[Federal Register Volume 64, Number 116 (Thursday, June 17, 1999)]
[Rules and Regulations]
[Pages 32394-32397]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-15253]


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FEDERAL ELECTION COMMISSION

11 CFR Part 9034

[Notice 1999-9]


Matching Credit Card and Debit Card Contributions in Presidential 
Campaigns

AGENCY: Federal Election Commission.

ACTION: Final rules and transmittal of regulations to Congress.

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SUMMARY: The Commission has adopted new regulations that allow 
contributions made by credit or debit card, including contributions 
made over the Internet, to be matched under the Presidential Primary 
Matching Payment Account Act. ``Matchable contributions'' are those 
which, when received by candidates who qualify for payments under the 
Presidential Primary Matching Payment Account Act, are matched by the 
Federal Government. The new rules provide that credit and debit card 
contributions, including those made over the Internet, are matchable to 
the extent provided by law, provided that controls and procedures are 
in place to detect excessive and prohibited contributions. Please note 
that further documentation requirements may be addressed in the 
Commission's upcoming final rules governing public financing of 
presidential primary and general election candidates.

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

FOR FURTHER INFORMATION CONTACT: N. Bradley Litchfield, Associate 
General Counsel, or Rita A. Reimer, Attorney, 999 E Street, N.W., 
Washington, D.C. 20463, (202) 694-1650 or (800) 424-9530 (toll free).

SUPPLEMENTARY INFORMATION: The Commission is publishing today revisions 
to its regulations at 11 CFR 9034.2 and 9034.3 to permit the matching 
of credit card and debit card contributions, including contributions 
received over the Internet, under the Presidential Primary Matching 
Payment Account Act, 26 U.S.C. 9031 et seq. (``Matching Payment Act''). 
Please note that other revisions to the Commission's rules concerning 
the public financing of presidential primary and general election 
campaigns will be addressed in a separate document. In addition, the 
Commission may address further documentation requirements of these new 
rules in that document.
    Debit card contributions are deducted directly from the 
contributor's checking, savings, or other financial account. Credit 
card contributions are billed to the contributor and are usually 
processed by a third-party entity.
    Under the Matching Payment Act, if a candidate for the presidential 
nomination of his or her party agrees to certain conditions and raises 
in excess of $5,000 in contributions of $250 or less from residents of 
each of at least 20 States, the first $250 of each eligible 
contribution is matched by the Federal Government. 26 U.S.C. 9033, 
9034. In the past the Commission has declined to match credit card 
contributions, although it has allowed them in other contexts. The 
Commission has always held contributions submitted for matching to a 
higher documentation standard, because the matching fund program 
involves the disbursement of millions of dollars in taxpayer funds. 
However, the Commission has now determined that such contributions may 
be matched under certain circumstances.
    On December 16, 1998, the Commission published a Notice of Proposed 
rulemaking (``NPRM'') in which it sought comments on a wide range of 
issues involved in the public financing of presidential primary and 
general election campaigns. 63 FR 69524 (Dec. 16, 1998). While the NPRM 
did not specifically seek comments on credit card and Internet 
contributions, it stated that the Commission would welcome comments on 
``other aspects of the public financing process that could be addressed 
in these regulations.'' Id. at 69532.
    In response to the NPRM, several commenters urged the Commission to 
match qualified contributions made by credit or debit card over the 
Internet. These commenters included America Online (``AOL''); Aristotle 
Publishing, Inc.; the Democratic National Committee (``DNC''); the 
Republican National Committee (``RNC''); and a joint comment by Lyn 
Utrecht and Eric Kleinfeld of Ryan, Phillips, Utrecht, & MacKinnon, and 
Patricia Fiori. In addition, the Commission held a public hearing on 
March 24, 1999, at which representatives of AOL, the DNC, the RNC, and 
Ms. Utrecht testified on this issue. After considering the comments, 
testimony and other relevant material, the Commission has decided to 
authorize the matching of such contributions under the circumstances 
described below.
    It is well established that the Administrative Procedure Act 
(``APA'') requires only that an agency give notice which contains 
``either the terms or substance of the proposed rule or a description 
of the subjects and issues involved.'' 5 U.S.C. 553(b)(3). Under the 
APA, the final rule must be a ``logical outgrowth'' of the proposed 
rule on which it solicited comments. Chocolate Manufacturers Ass'n v. 
Block, 755 F.2d 1098 (4th Cir. 1985).
    Since these rules are not major rules within the meaning of 5 
U.S.C. 804(2), the Matching Payment Act controls the legislative review 
process. See 5 U.S.C. 801(a)(4), Small Business Enforcement Fairness 
Act, Pubic Law 104-121, section 251, 110 Stat. 857, 869 (1996). Section 
9039(c) of Title 26, United States Code, requires that any rules or 
regulations prescribed by the Commission to carry out the provisions of 
the Matching Payment Act 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 Friday, June 11, 1999.

