[Federal Register Volume 63, Number 241 (Wednesday, December 16, 1998)]
[Proposed Rules]
[Pages 69224-69229]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 98-33317]


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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 63, No. 241 / Wednesday, December 16, 1998 / 
Proposed Rules  

[[Page 69224]]


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FEDERAL ELECTION COMMISSION

11 CFR Parts 100 and 114

[Notice 1998--17]


Definition of ``Member'' of a Membership Association

AGENCY: Federal Election Commission.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: The Commission is seeking comments on further proposed 
revisions to its rules governing who qualifies as a ``member'' of a 
membership association. A membership association can solicit 
contributions from its members to a separate segregated fund 
established by the association, and can include express electoral 
advocacy in communications to its members. The revised proposal would 
largely address the internal characteristics of an association that, 
coupled with certain financial or organizational attachments, would be 
sufficient to confer this status.

DATES: Comments must be received on or before February 1, 1999.

ADDRESSES: All comments should be addressed to Susan E. Propper, 
Assistant General Counsel, and must be submitted in either written or 
electronic form. Written comments should be sent to the Federal 
Election Commission, 999 E Street, NW., Washington, DC 20463. Faxed 
comments should be sent to (202) 219-3923, with printed copy follow-up. 
Electronic mail comments should be sent to [email protected]. Commenters 
sending comments by electronic mail should include their full name and 
postal service address within the text of their comments. Electronic 
comments that do not contain the full name, electronic mail address and 
postal service address of the commenter will not be considered.

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

SUPPLEMENTARY INFORMATION: Although the Federal Election Campaign Act 
of 1971 as amended (``FECA'' or ``Act''), 2 U.S.C. 431 et seq., 
prohibits direct corporate contributions in connection with federal 
campaigns, 2 U.S.C. 441b(a), it permits corporations, including 
incorporated membership associations, to solicit contributions from 
their restricted class to a separate segregated fund (``SSF''). In the 
case of membership associations, the restricted class consists of the 
members of each association, their executive and administrative 
personnel, and their families. These contributions can be used for 
federal political purposes. The Act also allows membership associations 
to communicate with their members on any subject, including 
communications that include express electoral advocacy. 2 U.S.C. 
441b(b)(2)(A), 441b(b)(4)(C). The Commission's implementing regulations 
defining who is a ``member'' of a membership association are found at 
11 CFR 100.8(b)(4)(iv) and 11 CFR 114.1(e).
    The Commission's original ``member'' rules, which had been adopted 
in 1977, were the subject of a 1982 United States Supreme Court 
decision, FEC v. National Right to Work Committee (``NRWC''), 459 U.S. 
196 (1982). In 1993, following a series of advisory opinions in this 
area, the Commission revised the text of the rules to reflect that 
decision. 58 FR 45770 (Aug. 30, 1993), effective Nov. 10, 1993. 58 FR 
59640. The revised rules were held to be unduly restrictive by the 
United States Court of Appeals for the District of Columbia Circuit in 
Chamber of Commerce of the United States (``Chamber'') v. FEC, 69 F.3d 
600 (D.C. Cir. 1995), amended on denial of rehearing, 76 F.3d 1234 
(D.C. Cir. 1996). This rulemaking followed.

