[Federal Register Volume 64, Number 214 (Friday, November 5, 1999)]
[Proposed Rules]
[Pages 60360-60368]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-28982]


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 Proposed Rules
                                                 Federal Register
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 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
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  Federal Register / Vol. 64, No. 214 / Friday, November 5, 1999 / 
Proposed Rules  

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FEDERAL ELECTION COMMISSION

11 CFR Parts 100, 102, 103, 104, 106, 107, 109, 110, 114, and 116

[Notice 1999--24]


Use of the Internet for Campaign Activity

AGENCY: Federal Election Commission.

ACTION: Notice of inquiry and request for comments.

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SUMMARY: The Commission is currently examining the issues raised by the 
use of the Internet to conduct campaign activity. The Commission is 
conducting this review in order to assess the applicability of the 
Federal Election Campaign Act and the Commission's current regulations 
to campaign activity conducted using this medium. In order to assist in 
its review, the Commission invites comments on the application of the 
Act and the current regulations to Internet campaign activity. The 
Commission will use the comments received to determine whether or not 
to issue a Notice of Proposed Rulemaking (``NPRM''), which may include 
proposed changes to its regulations. An NPRM would seek further comment 
on any proposed revisions to the Commission's rules. The Commission has 
made no final decisions regarding the issues discussed in this notice, 
and may ultimately decide to take no action. Further information is 
provided in the supplementary information that follows.

DATES: Comments must be submitted on or before January 4, 2000.

ADDRESSES: All comments should be addressed to Rosemary C. Smith, 
Acting Assistant General Counsel, and must be submitted in either 
written or electronic form. Written comments should be sent to the 
Federal Election Commission, 999 E Street, N.W., Washington, DC 20463. 
Faxed comments should be sent to (202) 219-3923, with printed copy 
follow up. Electronic mail comments should be sent to 
[email protected], and should include the full name, electronic mail 
address and postal service address of the commenter. Additional 
information on electronic submission is provided below.

FOR FURTHER INFORMATION CONTACT: Rosemary C. Smith, Acting Assistant 
General Counsel, or Paul Sanford, Staff Attorney, 999 E Street, N.W., 
Washington, D.C. 20463, (202) 694-1650 or (800) 424-9530.

SUPPLEMENTARY INFORMATION: In recent years, there has been a dramatic 
increase in the use of the Internet to conduct campaign activity 
related to federal elections. Candidates, parties and political action 
committees (``PACs'') have apparently concluded that the Internet is a 
powerful campaign tool with the potential to significantly influence 
the outcome of federal elections. Individuals and other organizations 
have also used the Internet to participate directly in election 
campaigns, taking advantage of the medium's capacity to reach large 
numbers of people at very little cost.
    The dramatic increase in campaign activity conducted on the 
Internet raises a number of issues regarding the applicability of the 
Federal Election Campaign Act of 1971, as amended, 2 U.S.C. 431 et seq. 
(``FECA'' or ``the Act''). The Act requires candidates, parties and 
PACs to file disclosure reports regarding their election-related 
activity, and also imposes restrictions and limitations on the amounts 
that may be contributed to candidates, parties and PACs by individuals, 
corporations, labor organizations and other committees.
    Although the FECA was enacted long before widespread use of the 
Internet, and has, in some instances, been narrowed by court decisions, 
see e.g., Buckley v. Valeo, 424 U.S. 1 (1976), FEC v. Massachusetts 
Citizens for Life, 479 U.S. 238 (1986), it remains broad enough to 
potentially encompass some election-related activity conducted on the 
Internet. For example, section 431(8) states that the term 
``contribution'' includes ``any gift, subscription, loan, advance or 
deposit of money or anything of value made by any person for the 
purpose of influencing any election for Federal office.'' 2 U.S.C. 
431(8)(A)(i), 11 CFR 100.7(a)(1). The Commission has historically 
interpreted the phrase ``anything of value'' in section 431(8)(A)(i) to 
include in-kind contributions, i.e., the provision of goods or services 
without charge or at less than the usual or normal charge. 11 CFR 
100.7(a)(1)(iii). The term ``contribution'' also includes ``the payment 
by any person of compensation for the personal services of another 
person which are rendered to a political committee without charge for 
any purpose.'' 2 U.S.C. 431(8)(A)(ii), 11 CFR 100.7(a)(3).
    Similarly, section 431(9) states that the term ``expenditure'' 
includes ``any purchase, payment, distribution, loan, advance, deposit, 
or gift of money or anything of value, made by any person for the 
purpose of influencing any election for Federal office.'' 2 U.S.C. 
431(9)(A), 11 CFR 100.8(a). In-kind contributions are also 
expenditures. 11 CFR 100.8(a)(1)(iv).
    Section 441b of the Act generally prohibits contributions and 
expenditures by corporations and labor organizations, and states that, 
for the purposes of this prohibition, the term ``contribution or 
expenditure'' includes any direct or indirect payment, distribution, 
loan, advance, deposit, or gift of money, or any services, or anything 
of value (except a loan of money by a national or State bank made in 
accordance with the applicable banking laws and regulations and in the 
ordinary course of business) to any candidate, campaign committee, or 
political party in connection with any election to any federal office. 
Id.
    Thus, the Act, and in particular, the contribution and expenditure 
definitions, are at least facially applicable to a wide range of 
activity, including some activity that could be conducted on the 
Internet. However, the Act also contains a number of exemptions from 
the contribution and expenditure definitions. For example, the value of 
services provided without compensation by any individual who volunteers 
on behalf of a candidate or political committee is not a contribution. 
2 U.S.C. 431(8)(B)(i). The Act also excludes costs incurred by state 
and local party committees for (1) slate cards and sample ballots, (2) 
campaign materials (such as pins, bumper stickers, brochures, yard 
signs, etc.) used in connection with volunteer activities, and (3) 
voter registration and get-out-the-vote activities on behalf of 
Presidential and Vice Presidential nominees, under certain 
circumstances. 2 U.S.C. 431(8)(B)(v), (x), (xii), (9)(B)(iv), (viii), 
(ix).

