[Federal Register Volume 64, Number 146 (Friday, July 30, 1999)]
[Rules and Regulations]
[Pages 41266-41273]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-19515]


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FEDERAL ELECTION COMMISSION

11 CFR Parts 100 and 114

[Notice 1999-12]


Definition of ``Member'' of a Membership Organization

AGENCY: Federal Election Commission.

ACTION: Final rules and transmittal of regulations to Congress.

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SUMMARY: The Commission has revised its rules governing who qualifies 
as a ``member'' of a membership organization. An incorporated 
membership organization or labor organization can solicit contributions 
from its members to a separate segregated fund (``SSF'') established by 
the organization, and can include express electoral advocacy in 
communications to its members. Unincorporated membership organizations 
can similarly make internal communications to their members but cannot 
establish SSF's. The revisions largely address the internal 
characteristics of an organization that, when coupled with certain 
financial or organizational attachments, are sufficient to confer 
membership status.

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 2 U.S.C. 438(d).

FOR FURTHER INFORMATION CONTACT: Ms. Rosemary C. Smith, Acting 
Assistant General Counsel, or Ms. Rita A. Reimer, Attorney, 999 E 
Street N.W., Washington, DC 20463, (202) 694-1650 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 organizations, to solicit contributions from 
their restricted class to a separate segregated fund. In the case of 
incorporated membership organizations, the restricted class consists of 
the

[[Page 41267]]

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 
organizations 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 organization 
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 F.R. 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. On April 29, 1998, the Commission held a public 
hearing on this rulemaking at which 10 witnesses testified.
    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 organization 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 the voting rights contained in the 
current rules; the right to serve on policy-making boards of the 
organization; eligibility to be elected to the governing positions in 
the organization; and the possibility of disciplinary action against 
the member by the organization. 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 
organization by meeting the three preliminary requirements could 
consider as members all persons who paid the amount of annual dues set 
by the organization, regardless of amount.
    The 1997 NPRM also proposed that direct membership in any level of 
a multi-tiered organization be construed as membership in all tiers of 
the organization for purposes of these rules.
    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 sought comments on a slightly different 
approach, one that would address more fully the attributes of 
membership organizations, in addition to members' required financial or 
organizational attachments. The Commission accordingly published a 
second NPRM that focused primarily on characteristics of membership 
organizations. 63 F.R. 69224 (Dec. 16, 1998).
    The Commission received 25 comments in response to the second NPRM. 
Commenters included the Alliance for Justice; the American Federation 
of Labor and Congress of Industrial Organizations (``AFL-CIO''); the 
American Federation of State, County and Municipal Employees 
(``AFSCME''); the American Hotel and Motel Association (``AH&MA''); the 
American Medical Association; the Americans Back in Charge Foundation; 
the American Society of Association Executives (``ASAE''); Peter A. 
Bagatelos; Camille Bradford; the Hon. Thomas M. Davis; the Free Speech 
Coalition; Harmon, Curran, Spielberg & Eisenberg; the Internal Revenue 
Service; the James Madison Center for Free Speech; the National 
Association of Business Political Action Committees (``NABPAC''); the 
National Association of Realtors; the National Citizens Legal Network 
(``NCLN''); the National Education Association (``NEA''); the National 
Lumber and Building Material Dealers Association (``NLBMDA''); the 
National Right to Work Committee; the National Rural Electric 
Cooperative Association; the National Telephone Cooperative 
Association; Vigo G. Nielsen, Jr.; Daniel M. Schember; and the United 
States Chamber of Commerce.
    The Commission held a hearing on this NPRM on March 17, 1999, at 
which 13 witnesses testified. Witnesses included representatives of the 
Alliance for Justice; the AFL-CIO; AFSCME; AH&MA the Americans Back in 
Charge Foundation; ASAE; the Free Speech Coalition; the James Madison 
Center for Free Speech; NABPAC; NCLN; NEA; Ms. Bradford; and Mr. 
Schember.