History of the Rulemaking

    On February 24, 1997, the Commission received a Petition for 
Rulemaking from James Bopp, Jr., on behalf of the National Right to 
Life Committee, Inc. The Petition urged the Commission to revise its 
member rules to reflect the Chamber decision. The Commission published 
a Notice of Availability (``NOA'') in the Federal Register on March 29, 
1997, 62 FR 13355, and received two comments in response.
    On July 31, 1997, the Commission published in the Federal Register 
an Advance Notice of Proposed Rulemaking (``ANPRM'') addressing these 
rules. 62 FR 40982. Because the Chamber decision, the petition for 
rulemaking, and the comments received in response to the NOA provided 
few specific suggestions as to how the rules should be amended to 
comport with the decision, the Commission did not propose specific 
amendments to the rules. Rather, it sought general guidance on the 
factors to be considered in determining the existence of this 
relationship. The Commission received 14 comments in response to the 
ANPRM.
    On December 22, 1997, the Commission published a Notice of Proposed 
Rulemaking (``NPRM'') on this matter, 62 FR 66832, and received 22 
comments in response. Comments were received from the Alliance for 
Justice; the American Federation of State, County and Municipal 
Employees (``AFSCME''); the American Federation of Labor and Congress 
of Industrial Organizations (``AFL-CIO''), the American Hospital 
Association and Political Action Committee (``AHAPAC''); the American 
Hotel and Motel Association (``AH&MA''); the American Society of 
Association Executives (``ASAE''); the Americans Back in Charge 
Foundation; Jan Witold Baran; The Chicago Mercantile Exchange; the 
College of American Pathologists (``CAP''); the Free Speech Coalition, 
Inc.; the James Madison Center for Free Speech; the National Lumber and 
Building Material Dealers Association; the National Citizens Legal 
Network; the National Rural Electric Cooperative Association; the 
National Right to Work Committee; the Opticians Association of America 
(``OAA''); Daniel M. Schember; Donald J. Seaman; the U.S. Chamber of 
Commerce; the Washington State Farm Bureau; and the Wholesaler-
Distributor Political Action Committee.
    On April 29, 1998, the Commission held a public hearing on this 
rulemaking at which 10 witnesses testified. The witnesses included 
representatives from AFSCME; the AFL-CIO; AH&MA ASAE; Americans Back 
in Charge, Inc.; the Free Speech Coalition, Inc.; the James Madison 
Center for Free Speech; the National Citizens Legal Network; OAA; and 
Mr. Schember.

[[Page 69225]]

    After further considering this matter, the Commission has now 
decided to reconsider the rules with a slightly different focus from 
that proposed in the original NPRM. Accordingly, the Commission is 
seeking comments on a second NPRM proposing further revisions to these 
rules. This new proposal primarily addresses the required 
characteristics of membership associations. The Commission is 
publishing this second NPRM because it did not propose any changes to 
these provisions in the original NPRM. See 62 FR 68834 (Dec. 22, 1997).

Background

    In its NRWC decision, the Supreme Court rejected an argument by a 
nonprofit, noncapital stock corporation, whose articles of 
incorporation stated that it had no members, that it should be able to 
treat as members individuals who had at one time responded, not 
necessarily financially, to an NRWC advertisement, mailing, or personal 
contact. The Supreme Court rejected this definition of ``member,'' 
saying that to accept it ``would virtually excise from the statute the 
restriction of solicitation to `members.' '' Id. at 203. The Court 
determined that ``members'' of nonstock corporations should be defined, 
at least in part, by analogy to stockholders of business corporations 
and members of labor unions. Viewing the question from this perspective 
meant that ``some relatively enduring and independently significant 
financial or organizational attachment is required to be a `member' '' 
for these purposes. Id. at 204. The NRWC's asserted members did not 
qualify under this standard because they played no part in the 
operation or administration of the corporation, elected no corporate 
officials, attended no membership meetings, and exercised no control 
over the expenditure of their contributions. Id. at 206. The 1993 
revisions to the Commission's rules were intended to incorporate this 
standard.

The Current Rules

    The current rules require an organization to meet three preliminary 
requirements before it can qualify as a membership association. These 
requirements are that it (1) expressly provide for ``members'' in its 
articles and by-laws; (2) expressly solicit members; and (3) expressly 
acknowledge the acceptance of membership, such as by sending a 
membership card or including the member on a membership newsletter 
list. 11 CFR 100.8(b)(4)(iv)(A), 114.1(e)(1). If these preliminary 
requirements are met, a person may qualify as a member either by having 
a significant financial attachment to the membership association (not 
merely the payment of dues), or the right to vote directly for all 
members of the association's highest governing body. However, in most 
instances a combination of regularly-assessed dues and the right to 
vote directly or indirectly for at least one member of the 
association's highest governing body is required. The term ``membership 
association'' includes membership organizations, trade associations, 
cooperatives, corporations without capital stock, and local, national 
and international labor organizations that meet the requirements set 
forth in these rules.

