[Federal Register Volume 62, Number 83 (Wednesday, April 30, 1997)]
[Rules and Regulations]
[Pages 23335-23337]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-11183]



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 Rules and Regulations
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  Federal Register / Vol. 62, No. 83 / Wednesday, April 30, 1997 / 
Rules and Regulations  

[[Page 23335]]


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FEDERAL ELECTION COMMISSION

11 CFR Part 104

[Notice 1997-7]


Recordkeeping and Reporting by Political Committees: Best Efforts

AGENCY: Federal Election Commission.

ACTION: Final Rule; Transmittal of regulations to Congress.

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SUMMARY: The Federal Election Commission is revising its regulations 
implementing the requirement of the Federal Election Campaign Act 
(``FECA'') that treasurers of political committees exercise best 
efforts to obtain, maintain and report the complete identification of 
each contributor whose contributions aggregate more than $200 per 
calendar year. The new rules change the required statement that must 
accompany solicitations for contributions. The revisions also state 
that separate segregated funds must report contributor information in 
the possession of their connected organizations. Further information is 
provided in the supplementary information which follows.

DATES: Further action, including the announcement of an effective date, 
will be taken after these regulations have been before Congress for 30 
legislative days pursuant to 2 U.S.C. 438(d). A document announcing the 
effective date will be published in the Federal Register.

FOR FURTHER INFORMATION CONTACT: Ms. Susan E. Propper, Assistant 
General Counsel, or Ms. Rosemary C. Smith, Senior Attorney, 999 E 
Street N.W., Washington, D.C. 20463, (202) 219-3690 or toll free (800) 
424-9530.

SUPPLEMENTARY INFORMATION: The Commission is publishing today the text 
of revisions to its regulations at 11 CFR 104.7(b)(1) and (b)(3), which 
set forth steps needed to ensure that political committees use their 
best efforts to obtain, maintain and submit the names, addresses, 
occupations and employers of contributors whose donations exceed $200 
per year. These regulations implement section 432(i) of the Federal 
Election Campaign Act of 1971, as amended (``the Act'' or ``FECA''). 2 
U.S.C. 432(i).
    On October 9, 1996 the Commission issued a Notice of Proposed 
Rulemaking (NPRM) in which it sought comments on proposed revisions to 
these regulations. 61 F.R. 52901 (Oct. 9, 1996). The comment period was 
subsequently extended to January 31, 1997. 61 F.R. 68688 (Dec. 30, 
1996). Written comments were received from the Center for Responsive 
Politics (CRP), the Republican National Committee (RNC), Washington 
State Coalition Against Violent Crime (WSCAV), the Internal Revenue 
Service (IRS), Hervey W. Herron, and a joint comment from Seafarers 
Political Activity Donation (SPAD) and Seafarers International Union 
(SIU).
    Since these rules are not major rules within the meaning of 5 
U.S.C. 804(2), the FECA controls the legislative review process. See 5 
U.S.C. 801(a)(4), Small Business Regulatory Reform Enforcement Fairness 
Act, Public Law 104-121, section 251, 110 Stat. 857, 869 (1996). 
Section 438(d) of Title 2, United States Code, requires that any rules 
or regulations prescribed by the Commission to carry out the provisions 
of Title 2 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 April 25, 1997.

Explanation and Justification

    The FECA specifies that reports filed by political committees 
disclose ``the identification of each * * * person (other than a 
political committee) who makes a contribution to the reporting 
committee * * * whose contribution or contributions [aggregate over 
$200 per calendar year] * * * together with the date and amount of any 
such contribution.'' 2 U.S.C. 434(b)(3)(A). For an individual, 
``identification'' means his or her full name, mailing address, 
occupation and employer. 2 U.S.C. 431(13). Treasurers of political 
committees must be able to show they have exercised their best efforts 
to obtain, maintain and report this information. 2 U.S.C. 432(i).
    The Commission's regulations at 11 CFR 104.7(b), which implement 
these requirements of the FECA, are being revised to resolve two 
issues. The first concerns the phrasing of the request for contributor 
identifications and other information which must be included in all 
political committee solicitations. The second concerns the measures 
separate segregated funds should take if they do not receive the 
necessary information from contributors.