Explanation and Justification

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

[[Page 41268]]

this definition of ``member,'' saying that to accept it ``would 
virtually excise from the statute the restriction of solicitation to 
`members.' '' 459 U.S. 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 organization. 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 C.F.R. 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 organization (not 
merely the payment of dues), or the right to vote directly for all 
members of the organization'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 
organization's highest governing body is required. The term 
``membership organization'' includes membership organizations, trade 
organizations, 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 Court of Appeals for the D.C. Circuit reversed this ruling.
    The case was jointly brought by the Chamber of Commerce and the 
American Medical Association (``AMA''), two organizations that do not 
provide their asserted ``members'' with the voting rights necessary to 
confer this status under the current rules. The appellate 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).

Section 100.8(b)(4) Membership Organizations

    First, the Commission has replaced the term ``membership 
association'' wherever it appears in this section with the term 
``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 NPRM proposed adding unincorporated associations to the 
definition of membership organizations, for purposes of 11 CFR 100.8 
only. The comments on this proposal were mixed. Some supported the 
idea, while others argued against it, saying that it might exceed the 
Commission's authority by blurring the statutory distinction between 
corporations and other entities contained in the FECA.
    The Commission is expanding the definition of membership 
organization to include unincorporated associations because it believes 
this is consistent with congressional intent. It is clear from the 
placement of the exception at 2 U.S.C. 431(9)(B)(iii), i.e., in the 
Act's ``definition'' section, that Congress intended to allow 
noncorporate and non-labor union organizations to avail themselves of 
the internal membership communication exception. By including the 
internal communications exception in the definition of ``expenditure,'' 
the statute allows noncorporate and non-union membership organizations 
to communicate with their members without subjecting them to the normal 
prohibitions and reporting requirements.
    Paragraph (b)(4) lists the types of 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. It currently states 
that entities ``organized primarily for the purpose of influencing the 
nomination for election, or election, of any individual to Federal 
office'' are not

[[Page 41269]]

entitled to the membership communications exemption.
    The Commission has decided to move this language to new paragraph 
11 CFR 100.8(b)(4)(iv)(A)(6), the provision in 11 CFR 100.8 that 
explicitly defines a ``membership organization.'' This change insures 
that organizations primarily organized to influence a Federal election 
cannot, by definition, be classified as membership organizations under 
the Act.
    The NPRM proposed further revising this section to include only 
communications ``subject to the direction and control of [the 
membership organization] and not any other person.'' Several commenters 
expressed concern that this provision could infringe on 
constitutionally protected free speech rights, and lead to unwarranted 
Commission intrusion into an organization's internal workings. The 
Commission is not including this language in the final rule because it 
has determined that the current language, which encompasses ``[a]ny 
cost incurred for any communication by a membership organization to its 
members,'' sufficiently addresses its concern that an organization not 
be used as a conduit by a candidate or other outside entity seeking to 
influence unlawfully a Federal election.