Explanation and Justification

    A matchable contribution for purposes of the Matching Fund Act is 
generally defined at 26 U.S.C. 9034(a) as ``a gift of money made by a 
written instrument which identifies the person making the contribution 
by full name and mailing address.'' The Commission's regulations at 11 
CFR 9034.2(b) define the term written instrument to mean a check 
written on a personal, escrow or trust account representing or 
containing the contributor's personal funds; a money

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order; or any similar negotiable instrument.'' The written instrument 
must contain the full name and signature of the contributor(s), the 
amount and date of the contribution, and the mailing address of the 
contributor(s). 11 CFR 9034.2(c). The Commission's rules at 11 CFR 
9034.3(c) state that ``a contract, promise, or agreement, whether or 
not legally enforceable, such as a pledge card or credit card 
transaction'' is a non-matchable contribution.
    All contributions received in connection with Federal elections are 
subject to the limitations and prohibitions of the Federal Election 
Campaign Act (``FECA'' or the ``Act''), 2 U.S.C. 431 et seq. The Act 
prohibits corporations, labor organizations and national banks from 
making any contribution in connection with a Federal election, 2 U.S.C. 
441b(a). The Act also prohibits contributions by Federal contractors, 2 
U.S.C. 441c, and by foreign nationals who are not permanent legal 
residents, 2 U.S.C. 441e. Contributions by persons whose contributions 
are not prohibited by the Act are subject to the limits set out in 2 
U.S.C. 441a(a), generally $1,000 per candidate per election to Federal 
office. 2 U.S.C. 441a(a)(1). Individual contributions to candidates and 
political committees may not aggregate more than $25,000 in any 
calendar year. 2 U.S.C. 441a(a)(3).
    The Commission considered the possibility of matching credit card 
contributions in 1983 but declined to match such payments ``because 
credit cards present problems for ensuring that the requirements of 
matchability are met.'' 48 FR 5224, 5228 (Feb. 4, 1983). The Commission 
cited as examples of such problems the fact that credit card 
contributions made by phone would lack the contributor's signature; 
determining the source of the funds used for the contributions could be 
complicated, since some accounts that appear to be personal are 
actually paid for by corporations; and candidates would be requesting 
more in matching funds than they receive in contributions, since credit 
card companies deduct varying amounts to pay for their services. Id.
    The Commission has, however, authorized the use of credit cards for 
unmatched contributions since 1978. See Advisory Opinion (``AO'') 1978-
68. It has also authorized corporations to reimburse their Political 
Action Committees (``PAC'') for service charges incurred by credit card 
contributions, AO 1984-45; automatic fund transfers from contributors' 
bank accounts to committee accounts, AO 1989-26; contributions and 
membership dues to be paid to a PAC via credit card, AO 1990-4; and 
campaigns to solicit contributions to be made by advance authorization 
of credit card charges, AO 1991-1.
    In AO 1978-68 the Commission assumed that credit card issuers would 
follow their usual and normal collection procedures with respect to 
obtaining payment from persons who used their cards to make political 
contributions; and that credit card issuers, as well as the companies 
processing the credit card charges, would render their services in the 
ordinary course of business and receive the usual and normal charge for 
their services, i.e., the prevailing charge for the services at the 
time they were rendered. See 11 CFR 100.4(a)(1)(iii)(B). Otherwise, the 
difference would constitute an in-kind corporate contribution in 
violation of 2 U.S.C. 441b. The Commission is making the same 
assumptions for purposes of this rulemaking.
    The Commission is making this change for several reasons. The use 
of credit cards has expanded dramatically since this issue was last 
considered in 1983. The Commission is convinced that credit and debit 
card contributions present no greater danger of fraud than do other 
contributions, if adequate precautions are taken. This approach also 
allows matching contributions to be made over the Internet, consistent 
with the Commission's expressed interest in utilizing this evolving 
medium where appropriate in FECA and public funding contexts.

