[Federal Register Volume 67, Number 145 (Monday, July 29, 2002)]
[Rules and Regulations]
[Pages 49064-49132]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-18311]
[[Page 49063]]
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Part II
Federal Election Commission
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11 CFR Parts 100, et al.
Prohibited and Excessive Contributions: Non-Federal Funds or Soft
Money; Final Rule
Federal Register / Vol. 67, No. 145 / Monday, July 29, 2002 / Rules
and Regulations
[[Page 49064]]
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FEDERAL ELECTION COMMISSION
11 CFR Parts 100, 102, 104, 106, 108, 110, 114, 300, and 9034
[Notice 2002 -11]
Prohibited and Excessive Contributions: Non-Federal Funds or Soft
Money
AGENCY: Federal Election Commission.
ACTION: Final rules and transmittal of regulations to Congress.
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SUMMARY: The Federal Election Commission is revising its rules relating
to funds raised, received, and spent by party committees under the
Federal Election Campaign Act of 1971, as amended (``FECA'' or the
``Act''). The revisions are based on the Bipartisan Campaign Reform Act
of 2002 (``BCRA''), which adds to the Act new restrictions and
prohibitions on the receipt, solicitation, and use of certain types of
non-Federal funds, which are commonly referred to as ``soft money.''
BCRA and the revised rules prohibit national parties from raising or
spending non-Federal funds. They also permit State, district, and local
party committees to fund certain ``Federal election activity,''
including certain voter registration and get-out-the-vote (``GOTV'')
drives, with money raised pursuant to new limitations, prohibitions,
and reporting requirements under BCRA, or with a combination of funds
subject to various requirements of the Act and BCRA. They also address
fundraising by Federal and non-Federal candidates and Federal
officeholders on behalf of political party committees, other
candidates, and non-profit organizations. Further information is
contained in the Supplementary Information that follows.
DATES: The effective date is November 6, 2002, except for 11 CFR
106.7(a) which is effective January 1, 2003.
FOR FURTHER INFORMATION CONTACT: Mr. John C. Vergelli, Acting Assistant
General Counsel; or Attorneys Mr. Anthony T. Buckley, Mr. Jonathan M.
Levin, Ms. Dawn Odrowski, Ms. Anne A. Weissenborn, 999 E Street, NW.,
Washington, DC 20463, (202) 694-1650 or (800) 424-9530.
SUPPLEMENTARY INFORMATION: The Bipartisan Campaign Reform Act of 2002
(``BCRA''), Public Law 107-155, 116 Stat. 81 (March 27, 2002), contains
extensive and detailed amendments to the Federal Election Campaign Act
of 1971, as amended (``FECA'' or the ``Act''), 2 U.S.C. 431 et seq.
This is the first of a series of rulemakings the Commission is
undertaking this year in order to meet the rulemaking deadlines set out
in BCRA. These rules address BCRA's new limitations on party,
candidate, and officeholder solicitation and use of non-Federal
funds.\1\
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\1\ Future rulemakings will address: (1) Electioneering
communications and issue ads; (2) coordinated and independent
expenditures; (3) the so-called ``millionaires'' amendment,'' which
increases contribution limits for congressional candidates facing
self-financed candidates on a sliding scale, based on the amount of
personal funds the opponent contributes to his or her campaign; (4)
the increase in contribution limits; and (5) other new and amended
provisions, including contribution prohibitions and reporting. This
last rulemaking will address contributions by minors, foreign
nationals, and U.S. nationals; inaugural committees; fraudulent
solicitations; disclaimers; personal use of campaign funds; and
civil penalties. BCRA's impact on national nominating conventions
will be addressed in a separate rulemaking.
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Section 402(c)(2) of BCRA establishes a 90-day deadline for the
Commission to promulgate these rules. Since BCRA was signed into law on
March 27, 2002, the 90-day deadline was June 25, 2002.\2\ The
Commission promulgated these rules on June 22, 2002. The new rules will
take effect on November 6, 2002, the day following the November 2002
general election, except rules that take effect after the transition
period. 2 U.S.C. 431 note.
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\2\ BCRA's deadline for promulgation of the remaining rules is
270 days after the date of enactment, or December 22, 2002.
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Because of the extremely tight deadline for promulgating these
rules, the Commission adhered to a shorter-than-usual timeline for
receiving and considering public comments. The Notice of Proposed
Rulemaking (``NPRM'') on which these rules are based was published in
the Federal Register on May 20, 2002. 67 FR 35654 (May 20, 2002).
Comments were received from 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 Association of State Democratic Chairs
(``ASDC''); Dr. Peter Bearse; the California Republican Party; the
Campaign and Media Legal Center; the Center for Responsive Politics
(``CRP'') and FEC Watch (joint comment); Common Cause and Democracy 21
(joint comment); the Connecticut Republican State Central Committee;
the Democratic National Committee (``DNC''), the Democratic Senatorial
Campaign Committee (``DSCC'') and the Democratic Congressional Campaign
Committee (``DCCC'') (joint comment); Development Strategies
Corporation; Benjamin L. Ginsberg, Esq.; Ms. Janice P. Johnson; the
Latino Coalition and National Taxpayer Network, Inc. (joint comment);
the Michigan Democratic Party (``MDP''); Mindshare Internet Campaigns
L.L.C.; the NAACP National Voter Fund (``NAACP NVF''); the National
Republican Congressional Committee (``NRCC''); OMB Watch; Senators John
S. McCain and Russell D. Feingold, and Representatives Christopher
Shays and Marty Meehan (joint comment), and a supplemental comment from
Senator McCain; Representative Bob Ney; Norman D. Petrick; and the
Republican National Committee (``RNC'').
The Commission held a public hearing on the NPRM on June 4 and 5,
2002, at which it heard testimony from representatives of the ASDC; the
AFL-CIO; the Campaign and Media Legal Center; Common Cause and
Democracy 21; CRP and FEC Watch; the DNC, DSCC and DCCC; the Latino
Coalition and the Taxpayer Network, Inc.; NAACP NVF; the MDP; the RNC,
the RNCC, and the Republican State Chairmen; and Mr. Ginsberg. Please
note that, for purposes of this document, the terms ``commenter'' and
``comment'' cover both written comments and oral testimony at the
public hearing.
Under the Administrative Procedures Act, 5 U.S.C. 553(d), and the
Congressional Review of Agency Rulemaking Act, 5 U.S.C. 801(a)(1),
agencies must submit final rules to the Speaker of the House of
Representatives and the President of the Senate and publish them in the
Federal Register at least 30 calendar days before they take effect. The
final rules on Prohibited and Excessive Contributions: Non-Federal
Funds or Soft Money were transmitted to Congress on July 16, 2002.