Section 100.8(b)(4)(iv)(A) Attributes of Membership Organizations

    Paragraph (b)(4)(iv)(A) of this section addresses the attributes of 
membership organizations. 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, 
these rules are intended to prevent individuals from establishing 
``sham'' membership organizations in an effort to circumvent the Act's 
contribution and expenditure limits. For this reason, the Commission 
believes it is appropriate to focus on the structure of the membership 
organization as well as on who qualifies as a member.
    Accordingly, revised paragraph (A)(1) states that a membership 
organization shall be composed of members vested with the power and 
authority to operate or administer the organization pursuant to the 
organization's articles, bylaws, constitution or other formal 
organizational documents. The Commission believes it is axiomatic that 
membership organizations should be composed of members, and that 
members should have the power to operate or administer the 
organization. This language is a combination of that contained in 
proposed paragraphs (A)(1) and (A)(3) of the December, 1998 NPRM (63 
F.R. 69224). Proposed paragraph (A)(3) of the December, 1998 NPRM 
required that the organization ``be self governing, such that the power 
and authority to direct and control the organization is vested in some 
of all members.'' The phrases ``self-governing'' and ``direct and 
control'' were removed in favor of the revised language noted above. 
The Commission notes that organizations would be able to delegate 
administrative and related responsibilities to smaller committees or 
other groups of members; the new rule does not require that all members 
approve all organization actions. Additionally, membership 
organizations with self-perpetuating boards of directors will be 
considered to have met this requirement if all members of the board are 
themselves members of the organization, as long as the organization has 
chosen this structure and it meets all other requirements of these 
regulations.
    With regard to the requirement in paragraph (A)(2) that the 
qualifications and requirements for membership be expressly stated, the 
Commission notes that this provision would not preclude the 
organizational documents from delegating the responsibility to set 
specific requirements, such as the amount of dues or other 
qualifications or requirements, to the board of directors or other 
committees or groups of members.
    The term ``constitution'' was also added to paragraphs (A)(1), 
(A)(2) and (A)(3) as a ``formal organizational document'' in response 
to several comments noting that many membership organizations 
considered constitutions to be their primary organizing document.
    One commenter asked the Commission to drop the requirement that 
membership organizations ``shall be composed of members,'' arguing that 
some membership organizations include non-members and might find it 
difficult to distinguish between the two. Since the FECA specifically 
refers to ``members,'' and limits communications and solicitations to 
members, the Commission believes it is appropriate to include this 
requirement in the rules. Please note, this does not mean that 
organizations that permit non-members to participate in certain aspects 
of their operations will lose their status as a membership organization 
pursuant to the FECA, although they cannot solicit from or send express 
advocacy communications to such non members.
    Some commenters pointed out that covered organizations may have to 
amend their bylaws to comply with these new requirements; and that this 
can be a lengthy process for those organizations which, for example, 
must approve the proposed changes at consecutive annual meetings. The 
Commission may consider such organizations to be in compliance with 
these rules while steps are underway, in accordance with the 
organization's rules, to come into compliance, assuming that the other 
requirements of the rules are met, as long as necessary changes are 
made at the first opportunity available under the organization's rules.
    Revised paragraph (A)(3) states that membership organizations shall 
make their articles, bylaws or other formal organizational documents 
available to their members. As noted above, the Supreme Court's 
language in the NRWC decision, 459 U.S. at 204, pointed to the need for 
members of membership organizations to have ``relatively enduring and 
independently significant financial or organizational attachments'' to 
the organization. Those attachments can hardly be meaningful if the 
members are unaware of their rights and obligations. This requirement 
is therefore a corollary to that found at revised paragraph (A)(1), 
that members constitute the organization.
    The NPRM proposed that such documents be made ``freely'' available 
to members, a term some commenters thought implied that the documents 
would have to be provided free of charge. They argued that this could 
prove costly for small organizations with lengthy organizational 
documents.
    The Commission did not intend by its use of the word ``freely'' to 
indicate that the documents would have to be made available ``free of 
charge.'' Rather, organizations may impose reasonable copying and 
delivery fees for this service. They may also make these documents 
available at their headquarters or other offices, where members 
choosing to do so may consult and copy them.
    Labor organizations also asserted that the Commission has no 
authority to impose requirements in addition to those contained in the 
Labor-Management Reporting and Disclosure Act of 1959 (``LMRDA'') and 
other Federal labor laws. The Commission believes that the revised 
rules largely comport with the LMRDA's requirements. However, the FECA 
and the Federal labor laws were enacted for different purposes, and the 
Commission cannot be bound by other statutes that would limit its 
authority in enforcing and interpreting the FECA.
    New paragraphs (A)(4) and (5) contain the two preliminary 
requirements that formerly appeared in paragraphs (A)(2)

[[Page 41270]]

and (3). These paragraphs state that membership organizations shall 
expressly solicit members, and expressly acknowledge the acceptance of 
membership, such as by sending a membership card or including the 
member on a membership newsletter list. New paragraph (A)(4) has been 
revised slightly to clarify that an organization must expressly solicit 
persons to become members of the organization.
    New paragraph (A)(6) contains the language moved from the 
introductory text of 11 CFR 100.8(b)(4), supra. It states that 
organizations primarily organized for the purpose of influencing the 
nomination for election, or election, of any individual for Federal 
office cannot qualify as membership organizations for purposes of these 
rules.