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    News stories, commentaries and editorials distributed by a 
broadcasting station, newspaper, magazine or other periodical 
publication are not expenditures, unless the broadcaster or publisher 
is owned or controlled by a candidate, political committee or political 
party. 2 U.S.C. 431(9)(B)(i). In addition, communications on any 
subject between a corporation and its stockholders, executive and 
administrative personnel, and their families, and between a labor 
organization, its members and their families, are not expenditures 
under the Act. 2 U.S.C. 441b(b)(2)(A). Costs incurred by publicly 
funded Presidential primary candidates ``in connection with the 
solicitation of contributions'' are also exempt from the expenditure 
definition. 2 U.S.C. 431(9)(B)(vi).
    Although there are no minimum dollar thresholds for something of 
value to be considered a contribution or expenditure, the Act excludes 
activity that falls below certain dollar thresholds from some of the 
reporting requirements. For example, individuals that make independent 
expenditures are not required to submit disclosure reports unless their 
expenditures aggregate in excess of $250 during a calendar year. 2 
U.S.C. 434(c). Similarly, organizations are not required to register 
and report as political committees until their contributions or 
expenditures aggregate in excess of $1000 in a calendar year. 2 U.S.C. 
Sec. 431(4). Political committees are only required to provide the 
identification (name, mailing address, occupation, name of employer, 2 
U.S.C. 431(13)) of those contributors whose contributions aggregate in 
excess of $200 in a calendar year. 2 U.S.C. 434(b)(3)(A).
    As the agency responsible for administering the Federal Election 
Campaign Act, the Federal Election Commission (``FEC'' or 
``Commission''), must determine the extent to which the Act applies to 
campaign activity conducted on the Internet. In an effort to begin the 
process of making this determination, the Commission requests comments 
on the application of the Act and the Commission's current regulations 
to Internet campaign activity.
    One threshold question upon which the Commission invites comments 
is whether campaign activity conducted on the Internet should be 
subject to the Act and the Commission's regulations at all. Are 
Internet campaign activities analogous to campaign activities conducted 
in other contexts, or do they differ to such a degree as to require 
different rules?
    In addition, commenters are encouraged to discuss aspects of the 
Commission's current regulations that may affect or inhibit the use of 
the Internet in ways that may not have been anticipated or intended 
when the regulations were promulgated, and which may now be 
inappropriate when applied to Internet activity. Commenters are also 
encouraged to identify and discuss provisions of the FECA or the 
regulations the application of which is unclear in the context of 
political activity conducted on the Internet.
    Several significant issues relating to the use of the Internet are 
discussed in detail below. Comments are also welcome on any other 
Internet-related issues that should be addressed in the regulations.

Internet Activities as Contributions or Expenditures

1. Introduction

    The threshold question raised when the Internet is used for 
activity relating to federal candidates and elections is whether that 
activity should be treated as a contribution or an expenditure under 
the Act. If so, under what circumstances? The contribution and 
expenditure definitions are summarized above. The Commission invites 
general comments on the application of these definitions to candidate 
and election-related activity conducted on the Internet. The Commission 
is also interested in comments on the issues raised by these 
definitions in the particular situations described below.

2. Candidate Web Sites

    Increasing numbers of candidates are establishing web sites to 
support their campaigns. The most basic question raised is how the 
candidate's committee should treat costs associated with establishing a 
campaign web site. Are these costs expenditures under the Act? Or, 
should they be treated as some other type of committee disbursement?
    The Commission is also interested in comments on several specific 
issues that arise in relation to hyperlinks on candidate web sites. A 
hyperlink is an electronic link to another web site. If a candidate's 
site contains a hyperlink to the site of another candidate or a 
political party, should that link be treated as a contribution from the 
candidate who operates the originating site to the linked candidate or 
party committee? If so, how should the value of that contribution be 
determined? When does that contribution occur? If the link remains on 
the site for an extended period, does the contribution occur in each 
reporting period during which it remains on the site? When should it be 
reported? (Reporting issues will be discussed more extensively below.)
    What if the candidate's web site contains a link to the site of a 
vendor that sells items such as pins, T-shirts, bumper stickers, etc., 
that express support for the candidate? In this situation, the link 
serves as a form of advertising for the vendor. Are there circumstances 
under which this would raise issues under the FECA? What if the vendor 
is a corporation, and is paying the campaign to provide the link? Would 
this payment be a contribution, or should the committee treat it as a 
permissible ``other receipt?'' Is it a contribution only if the vendor 
pays more than the usual and normal charge for the link?

3. Web Sites of Publicly Funded Candidates

    The Commission invites comments on whether there are special 
considerations involving web sites established by Presidential 
candidates who accept public funding under the Presidential Election 
Campaign Fund Act, 26 U.S.C. 9001 et seq., or the Presidential Primary 
Matching Payment Account Act, 26 U.S.C. 9031 et seq. What issues arise 
when publicly funded Presidential candidates use the Internet to 
promote their candidacies?
    For example, the Commission recently reversed a long-standing 
policy to allow for matching of credit card contributions received by 
Presidential primary candidates via the Internet. 64 FR 32,394 (June 
17, 1999). This raises an issue regarding solicitation costs incurred 
by publicly funded candidates.
    Under 2 U.S.C. 431(9)(B)(vi) and 11 CFR 100.8(b)(21), costs 
incurred by publicly funded Presidential primary candidates ``in 
connection with the solicitation of contributions'' are not 
expenditures under the Act. Similarly, solicitation costs incurred by 
publicly funded general election candidates are not expenditures if 
contributions are being solicited to make up for deficiencies in 
amounts received from Presidential Election Campaign Fund. Id. As a 
result, these costs do not count toward the expenditure limits set out 
in section 441a(b). See 2 U.S.C. 431(9)(B)(vi), 26 U.S.C. 9003(b)(1), 
9033(b)(1). If a publicly funded candidate uses its web site to solicit 
contributions, should a portion of the cost of establishing and 
maintaining the site be exempt from the definition of expenditure under 
this provision? If so, how should the exempt amount be determined?

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    The Commission invites comments on this issue and any other issues 
raised by the use of the Internet by publicly funded candidates.

