall be 
attributed to the primary election limits.
    (5) Media production costs. For media communications that are 
broadcast or published both before and after the date of the 
candidate's nomination, 50% of the media production costs shall be 
attributed to the primary election limits, 

[[Page 31883]]
and 50% to the general election limits. Distribution costs, including 
such costs as air time and advertising space in newspapers, shall be 
paid for 100% by the primary or general election campaign depending on 
when the communication is broadcast or distributed.
    (6) Campaign Communications. (i) Solicitations. The costs of a 
solicitation shall be attributed to the primary election or to the 
GELAC, depending on the purpose of the solicitation. If a candidate 
solicits funds for both the primary election and for the GELAC in a 
single communication, 50% of the cost of the solicitation shall be 
attributed to the primary election, and 50% to the GELAC.
    (ii) Other communications. Except as provided in paragraph (e)(5) 
of this section, the costs of a campaign communication that does not 
include a solicitation shall be attributed to the primary or general 
election limits based on the date on which the communication is 
broadcast, published or mailed. The cost of a communication that is 
broadcast, published or mailed before the date of the candidate's 
nomination shall be attributed to the primary election limits.
    (7) Travel costs. Expenditures for campaign-related transportation, 
food, and lodging by any individual, including a candidate, shall be 
attributed according to when the travel occurs. If the travel occurs on 
or before the date of the candidate's nomination, the cost is a primary 
election expense. Travel to and from the convention shall be attributed 
to the primary election. Travel by a person who is working exclusively 
on general election campaign preparations shall be considered a general 
election expense even if the travel occurs before the candidate's 
nomination.
    34. Section 9034.5 is 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 non-qualified campaign 
expenses nor any amounts determined or anticipated to be required as 
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 expense 
category and quarterly or monthly time period. This breakdown shall 
include estimated costs for office space rental, staff salaries, legal 
expenses, accounting expenses, 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 received 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 shall be considered to be the total 
original cost of such items when acquired less 40%, to account for 
depreciation, except that items received after the date of 
ineligibility must be valued at their fair market value on the date 
received.
* * * * *
    (f)(1) With each submission for matching fund payments filed after 
the candidate's date of ineligibility, the candidate shall certify 
that, as of the close of business on the last business day preceding 
the date of submission for matching funds, his or her remaining net 
outstanding campaign obligations equal or exceed the amount submitted 
for matching.
    (2) A candidate who makes a submission for matching fund payments 
after his or her date of ineligibility shall also submit a revised 
statement of net outstanding campaign obligations. This revised 
statement shall be due before the next regularly scheduled payment 
date, on a date to be determined and published by the Commission. 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.
    35. Section 9034.6 is 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, and 
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 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 reimbursements received from media representatives 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 amount of reimbursement sought 
from a media representative under paragraph (a)(2) of this section 
shall not exceed 110% of 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. Any 
reimbursement received in excess of this amount shall be disposed of in 
accordance with paragraph (d)(1) of this section.
    (2) For the purposes of this section, a media representative's pro 
rata share shall be calculated by dividing the total actual cost of the 
transportation and services provided 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 