Section 100.8(b)(4)(iv)(B) Definition of ``member'' of a membership 
organization

    The Commission interprets the Supreme Court's requirement in the 
NRWC decision that members of membership organizations have a 
``relatively enduring and independently significant financial or 
organizational'' attachment, supra, to mean that members must have a 
long term and continuous bond with the organization itself. The new 
rules define this as either a meaningful ownership or investment stake; 
the payment of dues on a regular basis; or direct participatory rights 
in the governance of the organization.
    The introductory language of paragraph (b)(4)(iv)(B), which states 
that members must satisfy the requirements for membership in a 
membership organization and affirmatively accept the organization's 
invitation to become a member, has not been changed. Nor has paragraph 
(B)(1), which confers membership on those having some significant 
financial attachment to the organization, such as a significant 
investment or ownership stake.
    One commenter objected to this provision, saying that it would 
allow wealthy individuals and other entities to purchase memberships, 
and that the payment of dues should be sufficient for this purpose. 
However, this provision addresses the situation where a member may pay 
several hundred thousand dollars to purchase a seat on a stock 
exchange, for example, but does not pay dues.
    Paragraph (B)(2) requires members to pay membership dues at least 
annually, of a specific amount predetermined by the organization. 
Commenters largely agreed with the Commission's proposal not to set any 
minimum amount of dues, because this varies so widely from organization 
to organization. The term ``at least'' has been added to the language 
proposed in the NPRM to address situations where dues are paid more 
frequently, i.e., bi-weekly or monthly, as is true of most labor 
organizations.
    Several commenters expressed concern over the annual dues 
requirement, noting that, despite an organization's best efforts, not 
all members renew their memberships within a twelve-month period. These 
commenters raised the question of whether the annual dues standard 
would require organizations to exclude, for FECA purposes, any members 
who are late in paying dues. As long as organizations maintain and 
enforce an annual (or more frequent) dues requirement, payments within 
a flexible window or subject to a reasonable grace period would meet 
this requirement.
    Paragraph (B)(3) defines significant organizational attachment to 
include (i) the affirmation of membership on at least an annual basis, 
and (ii) direct participatory rights in the governance of the 
organization. The regulation cites as examples of such rights the right 
to vote directly or indirectly for at least one individual on the 
membership organization's highest governing board; the right to vote on 
policy questions where the highest governing body of the membership 
organization is obligated to abide by the results; the right to approve 
the organization's annual budget; or the right to participate directly 
in similar aspects of the organization's governance.
    The Commission notes that these requirements apply only to those 
members who do not pay annual dues, or whose financial attachment to 
the organization is not a significant investment or ownership stake. 
This allays the concern of some commenters that, as the proposal was 
originally drafted, members might be required to annually affirm their 
membership in addition to paying annual dues.
    As with the annual dues requirement, the Commission intends to give 
organizations some flexibility in interpreting the phrase ``annual 
affirmation.'' For example, such activities as attending and signing in 
at a membership meeting or responding to a membership questionnaire 
would satisfy this requirement. The organization would not have to send 
out a mailing form for this purpose unless a member did not pay dues 
and had no other significant contact with the organization over the 
period in question.
    Several commenters objected to the annual affirmation requirement 
proposed in the NPRM, and the Commission has substantially loosened 
this in an effort to address their concerns. It has not eliminated it 
entirely, however, because the Commission is bound by the Supreme 
Court's requirement that there be a significant or relatively enduring 
attachment between the member and the organization.