Section 104.7(b)(1)

    The Commission's current regulations at 11 CFR 104.7(b)(1) require 
the inclusion of the following statement on all solicitations: 
``Federal law requires political committees to report the name, mailing 
address, occupation and name of employer for each individual whose 
contributions aggregate in excess of $200 in a calendar year.'' 
Recently, the Court of Appeals for the D.C. Circuit concluded that this 
mandatory statement is inaccurate and misleading. Republican National 
Committee v. Federal Election Commission, 76 F.3d 400, 406 (D.C. Cir. 
1996), cert. denied, 117 S.Ct. 682 (1997). The court pointed out that 
the FECA only requires committees to use their best efforts to collect 
the information and to report whatever information donors choose to 
provide. Other provisions of the ``best efforts'' regulations were 
upheld by the court.
    Consequently, the NPRM proposed revising paragraph (b)(1) of 
section 104.7 by requiring political committees to include in their 
solicitations an accurate statement of the statutory requirements. The 
notice indicated that either of the following two examples would 
satisfy this requirement, but would not be the only allowable 
statements: (1) ``Federal law requires us to use our best efforts to 
collect and report the name, mailing address, occupation and name of 
employer of individuals whose contributions exceed $200 in a calendar 
year.'' (2) ``To comply with Federal law, we must use best efforts to 
obtain, maintain, and submit the name, mailing address, occupation and 
name of employer of individuals whose contributions exceed $200 per 
calendar year.'' Alternatively,

[[Page 23336]]

comments were also sought on whether it would be preferable to simply 
require all political committees to use one or the other of these two 
formulations.
    The public comments reflected a variety of reactions to this 
proposed rule. Two commenters misunderstood the proposed rule in that 
they believed political committees would be penalized if they fail to 
use one of the FEC-prescribed statements. As explained, below, that 
would not be the case, as long as political committees use an accurate 
statement of the law. One commenter expressed concerns as to the 
statutory authority and constitutionality of the Commission's proposed 
rule. These considerations have already been resolved in Republican 
National Committee v. Federal Election Commission, 76 F.3d 400, 406 
(D.C. Cir. 1996), cert. denied, 117 S.Ct. 682 (1997). Another commenter 
expressed general concerns regarding the impact of contributions in 
political campaigns and urged various legislative changes. The Internal 
Revenue Service found no conflict between the FEC's proposed rules and 
the Internal Revenue Code or IRS rules promulgated thereunder.
    Another commenter urged the adoption of stronger measures, such as 
notifying contributors that their contributions will not be deposited 
and must be returned if they do not provide complete contributor 
identifications. This commenter believes that differences in reporting 
rates are attributable to variations in the seriousness of different 
committees' efforts to comply with the statutory requirements. It is 
concerned that the Commission's present best efforts rules are 
inadequate in ensuring sufficient disclosure. The Commission has 
previously considered and rejected this approach because it is beyond 
the statutory authority granted to the Commission at this time. See 
Explanation and Justification 58 F.R. 55727-28 (Oct. 27, 1993). The 
commenter also urged the Commission to prohibit the use of ``vague'' 
descriptions of occupations such as ``business owner,'' ``chairman,'' 
``administrator,'' ``manager,'' and ``self-employed.'' The Commission 
is reluctant to bar the use of the titles the commenter believes to be 
vague because many of them are commonly-used official titles which 
provide meaningful information in combination with the name of the 
contributor's employer.
    In the final rules which follow, paragraph (b)(1) of section 104.7 
states that solicitations must contain an accurate statement, and 
provides two examples of statements that will be acceptable. However, 
for the reasons raised by the commenters, the Commission has decided 
not to require political committees to use only the statements listed. 
Consequently, the final regulations have been revised to allow for the 
use of other accurate statements of federal law regarding best efforts. 
Thus, the Commission has made every effort to ensure that committees 
have as much flexibility as possible. Nevertheless, please note that 
statements such as ``Federal law requires political committees to ask 
for this information,'' without more, do not provide contributors with 
a complete statement regarding Federal law, and hence, do not meet the 
requirements of revised 11 CFR 104.7(b)(1).