4. Web sites created by individuals

a. Text and other materials
    Many web sites created by individuals contain references to 
candidates and political parties. Some sites, often referred to as 
``fan sites,'' are devoted entirely to urging support for or opposition 
to one or more candidates. In other situations, only a portion of an 
individual's web site might be devoted to candidate advocacy.
    The FECA distinguishes between activities conducted by individuals 
in cooperation or consultation with a candidate, and activities 
undertaken independently of a candidate. Generally, if an individual 
conducts campaign activity in cooperation or consultation with a 
candidate, the cost of that activity is an in-kind contribution. 2 
U.S.C. 431(8)(A)(ii), 431(17). An individual may make no more than 
$1000 in contributions to a candidate per election. 2 U.S.C. 
441a(a)(1)(A). In addition, the receipt of in-kind contributions must 
be reported by the candidate. 2 U.S.C. 434(b), 11 CFR 104.3(a)(4)(i).
    In contrast, if an individual conducts activity ``without 
cooperation or consultation with any candidate, or any authorized 
committee or agent of such candidate, and which is not made in concert 
with, or at the request or suggestion of, any candidate, or any 
authorized committee or agent of such candidate,'' that activity is not 
a contribution. However, if the activity expressly advocates the 
election or defeat of a candidate, the expenses incurred in that 
activity are an independent expenditure. 2 U.S.C. 431(17). Although 
individuals may make unlimited independent expenditures on behalf of a 
candidate, ``every person (other than a political committee) who makes 
independent expenditures in an aggregate amount or value in excess of 
$250 during a calendar year'' must file disclosure reports. 2 U.S.C. 
434(c).
    How should these definitions be applied to web sites created by 
individuals that contain references to candidates or political parties? 
Are costs incurred by individuals in posting materials relating to 
candidates or parties covered by the FECA? If so, how should the value 
of the individual's contribution or independent expenditure be 
determined? What costs should be taken into account? Should the 
individual posting the materials be required to treat a portion of the 
initial cost of the computer hardware used to operate the web site as 
part of the contribution or expenditure? Should the individual be 
required to treat any other expenses, such as the costs of software 
purchased to create the site and fees paid to maintain it, as a 
contribution or expenditure?
    What if the site contains both candidate or party-related materials 
and other unrelated materials? Should a portion of the costs of the 
site be treated as a contribution or expenditure? What if an individual 
who already owns a computer and already has access to the Internet 
posts candidate or party-related materials on the Internet? An 
individual in this situation may incur little or no additional cost in 
posting these materials. Does this mean that no contribution or 
expenditure has occurred?
    With regard to the issue of whether an individual's Internet 
activities should be treated as an in-kind contribution or independent 
expenditure, 2 U.S.C. 431(17) states that ``[t]he term `independent 
expenditure' means an expenditure by a person expressly advocating the 
election or defeat of a clearly identified candidate which is made 
without cooperation or consultation with any candidate, or any 
authorized committee or agent of such candidate, and which is not made 
in concert with, or at the request or suggestion of, any candidate, or 
any authorized committee or agent of such candidate.'' What types of 
contacts between an individual and a candidate should be regarded as 
``cooperation or consultation,'' often referred to as ``coordination,'' 
with the candidate within the meaning of this section? Should the types 
of contact considered coordination with a candidate be different for 
Internet activities than for activities that take place in other 
contexts? The Commission is currently engaged in a rulemaking on the 
issue of coordination with a candidate, and has published two Notices 
of Proposed Rulemaking seeking comments on this issue. 63 FR 69,523 
(Dec. 16, 1998), 62 FR 24,367 (May 5, 1997). Two recent court decisions 
also discussed the concept of coordination. Federal Election Commission 
v. Christian Coalition, 52 F. Supp. 2d (D.D.C. 1999), Federal Election 
Commission v. Public Citizen, 1999 WL 731056 (N.D.Ga. 1999). See also, 
Clifton v. Federal Election Commission, 114 F.3d 1309 (1st Cir. 1997) 
cert. denied 118 S. Ct. 1036 (1998), Colorado Republican Federal 
Campaign Committee v. FEC, 518 U.S. 604 (1996). Comments are invited on 
how coordination should be defined in the context of campaign activity 
conducted on the Internet.
    How should the regulations address the republication of candidate-
generated materials on web sites created by individuals? For example, a 
visitor to a candidate's web site might download files known as 
``banners'' that can be posted like electronic bumper stickers on the 
visitor's own site. In other cases, a visitor might download textual 
materials, such as speeches or position papers, and make these 
materials available on his or her own site. Ordinarily, the 
republication of campaign materials prepared by the candidate would be 
an in-kind contribution. 2 U.S.C. 441a(a)(7)(B), 11 CFR 109.1(d)(1). 
Should this rule apply to republication of materials on the Internet? 
If so, how should the in-kind contribution be valued for FECA purposes? 
Or, should the Commission create an exception to this rule for the 
republication of materials on the Internet, since the marginal cost to 
the individual of adding a banner or other downloaded material to his 
or her web site is near zero?
    If an individual posts candidate-related materials on the Internet 
without cooperation or consultation with the candidate, the question 
raised is whether the candidate-related content should be treated as an 
independent expenditure. Generally, a communication must contain 
express advocacy in order to be an independent expenditure. 2 U.S.C. 
431(17). How should this test be applied to the contents of a web site? 
Should the test be applied to the site as a whole, or should it be 
applied separately to different areas of the site?
b. Hyperlinks
    Some web sites created by individuals contain hyperlinks to a 
candidate's site or to the site of another political committee. Under 
what circumstances should posting a hyperlink be treated as a 
contribution or independent expenditure?
    A hyperlink on an individual's web site may have value to the 
linked candidate, since the link will inevitably steer visitors from 
the individual's site to the candidate's site. If the individual has 
been in contact with the campaign and has agreed to provide the link at 
no charge or less than the usual and normal charge, the link could be 
regarded as an in-kind contribution. On the other hand, the costs of 
providing the link are often negligible or nonexistent. In addition, 
the practice in some areas of the Internet industry may be to place no 
value on these links. Thus, the usual and normal charge for providing a 
link may be zero.

