[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
[[Page 32395]]
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
[[Page 32397]]
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]
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