The Chamber of Commerce Decision

    The United States District Court for the District of Columbia held 
that the current rules were not arbitrary, capricious or manifestly 
contrary to the statutory language, and therefore deferred to what the 
court found to be a valid exercise of the Commission's regulatory 
authority. Chamber of Commerce of the United States v. FEC, Civil 
Action No. 94-2184 (D.D.C. Oct. 28, 1994)(1994 WL 615786). However, the 
D.C. Circuit Court of Appeals reversed this ruling.
    The case was jointly brought by the Chamber of Commerce and the 
American Medical Association (``AMA''), two associations that do not 
provide their asserted ``members'' with the voting rights necessary to 
confer this status under the current rules. The circuit court held that 
the ties between these members and the Chamber and the AMA are 
nonetheless sufficient to comply with the Supreme Court's NRWC 
criteria, and therefore concluded that the Commission's rules are 
invalid because they define the term ``member'' in an unduly 
restrictive fashion. 69 F.3d at 604.
    The Chamber is a nonprofit corporation whose members include 3,000 
state and local chambers of commerce, 1,250 trade and professional 
groups, and 215,000 ``direct business members.'' The members pay annual 
dues ranging from $65 to $100,000 and may participate on any of 59 
policy committees that determine the Chamber's position on various 
issues. However, the Chamber's Board of Directors is self-perpetuating 
(that is, Board members elect their successors); so no member entities 
have either direct or indirect voting rights for any members of the 
Board.
    The AMA challenged the exclusion from the definition of member 
44,500 ``direct'' members, those who do not belong to a state medical 
association. Direct members pay annual dues ranging from $20 to $420; 
receive various AMA publications; and participate in professional 
programs put on by the AMA. They are also bound by and subject to 
discipline under the AMA's Principles of Medical Ethics. However, since 
state medical associations elect members of the AMA's House of 
Delegates, that organization's highest governing body, direct members 
do not satisfy the voting criteria set forth in the current rules.
    The Chamber court, in an Addendum to the original decision, noted 
that the Commission ``still has a good deal of latitude in 
interpreting'' the term ``member.'' 76 F.3d at 1235. However, in its 
original decision, the court held the rules to be arbitrary and 
capricious as applied to the Chamber, since under the current rules 
even those paying $100,000 in annual dues cannot qualify as members. As 
for the AMA, the rule excludes members who pay up to $420 in annual 
dues and, among other organizational attachments, are subject to 
sanctions under the Principles of Medical Ethics. The court explained 
that this latter attachment ``might be thought, [] for a professional, 
[to be] the most significant organizational attachment.'' 69 F.3d at 
605 (emphasis in original).
    The current rules provide a ``safe harbor'' for membership 
associations, since those who meet the requirements set forth in these 
rules clearly enjoy ``member'' status. Associations can also seek 
advisory opinions pursuant to 2 U.S.C. 437f to determine how the rules, 
as interpreted in the Chamber of Commerce decision, apply to their 
particular situations. However, the Commission believes it is 
appropriate to include in the text of the rules additional guidance 
consistent with the Chamber decision.

The December 1997 NPRM

    The 1997 NPRM sought comments on three alternative proposals, 
referenced as Alternatives A, B, and C. None of the alternatives 
proposed any changes to the three preliminary requirements, or to the 
provisions in the current rules that recognize as members persons who 
have a stronger financial interest in an association than the payment 
of annual dues, such as those who own or lease seats on stock exchanges 
or boards of trade. 11 CFR 100.8(b)(4)(iv)(B)(1), 114.1(e)(2)(i), AO 
1997-5.
    Under Alternative A, all persons who paid $50 in annual dues or met 
specified organizational attachments would be considered members. The 
NPRM suggested such attachments as