[[Page 60363]]

How widespread is the practice of providing free links? Should the 
result be that no contribution or expenditure occurs when an individual 
posts a hyperlink to a candidate or party web site?
    If the individual that posts the link does so without any 
consultation or coordination with the linked candidate's campaign, the 
link would not be a contribution to the candidate's campaign. In these 
circumstances, the issue is whether the link should be treated as an 
independent expenditure. Generally, a communication must contain 
express advocacy in order to be an independent expenditure. 2 U.S.C. 
431(17). Should the express advocacy test be applied to the text of the 
hyperlink itself, or to the contents of the candidate's site? Would a 
hyperlink that appears as ``JonesMiller2000'' be express advocacy? What 
if the text of the hyperlink does not constitute express advocacy, but 
the linked site contains express advocacy?
    Assuming that the text of the link contains express advocacy, how 
should the value of the independent expenditure be determined? As 
explained above regarding possible contributions, the owner of the site 
may incur little or no additional cost in posting the link. Thus, 
although the link might fall within the definition of ``independent 
expenditure,'' it may fall below the $250 reporting threshold in 2 
U.S.C. 434(c). Should the fact that the cost of the link is incremental 
relieve the individual of his or her reporting obligation?
c. Web Sites Created by Campaign Volunteers
    The Commission invites comments on the extent to which Internet 
services provided by volunteers should be covered by the volunteer 
exemption in section 431(8)(B)(ii) of the Act. Section 431(8)(B)(ii) 
exempts ``the use of real or personal property * * * voluntarily 
provided by an individual to any candidate or any political committee 
of a political party in rendering voluntary personal services on the 
individual's residential premises.'' Are Internet services covered by 
this section?
d. Disclaimers
    Section 441d of the FECA states that ``[w]henever any person makes 
an expenditure for the purpose of financing communications expressly 
advocating the election or defeat of a clearly identified candidate, or 
solicits any contribution through any broadcasting station, newspaper, 
magazine, outdoor advertising facility, direct mailing, or any other 
type of general public political advertising,'' the communication must 
contain a disclaimer statement. See also 11 CFR 110.11. Generally, this 
statement must indicate who paid for the advertisement and whether it 
was authorized by a candidate or candidate's committee. If so, the 
candidate or committee must also be identified.
    In Advisory Opinion 1998-22, an independent voter sought guidance 
on the application of the disclaimer requirement to a web site that 
urged the election of a candidate and the defeat of that candidate's 
opponent. The Commission noted its conclusion in previous advisory 
opinions that, because of the Internet's general availability, a web 
site would be considered general public political advertising. Since 
the site expressly advocated the election and defeat of candidates, it 
was an independent expenditure that required a disclaimer under section 
441d. See also Advisory Opinions 1995-9 and 1995-35.
    The Commission is interested in comments on the conclusion reached 
in Advisory Opinion 1998-22, and on the application of the disclaimer 
requirement to the Internet. Should web sites created and maintained by 
individuals be considered general public political advertising within 
the meaning of section 441d? Internet users generally have to take the 
affirmative step of directing their browsers to a web site in order to 
view the contents of that site. In contrast, individuals are often 
exposed to broadcast messages, newspaper advertisements and direct mail 
involuntarily, without any deliberate action on their part. Should web 
sites be treated differently than newspapers and broadcast stations for 
this reason? The Commission invites comments on this issue.

5. Nonconnected Committees and Other Unincorporated Organizations

    Since nonconnected political committees (other than multicandidate 
committees) and other unincorporated organizations are treated the same 
as individuals under the FECA, many of the same issues arise when these 
entities use the Internet for candidate-related activity. The 
Commission invites commenters to discuss the issues raised above as 
they apply to these entities.
    The Commission is also interested in comments on the circumstances 
under which the inclusion of a hyperlink on the web site of a 
nonconnected committee or other unincorporated organization should be 
treated as ``nonpartisan activity designed to encourage individuals to 
vote or to register to vote'' under section 431(9)(B)(ii). In Advisory 
Opinion 1999-7, the Commission responded to a inquiry from a state 
government agency that posted hyperlinks to candidates on its web site. 
The Commission concluded that providing information about all ballot-
qualified candidates in a nonpartisan manner without first attempting 
to determine recipients' candidate or party preferences falls within 
section 431(9)(B)(ii) and 11 CFR 100.8(b)(3). Section 100.8(b)(3) 
states that ``[a]ny cost incurred for activity designed to encourage 
individuals to register to vote or to vote is not an expenditure if no 
effort is or has been made to determine the party or candidate 
preference of individuals before encouraging them to register to vote 
or to vote.''
    Should the Commission revise the regulations to specifically 
exclude hyperlinks posted in this manner from the definition of 
``expenditure?'' In its opinion, the Commission noted that the state 
agency's site already included candidate mailing addresses and 
telephone numbers, and concluded that ``[t]he addition of campaign web 
addresses in the form of hyperlinks does not change this analysis.'' 
Should hyperlinks be treated as the equivalent of campaign mailing 
addresses in all circumstances?
    Commenters are also welcome to raise any other issues relating to 
the use of the Internet by nonconnected committees and other 
unincorporated organizations.

6. Corporations and Labor Organizations

a. Communications
    Many corporations and labor organizations operate web sites to 
communicate with the general public. Section 441b of the Act prohibits 
corporations and labor organizations from making contributions or 
expenditures in connection with federal elections. Thus, the Act 
generally prohibits these entities from using their web sites to assist 
or advocate on behalf of any federal candidate.
    The question raised is under what circumstances should a candidate 
or election-related communication on a corporate or labor organization 
be treated as a prohibited contribution or independent expenditure? If 
the election-related communication is in the form of a hyperlink to the 
web site of a candidate or party committee, the issues that arise are 
similar to those discussed in section 4(b), above, regarding hyperlinks 
posted on an individual's web site. The Commission invites comments on 
these issues, as