Contributions Made Over the Internet--Background

    The Commission has interpreted its regulations to be consistent 
with contemporary technological innovations where the use of the 
technology would not compromise the intent of law. However, the 
Commission believes that additional precautions must be taken when 
credit and debit card contributions are made over the Internet, because 
there is no direct paper transfer involved in such transactions. In 
contrast, if a credit card contribution is solicited over the 
telephone, the person taking the information can inform the contributor 
directly of the Act's limits and prohibitions, and check any 
potentially troublesome information, such as a foreign residential 
address. Where contributions are solicited by mail or other printed 
material, the recipient has a written document setting out the Act's 
requirements and prohibitions for permanent reference.
    In AO 1995-9, the Commission authorized political contributions to 
be made via credit card over the Internet, provided that safeguards 
were in place to screen out excessive and prohibited contributions. It 
subsequently authorized the solicitation of matchable contributions 
over the Internet, in AO 1995-35. However, the requester of that AO 
sought permission only to solicit funds over the Internet--contributors 
were asked to mail the resulting contributions to the campaign in the 
form of personal checks. Those who commented on the current NPRM asked 
the Commission to match contributions that are both solicited and paid 
for by credit card over the Internet, thus eliminating this middle 
step.
    On March 18, 1999, the Commission received Advisory Opinion Request 
1999-9, which sought to accomplish this same result through the AO 
process. The Commission approved that request on June 10, 1999, but 
made its approval contingent on final promulgation of the regulations 
following the Congressional review period.
    The Commission has determined in these advisory opinions that 
certain conditions and procedures are sufficient to allay concerns over 
the receipt of prohibited contributions using credit cards, and to meet 
other FECA requirements. While the Commission is not mandating any 
particular language or procedures for this purpose, it notes that the 
following measures constitute ``safe harbors'' which have already been 
deemed satisfactory. Additional information on this topic will be 
included in the Commission's Guideline for Presentation in Good Order 
(``PIGO''), which is made available to all candidates who qualify for 
funding under the Matching Payment Act, as well as to other interested 
parties. See 11 CFR 9033.1(b)(9).

Section 9034.2(b) The ``Written Instrument'' Requirement

    The Commission is amending paragraph (b) of section 9034.2 to 
clarify the meaning of the term written instrument in the context of 
contributions by credit or debit card. Consistent with the Black's Law 
Dictionary definition discussed below, the new rule specifically states 
that this term covers either a transaction slip or other writing signed 
by the cardholder, or in the case of such a contribution made over the 
Internet, an electronic record of the transaction created and 
transmitted by the cardholder, and including the name of the cardholder 
and the card number, which can be maintained electronically and 
reproduced in a written form by the

[[Page 32396]]

recipient candidate or candidate's committee.
    Black's Law Dictionary defines written instrument as ``[s]omething 
reduced to writing as a means of evidence, and as the means of giving 
formal expression to some act or contract'' (6th Ed., 1990, at 1612). 
Clearly this would cover credit card transactions that were ``reduced 
to writing'' at some stage of the process. In fact, there is a small 
but growing body of case law holding that computer records also 
constitute written instruments, as long as they can be printed out in 
paper form. Clyburn v. Allstate Insurance Co., 826 F.Supp. 955, 956 
(D.S.C. 1993); People v. Perry, 605 N.Y.S.2d 790, 199 A.D.2d 889 
(1993); Colonial Dodge, Inc. v. Chrysler Corporation, 11 F.Supp.3d 737, 
750-51 (D.Md. 1996); see also People v. LeGrand, 439 N.Y.S.2d 695, 81 
A.D.2d 945 (1981) (credit card vouchers and receipts held to be 
``written instruments'' for purposes of state forgery statute).
    While the use of the Internet for campaign contributions does not 
entail a ``written instrument'' in the traditional sense, this does not 
foreclose its use for this purpose. The Commission stated in AO 1995-9 
that, in order to be valid under the FECA, electronic transactions of 
this nature must entail the creation and maintenance of a complete and 
reliable ``paper trail'' for recordkeeping, disclosure, and audit 
purposes. The campaign can then print out these forms as required. 
Please note that the Commission is not requiring campaigns to print out 
these records at the time they are received, but only that they be kept 
in a form which will allow them to be printed out as needed.

Section 9034.2(c) Definition of Signature

    The Commission is revising paragraph (c) of section 9034.2 to 
clarify that the term signature means, in the case of a contribution by 
a credit or debit card, either an actual signature by the cardholder 
who is the donor on a transaction slip or other writing, or in the case 
of such a contribution made over the Internet, the full name and card 
number of the cardholder who is the donor, entered and transmitted by 
the cardholder.
    The Commission does not believe that the term signature can be 
extended to telephone transactions where the only record is being 
created wholly by the recipient committee. While the use of electronic 
signatures is becoming increasingly common, it is universally 
understood that it is the signatory's (in this case, the donor's) act 
of entering his or her name that represents a legal act. However, if 
the committee sends out a voucher and receives a contributor-signed 
return of the voucher, or obtains some other verification of the 
contribution from the contributor, the credit card contribution 
initially approved over the telephone could then be matched.