[[Page 69226]]

the voting rights contained in the current rules; the right to serve on 
policy-making boards of the association; eligibility to be elected to 
the governing positions in the association; and the possibility of 
disciplinary action against the member by the association. A lesser 
dues obligation coupled with weaker organizational attachments would 
also be sufficient for this purpose.
    Alternative B distinguished between the types of organizations 
addressed by the Chamber decision, i.e., those formed to further 
business or economic interests or to implement a system of self-
discipline or self-regulation within a line of commerce; and 
ideological, social welfare, and political organizations. Persons 
paying any amount of annual dues would be considered members of the 
first category of organizations, while annual dues of $200 or more 
would be required for membership in the second category, unless the 
purported members had the same voting rights required by the current 
rule.
    Under Alternative C, an organization that qualified as a membership 
association by meeting the three preliminary requirements could 
consider as members all persons who paid the amount of annual dues set 
by the association, regardless of amount.
    The 1997 NPRM also proposed that direct membership in any level of 
a multitiered association be construed as membership in all tiers of 
the association for purposes of these rules. All three alternatives set 
out in that NPRM would adopt this approach, and the Commission is not 
now proposing further changes in this area.
    As was the case with the ANPRM, the comments and testimony received 
in response to the NPRM expressed a wide range of views--there was no 
consensus on how best to address this situation. After further 
consideration, the Commission is now seeking comments on a slightly 
different approach, one that would address more fully the attributes of 
membership associations, in addition to members' required financial or 
organizational attachments.

The New Proposal

    First, the Commission is proposing that the term ``membership 
association'' in 11 CFR 100.8(b)(4)(iv)(A) and 114.1(e)(1) be replaced 
by ``membership organization.'' The Commission believes it is 
appropriate to refer to the covered entities as ``membership 
organizations'' because that is the term used in the Act. See, 2 U.S.C. 
431(9)(B)(iii) and 441b(b)(4)(C). ``Membership organization'' is also 
referred to in 11 CFR 100.8(b)(4), which describes the entities 
entitled to the ``internal communication'' exception to the Act's 
definition of expenditure.
    The Commission is therefore proposing to replace the term 
``membership association'' with ``membership organization'' in 
paragraphs 100.8(b)(4)(iv)(A) and 114.1(e)(1). The revised definitions 
would provide that, for purposes of these rules, membership 
organization means a trade association, cooperative, corporation 
without capital stock, or local, national or international labor 
organization.
    The other newly-proposed revisions to the member rules primarily 
focus on attributes of membership organizations, the term used in 
current 11 CFR 100.8(b)(4). Since the purpose of the Act's ``membership 
communications'' exception is to allow bona fide membership 
organizations to engage in political communications with their members, 
the new rule would prevent individuals from establishing ``sham'' 
membership organizations in an effort to circumvent the Act's 
contribution and expenditure limits. The Commission believes it is 
appropriate to focus on the structure of the membership organization as 
well as on who qualifies as a member, and is therefore proposing the 
following amendments to 11 CFR 100.8(b)(4)(iv)(A) and 114.1(e)(1), the 
so-called ``preliminary requirements'' an entity must meet to qualify 
as a membership organization.
    First, since it is axiomatic that membership organizations should 
be composed of members, the Commission is proposing to replace the 
language at 11 CFR 100.8(b)(4)(iv)(A)(1) and 114.1(e)(1)(i), stating 
that an organization must expressly provide for members in its articles 
and bylaws, with this more general requirement.
    The second additional requirement would be that the organization be 
self-governing, that is, that the power and authority to direct and 
control the organization be vested in some or all members, pursuant to 
the organization's articles, bylaws, and other formal organizational 
documents. However, the organization would be able to delegate these 
responsibilities to smaller committees or other groups of members--the 
Commission is not proposing that all members be required to approve all 
organization actions. Membership associations with self-perpetuating 
boards would meet this requirement as long as all members of the board 
were themselves members of the organization, assuming that the 
organization had chosen this structure and that it met all other 
requirements of these regulations.
    Further, as noted above, the Supreme Court's language in the NRWC 
decision, 459 U.S. at 204, pointed to the need for members to have 
``relatively enduring and independently significant financial or 
organizational attachments.'' However, those attachments can hardly be 
meaningful if the members are unaware of their rights and obligations. 
Therefore, as a corollary to the proposal that only members constitute 
the organization, the Commission is proposing that membership 
organizations be required to inform members of their rights, 
qualifications and obligations under the organization's articles, 
bylaws and other formal organizational documents. In addition, 
organizations would be required to make their articles, bylaws and 
other formal organizational documents freely available to their 
members.
    The Commission's rules currently list at 11 CFR 100.8(b)(4) the 
entities entitled to the expenditure exemption and the types of 
communications (i.e., express advocacy) that an exempted organization 
may engage in without those communications being classified as an 
expenditure. As this paragraph states, entities ``organized primarily 
for the purpose of influencing the nomination for election, or 
election, of any individual to Federal office'' are not entitled to the 
membership communications exemption.
    The Commission is proposing that this paragraph be revised to 
delete the aforementioned language. In its place, this phrase would be 
re-inserted in new paragraphs 11 CFR 100.8(b)(4)(iv)(A)(7) and 
114.1(e)(1)(vii), the provisions that explicitly define a ``membership 
organization.'' This would insure that an organization primarily 
organized to influence a Federal election could not, by definition, be 
classified as a membership organization under the Act.
    Consistent with these changes, the Commission is also proposing to 
amend 11 CFR 100.8(b)(4) to clarify that the membership communications 
exception established by that section applies only to those 
communications made at the direction and control of the membership 
organization, and not of any other person.
    As for the definition of ``member,'' the Commission believes that 
the NRWC requirement that members of membership organizations have a 
``relatively enduring and independently significant financial or 
organizational'' attachment, supra, mandates that members have a 
continuous, long term bond with the organization itself. As 
Alternatives A and B in the 1997 NPRM suggest, ``relatively enduring'' 
attachments can be interpreted to mean