[[Page 31884]]
personnel, national security staff and any other individuals to whom 
such transportation and services are made available, except that, when 
seeking reimbursement for transportation costs paid by the committee 
under 11 CFR 9034.7(b)(5)(i)(C), the total number of individuals shall 
not include national security staff.
    (c) Deduction of reimbursements from expenditures subject to the 
overall expenditure limitations.
    (1) The Committee may deduct from the amount of expenditures 
subject to the overall expenditure limitation:
    (i) The amount of reimbursements received from media 
representatives in payment for the transportation and services 
described in paragraph (a) of this section, up to the actual cost of 
the transportation and services provided to media representatives; and
    (ii) An additional amount of the reimbursements received from media 
representatives, representing the administrative costs incurred by the 
committee in providing these services to the media representatives and 
seeking reimbursement for them, equal to:
    (A) Three percent of the actual cost of transportation and services 
provided to the media representatives under this section; or
    (B) An amount in excess of 3% representing the administrative costs 
actually incurred by the committee in providing services to the media 
representatives, provided that the committee is able to document the 
total amount of administrative costs actually incurred.
    (2) For the purposes of this paragraph, ``administrative costs'' 
includes all costs incurred by the committee in making travel 
arrangements and seeking reimbursement, whether these services are 
performed by committee staff or by independent contractors.
    (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) of this section shall be paid to 
the Treasury.
    (e) Reporting. The total amount paid by an authorized committee for 
the services and facilities described in paragraph (a)(1) of this 
section, plus the administrative costs incurred by the committee in 
providing these services and facilities and seeking reimbursement for 
them, shall be reported as an expenditure in accordance with 11 CFR 
104.3(b)(2)(i). Any reimbursement received by such committee under 
paragraph (b)(1) of this section shall be reported in accordance with 
11 CFR 104.3(a)(3)(ix).
    36. Section 9034.7 is 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 campaign of a candidate seeking nomination 
for election 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 the candidate. Other factors, 
including the setting, timing and statements or expressions of the 
purpose of an event and the substance of the remarks or speech made, 
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 by the committee for Commission 
inspection. The itinerary shall show the time of arrival and departure 
and the type of event held.
    (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. When required to be created, a copy of the 
government's or the charter company's official manifest shall also be 
maintained and made available by the committee.
    (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) In the case of travel to a city not served by a regularly 
scheduled commercial airline service, the commercial charter rate for 
an airplane sufficient in size to accommodate the campaign-related 
travelers, including the candidate, plus the news media and the Secret 
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 greater of the 
amount billed or the amount required under paragraph (b)(5)(i) of this 
section for one passenger.
    (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 conveyance 
sufficient in size to accommodate the campaign-related travelers, 
including the candidate, plus the news media and the Secret Service.
    (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, 

[[Page 31885]]
including the airline, the flight number and travel service providing 
that fare or the charter rate, as appropriate. For travel by other 
conveyances, the committee shall maintain documentation of the 
commercial rental rate for a conveyance of sufficient size, including 
the provider of the conveyance and the size, model and make of the 
conveyance.
    (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 trips 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 9036--REVIEW OF SUBMISSION AND CERTIFICATION OF PAYMENTS BY 
COMMISSION

    37. The authority citation for part 9036 continues to read as 
follows:

    Authority: 26 U.S.C. 9036 and 9039(b).

    38. Section 9036.2 is amended by revising paragraph (b)(1)(ii) and 
adding a new sentence to the end of paragraph (b)(1)(vi), to read as 
follows:


Sec. 9036.2  Additional submissions for matching fund payments.

* * * * *
    (b) * * *
    (1) * * *
    (ii) The candidate is required to submit an alphabetical list of 
contributors (either solely in magnetic media from or in both printed 
and magnetic media forms), but not segregated by State as required in 
the threshold submission;
* * * * *
    (vi) * * * In lieu of submitting photocopies, the candidate may 
submit digital images of checks, written instruments and deposit slips 
as specified in the Computerized Magnetic Media Requirements. The 
candidate shall provide the computer equipment and software needed to 
retrieve and read the digital images, if necessary, at no cost to the 
Commission, and shall include digital images of every contribution 
received and imaged on or after the date of the previous matching fund 
request. Contributions and other documentation not imaged shall be 
submitted in photocopy form.
* * * * *
    39. In section 9036.5, the introductory text of paragraph (a) is 
revised to read as follows:


Sec. 9036.5  Resubmissions.

    (a) Alternative resubmission methods. Upon receipt of the 
Commission's notice of the results of the submission review pursuant to 
11 CFR 9036.4(b), or of an inquiry pursuant to 11 CFR 9039.3 that 
results in a downward adjustment to the amount of certified matching 
funds, a candidate may choose to:
* * * * *

PART 9037--PAYMENTS AND REPORTING

    40. The authority citation for part 9037 continues to read as 
follows:

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

    41. Section 9037.4 is 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 the receipts, the payees or the creditors, as 
appropriate. In the case of individuals, such schedule shall list all 
contributors, payees, and creditors in alphabetical order by surname.