Section 9034.2(c)(8) Credit and Debit Card Contributions, Including 
Those Made Over the Internet

Section 9034.2(c)(8)(i) General Requirement
    This section establishes the requirements for matching credit and 
debit card contributions, including those received over the Internet. 
It generally states at paragraph (c)(8)(i) that such contributions are 
matchable, provided that the requirements of 11 CFR 9034.2(b) 
concerning a written instrument and of 11 CFR 9034.2(c) concerning a 
signature are satisfied. As explained above, it excludes telephone 
transactions where the only record is being created wholly by the 
recipient committee.
Section 9034.2(c)(8)(ii) Prohibited Contributions
    The new rules state at paragraph (c)(8)(ii) that credit card and 
debit card contributions will be matched, if evidence is submitted by 
the committee that the contributor has affirmed that the contribution 
is from personal funds and not from funds otherwise prohibited by law.
    In order to comply with this provision, a committee should take 
steps to insure that controls and procedures are in place to minimize 
the possibility of contributions by foreign nationals, by Federal 
Government contractors, and by labor organizations, or by an individual 
using corporate or other business entity credit accounts. Such controls 
and procedures should also help the recipient committee identify 
contributions made by the same individual using different or multiple 
credit card accounts; and contributions by two or more individuals who 
are each authorized to use the same account, but where the legal 
obligation to pay the account only extends to one (or more) of the card 
holders, and not to all of them.
    In Advisory Opinion 1999-9 the requester outlined numerous steps 
and procedures that campaign intended to take to screen for prohibited 
and excessive contributions. In Advisory Opinion 1995-9 the Commission 
approved other specific procedures for this purpose. While these 
regulations do not mandate all of these procedures, campaigns are still 
required to make reasonable efforts to prevent receipt of prohibited or 
excessive contributions. In Advisory Opinion 1999-9, for instance, to 
screen further for corporate or business entity cards, the committee 
explained that it intended to take advantage of the fact that corporate 
or business entity credit cards are generally billed directly to the 
entity's offices, rather than to an individual's home. If the billing 
and residential addresses provided by the prospective donor were 
different, the committee's web site would display a message noting the 
discrepancy and reminding the donor that it cannot accept contributions 
made on corporate or business entity credit cards, or on any card that 
does not represent the contributor's own personal funds. It was noted 
at the Commission's public hearing that similar action could be taken 
in an effort to bar prohibited contributions from foreign nationals, if 
the residence address was outside the United States. However, the rules 
do not prescribe particular language and procedures to assure that 
these concerns are met.
    If contributions are not rejected for one of the foregoing reasons, 
soliciting campaigns present them for payment by the credit card 
company or other servicing entity in the usual manner. That entity 
will, in turn, ascertain that the name, address and other identifying 
information provided by the contributor matches that on record. If so, 
it will forward the amount of the contribution, less applicable fees, 
to the campaign. In the case of a debit card transaction, the financial 
institution that administers the account will forward the money to the 
campaign without this intermediate step. The receipt of the money by 
the campaign will serve as confirmation that the financial institution 
or other processing entity considers the transaction to be legal.

Section 9034.3(c) Non-Matchable Contributions

    The Commission is revising section 9034.3(c) to delete from the 
definition of non-matchable contributions the term ``credit card 
transactions,'' because it has determined that credit card 
contributions may be matched under the circumstances set forth in this 
document.

Other Issues

Best Efforts

    Treasurers of political committees are required to exercise ``best 
efforts'' to report all contributions, 2 U.S.C. 432(i), and to include 
in these reports the complete identification of each

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contributor whose contributions aggregate more than $200 per calendar 
year. 2 U.S.C. 434(b)(3)(A). For an individual, ``identification'' 
means the full name, mailing address, occupation and employer. 2 U.S.C. 
431(13). A contributor's failure to provide this information does not 
bar the recipient committee from accepting the contribution, since the 
FECA requires only that the committee make ``best efforts'' to obtain 
it. However, the Commission's rules at 11 CFR 104.7(b)(2) require the 
recipient to make one oral or written follow-up attempt to obtain the 
contributor information for any contribution that exceeds $200 per 
calendar year.
    The Commission is not revising its ``best efforts'' regulations in 
this rulemaking because those rules apply to all categories of 
political committees, including presidential campaign committees that 
qualify for matching Federal payments under 26 U.S.C. 9031 et seq. 
Furthermore, Commission regulations impose additional documentation 
requirements for matchable contributions whether or not a presidential 
campaign has exerted ``best efforts'' to obtain the contributor 
information that it is required to report under 2 U.S.C. 434(b)(3)(A). 
See 11 CFR 9036.1(b)(1)(i) and (ii) and 9036.2(b)(1)(v). Nevertheless, 
the Commission notes that the use of computer technology to solicit and 
receive matchable contributions through the Internet does present new 
options for a committee's compliance with the ``best efforts'' rules.
    The requesters of both AO 1995-9 and 1999-9 stated that, if a 
contributor did not provide the required donor information, he or she 
would immediately receive another message asking again for the 
information. Some witnesses at the public hearing stated that 
contributors are more likely to provide information when prompted to do 
so by a computer than they might in other circumstances. In AO 1995-9, 
the Commission determined that, in the unique case of a contribution 
received over the Internet, the request could consist of an electronic 
message sent to the contributor's e-mail address. Any such request must 
be made after the committee receives the confirmation discussed above, 
and must meet the specific ``best efforts'' requirements set forth in 
11 CFR 104.7(b)(2).