[[Page 69227]]

that an individual renews membership annually by meeting the 
organization's dues requirement, so long as he or she continues to 
satisfy the organization's provisions for membership. Similarly, the 
Commission proposes that this requirement could be satisfied where a 
member affirmatively and voluntarily renews his or her membership in 
writing on an annual basis. In the Commission's view, the annual 
payment of dues or voluntary annual reaffirmation of membership would 
satisfy the ``relatively enduring'' aspect of the NRWC Court's test. 
The proposal does not contain any threshold dues requirement, as the 
Commission believes this decision is best made by the individual 
membership organizations.
    In reformulating the organizational attachments prong of this test, 
the Commission is mindful of the broader implications of the Chamber 
decision and the Supreme Court's decision in FEC v. Akins, 118 S.Ct. 
1777, 1778 (1998). These decisions indicate that overly restrictive 
definitions are less likely to survive judicial scrutiny.
    Further, the comments and testimony received up to this point on 
the rulemaking indicate that models of governance within membership 
organizations are nearly as numerous as the number of organizations 
themselves. Taking this organizational diversity into account, and in 
the wake of the Akins and Chamber decisions, the Commission believes it 
should avoid prescribing an extensive list of permissible 
organizational attachments. For this reason the Commission is proposing 
that, while certain types of activities included in Alternatives A and 
B of the 1997 NPRM be included in the rules as instructive examples, 
the new rule simply provides that members be given the right to play a 
significant, non-advisory role in the organization's governance. Under 
this approach, 11 CFR 100.8(b)(4)(iv)(B)(3) and 114.1(e)(2)(iii) would 
be amended to require ``direct and enforceable participatory and 
governing rights'' in the organization. The Commission notes that such 
rights would be required only in the situation where members did not 
pay a specific, predetermined amount of annual dues to the 
organization.
    Alternatives A and B would both provide that students and lifetime 
members of certain entities could qualify as ``members'' of a 
membership organization upon payment of lesser annual dues, and without 
reference to voting rights. 62 FR 66837. The Commission is now 
proposing to revise 11 CFR 100.8(b)(iv)(D) and 114.1(e)(5) to expressly 
provide the same treatment to retired union members who have paid dues 
as active members for at least ten years (in satisfaction of the 
requirement of a significant financial attachment) but who are no 
longer required to do so. The Commission believes that, upon 
retirement, union members maintain a significant ``organizational 
attachment'' to their unions by virtue of insurance policies and other 
retirement benefits.
    Finally, in those cases where state law does not allow certain 
organizations to have ``members'' for policy reasons unrelated to the 
FECA, the revised NPRM would add language to clarify that those 
organizations still could be recognized as ``membership organizations'' 
for FECA purposes. The Commission is seeking specific comments on the 
implications of this proposal and the relationship between state and 
Federal law in this area.
    In addition, the Commission is proposing that the definition of 
``membership organization,'' for purposes of section 100.8(b)(4) only, 
also include unincorporated associations. The term ``unincorporated 
association'' would cover those entities that are not trade 
associations, cooperatives, corporations without capital stock, or 
labor organizations, that nevertheless met the requirements set forth 
in these rules. This change would address the situation under the 
current rules in which, if an unincorporated membership group wishes to 
support one of its member's campaign for Congress with a mailing to the 
organization's members, the costs of that mailing would constitute a 
contribution to that candidate, subject to the limit established at 2 
U.S.C. 441a(a)(1)(A).
    The application of the membership organization ``internal 
