[Federal Register Volume 61, Number 60 (Wednesday, March 27, 1996)]
[Proposed Rules]
[Pages 13464-13468]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-7405]



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FEDERAL ELECTION COMMISSION

11 CFR Part 104

[Notice 1996-10]


Electronic Filing of Reports by Political Committees

AGENCY: Federal Election Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Federal Election Commission is seeking comment on proposed 
rules to implement an electronic filing system for reports of campaign 
finance activity filed with the agency. Although the agency has been 
working on the development of an electronic filing sytem for some time, 
the proposals in this Notice are also designed to reflect recent 
changes in the Federal Election Campaign Act of 1971. The proposed 
rules would establish requirements for filing reports electronically, 
including specifying the format for data to be submitted by filers, 
procedures for submitting amendments to reports, and methods of 
satisfying signature requirements under the law.

DATES: Comments must be received on or before May 28, 1996.

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

FOR FURTHER INFORMATION CONTACT: Ms. Susan E. Propper, Assistant 
General Counsel, 999 E Street, NW., Washington, DC 20463, (202) 219-
3690 or (800) 424-9530.

SUPPLEMENTARY INFORMATION: On December 28, 1995, Public Law 104-79 
amended the Federal Election Campaign Act of 1971 to require, inter 
alia, that the Commission create a system to ``permit reports required 
by this Act to be filed and preserved by means of computer disk or any 
other electronic format or method, as determined by the Commission.'' 
109 Stat. 791(1995), section 1(a). The new law requires this system to 
be available for reports covering periods after December 31, 1996. This 
means the new system will be in place for the first reports filed in 
the 1998 election cycle. The goals of such a system include more 
complete on line access to reports on file with the Commission, reduced 
paper filing and manual processing, and more efficient and cost-
effective methods of operation for filers and for the Commission. Note 
that participation in the electronic filing program by committees and 
other persons filing reports will be voluntary.
    There are a number of factors that should be considered before any 
system can be successfully implemented. The information must be 
submitted in a standardized format so that the Commission's computer 
system can read the information and locate all the different data 
elements that are part of a committee's report. At the outset, the 
Commission plans to accept reports filed electronically, store them, 
and make them available to the public. The information will then be 
processed by the Commission in the same manner as paper reports (i.e. 
creating paper copies for review and integration into the disclosure 
data base). Ultimately, the electronically filed material will be 
directly integrated into the Commission's data bases. While most 
electronic filing systems developed at the state and local level have 
required submission of paper reports along with electronic media, the 
FEC process does not include this requirement. In fact, committees 
choosing to file electronically would have to include all information 
found in a report in the electronic data submitted. When paper copies 
of reports are necessary for processing, the Commission will create 
those documents.

(Note: However, that certain forms and schedules have special 
requirements that may require submission of a paper copy under 
proposed paragraph (f).)

    It is also important, however, that the system be designed in a 
fashion that allows committees to comply most easily with the Act's 
requirements. Thus, the Commission is developing methods for complying 
with statutory requirements such as submitting a report signed by the 
committee's treasurer, and to accommodate, for example, the need to 
file amendments to reports or to explain more fully certain 
transactions included on a committee's report. However, certain 
schedules and forms require signatures of third parties or submission 
of additional materials such as loan agreements. The Commission will 
need to design the format structure to include the information provided 
on these forms and schedules, but will also need a mechanism to meet 
the additional requirements of these documents.
    The system being designed by the Commission will be available to 
all committees required to file reports with the Commission that wish 
to file in an electronic format. Public Law 104-79 changed the place of 
filing for committees that formerly filed with the Clerk of the House 
of Representatives. These committees, as well as those that have 
historically filed with the Commission, will have the opportunity to 
file under the new system. Proposed section 104.18 will set forth the 
requirements for electronic filing. Please note that committees that 
are required to file reports with the Secretary of the Senate will not 
be covered by the Commission's new rules.
    The Commission welcomes comments from committees that will be 
affected by this change. Vendors with knowledge of the software 
concerns that might be involved in implementing such a system, and 
state and local jurisdictions that have had experience with electronic 
filing, are also encouraged to participate. Finally, end-users of 
campaign finance information, such as researchers and the media, may 
wish to offer their suggestions from a consumer's perspective.
    Interested persons should also note that the Commission will be 
developing its record format specifications in a separate process at 
the same time it is considering these rules. Software vendors and 
committees that wish to comment or make suggestions regarding the 
format specifications should contact the Data Systems Division to be 
included on the list of those consulted.