Section 100.8(b)(4)(iv)(C) Case-by-case Determinations

    The Commission is revising paragraph (b)(4)(iv)(C) of this section, 
which provides for case-by-case determinations of membership status 
through the advisory opinion (``AO'') process for those who do not 
precisely meet the requirements set forth in paragraph (B), to 
specifically state that it applies to retired members, in addition to 
the student and lifetime members addressed in the former version.
    The NPRM proposed adding new paragraph (b)(4)(iv)(D) to address the 
status of retired union members who had paid dues for a period of at 
least ten years. Some unions commented that they could not easily 
determine which retired members met this criterion. Other commenters 
urged the Commission to treat all retired members the same, regardless 
of whether they had retired from a union or from some other 
organization.
    It is apparent from these comments that membership organizations 
have a wide range of relationships with their retired members. For this 
reason the Commission has decided that it is best to address this 
situation through the advisory opinion process, as is true of student, 
lifetime, honorary and similar member categories. In addition, please 
note that the Commission has addressed the question of retired members 
in AOs 1995-14, 1995-13, and 1987-5, which continue to provide guidance 
to similarly-situated organizations.
    For instance, the most permissive advisory opinion, AO 1987-5, 
approved a life membership policy including members who had paid dues 
for ten years and reached age 65. That opinion also involved the 
retention of voting rights, which would not be essential under the new 
rules. These new rules include separate annual dues and organizational 
attachment tests as alternatives. Members who possess the requisite 
voting rights and affirm membership at least annually would qualify as 
members regardless of whether they ever paid dues.

[[Page 41271]]

Section 100.8(b)(4)(iv)(D) Labor Organizations

    This provision, which has not been revised, states that, 
notwithstanding the requirements of paragraphs (b)(4)(iv)(B)(1) through 
(3) of this section, 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.
    The NPRM proposed deleting this language and replacing it with the 
provision relating to retired union members that has now been 
incorporated into the case-by-case determination process. At the time 
the NPRM was published, the Commission believed that unions with 
several organized levels would fall within the provisions relating to 
multi-tiered organizations contained in new paragraph 
100.8(b)(4)(iv)(E) of this section, infra. However, some of the labor 
organizations that commented pointed out that their particular 
organizational structure did not precisely fit this model. The 
Commission is therefore retaining the current language to insure that 
unions continue to be treated as Congress intended in drafting this 
portion of the FECA. See FEC v. Sailors' Union of the Pacific Political 
Fund, 824 F. Supp. 492, 495 (N.D. Cal. 1986), aff'd 828 F.2d 502 (9th 
Cir. 1987).

Section 100.8(b)(4)(iv)(E) Multi-tiered Organizations

    This provision, which was originally proposed in the 1997 NPRM, 
states that, in the case of a membership organization which has a 
national federation structure or has several levels, including, for 
example, national, state 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 paragraphs (b)(4)(iv)(B) (1), 
(2), (3), or (4) of this section, shall also qualify as a member of all 
affiliates for purposes of these rules. It further states that the 
factors set forth in the Commission's affiliation rules at 11 CFR 
100.5(g)(2), (3) and (4) shall be used to determine whether entities 
are affiliated for purposes of this paragraph.
    The commenter who first recommended this approach noted that a 
person who joins one tier of a multi-tiered organization clearly 
demonstrates an intention to associate with the entire organization. 
This new approach will also make enforcement easier and prevent what 
could otherwise be a large number of requests for advisory opinions 
from multi-tiered organizations. No comments were received opposing 
this change.