Explanation and Justification
I. Terminology
Because the term ``soft money'' is used by different people to
refer to a wide variety of funds under different circumstances, the
Commission is using the term ``non-Federal funds'' in the final rules
rather than the term ``soft money.'' BCRA does not use the term ``soft
money'' except in the heading of Title I and the headings within Title
IV. Nonetheless, the Commission sought comment on whether use of the
term ``soft money'' would in some instances be preferable.
Not all commenters addressed this issue, and several of those who
did not address the issue used the term ``soft money'' throughout their
comments. Most of those who addressed this question, however, urged the
Commission to use the terms ``Federal funds'' and ``non-Federal funds''
in
[[Page 49065]]
place of what they characterized as the often-misunderstood term ``soft
money.'' One commenter urged the Commission to use the terms
``regulated'' and ``unregulated'' funds, arguing that the terms
``Federal'' and ``non-Federal'' funds are also confusing. However, the
terms ``Federal'' and ``non-Federal'' have been used by the Commission
for many years throughout the rules and are thus familiar to those
active in this area. See, for example, 11 CFR 102.5 (``Federal'' and
``non-Federal'' accounts); 11 CFR 106.5 (``Federal'' and ``non-
Federal'' disbursements). The terms ``regulated'' and ``unregulated''
could also be subject to different interpretations. Moreover, non-
Federal funds are regulated by State law. The Commission is, therefore,
using the terms ``Federal'' and ``non-Federal'' throughout the text of
the regulations and the accompanying Explanation and Justification.
II. The Statutory Framework
The Act limits the amount that individuals can contribute to
candidates, political committees, and political parties for use in
Federal elections. 2 U.S.C. 441a. The Act also prohibits corporations
and labor organizations from contributing their general treasury funds
for these purposes. 2 U.S.C. 441b. Contributions from national banks, 2
U.S.C. 441b(a); government contractors, 2 U.S.C. 441c; foreign
nationals, 2 U.S.C. 441e; and minors, new 2 U.S.C. 441k, as enacted by
BCRA; as well as contributions made in the name of another, 2 U.S.C.
441f; are also prohibited. These strictures regulate what is often
referred to as ``hard money,'' or Federal funds.
Some donations that do not meet the FECA hard money requirements,
for example, corporate and labor organization general treasury
contributions, may not be used for Federal elections, and are referred
to as non-Federal funds. Non-Federal funds may not be used for the
purpose of influencing any election for Federal office. Funds raised
that are used by State or local parties or State or local candidates on
non-Federal elections are governed by State or local law. Prior to
BCRA's revisions, the FECA permitted national party committees, Federal
candidates, and officeholders to raise money not subject to some of the
Act's source limitations and prohibitions. Beginning November 6, 2002,
under BCRA, national party committees ``may not solicit, receive, or
direct to another person a contribution, donation, or transfer of funds
or any other thing of value, or spend any funds, that are not subject
to the limitations, prohibitions, and reporting requirements of this
Act.'' 2 U.S.C. 441i(a).
BCRA also requires State, district, and local political party
committees to pay for ``Federal election activities,'' which is a new
term introduced and defined by BCRA, 2 U.S.C. 431(20), with entirely
Federal funds or, in some cases, a mix of Federal funds and a new type
of non-Federal funds, which the rules call ``Levin funds.'' These two
provisions are related in that the latter is intended to prevent
evasion of the former. A State, district, or local political party
committee may not evade the restrictions in BCRA by receiving funds
transferred from a national party committee and spending those funds on
Federal election activity. A State, district, or local party committee
must spend Federal and Levin funds it raises itself on these
activities. See 148 Cong. Rec. H408-409 (daily ed. Feb. 13, 2002)
(statement of Rep. Shays).
As discussed below, these new and revised rules partially supersede
the following advisory opinions relating to preemption as to party
office buildings: Advisory Opinions 2001-12, 2001-1, 1998-8, 1998-7,
1997-14, 1993-9, 1991-5, and 1986-40. Other advisory opinions may no
longer be relied upon to the extent they conflict with BCRA. Further
guidance will be forthcoming in future advisory opinions and
rulemakings.
III. Part 100--Scope and Definition
11 CFR 100.14 Definition of ``State Committee, Subordinate Committee,
District, or Local Committee''
Several provisions of BCRA refer to ``State, district, and local
committees of a political party.'' See, e.g., the ``Levin Amendment,''
2 U.S.C. 441i(b)(2). In the NPRM, the Commission pointed out that the
terms ``State committee,'' ``subordinate committee,'' and ``party
committee,'' are already defined in the regulations, although
``district committee'' and ``local committee'' are not. 11 CFR 100.14,
100.5(e)(4); see also 2 U.S.C. 431(15).
In paragraph (a) of section 100.14, status as a State committee is
determined by reference to the party bylaws or State law. This
provision, which did not draw comment, allows the regulation to cover
those States in which party committee status is a matter of State law
and those in which it is a matter of party bylaws.
The proposed regulation published in the NPRM provided, in
paragraphs (a), (b), and (c), with regard to ``State committees,''
``subordinate committees,'' and ``district or local committees,''
respectively, that an organization must be ``part of the official party
structure'' and be ``responsible for the day-to-day operation of the
political party'' to meet the definition. Three commenters, including
the principal Congressional sponsors of BCRA, objected to this
conjunctive requirement. These commenters collectively believe that
limiting the definition to organizations that are part of the
``official party structure'' will open the door to purportedly
``unofficial'' party organizations that would be able to avoid BCRA's
requirement while ``manifestly engaged in party operations.'' Instead,
they propose a disjunctive definition, which would provide that a party
organization meets the respective definitions if it is part of the
official party structure or responsible for the day-to-day operation of
the party. The Commission has concluded that requiring a committee to
be part of the official party structure before it satisfies the
regulatory definition is an important safeguard, ensuring that BCRA's
provisions sweep only as far as necessary to accomplish its ends. The
Commission also believes that its definition of ``subordinate committee
of a State, district, or local committee,'' which includes any
organization that is directly or indirectly established, financed,
maintained, or controlled by the State, district, or local committee
fully addresses the sponsor's regulatory concerns in this area.
Paragraph (b) is a new provision defining ``district or local
committee.'' (This provision was labeled paragraph (c) in the NPRM,
while subordinate committees were covered by paragraph (b). In the
final rules, the Commission has covered subordinate committees in
paragraph (c). This reordering of paragraphs within section 100.14
reflects the priority given to district and local party committees in
BCRA.) This definition largely parallels paragraph (a) but for
political subdivisions below the State level, and encompasses those
political party committees that do not necessarily operate formally
under the ``control or direction'' of the State party committee. In the
final rules, the Commission has deleted the phrase, ``including an
entity that is directly or indirectly established, financed,
maintained, or controlled by the district or local committee.''
The principal Congressional sponsors of BCRA commented that the
words, ``under State law,'' as they appeared in the NPRM, are redundant
given the preceding reference to ``operation of State law.'' The
Commission agrees, and has deleted the redundant words in the final
rule.