PART 9038--EXAMINATIONS AND AUDITS

    42. The authority citation for part 9038 continues to read as 
follows:

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

    42A. The part heading is revised as set forth above.
    43. Section 9038.1 is amended by revising paragraphs (b)(2)(iii), 
(c), (d) and (e) and adding new paragraph (f) to read as follows:


Sec. 9038.1  Audit.

* * * * *
    (b) * * *
    (2) * * *
    (iii) Exit conference. At the conclusion of the fieldwork, 
Commission staff will hold an exit conference to discuss with committee 
representatives the staff's preliminary findings and recommendations 
which the staff anticipates it will present to the Commission for 
approval. Commission staff will prepare a written Exit Conference 
Memorandum that discusses these findings and recommendations. A copy of 
the Exit Conference Memorandum will be given to committee 
representatives at the exit conference. These findings may include an 
evaluation of procedures and systems employed by the candidate and 
committee to comply with applicable provisions of the Federal Election 
Campaign Act, the Presidential Matching Payment Account Act and 
Commission regulations; the accuracy of statements and reports filed 
with the Commission by the candidate and committee; and preliminary 
calculations regarding future repayments to the United States Treasury. 
Commission staff will advise committee representatives at this 
conference of the committee's opportunity to respond to these proposed 
findings, the projected timetable regarding the issuance of the audit 
report and any repayment determination, the committee's opportunity for 
an administrative review of any repayment determination, and the 
procedures involved in Commission repayment determinations under 11 CFR 
9038.2.
* * * * *
    (c) Committee Response to the Exit Conference Memorandum. The 
candidate and his or her authorized committee may submit in writing 
within 60 calendar days after the exit conference, legal and factual 
materials disputing or commenting on the proposed findings contained in 
the Exit Conference Memorandum. In addition, the committee shall submit 
any additional documentation requested by 

[[Page 31886]]
Commission staff. Such materials may be submitted by counsel if the 
candidate so desires.
    (d) Approval and issuance of audit report. (1) Before voting on 
whether to issue and approve an audit report, the Commission will 
consider any written legal and factual materials timely submitted by 
the candidate or his or her authorized committee in accordance with 
paragraph (c) of this section. The Commission-approved audit report may 
address issues other than those contained in the Exit Conference 
Memorandum. In addition, this report will contain a repayment 
determination made by the Commission pursuant to 11 CFR 9038.2(c)(1).
    (2) The audit report may contain issues that warrant referral to 
the Office of General Counsel for possible enforcement proceedings 
under 2 U.S.C. 437g and 11 CFR part 111.
    (3) Addenda to the audit report may be approved and issued by the 
Commission from time to time as circumstances warrant and as additional 
information becomes available. Such addenda may be based on follow-up 
fieldwork conducted under paragraph (b)(3) of this section, and/or 
information ascertained by the Commission in the normal course of 
carrying out its supervisory responsibilities. The procedures set forth 
in paragraphs (c) and (d) (1) and (2) of this section will be followed 
in preparing such addenda. The addenda will be placed on the public 
record as set forth in paragraph (e) of this section. Such addenda may 
also include additional repayment determination(s).
    (e) Public release of audit report. (1) The Commission will 
consider the audit report in an open session agenda document. The 
Commission will provide the candidate and the committee with copies of 
any agenda document to be considered in an open session 24 hours prior 
to releasing the agenda document to the public.
    (2) Following Commission approval of the audit report, the report 
will be forwarded to the committee and released to the public. The 
Commission will provide the candidate and committee with copies of the 
audit report approved by the Commission 24 hours before releasing the 
report to the public.
    (f)(1) Sampling. In conducting an audit of contributions pursuant 
to this section, the Commission may utilize generally accepted 
statistical 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 apparent errors found among the sample items were 
not errors, the Commission shall make a new projection based on the 
reduced number of errors in the sample.
    (3) Within 30 days of service of the Final Audit Report, the 
committee shall submit a check to the United States Treasury for the 
total amount of any excessive or prohibited contributions not refunded, 
reattributed or redesignated in a timely manner in accordance with 11 
CFR 103.3(b) (1), (2) or (3); or take any other action required by the 
Commission with respect to sample-based findings.
    44. Section 9038.2 is amended by revising paragraphs (a) (2) and 
(3), (b)(2)(iii), (b)(4), (c), (d), (f), and the first sentence of 
paragraph (g), and by adding paragraphs (a)(4) and (i), to read as 
follows:


Sec. 9038.2  Repayments.