communication'' exception to an unincorporated association is a 
potentially significant change from current Commission policy, on which 
the Commission welcomes comment. One possible ramification of this 
proposal concerns the manner in which the costs of these communications 
are reported. If a membership communication was made independently of 
any candidate's campaign, section 431(9) only requires that the costs 
be reported if they exceed $2000 per election and the communication is 
not part of a publication that is primarily devoted to topics other 
than express advocacy of a candidate's election or defeat. 11 CFR 
100.8(b)(4). Moreover, only the costs, and not the sources of the funds 
expended, must be reported. 11 CFR 104.6(c). In contrast, section 
434(c) of the Act requires a person (other than a political committee) 
to report independent expenditures once the costs exceed $250.
    A second possible effect concerns internal communications that are 
coordinated with a candidate. The Commission's current rules allow 
corporations and labor organizations that wish to make internal 
communications to their restricted class to coordinate the 
communication with a candidate, although such coordination could 
compromise the independence of later activity by that entity or its 
SSF. See 11 CFR 114.2(c). An unincorporated association, unlike 
corporations and labor organizations, is permitted to make 
contributions from its treasury funds to candidates. If these 
unincorporated associations are permitted to coordinate express 
advocacy communications to their ``members'', the amount they could 
spend on such communications would be unlimited rather than subject to 
the Act's contribution limits under section 441a.
    An argument can be made that the proposed addition of 
unincorporated associations to the internal communications exception is 
in conflict with the balancing approach adopted by Congress in crafting 
the current statutory scheme. Under this approach, Congress gave the 
corporations and unions who were subject to section 441b certain rights 
in return for other obligations and restrictions, which are balanced by 
other rights and restrictions in the law for individuals and 
unincorporated entities.
    Please note, however, that the Commission does not intend by this 
proposed change to signal that unincorporated associations could begin 
establishing, and paying the unlimited costs of, a separate segregated 
fund. See 2 USC 441b(b)(2)(C). Cf. California Medical Association v. 
FEC, 453 U.S. 182 (1981). For this reason, the proposal to add 
unincorporated associations would only be made in section 100.8(b)(4) 
of the regulations. To avoid any confusion, the Commission will make 
conforming changes to Part 114 in the final rules to clarify that 
membership organizations referred to in that part are limited to 
``incorporated'' entities, if the proposal to add unincorporated groups 
is approved by the Commission at the final rule stage.
    The Commission also welcomes comments on any related topic.

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

    These proposed rules would not, if promulgated, have a significant 
economic impact on a substantial

[[Page 69228]]

number of small entities. The basis for this certification is that the 
rules would broaden the current definition of who qualifies as a member 
of a membership association, thus expanding the opportunity for such 
associations to send electoral advocacy communications and solicit 
contributions to their separate segregated funds, but would not require 
any expenditure of funds. Therefore, no significant impact would result 
for purposes of this requirement.

List of Subjects

11 CFR Part 100

    Elections.

11 CFR Part 114

    Business and industry, Elections, Labor.

    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 100--SCOPE AND DEFINITIONS (2 U.S.C. 431)

    1. The authority citation for Part 100 would continue to read as 
follows:

    Authority: 2 U.S.C. 431, 438(a)(8).

    2. Section 100.8 would be amended by revising paragraphs (b)(4) 
introductory text and (b)(4)(iv) to read as follows:


Sec. 100.8  Expenditure (2 U.S.C. 431(9)).