Section 104.7(b)(3)

    The NPRM proposed revising paragraph (b)(3) of section 104.7 to 
indicate that separate segregated funds are expected to report 
contributor information in the possession of their connected 
organizations. This includes corporations (including corporations 
without capital stock), labor organizations, trade associations, 
cooperatives and membership organizations. In some situations, it may 
be more efficient for separate segregated funds to obtain the missing 
contributor information from their connected organizations than from 
the contributors.
    One commenter supported this proposal. The Internal Revenue Service 
found no conflict between the FEC's proposed rules and the Internal 
Revenue Code or IRS rules promulgated thereunder. Another commenter 
expressed concerns that this proposal would alter the resolution 
reached by the Commission in Advisory Opinion 1996-25, issued to the 
Seafarers Political Activity Donation and its connected organization, 
the Seafarers International Union.
    The Commission has decided to add the proposed new language to 11 
CFR 104.7(b)(3). This will ensure that contributor identifications are 
reported as accurately and as completely as possible. Since many 
separate segregated funds are already reporting most, if not all, of 
this information, the effect of this provision should be minimal. Given 
that connected organizations establish, administer and financially 
support their separate segregated funds, it is reasonable for them to 
provide necessary information in their records when the contributors do 
not do so. Please note that it is not the Commission's intention at 
this time to modify or supersede AO 1996-25. Thus, the procedures 
described in A0 1996-25 will continue to satisfy the revised best 
efforts regulations for those entities entitled to rely on that 
opinion.

Certification of no Effect Pursuant to 5 U.S.C. 605(b) [Regulatory 
Flexibility Act]

    The attached final rules will not, if promulgated, have a 
significant economic impact on a substantial number of small entities. 
The basis for this certification is that a portion of the attached 
rules will provide any small entities affected with greater flexibility 
in complying with the best efforts requirements of the Act by giving 
them new options as to the statement to be included in their 
solicitations. Small entities will be affected by the remaining portion 
of the attached rules only if they are separate segregated funds. 
Experience has shown that the large majority of these separate 
segregated funds are already in compliance with the requirements on 
reporting contributor information. Thus, obtaining missing contributor 
information from their connected organizations will not have a 
significant economic effect on a substantial number of these small 
entities.

List of Subjects in 11 CFR Part 104

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

    For the reasons set out in the preamble, Subchapter A, Chapter I of 
Title 11 of the Code of Federal Regulations is amended as follows:

PART 104--REPORTS BY POLITICAL COMMITTEES (2 U.S.C. 434)

    1. The authority citation for Part 104 continues to read as 
follows:

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

    2. Section 104.7 is amended by revising paragraphs (b)(1) and 
(b)(3) to read as follows:


Sec. 104.7  Best efforts (2 U.S.C. 432(i)).

* * * * *
    (b) * * *
    (1) All written solicitations for contributions include a clear 
request for the contributor's full name, mailing address, occupation 
and name of employer, and include an accurate statement of Federal law 
regarding the collection and reporting of individual contributor 
identifications. The following are examples of acceptable statements, 
but are not the only allowable statements: ``Federal law requires us to 
use our best efforts to collect and report the name, mailing address, 
occupation and name of employer of individuals whose

[[Page 23337]]

contributions exceed $200 in a calendar year;'' and ``To comply with 
Federal law, we must use best efforts to obtain, maintain, and submit 
the name, mailing address, occupation and name of employer of 
individuals whose contributions exceed $200 per calendar year.'' The 
request and statement shall appear in a clear and conspicuous manner on 
any response material included in a solicitation. The request and 
statement are not clear and conspicuous if they are in small type in 
comparison to the solicitation and response materials, or if the 
printing is difficult to read or if the placement is easily overlooked.
* * * * *
    (3) The treasurer reports all contributor information not provided 
by the contributor, but in the political committee's possession, or in 
its connected organization's possession, regarding contributor 
identifications, including information in contributor records, 
fundraising records and previously filed reports, in the same two-year 
election cycle in accordance with 11 CFR 104.3; and
* * * * *
    Dated: April 25, 1997.
John Warren McGarry,
Chairman, Federal Election Commission.
[FR Doc. 97-11183 Filed 4-29-97; 8:45 am]
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