    (a) * * *
    (2) The Commission will notify the candidate of any repayment 
determinations made under this section as soon as possible, but not 
later than 3 years after the close of the matching payment period. The 
Commission's issuance of the audit report to the candidate under 11 CFR 
9038.1(d) will constitute notification for purchases of this section.
    (3) Once the candidate receives notice of the Commission's 
repayment determination under this section, the candidate should given 
preference to the repayment over all other outstanding obligations of 
his or her committee, except for any federal taxes owned by the 
committee.
    (4) Repayments may be made only from the following sources: 
personal funds of the candidate (without regard to the limitations of 
11 CFR 9035.2), contributions and federal funds in the committee's 
account(s), and any additional funds raised subject to the limitations 
and prohibitions of the Federal Election Campaign Act of 1971, as 
amended.
 * * * * *
    (b) * * *
    (2) * * *
    (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 (b)(2)(iii)--
    (A) Total deposits is defined in accordance with 11 CFR 
9038.3(c)(2); and
    (B) 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.
 * * * * *
    (4) Surplus; income derived from the use of surplus public funds. 
The Commission may determine that the candidate's net outstanding 
campaign obligations, as defined in 11 CFR 9034.5, reflect a surplus. 
The Commission may determine that the net income derived from an 
investment or other use of surplus public funds after the candidates's 
date of ineligibility, less Federal, State and local paid on such 
income, shall be paid to the Treasury.
    (c) Repayment determination procedures.  The Commission's repayment 
determination will be made in accordance with the procedures set forth 
at paragraphs (c)(1) through (c)(4) of this section.
    (1) Repayment determination. The Commission will provide the 
candidate with a written notice of its repayment determination(s). This 
notice will be included in the Commission's audit report prepared 
pursuant to 11 CFR 9038.1(d), or inquiry report pursuant to 11 CFR 
9039.3, and will set forth the legal and factual reasons for such 
determination(s), as well as the evidence upon which any such 
determination is based. The candidate shall repay to the United States 
Treasury in accordance with paragraph (d) of this section, the amount 
which the Commission has determined to be repayable.
    (2) Administrative review of repayment determination. If a 
candidate disputes the Commission's repayment determination(s), he or 
she may request an administrative review of the determination(s) as set 
forth in paragraph (c)(2)(i) of this section.
    (i) Submission of written materials. A candidate who disputes the 