[[Page 60364]]

they arise in the context of web sites operated by corporations and 
labor organizations.
    The FECA also contains a number of exceptions from the contribution 
and expenditure definitions that enable a corporation or labor 
organization to engage in certain election-related activity without 
violating the Act. For example, the Act exempts ``communications by a 
corporation to its stockholders and executive or administrative 
personnel and their families or by a labor organization to its members 
and their families on any subject.'' 2 U.S.C. 441b(b)(2)(A). The 
Commission's regulations refer to these groups as the ``restricted 
class'' of a corporation or labor organization. 11 CFR 114.1(j).
    Section 114.4(c) of the regulations also contains a series of 
exceptions that allow corporations and labor organizations to 
distribute certain candidate and election-related materials to the 
general public without violating section 441b. Under this section, a 
corporation or labor organization may make registration and get-out-the 
vote communications to the general public, provided that: (1) They do 
not expressly advocate the election or defeat of any clearly identified 
candidate or candidates of a clearly identified political party, and 
(2) they do not coordinate their efforts with any candidate or 
political party. 11 CFR 114.4(c)(2). Similarly, a corporation or labor 
organization may also distribute officially-produced registration or 
voting information, official registration-by-mail forms, and absentee 
ballots, provided the corporation or labor organization does not 
expressly advocate, does not coordinate, and does not encourage 
registration with any particular political party. 11 CFR 114.4(c)(3).
    A corporation or labor organization may also prepare and distribute 
the voting records of Members of Congress, provided that the voting 
record and all communications distributed with it do not expressly 
advocate, and that decisions on content and distribution of the record 
are not coordinated with any candidate, group of candidates or 
political party. 11 CFR 114.4(c)(4). But see Clifton v. Federal 
Election Commission, 114 F.3d 1309 (1st Cir. 1997) cert. denied 118 S. 
Ct. 1036 (1998). A corporation or labor organization may also prepare 
and distribute voter guides consisting of two or more candidates' 
positions on campaign issues under certain conditions set out in the 
section 114.4(c)(5). Finally, the rules allow a corporation or labor 
organization to endorse a candidate and announce the endorsement to the 
general public through a press release and press conference, so long as 
the press release and notice of the press conference are distributed 
only to the representatives of the news media that the corporation or 
labor organization customarily contacts when issuing nonpolitical press 
releases or holding press conferences for other purposes. 11 CFR 
114.4(c)(6).
    The Commission invites comments on the issues raised by corporate 
and labor organization use of the Internet for communication of 
candidate and election-related information. One threshold issue is 
whether, and under what circumstances, communication via the Internet 
should be regarded as communication to the general public, and when it 
should be treated as communication to a more limited audience. Advisory 
Opinion 1997-16 involved, inter alia, a corporate endorsement posted on 
the corporation's web site. The Commission concluded that communication 
of the endorsement via the web site would, in effect, be communication 
with the general public for purposes of section 441b, unless access was 
limited to members of the restricted class using a password or similar 
method. Should the Commission incorporate this interpretation into the 
regulations? Under what circumstances should the Commission treat 
information posted on a web site as communication to the restricted 
class? Under what circumstances should it be treated as distribution to 
the general public?
    If the web site is treated as communication to the general public, 
under what circumstances should a candidate or election-related 
communication on a corporate or labor organization web site be treated 
as a prohibited contribution or independent expenditure? If the 
election-related communication is in the form of a hyperlink to the web 
site of a candidate or party committee, the issues that arise are 
similar to those discussed in section 4(b), above, regarding hyperlinks 
posted on an individual's web site. The Commission invites comments on 
these issues, as they arise in the context of web sites operated by 
corporations and labor organizations.
    With regard to the types of communication permitted under section 
114.4(c) of the regulations, what special issues arise? How does the 
use of the Internet to distribute voter guides, voting records, 
absentee ballots or other registration or voting information impact the 
current regulations? Are there aspects of these regulations that should 
be revised?
    For example, the Commission is interested in comments on several 
issues that arise within the specific context of endorsements. As 
explained above, the rules allow a corporation or labor organization to 
announce an endorsement to the general public through a press release 
and press conference, so long as distribution of the press release and 
notice of the press conference is limited to those media 
representatives that the organization ordinarily contacts when issuing 
press releases or holding press conferences. 11 CFR 114.4(c)(6). Should 
a corporation or labor organization that routinely posts press releases 
on the Internet be allowed to post a press release announcing a 
candidate endorsement? Would it matter if the corporation or labor 
organization posts the endorsement release more prominently than it 
posts other press releases? What if the release received no special 
prominence or treatment? Or, should the endorsement be made accessible 
only to members of the restricted class and other employees?
    The Commission invites comments on these issues, and any other 
issues raised by corporate and labor organization communication via the 
Internet.
b. Internet Services as In-kind Contributions
    Some corporations are in the business of providing Internet-related 
services, such as Internet access, web site creation and maintenance, 
technical support, etc. The Commission is interested in comments on 
whether, and under what circumstances, the costs of Internet-related 
services should be treated as in-kind contributions.
    For example, in Advisory Opinion 1996-2, a corporation that 
provided Internet services and other on-line information services 
proposed to provide free member accounts to federal candidates on a 
nonpartisan basis, and asked whether these accounts would be prohibited 
in-kind contributions under the Act. The Commission concluded that the 
accounts would be in-kind contributions unless the corporation could 
show that it provided the accounts to nonpolitical customers in the 
ordinary course of business and on the same terms and conditions, i.e., 
the ``usual and normal charge.'' The Commission also said that even if 
the corporation could show that it provided free accounts in the 
ordinary course of business, the promotional value derived by the 
vendor in the form of prestige, goodwill, and increased usage by other 
members did not constitute adequate consideration to satisfy the 
``usual and normal charge'' requirement.

[[Page 60365]]

    The Commission invites comments on whether this conclusion should 
be revised or incorporated into the regulations, and on whether there 
are circumstances under which the provision of Internet services at 
less than the usual and normal charge should not be regarded as a 
contribution or expenditure.
c. Use of Corporate Facilities
    Section 114.9 of the regulations places limits on the extent to 
which the stockholders and employees of a corporation, or the 
officials, members and employees of a labor organization, may make use 
of the facilities of the corporation or labor organization for 
individual volunteer activities in connection with federal elections. 
Generally, the rule allows occasional, isolated or incidental use of 
the facilities, and requires users to reimburse the corporation or 
labor organization only to the extent that the corporation or labor 
organization's overhead costs are increased. The rule provides 
additional guidance as to what will be considered occasional, isolated 
or incidental use in particular situations.
    The Commission is interested in comments on the application of this 
rule to the use of corporate or labor organization facilities for 
Internet activities conducted in connection with federal elections. To 
what extent should a computer network be treated as part of a 
corporation or labor organization's facilities within the meaning of 
this provision? What level of use of such a network should be 
considered occasional, isolated or incidental use? How should this be 
determined?
    If a corporation allows an employee to post candidate-related 
materials on a web site that resides on the corporation's computer 
network, should the employee be required to reimburse the corporation 
for the costs of the site? What if the corporation's network has enough 
surplus capacity that the web site would not increase its overhead or 
operating costs? What if an employee uses the corporation or labor 
organization's computer network to send an electronic mail message 
soliciting contributions or expressly advocating the election or defeat 
of a candidate? Has the corporation or labor organization provided 
something of value?