[[Page 49066]]
Three commenters objected to adding language, ``as determined by
the Commission,'' in paragraph (b) of section 100.14. An association of
State party officials stated, referring to paragraph (b), ``there
should be no discretion left to the Commission to decide whether a
particular organization is a local party committee.'' A national party
committee described status as a local committee as a ``quintessential
State and local'' issue. The Commission has not included the phrase,
``as determined by the Commission,'' in paragraph (b) of section
100.14.
With regard to subordinate committees, in paragraph (c) of section
100.14, the phrase, ``as determined by the Commission,'' which was
included in the proposed regulation published in the NPRM, has not been
included in the final rules. The Commission has concluded that this
language, which refers to the availability of the advisory opinion
process, is not appropriate with regard to committees other than State
committees, whose status as State party committees, as determined by
the Commission, makes them eligible for higher contribution limits and
permits them to make coordinated expenditures under FECA. The principal
Congressional sponsors of BCRA commented that, as proposed in the NPRM,
this definition did not, but should, include within the definition an
entity that is directly or indirectly established, financed,
maintained, or controlled by the subordinate committee. The Commission
has included such a provision in paragraph (c) of section 100.14 of the
final rules.
11 CFR 100.24 Definition of ``Federal Election Activity''
Many of the operative provisions of Title I of BCRA use the term
``Federal election activity'' (``FEA''). See, e.g., 2 U.S.C.
441i(b)(1), (2), 2 U.S.C. 441i(d). Congress defined the term at 2
U.S.C. 431(20). The Commission is adopting new regulation 11 CFR 100.24
to implement the statutory definition.
The definition of FEA proposed in the NPRM drew numerous comments
urging divergent interpretations of key statutory terminology. Many of
these comments focused on four important phrases that are used in the
statutory definition at 2 U.S.C. 431(20). In light of these comments,
the Commission has revised the regulation proposed in the NPRM by
adding a new first paragraph, 11 CFR 100.24(a), which defines these
four terms for the purposes of the rest of the regulation and for use
in part 300 of chapter 1 of Title 11. These terms are ``voter
registration activity'' (see 2 U.S.C. 431(20)(A)(i)), ``in connection
with an election in which a candidate for Federal office appears on the
ballot,'' ``get-out-the-vote activity'' (``GOTV''), and ``voter
identification'' (see 2 U.S.C. 431(20)(A)(ii)).
A. Elections in Which Federal Candidates ``Appear on the Ballot''
The statutory definition of FEA provides that certain activities
are FEA if they are ``in connection with an election in which a
candidate for Federal office appears on the ballot.'' 2 U.S.C.
431(20)(A)(ii). Congress clearly intended to establish certain periods
of time in which no candidates for Federal office appear on the ballot.
The NPRM requested comment as to how to interpret this statutory
provision. Several commenters, including the principal Congressional
sponsors of BCRA, urged the Commission to construe this phrase to mean
``starting at the beginning of a two-year Federal election cycle,
except in states holding regularly scheduled state elections in odd-
numbered years.'' These commenters argued that this approach is
``consistent with the Commission's current practice with respect to
allocation of generic voter drive and administrative expenses,'' and
comports with the plain meaning of the statute.
In contrast, two commenters, a national party committee and a labor
organization, urged the Commission to pick a date certain, January 1 of
even-numbered years, to identify the time-frame that is ``in connection
with an election in which a candidate for Federal office appears on the
ballot.'' The commenters commended this approach as ``practical'' and
``reasonable.'' One of these commenters suggested that the concept of
even-numbered Federal election years is already familiar, and that
party activities are ``more diverse'' in odd-numbered years, in that
they are more focused on local and State activities. The Commission
notes that a large number of State and local elections take place in
odd-numbered years (e.g., mayoral elections in some large cities).
Activities in connection with such elections are presumably not
``conducted in connection with an election in which a candidate for
Federal office appears on the ballot,'' even under the most expansive
reading of the statute.
A civil rights organization urged the Commission to interpret the
term, ``in connection with an election in which a candidate for Federal
office appears on the ballot,'' to mean that period of time beginning
on the day on which a Federal candidate is actually certified for the
ballot in a given jurisdiction. This commenter argues this
interpretation is the plainest possible reading of the statute. This
civil rights organization also cautioned that an overly broad
definition of when a candidate ``appears on the ballot'' would unduly
hamper their legitimate fundraising efforts, and thus impede many, if
not all, of their non-partisan GOTV efforts. A Latino rights group and
a taxpayers' organization suggested that the Commission interpret the
statutory term to mean the earliest date on which a Federal candidate
could qualify for the ballot in a given jurisdiction.
Paragraph (a)(1) of 11 CFR 100.24 defines ``in connection with an
election in which a candidate for Federal office appears on the
ballot'' to mean two specific periods of time. The first begins on the
earliest filing deadline for access to the primary election ballot for
Federal candidates, as determined by State law, or in those States that
do not conduct primaries, on January 1 of each even-numbered year. This
time period ends on the date of the general election, up to and
including the date of any general runoff. This definition of ``in
connection with an election in which a candidate for Federal office
appears on the ballot'' closely tracks the statutory language of 2
U.S.C. 431(20)(A)(ii) by tying the definition to the actual date that
Federal candidates appear on the ballot. Although this definition may
result in all fifty States having different time-periods in which ``a
candidate for Federal office appears on the ballot,'' for purposes of
the Act, there will be only one relevant date in any particular State.
Thus, this is not at all burdensome on State and local party
committees, who are the primary actors affected by this clause,
especially since many of these committees must already pay attention to
State dates in order to file certain pre-election reports with the
Commission. Finally, this definition harmonizes the rule for regularly
scheduled Federal elections and special elections for Federal office
held outside normal election time frames. (See next paragraph.)
The second time-frame that is ``in connection with an election in
which a candidate for Federal office appears on the ballot'' occurs in
odd-numbered years in which a special election for a Federal office
occurs. Paragraph (a)(1)(ii) prescribes that the period beginning on
the date the special election date is set and ending on the day of the
special election is considered to be ``in connection with an election
in which a candidate for Federal office appears on the ballot.''
[[Page 49067]]
B. Voter Registration Activity
BCRA does not define ``voter registration activity,'' as that term
is used in the statutory definition of ``Federal election activity,''
although ``voter registration activity'' is ``Federal election
activity'' only when it is conducted 120 days or fewer before a
regularly scheduled Federal election. 2 U.S.C. 431(20)(A)(i). Paragraph
(a)(2) of section 100.24, in the final rules, defines voter
registration activity to encompass individualized contact for the
specific purpose of assisting individuals with the process of
registering to vote. The definition in paragraph (a)(2) also includes
the costs of printing and distributing voter registration information,
such as registration forms, and voting information, for example,
pamphlets of similar materials explaining the voter-registration
process.