[[Page 31887]]
    Commission's repayment determination(s) shall submit in writing, within 
60 calendar days after service of the Commission's notice, legal and 
factual materials demonstrating that no repayment, or a lesser 
repayment, is required. Such materials may be submitted by counsel if 
the candidate so desires. The candidate's failure to timely raise an 
issue in written materials presented pursuant to this paragraph will be 
deemed a waiver of the candidate's right to raise the issue at any 
future stage of proceedings including any petition for review filed 
under 26 U.S.C. 9041(a).
    (ii) Oral hearing. A candidate who submits written materials 
pursuant to paragraph (c)(2)(i) of this section may at the same time 
request in writing that the Commission provide such candidate with an 
opportunity to address the Commission in open session to demonstrate 
that no repayment, or a lesser repayment, is required. The candidate 
should identify in this request the repayment issues he or she wants to 
address at the oral hearing. If the Commission decides by an 
affirmative vote of four (4) of its members to grant the candidate's 
request, it will inform the candidate of the date and time set for the 
oral hearing. At the date and time set by the Commission, the candidate 
or candidate's designated representative will be allotted an amount of 
time in which to make an oral presentation to the Commission based upon 
the legal and factual materials submitted under paragraph (c)(2)(ii) of 
this section. The candidate or representative will also have the 
opportunity to answer any questions from individual members of the 
Commission.
    (3) Repayment determination upon review. In deciding whether to 
revise any repayment determination(s) following an administrative 
review pursuant to paragraph (c)(2) of this section, the Commission 
will consider any submission made under paragraph (c)(2)(i) and any 
oral hearing conducted under paragraph (c)(2)(ii), and may also 
consider any new or additional information from other sources. A 
determination following an administrative review that a candidate must 
repay a certain amount will be accompanied by a written statement of 
reasons supporting the Commission's determination(s). This statement 
will explain the legal and factual reasons underlying the Commission's 
determination(s) and will summarize the results of any investigation(s) 
upon which the determination(s) are based.
    (d) Repayment period. (1) Within 90 calendar days of service of the 
notice of the Commission's repayment determination(s), the candidate 
shall repay to the United States Treasury the amounts which the 
Commission has determined to be repayable. Upon application by the 
candidate, the Commission may grant an extension of up to 90 calendar 
days in which to make repayment.
    (2) If the candidate requests an administrative review of the 
Commission's repayment determination(s) under paragraph (c)(2) of this 
section, the time for repayment will be suspended until the Commission 
has concluded its administrative review of the repayment 
determination(s). Within 30 calendar days after service of the notice 
of the Commission's post-administrative review repayment 
determination(s), the candidate shall repay to the United States 
Treasury the amounts which the Commission has determined to be 
repayable. Upon application by the candidate, the Commission may grant 
an extension of up to 90 calendar days in which to make repayment.
    (3) Interest shall be assessed on all repayments made after the 
initial 90-day repayment period established at paragraph (d)(1) of this 
section or the 30-day repayment period established at paragraph (d)(2) 
of this section. The amount of interest due shall be the greater of:
    (i) An amount calculated in accordance with 28 U.S.C. 1961 (a) and 
(b); or
    (ii) The amount actually earned on the funds set aside under this 
section.
* * * * *
    (f) Additional repayments. Nothing in this section will prevent the 
Commission from making additional repayment determinations on one or 
more of the bases set forth at 11 CFR 9038.2(b) after it has made a 
repayment determination on any such basis. The Commission may make 
additional repayment determinations where there exist facts not used as 
the basis for any previous determination. Any such additional repayment 
determination will be made in accordance with the provisions of this 
section.
    (g) Newly-discovered assets. If, after any repayment determination 
made under this section, a candidate or his or her authorized 
committee(s) receives or becomes aware of assets not previously 
included in any statement of net outstanding campaign obligations 
submitted pursuant to 11 CFR 9034.5, the candidate or his or her 
authorized committee(s) shall promptly notify the Commission of such 
newly-discovered assets. * * *
* * * * *
    (i) Petitions for rehearing; stays pending appeal. The candidate 
may file a petition for rehearing of a repayment determination in 
accordance with 11 CFR 9038.5(a). The candidate may request a stay of a 
repayment determination in accordance with 11 CFR 9038.5(c) pending the 
candidate's appeal of that repayment determination.
    45. Section 9038.4 is amended by adding a sentence to the end of 
paragraph (c), to read as follows:


Sec. 9038.4  Extensions of time.

* * * * *
    (c) * * * If a candidate seeks an extension of any 60-day response 
period under 11 CFR part 9038, the Commission may grant no more than 
one extension to that candidate, which extension shall not exceed 15 
days.
* * * * *
    46. Section 9038.5 is amended by revising paragraphs (a), (b), 
(c)(1)(ii), and the introductory text of (c)(4), to read as follows:


Sec. 9038.5  Petitions for rehearing; stays of repayment 
determinations.