7. News Organizations

a. On-line Publications
    The Act contains an exception from the definition of 
``expenditure'' for ``any news story, commentary, or editorial 
distributed through the facilities of any broadcasting station, 
newspaper, magazine, or other periodical publication, unless such 
facilities are owned or controlled by any political party, political 
committee, or candidate.'' 2 U.S.C. 431(9)(B)(i). Section 100.8(b)(2) 
of the regulations also excludes ``any cost incurred in covering or 
carrying a news story, commentary, or editorial by any broadcasting 
station (including a cable television operator, programmer or 
producer), newspaper, magazine, or other periodical publication'' from 
the definition of ``contribution,'' unless the media outlet is owned or 
controlled by a political party, political committee, or candidate.
    The Commission is interested in comments on how these provisions, 
generally referred to collectively as the ``news story exemption,'' 
should be applied to the Internet. Under what circumstances should the 
Commission regard an Internet site as a ``newspaper, magazine, or other 
periodical publication'' within the meaning of the exemption in section 
431(9)(B)(i)? Should it make a difference whether the site owner also 
produces a broadcast or print publication? Should a site be treated as 
a periodical publication if the owner regularly revises or updates the 
site? What, if any, additional characteristics should be required?
    Some Internet publishers use ``list serves'' or other types of 
electronic mailing lists that enable the publisher to send the 
publication to all subscribers using a bulk e-mail message. Using this 
method, the publisher can distribute the publication to a large number 
of subscribers instantly, at very little cost. The Commission is 
interested in comments on whether publication and distribution via a 
list serve or other widely-distributed electronic mail communication 
should fall within the news story exemption? Should it make a 
difference whether recipients receive these communications without 
requesting them, only after requesting them, or only after paying a 
subscription fee? The Commission invites comments on these issues.
    Questions also arise as to whether and when information distributed 
via these sites would be a ``news story, commentary or editorial'' 
within in the meaning of the exemption. A similar issue arose in 
Reader's Digest Association v. Federal Election Commission, 509 F. 
Supp. 1210 (S.D.N.Y. 1981), in which Reader's Digest Association, a 
magazine publisher, produced a videotape that featured a federal 
candidate, and distributed it to various television stations and 
networks. The videotape related to a story to be run in its print 
edition. The court noted that the news story exemption ``would seem to 
exempt only those kinds of distribution that fall broadly within the 
press entity's legitimate press function.'' Id. at 1214. The court 
concluded that the Commission was entitled to investigate the question 
of whether Reader's Digest Association was acting as a press entity 
when it produced and distributed the videotape.
    The Commission invites comments on whether new rules are needed to 
determine whether a news organization's Internet activities fall within 
its legitimate press function. Are there types of web site content that 
should be regarded as unrelated to the press function?
b. Candidate Appearances
    The Commission is interested in comments on how the Act and 
regulations should be applied when candidates make public appearances 
via a web site operated by a news organization. These appearances can 
take many different forms. New technologies make it possible for 
candidates to appear on the Internet and interact with viewers in real 
time. In some cases, the candidate might make a speech that is 
broadcast on-line using streaming video technology. In other cases, a 
web site or Internet service provider might invite its members, 
subscribers, or the general public to attend a real-time on-line 
interview with a candidate, and may also invite viewers to submit 
questions for the candidate by electronic mail. It is also possible 
that, in the future, candidate debates will either be conducted 
entirely on-line, or will be simulcast on-line. In either case, viewers 
may be invited to submit questions or comments to the participating 
candidates.
    The Commission addressed some of the issues raised by this activity 
in Advisory Opinion 1996-16, in which a news and information service 
proposed to invite presidential candidates to appear in a series of 
electronic town meetings with the news service's subscribers. During 
these town meetings, the candidates were linked via two-way television 
to a live audience consisting of subscribers and other invited guests. 
The candidates made brief introductory remarks and then answered 
questions from the live audience. Other subscribers were able to listen 
by telephone line and submit questions by electronic mail. Later, they 
could view a multimedia version of the program on the service's 
dedicated computer terminals.

[[Page 60366]]

    The Commission concluded that town meetings fall within the press 
exemption when the news service is a bona fide press entity. The 
Commission reiterated two relevant considerations set out in the 
statute: (1) Whether the press entity is owned by a political party or 
candidate; and (2) whether the press entity is acting as a press entity 
in performing the media activity. The Commission noted that the media 
entity planned the meetings and therefore controlled the means of 
presentation, the duration, and the format of the candidates' 
appearances. Thus, the activity fell within the scope of the news story 
exemption. The Commission invites comments on whether this conclusion 
should be revised or incorporated into the regulations, and on other 
issues raised by candidate appearances on the Internet.
c. On-line Discussions
    Another area of campaign-related activity on the Internet is the 
use of ``chat rooms'' and other fora for interactive discussions of 
issues and candidates. Are there circumstances under which the sponsor 
of such a forum should be responsible for statements made by persons 
participating in the discussion? Does the sponsor make an expenditure 
by providing a venue for individuals to expressly advocate on behalf of 
a candidate?

8. Party Committees

    The Commission is interested in comments on the impact of the Act 
and regulations on the use of the Internet by political party 
committees. One area in which the rules may impact party committee use 
of the Internet is in the allocation of expenses between candidates 
under 11 CFR 106.1. Section 106.1(a) states that

[e]xpenditures, including in-kind contributions, independent 
expenditures, and coordinated expenditures made on behalf of more 
than one clearly identified federal candidate shall be attributed to 
each such candidate according to the benefit reasonably expected to 
be derived. For example, in the case of a publication or broadcast 
communication, the attribution shall be determined by the proportion 
of space or time devoted to each candidate as compared to the total 
space or time devoted to all candidates. In the case of a 
fundraising program or event where funds are collected by one 
committee for more than one clearly identified candidate, the 
attribution shall be determined by the proportion of funds received 
by each candidate as compared to the total receipts by all 
candidates. These methods shall also be used to allocate payments 
involving both expenditures on behalf of one or more clearly 
identified federal candidates and disbursements on behalf of one or 
more clearly identified non-federal candidates.