The Commission has expressly rejected an approach whereby merely
encouraging voter registration would constitute Federal election
activity. The regulation requires concrete actions to assist voters,
rather than mere exhortation. A more expansive definition would run the
risk that thousands of political committees and grassroots
organizations that merely encouraged voting as a civic duty, who have
never been subject to Federal regulation for such conduct, would be
swept into the extensive reporting and filing requirements mandated
under Federal law.
C. Get-Out-the-Vote
Based upon the comments received in response to the rules proposed
in the NPRM, the testimony at the public hearing, and its own analysis
of BCRA, the Commission has concluded that it must define GOTV in a
manner that distinguishes the activity from ordinary or usual
campaigning that a party committee may conduct on behalf of its
candidates. Stated another way, if GOTV is defined too broadly, the
effect of the regulations would be to federalize a vast percentage of
ordinary campaign activity.
The Commission received several comments on this topic. A State
political party and an association of State party officials argued that
the timing (i.e., relative to the election) should not be relevant to
determining whether an activity is GOTV. Rather, both commenters
suggested that GOTV ``should refer to actual communications with voters
for the purpose of encouraging them to vote.'' Two public interest
groups agreed that timing relative to the election is not relevant to
determining whether an activity is GOTV. Neither group, however,
suggests an actual definition of the term. The Congressional sponsors
``strongly disagree with the suggestion that * * * voter contacts may
constitute [GOTV] only if they occur `on Election day or shortly
before.' Contacting voters to encourage voting is [GOTV] whenever it
occurs.'' A labor organization suggested that timing is relevant, and
urged that the Commission's definition of GOTV be limited to activities
that occur on election day.
In the final rules, at 11 CFR 100.24(a)(3), the Commission adopts a
definition of ``GOTV activity'' as ``contacting registered voters * * *
to assist them in engaging in the act of voting.'' This definition is
focused on activity that is ultimately directed to registered voters,
even if the efforts also incidentally reach the general public. Second,
GOTV has a very particular purpose: assisting registered voters to take
any and all necessary steps to get to the polls and cast their ballots,
or to vote by absentee ballot or other means provided by law. The
Commission understands this purpose to be narrower and more specific
than the broader purposes of generally increasing public support for a
candidate or decreasing public support for an opposing candidate.
Paragraph (a)(3) provides a list of two examples of get-out-the-
vote activity that is intended to assist in applying the regulation to
particular factual situations. The first example, in paragraph
(a)(3)(i), is activity whereby an individual is provided specific
information on voting within 72 hours of an election, such as the date
of the election, the location of polling places, and the hours the
polls are open. The second example, in paragraph (a)(3)(ii), is
offering to transport or actually transporting voters to the polls.
The regulation explicitly excludes ``any communication by an
association or similar group of candidates for State and local office
or of individuals holding State or local office if such communication
refers only to one or more state or local candidates.'' Similar to the
exclusion for voter identification discussed below, this exclusion
keeps State and local candidates' grassroots and local political
activity a question of State, not Federal law. Interpreting the statute
to extend to purely State and local activity by State and local
candidates would potentially bring into the Federal regulatory scheme
thousands of State and local candidates that are currently outside the
Federal system. The Commission declines to undertake such a vast
federalization of State and local activity without greater direction
from Congress.
In the NPRM, the Commission posed several questions as to how the
term ``get-out-the-vote'' activity should be interpreted in the
statute. Among the issues raised was whether there should be an
exception for ``non-partisan'' GOTV. In their comment, the principal
Congressional sponsors of BCRA strongly opposed a non-partisan
exception as ``flatly inconsistent with BCRA.'' They argued that the
plain language of the statute does not permit such an exception. Three
other commenters, all of whom are public interest groups, make the same
general argument. These commenters, and the Congressional sponsors,
each opposed regulations that might contemplate ``non-partisan'' voter-
drive activities by party committees and candidates, which one of the
commenters labeled as ``oxymoronic.''
In contrast, one commenter, a non-profit corporation, urged the
Commission to adopt a ``non-partisan exception'' for non-profit
organizations that engage in non-partisan voter-drive activities such
as GOTV and voter registration. This group noted that the proposed
regulations would restrict fundraising on behalf of a non-profit by
political party committees and Federal candidates if the non-profit
spent money for FEA. It contended that, if the Commission fails to
distinguish between partisan and non-partisan voter-drive activities,
the efforts of legitimate, non-partisan groups to encourage voting will
be hampered, perhaps fatally, in the case of some organizations. This
commenter also argued that the Commission should create a ``safe
harbor'' to allow political party committees and Federal candidates to
raise funds on behalf of section 501(c)(3) organizations that legally
engage in non-partisan voter-drive activities.
In Title I of BCRA, Congress expressly addressed party fundraising
for tax-exempt organizations. Congress specifically provided that
national, State, district, and local political party committees ``shall
not solicit any funds for, or make or direct any donations to'' section
501(c) organizations that spend money on Federal election activity. 2
U.S.C. 441i(d)(1). The Commission does not discern, from the plain
language of section 441i(d)(1), any authority to craft a regulatory
exception to the definition of FEA that would modify the effect of
section 441i(d)(1). This conclusion is supported by the fact that
Congress did provide a limited exception for fundraising by Federal
candidates on behalf of 501(c) organization that engage in FEA. See 2
U.S.C. 441i(e)(4)(B)
[[Page 49068]]
(which provides that a Federal candidate is permitted to raise up to
$20,000 per calendar year from individuals for a section 501(c)
organization, even if the organization engages in certain FEA.)
Clearly, Congress could have crafted a non-partisan exception, but did
not do so with regard to party committees' GOTV drives. Therefore, the
Commission declines to adopt a ``non-partisan'' exception in 11 CFR
100.24 with regard to the definition of FEA.
In the NPRM, the Commission solicited comments as to whether there
should be a de minimis exception allowing a certain, nominal amount of
GOTV related to a Federal election that would nonetheless not render
these activities as FEA. The principal Congressional sponsors of BCRA
and a public interest group commented that there is no basis in the
statute for a de minimis exception, and that such an exception ``would
be contrary to the plain meaning of the statute.'' A labor
organization, a national party, and a State political party committee
support the inclusion of a de minimis exception. The State party
committee suggests a $5,000 exception, so that ``informal and
occasional GOTV and grassroots activities do not invoke the full force
of federal regulations.'' One of the labor organizations asserts the
exception would prevent the regulation from having a ``strict
liability'' aspect. The Commission declines to adopt a de minimis
exception in 11 CFR 100.24.
D. Slate Cards, Sample Ballots, and Other Exempt Activities
In the NPRM, the Commission specifically sought comment as to the
use of printed slate cards, sample ballots, palm cards, and similar
listings of three or more candidates in the context of GOTV. The
Commission also sought comment about the larger issue of the
relationship of ``exempt activities'' to ``Federal election
activities.'' 67 FR 35656.