    (a) Petitions for rehearing. (1) Following the Commission's final 
determination under 11 CFR 9033.10 or 9034.5(g) or the Commission's 
repayment determination under 11 CFR 9038.2(c), the candidate may file 
a petition for rehearing setting forth the relief desired and the legal 
and factual basis in support. To be considered by the Commission, 
petitions for rehearing must:
    (i) Be filed within 20 calendar days after service of the 
Commission's final determination or repayment determination;
    (ii) Raise new questions of law or fact that would materially alter 
the Commission's final determination or repayment determination; and
    (iii) Set forth clear and convincing grounds why such questions 
were not and could not have been presented during the original 
determination process.
    (2) If a candidate files a timely petition under this section 
challenging a Commission repayment determination, the time for 
repayment of the amount at issue will be suspended until the Commission 
serves notice on the candidate of its determination on the petition. 
The time periods for making repayment under 11 CFR 9038.2(d) shall 
apply to any amounts determined to be repayable following the 
Commission's consideration of a petition for rehearing under this 
section.

[[Page 31888]]

    (b) Effect of failure to raise issues. The candidate's failure to 
raise an argument in a timely fashion during the original determination 
process or in a petition for rehearing under this section, as 
appropriate, shall be deemed a waiver of the candidate's right to 
present such arguments in any future stage of proceedings including any 
petition for review filed under 26 U.S.C. 9041(a). An issue is not 
timely raised in a petition for rehearing if it could have been raised 
earlier in response to the Commission's original determination.
    (c) Stay of repayment determination pending appeal.
    (1) * * *
    (ii) A request for a stay shall be made in writing and shall be 
filed within 30 calendar days after service of the Commission's 
decision on a petition for rehearing under paragraph (a) of this 
section, or, if no petition for rehearing is filed, within 30 calendar 
days after service of the Commission's repayment determination under 11 
CFR 9038.2(c).
* * * * *
    (4) All stays shall require the payment of interest on the amount 
at issue. The amount of interest due shall be calculated from the date 
30 days after service of the Commission's repayment determination under 
11 CFR 9038.2(c) and shall be the greater of:
* * * * *
    47. Section 9038.7 is added to read as follows:


Sec. 9038.7  Administrative record.

    (a) The Commission's administrative record for final determinations 
under 11 CFR part 9033, sections 9034.5, 9036.5 and part 9039, and for 
repayment determinations under 11 CFR 9038.2, consists of all documents 
or materials submitted to the Commission for its consideration in 
making those determinations. The administrative record will include the 
certification of the Commission's vote(s), the audit report that is 
sent to the committee (for repayment determinations), the statement(s) 
of reasons, and the candidate agreement. The committee may include 
documents or materials in the administrative record by submitting them 
within the time periods set forth at 11 CFR 9033.3(b), 9033.4(a)(2), 
9033.6(c), 9033.7(b), 9033.9(b), 9034.5(g)(2), 9036.5(e), 9038.1(c) and 
9038.2(c)(2), as appropriate.
    (b) The Commission's administrative record for determinations under 
11 CFR part 9033, sections 9034.5, 9036.5 and 9038.2 and part 9039 does 
not include:
    (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 other than 
transcripts or audio tapes of oral hearings pursuant to 11 CFR 
9038.2(c)(2), although 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, Secs. 9034.5, 9036.5 and 9038.2 and part 9039.

PART 9039--REVIEW AND INVESTIGATION AUTHORITY

    48. The authority citation for part 9039 continues to read as 
follows:

    Authority: 26 U.S.C. 9039.

    49. Section 9039.3 is amended by adding new paragraph (b)(4), to 
read as follows:


Sec. 9039.3  Examination and audits; investigations.

* * * * *
    (b) * * *
    (4) If, at the close of the inquiry, the Commission determines that 
no action or no further action is warranted, the Commission shall so 
notify the candidate. If the inquiry results in an adjustment to the 
amount of certified matching funds, the procedures set forth at 11 CFR 
9036.5 or 9038.1 shall be followed, as appropriate. If the inquiry 
coincides with an audit undertaken pursuant to 11 CFR 9038.1, the 
information obtained in the inquiry will be utilized in making the 
repayment determination. If the inquiry results in an initial or 
additional repayment determination, the procedures set forth at 11 CFR 
9038.2, 9038.4, and 9038.5 shall be followed.

    Dated: June 12, 1995.
Danny L. McDonald,
Chairman.
[FR Doc. 95-14667 Filed 6-15-95; 8:45 am]
BILLING CODE 6715-01-M