Party committee web sites often contain references to multiple 
candidates. Should party committees be required to allocate the costs 
of their web sites to the candidates mentioned on the site? If so, 
should the ``time-space'' allocation method set out in section 106.1(a) 
be applied? Should a party committee be required to take any reference 
to a candidate, no matter how brief, into account in allocating the web 
site's costs? Or, should the committee be able to limit its allocation 
to more extensive references, and exclude candidates to whom only 
minimal reference is made? Would it be adequate to exempt hyperlinks to 
candidate web sites from the time-space allocation of a web site, but 
include more extensive references?
    Alternatively, should some or all of the expenses of a web site be 
treated as ``overhead, general administrative, fund-raising, and other 
day-to-day costs of political committees'' that need not be attributed 
to individual candidates under section 106.1(c)(1)? The Commission 
invites comments on these issues.
    The Commission is also interested in the related issue of whether 
the costs associated with references to candidates on a party committee 
web site should count toward the party committee's coordinated 
expenditure limit. Section 441a(d) of the Act states that the national 
committee of a political party and a state committee of a political 
party may make expenditures in connection with the general election 
campaign of candidates for Federal office, up to certain dollar limits. 
These limits apply to expenditures that are coordinated with the 
party's candidates. See Colorado Republican Federal Campaign Committee 
v. FEC, 518 U.S. 604 (1996). Under what circumstances should a party 
committee's Internet expenditures count toward this limit?
    Finally, the Commission encourages commenters to discuss any other 
issues relating to the use of the Internet by party committees.

Reporting and Recordkeeping

    The use of new avenues for conducting campaign activity often 
raises reporting issues. Consequently, the Commission is interested in 
comments on how the use of the Internet impacts the disclosure process.

1. Contributions Received Via the Internet

a. Reporting
    In Advisory Opinion 1995-9, the Commission concluded that a 
political committee could use the Internet to solicit and accept 
contributions so long as the recordkeeping and reporting requirements 
were met. The Commission cited previous advisory opinions in which it 
``recognized that the Act and regulations allow lawful contributions to 
be made not only by personal check, but also in other ways, including 
properly documented use of credit cards (Advisory Opinions 1978-68 and 
1984-45).'' As discussed above, the Commission also recently revised 
its regulations to allow for matching of credit card contributions 
received by Presidential primary candidates via the Internet. 64 FR 
32,394 (June 17, 1999). See also Advisory Opinion 1999-9.
    The Commission listed the reporting requirements that the 
nonconnected committee in Advisory Opinion 1995-9 was required to 
follow. The committee was required to itemize its receipts, and use 
best efforts to obtain and submit the full name, mailing address, 
occupation and name of employer of any person who makes contributions 
that aggregate in excess of $200 in a calendar year. The Commission 
also said that if a credit card company or other processing entity 
deducts fees from the contribution before forwarding it to the 
committee, those fees would be operating expenses of the committee, and 
must be reported as such. (Note that, for publicly funded candidates, 
these fees would be exempt fundraising expenses under 11 CFR 
100.8(b)(21)). The committee was also required to report the full 
amount paid by the contributor as a contribution, notwithstanding any 
deductions by the credit card company. See 2 U.S.C. 434(b)(5)(A), 11 
CFR 104.3(b)(3).
    The Commission invites comments on whether these conclusions should 
be revised or incorporated into the regulations, and on whether any 
additional reporting requirements should be imposed on committees that 
receive contributions via the Internet.
b. Screening prohibited and excessive contributions
    Section 103.3(b) of the regulations states that the treasurer of a 
political committee shall be responsible for examining all 
contributions received for evidence of illegality and for ascertaining 
whether contributions received, when aggregated with other 
contributions from the same contributor, exceed the contribution 
limitations of 11 CFR 110.1 or 110.2.
    The Commission is interested in comments on whether additional 
safeguards are needed to ensure that contributions received via the 
Internet do not come from sources that are prohibited from making 
contributions

[[Page 60367]]

under the Act, and do not exceed the contributions limits. Should the 
regulations regarding the process of the screening contributions be 
revised? Are more specific processing requirements needed to screen out 
contributions from foreign nationals?
    In Advisory Opinion 1995-9, the Commission endorsed a screening 
procedure in which the web site soliciting contributions would list the 
prohibitions in the Act, and ask contributors to specifically attest 
that their contributions were both voluntary and permissible under each 
prohibition. Potential contributors that did not do so would receive a 
message stating that Federal law prohibits their contribution, and 
inviting those who think they have filled out the contribution form 
incorrectly to try again. The Commission also addressed the issue of 
screening procedures in Advisory Opinion 1999-9. Should aspects of the 
screening procedures described in these advisory opinions be 
incorporated into the regulations? Should these procedures be modified? 
The Commission invites comments on these issues.

2. Disbursements for Expenses Incurred in Internet Activity

    The Commission is interested in comments on whether or not 
disbursements for Internet-related expenses should be subject to the 
reporting requirements? If so, how should costs associated with 
establishing a campaign web site be reported? Should they be operating 
expenses, or as some other type of expense? If the committee of a 
publicly funded candidate uses its web site to solicit contributions, 
should a portion of the cost of establishing and maintaining the site 
be treated as exempt fundraising expenses under 2 U.S.C. 431(9)(B)(vi) 
and 11 CFR 100.8(b)(21)? How should a committee report the initial 
costs of the computer hardware obtained to host the site? What about 
the costs of software purchased to create and maintain the site? How 
should fees paid to Internet service providers be reported?
    Comments are also welcome on whether the reporting requirements 
should be applied to a web site that is only partially devoted to 
candidate advocacy. If so, how should the costs associated with the 
candidate-related portion of the site be determined and reported?
    Similar issues arise in relation to a multicandidate committee web 
site that mentions several candidates. As discussed above in relation 
to party committees, section 106.1 of the Commission's current 
regulations requires multicandidate committees to attribute 
expenditures made on behalf of more than one candidate to each 
candidate according to the benefit reasonably expected to be derived. 
11 CFR 106.1(a)(1). Should a multicandidate committee whose web site 
expresses support for several candidates be required to allocate the 
costs of the site? If so, should the time-space allocation method in 
section 106.1(a)(1) be used to allocate those costs between the 
specifically identified candidates? Or, should the costs of the web 
site be treated the same as the committee's other administrative 
expenses, and allocated in accordance with 11 CFR 106.6(c)?