The term ``exempt activities'' refers to three types of spending by
State and local party organizations, each of which is excluded from the
statutory definitions of contribution and expenditure in 2 U.S.C.
431(8) and (9). That is, a payment by a State or local party
organization for an exempt activity is not a ``contribution,'' within
the meaning of the Act, to a candidate benefited by the activity, nor
an ``expenditure,'' within the meaning of the Act, by the party
organization.
Slate cards are one type of exempt activity. A payment for the
``costs of preparation, display, or mailing or other distribution . . .
with respect to a printed slate card or sample ballot, or other printed
listing, of 3 or more candidates for any public office,'' is not a
contribution or expenditure. The exclusion does not apply to spending
for displaying the slate card ``on broadcast stations, or in
newspapers, magazines, or similar types of general public political
advertising.'' 2 U.S.C. 431(8)(B)(v) (contribution); 2 U.S.C.
431(9)(B)(iv) (expenditure). See also 11 CFR 100.7(b)(9), 100.8(b)(10).
Note that the exemption extends to the costs of a mass mailing of the
slate card.
``The original intent of the slate card amendment was to allow
parties to print slate cards, sample ballots, etc., to educate voters
and encourage straight party voting without being subject to the
disclosure provisions and contribution and expenditure limitations in
Federal law.'' H.R. Rep. No. 93-1239, at 142 (1974) (House Committee on
Administration Report on the Federal Election Campaign Act Amendments
of 1974) (Supp. View of Rep. Frenzel). Other statements in the
legislative history tend to confirm this view of the intent behind the
provision. See, e.g., H.R. Rep. No. 93-1438, at 65 (1974) (Conference
Report on Federal Election Campaign Act Amendments of 1974) (intent of
provision ``is to allow State and local parties to educate the general
public as to the identity of the candidates of the party.'')
Several commenters have addressed the relationship between FEA and
exempt activities, including slate cards. One State party committee
commented that it understands BCRA to have ``clearly redefined all such
* * * activities as Federal election activities that must be funded
entirely by hard money.'' The principal Congressional sponsors of BCRA
commented that slate cards, sample ballots, and palm cards should be
included in GOTV. With regard to the larger issue of the relationship
between all exempt activities and FEA, the principal sponsors urged
that if an activity constitutes FEA, then it must be treated as such. A
public interest group argues that ``federal election activity subsumes
all previously allocable expenses,'' with certain exceptions not
relevant here.
In a joint comment, a national party committee and two
Congressional campaign committees advocated the opposite conclusion:
``Congress did not leave any suggestion in the legislative history that
these important exceptions were somehow overridden * * * by BICRA.''
These commenters argued that the Commission's current treatment of
exempt activities is consistent with BCRA because BCRA focuses on
``soft money'' spending for ``issue advertising,'' whereas exempt
activities are, by definition, at the grassroots level. Thus, they
conclude, ``exempt activities should not be deemed to be `Federal
election activity,' and that the costs of exempt activities should
continue to be allocated between Federal and non-Federal funds,'' by
which they mean non-Federal funds other than Levin funds. Another
national party committee, a State party committee, and a labor
organization made essentially the same points, agreeing that the
definition of Federal election activity should exclude exempt
activities.
The Commission does not interpret the Act, as amended by BCRA, to
permit blanket conclusions about the relationship of exempt activities
and FEA, in the sense of asserting that all exempt activities are
necessarily now FEA, or vice versa. It is clear that not all exempt
activities are FEA. For example, voter registration activities
undertaken by a State or local political party on behalf of the
Presidential ticket more than 120 days before a regularly scheduled
election is an exempt activity under 2 U.S.C. 431(8)(B)(xii) and
(9)(B)(ix), but not a Federal election activity. 11 CFR 100.24(b)(1).
It is also clear that some activities satisfy one of the definitions of
exempt activities and simultaneously satisfy one of the definitions of
FEA. For example, voter registration activities undertaken by a State
or local political party on behalf of the Presidential ticket fewer
than 120 days before a regularly scheduled election satisfy both the
definition of exempt activity and of Federal election activity. 2
U.S.C. 431(8)(B)(xii), (9)(B)(ix), and 20(A)(i).
In cases where a given activity undertaken by a State, district, or
local political party committee is both an exempt activity and a
Federal election activity, the issue is how it may or must be paid for.
On this point, BCRA and the Commission's pre-BCRA regulations appear to
be in conflict. Under BCRA, as interpreted in these final rules, if the
activity is deemed a FEA, it must be paid for with Federal funds, Levin
funds, or with an allocated mix of Federal and Levin funds. See 11 CFR
300.32(b). Under the Commission's pre-BCRA regulations, if the activity
is deemed an exempt activity that is combined with non-Federal activity
it may be paid for with an allocated mix of Federal and non-Federal
funds. 11 CFR 100.7(b)(9), (15), (17), 100.8(b)(10), (16), (18), and
106.5(a)(2)(iii). See Common Cause v. Federal Election Com'n, 692
F.Supp. 1391, 1394-1396 (D.D.C. 1987). The Common Cause case directly
addressed two of the three categories of exempt activities:
[[Page 49069]]
campaign materials used by volunteers (see 11 CFR 100.7(b)(15) and
100.8(b)(16)) and voter registration and GOTV activities on behalf of
the Presidential ticket (see 11 CFR 100.7(b)(17) and 100.8(b)(18)),
establishing that allocation of payments for these activities between
Federal and non-Federal funds was properly a matter for the Commission
to address in its regulations. Common Cause, 692 F.Supp. at 1396. While
not directly addressed in Common Cause, the allocation of the costs of
slate cards is also addressed in the Commission's regulations, but not
in FECA. Compare 2 U.S.C. 431(8)(B)(v) and (9)(B)(iv) (which does not
specifically provide for allocation) with 11 CFR 100.7(b)(9) and
100.8(b)(10) (which provides for allocation).
Since the Commission's regulations may not override the Act, as
amended by BCRA, if an activity undertaken by a State, district, or
local political party committee simultaneously constitutes both exempt
activity and Federal election activity, that activity must now be paid
for as a Federal election activity, not as an exempt activity.
The Commission emphasizes, however, that payments by a State,
district, or local political party committee for an activity that is
within one of the exempt activity categories remains excluded from the
definitions of ``contribution'' and ``expenditure.'' That is, the
conclusion explained in the preceding paragraph goes only to how the
activity must be paid for, not to characterizing the payment as a
contribution or expenditure under the Act.