* * * * *
    (b) * * *
    (4) Any cost incurred for any communications by a membership 
organization, including a labor organization, to its members, or by a 
corporation to its stockholders or executive or administrative 
personnel, is not an expenditure, as long as the communication is 
subject to the direction and control of that entity and not any other 
person, except that the costs directly attributable to such a 
communication that expressly advocates the election or defeat of a 
clearly identified candidate (other than a communication primarily 
devoted to subjects other than the express advocacy of the election or 
defeat of a clearly identified candidate) shall, if those costs exceed 
$2,000 per election, be reported to the Commission on FEC Form 7 in 
accordance with 11 CFR 104.6.
* * * * *
    (iv) (A) For purposes of paragraph (b)(4) of this section 
membership organization means an unincorporated association, trade 
association, cooperative, corporation without capital stock, or a 
local, national, or international labor organization that:
    (1) Is composed of members;
    (2) Expressly states the rights, qualifications, obligations and 
requirements for membership in its articles, bylaws and other formal 
organizational documents;
    (3) Is self-governing, such that the power and authority to direct, 
and control the association is vested in some or all members, pursuant 
to its articles, by laws and other formal organizational documents;
    (4) Makes its articles, bylaws and other formal organizational 
documents freely available to its members;
    (5) Expressly solicits members;
    (6) Expressly acknowledges the acceptance of membership, such as by 
sending a membership card or inclusion on a membership newsletter list; 
and
    (7) Is not organized primarily for the purpose of influencing the 
nomination for election, or election, of any individual for Federal 
office.
    (B) For purposes of paragraph (b)(4) of this section, the term 
members includes all persons who are currently satisfying the 
requirements for membership in a membership organization, affirmatively 
accept the membership organization's invitation to become a member, 
affirm their membership on at least an annual basis and either:
    (1) Have some significant financial attachment to the membership 
organization, such as a significant investment or ownership stake;
    (2) Are required to pay on a regular basis a specific amount of 
annual dues of an amount predetermined by the organization; or
    (3) Have a significant organizational attachment to the membership 
organization which includes direct and enforceable participatory and 
governing rights. For example, such rights could include the right to 
vote directly or indirectly for at least one individual on the 
membership organization's highest governing board; the right to vote 
directly for organization officers; the right to vote on policy 
questions where the highest governing body of the membership 
organization is obligated to abide by the results; or the right to 
participate directly in similar aspects of the organization's 
governance.
    (C) Notwithstanding the requirements of paragraph (b)(4)(iv)(B) of 
this section, the Commission may determine, on a case by case basis, 
that persons seeking to be considered members of a membership 
organization for purposes of this section have a significant 
organizational or financial attachment to the organization under 
circumstances that do not precisely meet the requirements of the 
general rule. For example, student members who pay a lower amount of 
dues while in school or long term dues paying members who qualify for 
lifetime membership status with little or no dues obligation may be 
considered members.
    (D) Notwithstanding the requirements of paragraphs (b)(4)(iv)(B)(1) 
through (3) of this section, retired members of a local union who have 
paid dues for a period of at least ten years are considered members of 
the union; and members of a local union are considered to be members of 
any national or international union of which the local union is a part 
and of any federation with which the local, national, or international 
union is affiliated.
    (E) In the case of a membership organization which has a national 
federation structure or has several levels, including, for example, 
national, state, regional and/or local affiliates, a person who 
qualifies as a member of any entity within the federation or of any 
affiliate by meeting the requirements of paragraph (b)(4)(iv)(B)(1), 
(2), (3) or (4) of this section shall also qualify as a member of all 
affiliates for purposes of paragraph (b)(4)(iv) of this section. The 
factors set forth at 11 CFR 100.5(g)(4) shall be used to determine 
whether entities are affiliated for purposes of this paragraph.
    (F) The status of a membership organization, and of members, for 
purposes of paragraph (b)(4) of this section, shall be determined 
pursuant to paragraph (b)(4)(iv) of this section and not by provisions 
of state law governing unincorporated associations, trade associations, 
cooperatives, corporations without capital stock, or labor 
organizations.
* * * * *

PART 114--CORPORATE AND LABOR UNION ACTIVITY

    3. The authority citation for Part 114 would continue to read as 
follows:

    Authority: 2 U.S.C. 431(8)(B), 431(9)(B), 432, 437d(a)(8), 
438(a)(8), and 441b.