Credit Card Costs

    The Commission has reconsidered the concern which it expressed in 
1983 over the percentage of credit card contributions that could be 
matched, and determined that the costs of processing credit and debit 
card contributions should be an allowable fundraising expense. Several 
commenters and witnesses pointed out that the costs of processing 
credit card contributions may be a significantly smaller cost to the 
campaign than the expenses associated with direct mail solicitations, 
holding a physical fundraising event such as a dinner or a reception, 
or paying fundraising consultants.

Retroactive Application

    These regulations will have retroactive application to otherwise 
qualified credit and debit card contributions made on January 1, 1999 
and thereafter, unless Congress and the President disapprove the 
regulations. Now that the Commission has determined that credit and 
debit card contributions may be matched, it believes it is appropriate 
to retroactively match such contributions, since many presidential 
campaigns will have engaged in substantial fundraising by the time 
these rules take effect. Since matching funds will not be disbursed 
until after the start of the matching payment period on January 1, 
2000, 26 U.S.C. 9032(6), 9037, this provides ample notice to those 
campaigns that wish to utilize this fundraising approach.

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 these regulations do not 
affect a substantial number of entities, and most covered entities are 
not ``small entities'' for purposes of the Regulatory Flexibility Act. 
Therefore the rules would not have a significant economic effect on a 
substantial number of small entities.

List of Subjects 11 CFR Part 9034

    Campaign funds, recordkeeping and reporting requirements.

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

PART 9034--ENTITLEMENTS

    1. The authority citation for Part 9034 continues to read as 
follows:

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

    2. Section 9034.2 is amended by revising paragraph (b), by adding a 
sentence at the end of the introductory text of paragraph (c), and by 
adding new paragraph (c)(8), to read as follows:


Sec. 9034.2  Matchable contributions.

* * * * *
    (b) For purposes of this section, the term written instrument means 
a check written on a personal, escrow or trust account representing or 
containing the contributor's personal funds; a money order; any similar 
negotiable instrument; or, for contributions by credit or debit card, a 
paper record, or an electronic record that can be reproduced on paper, 
of the transaction. For purposes of this section, the term written 
instrument also means, in the case of a contribution by a credit card 
or debit card, either a transaction slip or other writing signed by the 
cardholder, or in the case of such a contribution made over the 
Internet, an electronic record of the transaction created and 
transmitted by the cardholder, and including the name of the cardholder 
and the card number, which can be maintained electronically and 
reproduced in a written form by the recipient candidate or candidate's 
committee.
    (c) * * * For purposes of this section, the term signature means, 
in the case of a contribution by a credit card or debit card, either an 
actual signature by the cardholder who is the donor on a transaction 
slip or other writing, or in the case of such a contribution made over 
the Internet, the full name and card number of the cardholder who is 
the donor, entered and transmitted by the cardholder.
* * * * *
    (8) Contributions by credit or debit card are matchable 
contributions, provided that:
    (i) The requirements of paragraph (b) of this section concerning a 
written instrument and of paragraph (c) of this section concerning a 
signature are satisfied. Contributions by credit card or debit card 
where the cardholder's name and card number are given to the recipient 
candidate or candidate's committee only orally are not matchable.
    (ii) Evidence is submitted by the committee that the contributor 
has affirmed that the contribution is from personal funds and not from 
funds otherwise prohibited by law.
    3. Section 9034.3 is amended by removing the phrase ``or credit 
card transaction'' in paragraph (c).

    Dated: June 11, 1999.
Scott E. Thomas,
Chairman, Federal Election Commission.
[FR Doc. 99-15253 Filed 6-16-99; 8:45 am]
BILLING CODE 6715-01-P