With these considerations in mind, the Commission sees no valid
reason to handle slate cards differently from any other type of exempt
activity with regard to the definition of Federal election activity. If
a State, district, or local political party committee uses slate cards
as part of GOTV activity, or in a public communication that promotes or
supports, or attacks or opposes a Federal candidate, then the committee
must pay for the costs of these slate cards as a Federal election
activity (see 2 U.S.C. 431(20)(A)(ii), (iii)), although these payments
are excluded from the definition of ``expenditure.'' On the other hand,
if a State, district, or local political party committee uses slate
cards mentioning Federal and non-Federal candidates in the course of
campaigning that does not constitute Federal election activity, then it
may allocate the costs of these slate cards between Federal and non-
Federal funds.
E. Voter Identification
In BCRA, Congress included ``voter identification'' within the
definition of ``Federal election activity.'' 2 U.S.C. 431(20)(A)(ii).
In the NPRM, the Commission sought comment as to whether the proposed
definition was too narrowly or broadly crafted, and, in the
alternative, what activities should be incorporated into the definition
of ``voter identification.'' A consortium of non-profit groups
expressed concern that the term ``voter identification'' could be read
too broadly by encompassing ``efforts to identify the shared interests
of individuals for non-electoral purposes.'' They urged the Commission
to restrict the definition to ``activities designed primarily to
identify the political preferences of individuals in order to influence
their voting.'' Similarly, a State political party commented that the
definition in the proposed regulation was ``far too broad and instead
should be defined to include only activity that involved actual contact
of voters, by phone, in person or otherwise, to determine their
likelihood of voting generally or their likelihood of voting for a
specific Federal candidate.'' This State party committee specifically
urged that the final definition exclude the costs of ``acquisition or
enhancement of a list of voters, or the acquisition of publicly
available demographic information regarding these voters,'' arguing
that such functions are properly treated as administrative expenses
because they are part of the party's ``fundamental functions.'' Several
national party committees offered essentially similar views. A labor
organization commented that ``voter identification'' should be defined
as telephone calls or canvassing ``to identify voters for other Federal
election activities,'' and agreed that gathering data about voters
should be excluded. Another labor organization commented that ``voter
identification'' should be limited to determining voter intent with
regard to specific Federal candidates only.
In contrast, the principal Congressional sponsors of BCRA commented
that ``voter identification'' should include all activities designed to
determine registered voters, likely voters, or voters indicating a
preference for a specific candidate or party.'' They also commented
that voter identification efforts should not be excluded simply because
no mention is made of a Federal candidate. A public interest group
commented that ``voter identification'' includes ``all efforts to
identify voters, even if done in the name of state and local
candidates.''
With regard to the Commission's question, posed in the NPRM, about
distinguishing voter identification from GOTV, the principal
Congressional sponsors commented that the distinction ``makes no
difference'' because both types of activity are covered under the same
provision of BCRA (see 2 U.S.C. 431(20)(A)(ii)). A public interest
group urged the Commission not to limit voter identification to efforts
to identify voters for other Federal election activities, arguing that
only a ``tortured reading'' of the statute allows [GOTV] activity to
modify ``voter identification.'' A labor union disagreed, arguing that
only voter identification for the purposes of GOTV should be included.
Another public interest group argued against distinguishing the two
activities according to proximity in time to the election. (See
previous discussion under the discussion of GOTV.)
The Commission requested comments as to whether the regulations
should include a de minimis exception to voter identification
activities. One labor union requested that there be a de minimis
exception, particularly to allow for the maintenance and development of
voter files during non-election years. Both the Congressional sponsors
and a public interest group argued that such an exception would be
contrary to the plain language and intent of BCRA.
In paragraph (a)(4) of section 100.24, the Commission adopts a
definition of ``voter identification'' that includes the costs of
``creating or enhancing voter lists by verifying or adding information
about the voters' likelihood of voting or likelihood of voting for
specific candidates.'' The Commission notes that ``voter
identification'' is one of the types of Federal election activity that
will occur only during those times when a candidate for Federal office
appears on the ballot. See 11 CFR 100.24(a)(1).
The Commission recognizes that even during the period when a
Federal candidate appears on the ballot, the act of acquiring a voter
list in and of itself does not constitute voter identification.
Committees have a number of reasons for acquiring voter lists,
including fundraising and off-year party building activities. Such
activity, on its face, does not constitute ``voter identification''
with respect to the statute, as there lacks a nexus between the
activity and the statutory language that contemplates activity ``in
connection with an election in which a candidate appears on the
ballot.''
The final rule excludes from the definition certain voter
identification undertaken by groups or associations of State or local
candidates or
[[Page 49070]]
officeholders, solely in reference to State or local candidates. The
Commission included this exclusion because it finds it implausible that
Congress intended to federalize State and local election activity to
such an extent without any mention of the issue during the floor debate
for BCRA. BCRA makes voter identification a subset of Federal election
activity, and the regulatory implications of engaging in Federal
election activity are significant. For the Commission to exercise its
discretion so as to sweep within Federal regulation candidates for city
council, or the local school board, who join together to identify
potential voters for their own candidacies, the Commission would
require more explicit instruction from Congress.
F. Definition of ``Federal Election Activity''
Paragraph (b) of section 100.24 defines Federal election activity.
Paragraph (b)(1) implements 2 U.S.C. 431(20)(A)(i) by including voter
registration activity during the period that begins on the date that is
120 calendar days before the date of a regularly scheduled Federal
election. ``Special elections'' are not ``regularly scheduled,'' and
therefore excluded from the definition. Paragraph (b)(2) of section
100.24 implements 2 U.S.C. 431(20)(A)(ii) by including with the
definition of Federal election activity voter identification, GOTV, and
generic campaign activity when they are conducted in connection with an
election in which a Federal candidate appears on the ballot.
11 CFR 100.24(b)(3) follows new 2 U.S.C. 431(20) by providing that
a public communication that refers to a clearly identified candidate
for Federal office would constitute ``Federal election activity'' that
must be paid for with entirely Federal funds if the communication
promotes, supports, attacks, or opposes any candidate for that Federal
office. This is true even if a candidate for State or local office is
also mentioned or identified. ``Public communication'' is defined in
proposed 11 CFR 100.26, discussed below. Public communications falling
within this category of the definition of ``Federal election activity''
extend beyond communications expressly advocating a vote for or against
a candidate.
11 CFR 100.24(b)(4) implements 2 U.S.C. 431(20)(A)(iv) by providing
that Federal election activity includes services provided during any
month by an employee of a State, district, or local committee of a
political party who spends over 25% of that individual's compensated
time on activities in connection with a Federal election. There were no
comments on this definition. A number of issues involving employees are
discussed below in the Explanation and Justification for section
300.33. The Commission has concluded that the statute is clear on its
face, and therefore paragraph (b)(4) follows that statutory language
without additional interpretation.
G. Activities Excluded From the Definition of ``Federal Election
Activity''
In BCRA, Congress specifically excluded certain activities from the
definition of Federal election activity. 2 U.S.C. 431(20)(B).