3. Recordkeeping

    The use of the Internet for campaign activity also raises questions 
regarding the retention of campaign records. Sections 432(c) and (d) of 
the FECA require treasurers to create and maintain records of committee 
transactions, and preserve those records for three years after filing 
the associated report. In the case of reports filed electronically, 
machine-readable copies of committee reports must be maintained for 
three years.
    In Advisory Opinion 1995-9, discussed above, the Commission 
concluded that the requesting committee could maintain records of 
contributions received via the Internet in non-paper form so long as 
the electronic records contained the information required by the 
statute, and were retained for three years.
    The Commission is interested in comments on the types of records 
committees should be required to keep regarding transactions conducted 
via the Internet. Should these records be maintained differently than 
those made using traditional media? Should the conclusion reached in 
Advisory Opinion 1995-9 regarding retention of records be revised or 
explicitly stated in the regulations?

Other Issues

1. Electronic Mail

    Many aspects of the campaign finance process involve the use of the 
mail. The Commission is interested in comments on how broadly it should 
treat electronic mail as a substitute for regular mail.
    For example, section 432(i) of the FECA requires treasurers of 
political committees to exercise ``best efforts'' to report the 
complete identification of each 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). If a contributor fails to 
provide this information, the Commission's rules require the recipient 
committee to make one oral or written follow-up attempt to obtain the 
contributor information for any contribution that exceeds $200 per 
calendar year. 11 CFR 104.7(b)(2)
    The threshold question presented is whether a follow-up attempt 
sent by electronic mail should satisfy the best efforts requirement. In 
Advisory Opinion 1995-9, the Commission determined that, in the case of 
a contribution received via the Internet, the follow-up request could 
consist of an electronic message sent to the contributor's e-mail 
address. However, the request must be sent after the committee received 
the credit card company's confirmation of the contribution, and must 
meet the specific ``best efforts'' requirements set forth in 11 CFR 
104.7(b)(2).
    The Commission is interested in comments on whether the conclusion 
reached in Advisory Opinion 1995-9 regarding the use of electronic mail 
for best efforts follow-up communications should be revised or 
incorporated into the regulations. If so, how should the rules address 
situations where a committee's follow-up request is not successfully 
delivered to the contributor? For example, if the contributor has 
changed his or her e-mail address, he or she would not receive the 
follow-up request directly. Furthermore, if the contributor has not 
arranged for e-mail sent to his or her old address to be forwarded, he 
or she may not receive the request at all. In addition, the committee's 
follow-up request might reach the contributor's former address before 
that account has been completely deactivated by the Internet service 
provider. In that case, the committee would not receive an error 
message indicating that its follow-up request was undeliverable, and 
thus might not be aware that its follow-up request had not reached the 
contributor. How should the rules address these situations?
    Should the Commission extend Advisory Opinion 1995-9 to allow 
committees to use electronic mail to follow up on contributions 
received by regular mail? Are contributors more likely to provide 
information when prompted to do so by a computer than they are when 
they are prompted by regular mail or a phone call?
    Finally, the Commission is interested in comments on whether there 
are circumstances in which the disclaimer requirement should apply to 
electronic

[[Page 60368]]

mail. As explained above, section 441d of the FECA states that 
``[w]henever any person makes an expenditure for the purpose of 
financing communications expressly advocating the election or defeat of 
a clearly identified candidate, or solicits any contribution through 
any broadcasting station, newspaper, magazine, outdoor advertising 
facility, direct mailing, or any other type of general public political 
advertising,'' the communication must contain a disclaimer statement. 
See also 11 CFR 110.11. Comments are welcome on the question of whether 
list serves or other forms of electronic mail that are distributed to 
large numbers of recipients in bulk should be regarded as general 
public political advertisements for which a disclaimer is required.
    The Commission is also interested in comments on any other issues 
raised by the use of electronic mail for candidate or election-related 
activity.

2. Membership

    Section 441b(b)(4)(A) prohibits a corporation and its separate 
segregated fund from soliciting contributions from persons other than 
its stockholders and their families or its executive or administrative 
personnel and their families. However, under paragraph (b)(4)(C), a 
membership organization or its the separate segregated fund may solicit 
contributions from ``members'' of the organization. The Commission 
recently approved new rules defining the term ``member.'' 64 FR 41,266 
(Jul. 30, 1999). These rules are currently before Congress pending 
legislative review.
    Because of the increasing availability of the Internet, there may 
now be organizations that exist almost entirely on-line. Persons 
visiting the web site of such an organization may be invited to become 
members of the organization. Are there special considerations in 
determining whether these organizations qualify as ``membership 
organizations?'' Are there additional factors in evaluating whether 
someone is a ``member'' of an on-line membership organization?

3. Draft Committees

    Periodically, groups form to encourage, or ``draft,'' someone to 
become a candidate for a particular office. The Internet may be the 
ideal vehicle for draft committees to use to generate support for their 
prospective candidates.
    The Commission is interested in comments on the use of the Internet 
by draft committees. The current rules contain only one provision that 
is directed specifically at draft committees. Section 102.14(b)(2) 
states that ``[a] political committee established solely to draft an 
individual or to encourage him or her to become a candidate may include 
the name of such individual in the name of the committee provided the 
committee's name clearly indicates that it is a draft committee.'' 
Should the rules be revised to address other aspects of draft committee 
activities? Do web sites established by draft committees raise any 
special issues under the FECA? The Commission is interested in comments 
on these issues.

Conclusion

    The Commission invites comments on these issues, and on any other 
issues related to the use of the Internet for campaign activity.

    Dated: November 1, 1999.
Scott E. Thomas,
Chairman, Federal Election Commission.
[FR Doc. 99-28982 Filed 11-4-99; 8:45 am]
BILLING CODE 6715-01-U