Section 100.8(b)(4)(iv)(F) Inapplicability of State Law

    Paragraph (b)(4)(iv)(F) provides that, for purposes of these rules, 
the status of a membership organization 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. Several commenters objected to this proposal, arguing 
that the Commission should defer to State law in this area.
    Where an organization does not have ``members'' under that 
definition of state law, the right to vote for directors, and to 
exercise other rights normally given to members, is typically vested in 
the directors themselves. The board of directors thus elects its own 
successors, and in that sense is a self-perpetuating, autonomous board.
    State law, however, also typically gives an organization that 
elects not to have ``members'' as defined by state law the right to 
have other persons affiliated with the organization under such terms 
and conditions as the organizational documents or directors provide, 
and to call those persons ``members'' if the organization wishes to do 
so. In that circumstance, if the terms and conditions of membership 
satisfied these regulations, those persons would be ``members'' for 
purposes of the FECA, even if they were not ``members'' as defined 
under state law.
    The Commission does not believe that the vagaries of state law 
should determine whether or not an organization has members for 
purposes of the FECA. Therefore, the regulations make it clear that the 
determination of whether an organization has members for purposes of 
the FECA will be determined under these regulations, and not by the 
definitions of state law that may either include or exclude persons as 
members of an organization for reasons unrelated to the FECA.

Section 114.1(e) Definition of Membership Organization for Purposes of 
Corporate and Labor Organization Activity

    Revised section 114.1(e) is identical to revised section 
100.8(b)(4)(iv). Please note, however, that the reference to 
unincorporated associations which appears in revised 11 CFR 100.8(b)(4) 
applies only to Part 100 and not to Part 114, since part 114 addresses 
only activities by corporations and labor organizations.

Section 114.8(g) Federations of Trade Associations

    As was the case with rural cooperatives, the 1998 NPRM proposed the 
repeal of 11 CFR 114.8(g), relating to federations of trade 
associations, because it believed these provisions would be encompassed 
by the proposed multi-tier language. While no commenter addressed this 
change, the Commission notes that parts of this section address 
additional issues that are beyond the scope of the present rulemaking. 
For example, there is a difference in the trade association context 
between the groups that can be solicited for contributions to the trade 
association's SSF and those who can get other election-influencing 
messages that are not SSF solicitations. For this reason, the 
Commission is retaining the current language without revision.

Other Issues

Rural Cooperatives
    The Commission's rules at 11 CFR 114.7(k) allow certain rural 
cooperatives to, inter alia, solicit from and make express advocacy 
electoral communications to not only their own members, but the members 
of the cooperative's regional, state or local affiliates. The 1998 NPRM 
proposed repealing this provision and addressing this situation through 
11 CFR 100.8(b)(4)(iv)(E), the general multi-tiered organization 
provision discussed above. However, one of the rural electric 
cooperatives that commented stated that the structure of most rural 
cooperatives does not readily correspond to the multi-tiered model 
envisioned in that section. The Commission is therefore retaining 11 
CFR 114.7(k), to insure continued coverage of rural cooperatives under 
these rules.
Advisory Opinions Superseded
    AO 1991-24 addressed the efforts of the Credit Union National 
Association, Inc. (``CUNA'') and the Wisconsin Credit Union League to 
make partisan communications across multiple tiers of the organization. 
While the Commission approved the proposed procedures, these rules 
increase the options available to these and comparably situated multi 
tiered organizations. In AO 1993-24, the Commission determined that 
certain persons were not members of the National Rifle Association for 
purposes of the former rules because they did not have the required 
voting rights. The new rules supersede that portion of the AO that

[[Page 41272]]

requires voting rights to establish membership.
The Regulatory Flexibility Act
    One commenter disputed the Commission's certification under the 
Regulatory Flexibility Act, 5 U.S.C. 605(b), in the NPRM that the 
proposed rule would not have a significant economic impact on a 
substantial number of small entities. While the Commission does not 
concur with that assessment, it nevertheless has taken steps to allay 
this commenter's concerns by clarifying that (1) organizations may 
charge reasonable copying and mailing fees for making their 
organizational documents available to their members; and (2) 
organizations may follow their usual procedures in revising their 
bylaws or other documents, if these rules require this action.