Activities falling within one of the exceptions may be paid for with
entirely non-Federal funds. 11 CFR 100.24(c) implements these statutory
exceptions. Paragraphs (c)(1) through (c)(4) of section 100.24 parallel
the statutory exclusions at 2 U.S.C. 431(20)(B)(i) through (iv).
Paragraph (c)(1) excludes a public Communication that refers solely
to one or more clearly identified State or local candidates, and does
not promote or support, or attack or oppose, a clearly identified
candidate for Federal office, provided that the public communication is
not a voter registration activity, or GOTV, or voter identification. 2
U.S.C. 431(20)(B)(i). As an example of the application of this
paragraph, this exception does not apply to a telephone bank on the day
before an election where there is a Federal candidate on the ballot and
where GOTV phone calls are made to over 500 voters, even if the calls
only refer to a State or local candidate. 2 U.S.C. 431(20)(B)(i); see
11 CFR 100.24(b)(2).
Paragraph (c)(2) excludes a contribution to a State or local
candidate, provided that the contribution is not designated to pay for
voter registration activity, voter identification, GOTV, generic
campaign activity, a public communication promoting or supporting, or
attacking or opposing, a clearly identified Federal candidate, or
employee services as set forth in paragraphs (b)(1) through (b)(4) of
section 100.24. 2 U.S.C. 431(20)(B)(ii). In the final rules, the
Commission has added a reference to employee services as set forth in
paragraph (b)(4) for the sake of completeness.
Paragraph (c)(3) excludes the costs of State, district, or local
political conventions, meetings, or conferences. The principal
Congressional sponsors of BCRA commented that this approach was too
broad, in that it included ``a meeting or conference,'' whereas the
statutory provision it implemented, 2 U.S.C. 431(20)(B)(iii), refers
only to ``conventions.'' These commenters failed to note, however, that
meetings or conferences do not fall within the statutory definition of
Federal election activity, and this remains true whether the Commission
explicitly states it or not. Therefore, paragraph (c)(3) excludes the
costs of a State, district, or local convention, meeting or conference.
2 U.S.C. 431(20)(B)(iii). The principal Congressional sponsors
otherwise supported paragraphs (c)(1) through (c)(4).
Paragraph (c)(4) excludes the costs of grassroots campaign
materials that name or depict only State and local candidates. 2 U.S.C.
431(20)(B)(iv). The list of examples of such materials in paragraph
(c)(4) includes certain items not mentioned in the statute. The
Commission received no comments objecting to the additional items.
In the version of the regulation published in the NPRM, the
Commission included two additional exceptions that it has subsequently
determined should not be listed as exceptions to the definition of
Federal election activity in paragraph (c). These provisions would have
covered voter registration activity at any time other than the period
of time that is within 120 days of a regularly scheduled Federal
election, and GOTV and voter identification in elections in which no
Federal candidate appears on the ballot. While these activities are not
Federal election activities, under certain circumstances payments for
these activities must be allocated between Federal funds and non-
Federal funds. See 11 CFR 106.5. In this regard, these two types of
activities differ from the activities described in paragraphs (c)(1)
through (c)(4) of section 100.24, which always may be paid for with
entirely non-Federal funds. Therefore, the Commission has removed these
two provisions from the final regulation.
11 CFR 100.25 Definition of ``Generic Campaign Activity''
Section 100.25 implements the statutory definition of ``generic
campaign activity,'' which has been added to the Act by BCRA. ``Generic
campaign activity'' is defined in BCRA as campaign activity ``that
promotes a political party and does not promote a candidate or non-
Federal candidate.'' 2 U.S.C. 431(21).
Generic campaign activity is a form of Federal election activity
when it takes place in connection with an election in which a candidate
for Federal office appears on the ballot. 11 CFR 100.24(b)(2)(ii). The
Commission is defining ``in connection with an election in which a
candidate for
[[Page 49071]]
Federal office appears on the ballot'' to include special elections
fitting that description. 11 CFR 100.24(a)(1). Therefore, generic
campaign activity may, in principle, occur in connection with a special
election in which a candidate for Federal office appears on the ballot,
provided, of course, that the elements of the definition are otherwise
satisfied. An association of State party officials commented favorably
on this approach. A public interest group pointed out that Advisory
Opinion 1998-9, which was issued to a State party committee, addressed
a special election in which only one Federal office was at stake, and
thus only one candidate of the party on the ballot. The Commission
opined that under such circumstances a candidate was clearly
identified, and allocable ``generic activities'' by the party under
pre-BCRA 11 CFR 106.5(a)(2)(iv) were thus not possible with regard to
that special election. The final regulation is consistent with the
reasoning of Advisory Opinion 1998-9 in defining ``generic campaign
activity.''
The final regulation elaborates on the statute by including within
the definition of ``generic campaign activity'' those activities that
oppose a political party without opposing a specific candidate. A labor
organization commented that the regulation impermissibly goes beyond
the statute by including activities in opposition to another party. In
the Commission's experience, however, such activities in opposition to
another party implicitly promote the party undertaking the activities,
and are thus properly included in the definition. A national party
committee also argued against the approach taken in the proposed
regulation, characterizing it as ``confusing'' because it is framed in
terms of promoting and opposing the party, which ``unnecessarily clouds
the distinction of voter registration and GOTV activities.'' This
commenter would have the Commission define ``generic campaign
activity'' as an ``activity that promotes or opposes the particular
party's ticket, without mentioning or referring to candidates by
name.'' The Commission believes most of these concerns are addressed in
the definitions of voter registration activity and GOTV at 11 CFR
100.24(a)(2) and (3), respectively. Also, the distinction drawn by the
commenter, that is, between promoting the party and promoting the
party's ticket, is limited in practical application. Whether an
activity is characterized as voter registration, GOTV, or generic
campaign activity, it is treated as a Federal election activity when
conducted in certain relation to a Federal election, see 100.24(b)(1)
and (2), and is, in each case, a Federal election activity on which
Levin funds may be spent, see 11 CFR 300.32(b)(1).
In the version of the regulation proposed in the NPRM, ``generic
campaign activity'' would have been defined as a ``campaign activity''
that promotes or opposes a political party but not a candidate. In the
final rules, the definition instead refers to a ``public
communication'' that promotes or opposes a political party but not a
candidate. The Commission made this change to ensure that the
definition encompasses only the external activities of a political
party committee, that is, activities targeted to the public. This
interpretation is also consistent with the plain meaning of the
statutory provision, since it is difficult to envision how a campaign
activity could effectively promote or oppose a political party without
it taking the form of a public communication. This interpretation is
also consistent with Advisory Opinion 1998-9, which dealt with numerous
campaign activities that involved public communications.