Standard Format

    Several different standardization issues are presented by the 
Commission's proposal. A key requirement is that any data submitted 
electronically be conveyed in the Commission-approved format. The 
agency has dealt with these concerns previously in the context of 
publicly financed presidential candidates and convention committees. To 
address those situations, the Commission issued its Computerized 
Magnetic Media Requirements (CMMR), which established format 
specifications for certain computerized data submitted by these 
committees. The CMMR specifies the record format for submitting data; 
that is, it specifies the ``fields'' (required information) that make 
up the records and how much space is allocated for each field of data. 
There are separate fields for receipt and disbursement records, 
consistent with the Act's reporting provisions.
    A similar set of requirements is being developed for electronic 
filing of reports. These requirements will be contained in a document 
titled ``The Federal Election Commission's Electronic Filing 
Specifications Requirements.'' As previously noted, the format 
specifications will be made available to interested persons for comment 
and suggestions as they are being developed. When completed, this 
document will be available from the Commission at no charge.
    Another set of issues relates to the steps that will be necessary 
to integrate

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the reports filed into the Commission's data base. Currently, the 
Commission uses the reports to enter certain selected data into its 
computer data base. For the most part, this data is limited to totals 
from the committees' summary pages, and information on contributions 
and independent expenditures. When the Commission first implements its 
electronic filing program in 1997, it expects to continue its cross-
indexing of information from all reports, including those filed 
electronically. In addition, the Commission will maintain reports filed 
electronically in a separate data base, in order to preserve a record 
of what has been filed by each reporting entity. A copy of these 
records will be accessible on-line.
    In the future, the Commission intends to structure its program so 
that the data submitted by reporting entities will be in a form that 
can be directly added to the agency's data base. This development may 
require the specification of standards for reporting certain categories 
of information, in order to maintain the accuracy and integrity of the 
Commission's current data base. This will ensure, for example, that all 
contributions made by PACs to a particular candidate are reported in 
the same way so they can be accurately attributed in the Commission's 
data base to that candidate. Currently, the Commission ensures that the 
correct recipient is identified in the data base, even though reporting 
entities may have described the recipient in slightly different ways. 
The Commission may also wish to establish a standard list of purposes 
for reported disbursements, which could in turn be based on the expense 
classifications used in a chart of accounts. Both of these issues could 
be addressed by making updated lists available through the Internet 
that could be downloaded by committees. Information from these lists 
could then be moved into reports, simplifying the reporting process for 
committees.

Acceptance of Reports Filed Electronically

    A related issue addressed by the proposed rules concerns the need 
to ensure that reports filed electronically can be read by the 
Commission's computers. Data submitted in a format that does not meet 
the Commission's filing specifications and therefore does not permit 
the Commission's computers to read and locate required information will 
not be treated as a filed report under proposed paragraph 104.18(c). 
Similarly, a damaged disk that cannot be read by the computer system 
will not be accepted. In addition, filings that do not contain valid 
identifying information for the committee and the report being 
submitted, or that are not signed using one of the signature mechanisms 
provided by the rules, will not be considered filed. The Commission 
proposes to notify committees whose reports are not accepted.
    To determine that a report submitted in an electronic format meets 
these requirements, the Commission is developing validation software 
that will check the submitted record structures to be sure they meet 
the requirements of the format specifications. This software will be 
available to committees at no charge, to enable them to run their 
reports against this program and ensure that their submission will not 
be rejected.
    Another issue involves the method of submitting electronic reports. 
When the program first goes into effect in 1997, the Commission 
proposes to accept reports only on floppy disk. This approach will help 
ease the transition to accepting reports in this new format, since it 
is comparable to the Commission's past practice of accepting 
computerized media from Presidential campaigns. As soon as practicable, 
however, the Commission expects to initiate acceptance of reports 
through telecommunications. Among other things, since the law provides 
that reports are due on specified dates, this option would require the 
arrangement of a mechanism for handling a large influx of data during a 
compressed time period with intervening periods of no activity. As a 
guide to assessing the potential load factor involved in accepting 
reports via modem, the Commission encourages committees to comment on 
whether they are currently capable of submitting an electronic report 
via telecommunications and whether they perceive any problems with a 
system that allows reports to be filed in this manner.

Amended Reports

    Proposed paragraph (d) would require that amendments to reports be 
filed in an electronic format if the original report was filed 
electronically, and that the amendment consist of a complete version of 
the report as amended, not just those portions of the earlier 
submission that are being changed. The Commission welcomes comments on 
how to address amendments, particularly with regard to whether the 
amendment should be a complete version of the report. This approach has 
the advantage of placing a complete revised copy of the report on the 
public file, and therefore would not require those reviewing a 
committee's records to piece later amendments of reports together with 
earlier submissions. However, filing a complete revised version would 
not immediately indicate what aspects of the earlier report had 
changed. Larger reports could pose a particular problem in this regard. 
In addition, the Commission encourages comments on whether one approach 
would be easier for committees to comply with than the other.