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

    These rules do not have a significant economic impact on a 
substantial 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. The increased 
costs of such activity, if any, do not qualify as ``significant'' 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, Subchapter A, Chapter I of 
Title 11 of the Code of Federal Regulations is amended as follows:

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

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

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

    2. Section 100.8 is 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 communication by a membership 
organization, including a labor organization, to its members, or any 
cost incurred for any communication by a corporation to its 
stockholders or executive or administrative personnel, is not an 
expenditure, 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, some or all of whom are vested with the 
power and authority to operate or administer the organization, pursuant 
to the organization's articles, bylaws, constitution or other formal 
organizational documents;
    (2) Expressly states the qualifications and requirements for 
membership in its articles, bylaws, constitution or other formal 
organizational documents;
    (3) Makes its articles, bylaws, constitution or other formal 
organizational documents available to its members;
    (4) Expressly solicits persons to become members;
    (5) Expressly acknowledges the acceptance of membership, such as by 
sending a membership card or including the member's name on a 
membership newsletter list; and
    (6) 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, and 
either:
    (1) Have some significant financial attachment to the membership 
organization, such as a significant investment or ownership stake; or
    (2) Pay membership dues at least annually, of a specific amount 
predetermined by the organization; or
    (3) Have a significant organizational attachment to the membership 
organization which includes: affirmation of membership on at least an 
annual basis and direct participatory rights in the governance of the 
organization. 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 on policy 
questions where the highest governing body of the membership 
organization is obligated to abide by the results; the right to approve 
the organization's annual budget; 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 who do not precisely meet the requirements of the general 
rule, but have a relatively enduring and independently significant 
financial or organizational attachment to the organization, may be 
considered members for purposes of this section. For example, student 
members who pay a lower amount of dues while in school, long term dues 
paying members who qualify for lifetime membership status with little 
or no dues obligation, and retired members may be considered members of 
the organization.
    (D) Notwithstanding the requirements of paragraphs (b)(4)(iv)(B)(1) 
through (3) of this section, 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 paragraphs (b)(4)(iv)(B)(1), 
(2), or (3) 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)(2), (3) and (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

[[Page 41273]]

without capital stock, or labor organizations.
* * * * *

PART 114--CORPORATE AND LABOR ORGANIZATION ACTIVITY

    3. The authority citation for Part 114 continues 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 is amended by revising paragraph (e) to read as 
follows:


Sec. 114.1  Definitions.

* * * * *
    (e)(1) For purposes of this part 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, some or all of whom are vested with the 
power and authority to operate or administer the organization, pursuant 
to the organization's articles, bylaws, constitution or other formal 
organizational documents;
    (ii) Expressly states the qualifications and requirements for 
membership in its articles, bylaws, constitution or other formal 
organizational documents;
    (iii) Makes its articles, bylaws, constitution, or other formal 
organizational documents available to its members upon request;
    (iv) Expressly solicits persons to become members;
    (v) Expressly acknowledges the acceptance of membership, such as by 
sending a membership card or including the member's name on a 
membership newsletter list; and
    (vi) 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 this part, 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, and either:
    (i)Have some significant financial attachment to the membership 
organization, such as a significant investment or ownership stake; or
    (ii) Pay membership dues at least annually, of a specific amount 
predetermined by the organization; or
    (iii) Have a significant organizational attachment to the 
membership organization which includes: affirmation of membership on at 
least an annual basis; and direct participatory rights in the 
governance of the organization. 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; the right to approve 
the organization's annual budget; 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 who do not precisely meet the requirements on the general rule, 
but have a relatively enduring and independently significant financial 
or organizational attachment to the organization, may be considered 
members for purposes of this section. For example, student members who 
pay a lower amount of dues while in school, long term dues paying 
members who qualify for lifetime membership status with little or no 
dues obligation, and retired members of the organization may be 
considered members for purposes of these rules.
    (4) Notwithstanding the requirements of paragraphs (e)(2)(i) 
through (iii) of this section, 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 paragraphs (e)(2)(i), (ii), or 
(iii) of this section shall also qualify as a member of all affiliates 
for purposes of this part. The factors set forth at 11 CFR 100.5 
(g)(2), (3) and (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.
* * * * *
    Dated: July 27, 1999.
Scott E. Thomas,
Chairman, Federal Election Commission.
[FR Doc. 99-19515 Filed 7-29-99; 8:45 am]
BILLING CODE 6715-01-P