    4. Section 114.1 would be amended by revising paragraph 114.1(e) to 
read as follows:


Sec. 114.1  Definitions.

* * * * *
    (e)(1) For purposes of paragraph (e) of this section membership 
organization means a trade association, cooperative, corporation 
without capital stock, or a local, national, or international labor 
organization that:
    (i) Is composed of members;
    (ii) Expressly states the rights, qualifications, obligations and

[[Page 69229]]

requirements for membership in its articles, bylaws and other formal 
organizational documents;
    (iii) Is self-governing, such that the power and authority to 
direct, and control the association is vested in some or all members, 
pursuant to its articles, by laws and other formal organizational 
documents;
    (iv) Makes its articles, bylaws and other formal organizational 
documents freely available to its members;
    (v) Expressly solicits members;
    (vi) Expressly acknowledges the acceptance of membership, such as 
by sending a membership card or inclusion on a membership newsletter 
list; and
    (vii) Is not organized primarily for the purpose of influencing the 
nomination for election, or election, of any individual to Federal 
office.
    (2) For purposes of paragraph (e) of this section, the term members 
includes all persons who are currently satisfying the requirements for 
membership in a membership organization, affirmatively accept the 
membership organization's invitation to become a member, affirm their 
membership on at least an annual basis and either:
    (i) Have some significant financial attachment to the membership 
organization, such as a significant investment or ownership stake;
    (ii) Are required to pay on a regular basis a specific amount of 
annual dues of an amount predetermined by the organization; or
    (iii) Have a significant organizational attachment to the 
membership organization which includes direct and enforceable 
participatory and governing rights. For example, such rights could 
include the right to vote directly or indirectly for at least one 
individual on the membership organization's highest governing board; 
the right to vote directly for organization officers; the right to vote 
on policy questions where the highest governing body of the membership 
organization is obligated to abide by the results; or the right to 
participate directly in similar aspects of the organization's 
governance.
    (3) Notwithstanding the requirements of paragraph (e)(2) of this 
section, the Commission may determine, on a case by case basis, that 
persons seeking to be considered members of a membership organization 
for purposes of this section have a significant organizational or 
financial attachment to the organization under circumstances that do 
not precisely meet the requirements of the general rule. For example, 
student members who pay a lower amount of dues while in school or long 
term dues paying members who qualify for lifetime membership status 
with little or no dues obligation may be considered members.
    (4) Notwithstanding the requirements of paragraphs (e)(2) (i) 
through (iii) of this section, retired members of a local union who 
have paid dues for a period of at least ten years are considered 
members of the union; and members of a local union are considered to be 
members of any national or international union of which the local union 
is a part and of any federation with which the local, national, or 
international union is affiliated.
    (5) In the case of a membership organization which has a national 
federation structure or has several levels, including, for example, 
national, state, regional and/or local affiliates, a person who 
qualifies as a member of any entity within the federation or of any 
affiliate by meeting the requirements of paragraph (e)(2) (i), (ii), 
(iii) or (iv) of this section shall also qualify as a member of all 
affiliates for purposes of paragraph (e)(1) of this section. The 
factors set forth at 11 CFR 100.5(g)(4) shall be used to determine 
whether entities are affiliated for purposes of this paragraph.
    (6) The status of a membership organization, and of members, for 
purposes of this part, shall be determined pursuant to paragraph (e)(1) 
of this section and not by provisions of state law governing trade 
associations, cooperatives, corporations without capital stock, or 
labor organizations.
* * * * *


Sec. 114.7   [Amended]

    5. In Sec. 114.7, paragraph (k) would be removed.


Sec. 114.8   [Amended]

    6. In Sec. 114.8, paragraph (g) would be removed and reserved.

    Dated: December 11, 1998.
Scott E. Thomas,
Acting Chairman, Federal Election Commission.
[FR Doc. 98-33317 Filed 12-15-98; 8:45 am]
BILLING CODE 6715-01-P