Signature Requirements

    The Act requires that reports and statements shall be signed by the 
person responsible for filing them. See, 2 U.S.C. 434(a)(1) and (c). 
Public Law 104-79 directs the Commission to develop one or more methods 
for verifying reports filed electronically and states that such a 
verification will be treated the same as a signature for all purposes. 
In the initial phase of the new system, paragraph (e) of the proposed 
rule would require that filers utilize one of two methods for verifying 
their reports. Either a signed certification page would be submitted 
with the disk containing the electronic report, or the disk would 
contain a digitized version of the signed certification. When the 
Commission begins to accept reports filed by telecommunications, it 
plans to provide other methods for verification, such as providing an 
encryption key to the treasurer or allowing simultaneous mailing of a 
signature page, similar to the system being used by the Internal 
Revenue Service in its electronic filing program. Suggestions for other 
methods are welcome.
    Certain schedules and forms must be filed with signatures from 
third parties, however. For example, the Act requires that Schedule E 
and Form 5, which are used to report independent expenditures, be 
notarized. Schedule C-1 (Loans and Lines of Credit from Lending 
Institutions) and Form 8 (Debt Settlement Plans) must be filed with 
signatures from lenders and creditors, respectively. In addition, 
Schedule C-1 must be accompanied by a copy of the relevant loan 
agreement. The electronic record format will be designed to include the 
data provided on these forms and schedules. However, to satisfy these 
additional requirements, proposed paragraph (f) would also require that 
either a signed version of these schedules and forms (and any 
accompanying materials) be digitized and submitted as a separate file 
in the electronic submission, or that a signed paper original of these 
schedules and forms (and accompanying materials) be submitted with the 
electronic media.

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Additional Issues

    For those commenters who are reporting entities, some additional 
information about the committee would be helpful to the Commission's 
inquiry. In particular, the Commission would be interested in whether 
the committee uses a computer to maintain its records and prepare its 
reports. If so, what data is maintained on the computer? For example, 
does the data include information regarding contributors, contributions 
to candidates, other receipts and disbursements? If the committee uses 
a software package to maintain this data and/or to prepare its reports, 
what package(s) does it use? Does this software incorporate all the 
information the committee needs to file its reports or is it necessary 
to bring in information from other sources?
    In addition, the Commission would welcome comments indicating 
whether reporting committees plan to take advantage of this option. The 
Commission recognizes that, to be successful, any electronic filing 
program must accommodate to the extent possible the needs and 
capabilities of the filing community. A major factor to be considered 
in this regard is the high level of turnover among filers. A 
significant portion of the filing population is only involved in 
campaign finance disclosure for a relatively short period. This 
includes unsuccessful candidates as well as political committees that 
go out of existence after a few months or a year. Many committees, 
including those that have a more stable existence (such as party 
committees), operate largely with volunteers or experience frequent 
staff changes. Consequently, there also may be little staff continuity 
in some ongoing committees. Moreover, those that depend on volunteers 
may be disadvantaged by the limited time those individuals can devote 
to committee responsibilities.
    However, other committees have a more permanent staff and are 
sophisticated in their use of computers and their knowledge of the law. 
These committees might have an easier time converting to an electronic 
filing format.
    Therefore, a fundamental question on which the Commission welcomes 
comment concerns the potential benefits of an electronic filing system 
to filers and others. How can electronic filing make disclosure easier? 
Conversely, are there any perceived problems with the Commission's 
approach to electronic filing, whether from a procedural or technical 
perspective, and how can these problems be averted?
    A related point concerns committees that begin filing 
electronically but for some reason are later unable to do so. Proposed 
paragraph (a) would require that committees continue to submit reports 
in an electronic format for the remainder of the calendar year in which 
they elect to begin filing electronically. This provision has been 
added for several reasons, including enabling the agency to efficiently 
administer the disclosure program and to ensure continuity in the means 
by which a committee's reports are placed on the public record. While 
these are important considerations for the Commission's administration 
of the Act, should the Commission attempt to distinguish committees 
with a genuine problem from those who simply decide to discontinue 
submitting electronic reports? If so, how could this be accomplished?
    Information on the electronic capability of current filers would be 
helpful in assessing the community's readiness to move to this 
reporting format. Any other information the committee feels would be 
helpful to the Commission in its efforts to assess the ability of the 
regulated community to move to an electronic filing format would be 
appreciated.
    Finally, the Commission is interested in the experience of other 
jurisdictions that have implemented an electronic filing program. What 
have these jurisdictions found to be the most effective means of 
introducing filers to the new system, without jeopardizing the 
integrity of their ongoing program? Since the Commission will not have 
a test period for filing reports electronically before it begins 
accepting these reports solely in electronic format, are there any 
concerns of committees that should be addressed?

List of Subjects in 11 CFR Part 104

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

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

    These proposed rules will not, if promulgated, have a significant 
economic impact on a substantial number of small entities. The basis 
for this certification is that no small entity is required to submit 
reports electronically under these proposed rules.
    For the reasons set out in the preamble, it is proposed to amend 
subchapter A, Chapter I of title 11 of the Code of Federal Regulations 
as follows:

PART 104--REPORTS BY POLITICAL COMMITTEES

    1. The authority citation for Part 104 would be amended as follows:

    Authority: 2 U.S.C. 431(1), 431(8), 431(9), 432(d), 432(i), 434, 
438(a)(8), 438(b).


Sec. 104.17  [Reserved]

    2. Section 104.17 is reserved.
    3. Section 104.18 would be added to read as follows:


Sec. 104.18  Electronic filing of reports (2 U.S.C. 432(d) and 
434(a)(11)).

    (a) General. A political committee that files reports with the 
Commission, as provided in 11 CFR Part 105, may choose to file its 
reports in an electronic format that meets the requirements of this 
section. If a committee chooses to file its reports electronically, and 
its first electronic report passes the Commission's validation program 
in accordance with paragraph (c) of this section, it must continue to 
file in an electronic format all reports covering financial activity 
for that calendar year.
    (b) Format specifications. Reports filed electronically shall 
conform to the technical specifications, including file requirements, 
described in the Federal Election Commission's Electronic Filing 
Specifications Requirements. The data contained in the computerized 
magnetic media provided to the Commission shall be organized in the 
order specified by the Electronic Filing Specifications Requirements.
    (c) Acceptance of reports filed in electronic format.
    (1) Each committee that submits an electronic report shall check 
the report against the Commission's validation program before it is 
submitted, to ensure that the files submitted meet the Commission's 
format specifications and can be read by the Commission's computer 
system. Each report submitted in an electronic format under this 
section shall also be checked upon receipt against the Commission's 
validation program. The Commission's validation program is available on 
request and at no charge.
    (2) A report that does not pass the validation program will not be 
accepted by the Commission and will not be considered filed. If a 
committee submits a report that does not pass the validation program, 
the Commission will notify the committee that the report has not been 
accepted.
    (d) Amended reports. If a committee files an amendment to a report 
that was filed electronically, it shall also submit the amendment in an 
electronic format. The committee shall submit a complete version of the 
report as amended, and

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not just the portions of the earlier report that are being amended.
    (e) Signature requirements. The committee's treasurer, or any other 
person having the responsibility to file a designation, report or 
statement under this subchapter, shall verify the report in one of the 
following ways: by submitting a signed certification on paper that is 
submitted with the computerized media; or by submitting a digitized 
copy of the signed certification as a separate file in the electronic 
submission. Each verification submitted under this section shall 
certify that the person has examined the report or statement and, to 
the best of the signatory's knowledge and belief, it is true, correct 
and complete. Any verification under this section shall be treated for 
all purposes (including penalties for perjury) in the same manner as a 
verification by signature on a report submitted in a paper format.
    (f) Schedules and forms with special requirements. The following 
list of schedules, materials, and forms have special signature and 
other requirements and reports containing these documents shall 
include, in addition to providing the required data within the 
electronic report, either a paper copy submitted with the committee's 
electronic report or a digitized version submitted as a separate file 
in the electronic submission: Schedule C-1 (Loans and Lines of Credit 
From Lending Institutions), including copies of loan agreements 
required to be filed with that Schedule, Schedule E (Itemized 
Independent Expenditures), Form 5 (Report of Independent Exepnditures 
Made and Contributions Received), and Form 8 (Debt Settlement Plan). 
The committee shall submit any paper materials together with the 
electronic media containing the committee's report.
    (g) Preservation of reports. For any report filed in electronic 
format under this section, the treasurer shall retain a machine-
readable copy of the report as the copy preserved under 11 CFR 
104.14(b)(2). In addition, the treasurer shall retain the original 
signed version of any documents submitted in a digitized format under 
paragraphs (e) and (f) of this section.

    Dated: March 22, 1996.
Lee Ann Elliott,
Chairman, Federal Election Commission.
[FR Doc. 96-7405 Filed 3-26-96; 8:45 am]
BILLING CODE 6715-01-P