In the final rules, the Commission has added the words ``clearly
identified'' to qualify the phrase, ``Federal candidate or a non-
Federal candidate.'' The intent of this addition is to remove ambiguity
from the definition.
In the NPRM, the Commission sought comment on the extent, if any,
to which the exclusions for exempt activities in 11 CFR 100.7(b)(9),
(15), and (17) and 100.8(b)(8), (10), and (16), should apply to the
definition of ``generic campaign activity.'' A public interest group
commented that ``exempt activities should not be excluded from the
definition of `generic campaign activity. ''' An association of State
party officials commented that there appears to be no overlap between
exempt activities and generic campaign activities since the former,
``by definition, reference a clearly identified Federal candidate,''
while the latter, by definition, may not.
The Commission understands two of the categories of exempt
activities, slate cards (see 11 CFR 100.7(b)(9) and 100.8(b)(8)) and
voter registration on behalf of the Presidential ticket (see 11 CFR
100.7(b)(17) and 100.8(b)(16)), to have no applicability to payments
for generic campaign activity. This is so because these two types of
exempt activities, by their nature, promote one or more candidates, and
activities that promote a candidate are outside the scope of the
definition of generic campaign activity. The remaining category of
exempt activity--payments for certain campaign materials used by party
volunteers (see 11 CFR 100.7(b)(15) and 100.8(b)(10))--may in certain
circumstances also qualify as generic campaign activity under 11 CFR
100.25. If the campaign materials used by the volunteers promote only
the party, and do not promote a candidate, then this activity would be
both exempt and a generic campaign activity. A public interest group
included an essentially similar analysis of this point in their
comment.
11 CFR 100.26 Definition of ``Public communication''
BCRA amends 2 U.S.C. 431 by adding a new definition for the term
``public communication.'' BCRA defines ``public communication'' to
include communications by broadcast, cable, satellite, newspaper,
magazine, outdoor advertising facility, mass mailing or telephone bank
to the general public, or any other form of general public political
advertising.
The Commission did not include the Internet as a form of ``general
public political advertising'' in proposed 11 CFR 100.26 because this
provision of BCRA does not refer to the Internet. The Commission,
however, sought comment as to whether the definition of ``public
communication'' in proposed 11 CFR 100.26 should include or exclude
communications provided through the use of World Wide Web sites
available to the public, widely distributed electronic mail, or other
uses of the Internet, such as ``Webcasts'' or the transmission of high-
quality voice, graphics, or video advertisements.
Many commenters addressed this issue. A national political party,
an association of State party officials, an LLC that provides technical
services to campaigns, a State political party, a public interest
group, and a labor union urged the Commission not to include the
Internet in the definition of ``public communication.'' Four commenters
pointed to the lack of inclusion of the Internet in the list of modes
of public communications, noting that Congress had had an opportunity
to include the Internet in this definition, but declined to do so.
A number of commenters argued that the Internet provides a low cost
way for parties and other interested persons to disseminate their
message widely, and the Commission should not attempt to regulate their
doing so. The commenter who provides technical services to campaigns
wrote, ``[the Internet] is an open, decentralized platform on which
every user has the capacity to reach literally every other user.
Candidates
[[Page 49072]]
and interest groups can and do use this medium to engage in meaningful,
two-way dialogue * * *. Congress did not include other forms of two-way
dialogue such as candidate forums, rallies, debates, or other events
that are open to the public.''
The same commenter noted the practical impossibility in fashioning
restrictions on Internet communications given the rapidly changing
environment: ``Although the Internet itself has been in existence since
the early 1970s, it is only recently that the medium has emerged in the
mainstream * * * Internet technology continues to evolve, and so does
its application.''
Other commenters were strongly opposed to the exclusion of the
Internet from the media classified as public communications. The
principal Congressional sponsors of BCRA and three public interest
groups who support campaign finance reform argued that failure to
include the Internet in this definition could carve out an exception
for a widespread and growing form of political advertising. A public
interest group echoed the words of the Congressional sponsors: ``A
broad per se exclusion of that nature would be inadvisable because it
could permit state and local party entities to exploit rapidly
developing technology and new communications media to re-create or
prolong the current soft money system.''
The Commission has considered the issue of Internet communication,
both in the context of this rulemaking, as well as in previous
rulemakings and the advisory opinion process. The Commission concludes
that excluding the Internet from the definition of ``public
communication'' is consistent with the plain meaning of the statute,
consistent with Congress' decision not to include the Internet in the
statutory definition of ``public communication,'' and is the best
policy decision with regard to implementation of BCRA.
The Commission is convinced that the exclusion is appropriate from
the perspective of statutory construction because the Internet is
excluded from the list of media that constitute public communication
under the statute. BCRA does not reference the ``Internet'' or
``electronic mail'' in this section, although Congress used the terms
``Internet,'' ``website,'' and ``World Wide Web address'' in other
sections of BCRA. See, for example, 2 U.S.C. 434 note, enacted by BCRA
section 201 (Federal Communications Commission to compile and maintain
on its website information the FEC may need to carry out Title 2,
Subtitle A, of BCRA, relating to electioneering communications); 2
U.S.C. 438a, as enacted by BCRA section 502 (Commission to maintain a
website of election reports). Congress has also used the terms
``Internet'' and ``electronic mail'' in other statutes and
distinguished them from ``telecommunications services.'' See
Communications Decency Act of 1996, 47 U.S.C. Sec. 230(f)(1) (defining
``Internet'') and 231(e)(4) (including ``electronic mail'' and
excluding ``telecommunications services'' from definition of ``Internet
access service''). BCRA does reference ``any other form of general
public political advertising'' in the definition of ``public
communication.'' General language following a listing of specific
terms, however, does not evidence Congressional intent to include a
separate and distinct term that is not listed, such as the Internet.
See Sutherland Statutes and Statutory Construction, section 47; 17
Ejusdem generis, Vol. 2A (6th ed. 2000). It is also noted that there is
no indication in the legislative history that Congress contemplated
including the Internet in the definition of public communication.
Perhaps most important, there are significant policy reasons to
exclude the Internet as a public communication. The Commission fails to
see the threat of corruption that is present in a medium that allows
almost limitless, inexpensive communication across the broadest
possible cross-section of the American population. Unlike media such as
television and radio, where the constraints of the medium make access
financially prohibitive for the general population, the Internet is by
definition a bastion of free political speech, where any individual has
access to almost limitless political expression with minimal cost. As
one public interest group who favors campaign finance reform argued:
``There are good policy reasons for leaving the Internet out of the
definition, as it is cheap and widely available. Internet
communications are not part of the campaign finance problem, and should
not be regulated as such unless Congress specifically mandates it.''
11 CFR 100.27 Definition of ``Mass Mailing''
BCRA amends 2 U.S.C. 431 by adding a new definition of the term
``mass mailing'' at section 431(23). This definition, which is set out
in new 11 CFR 100.27, includes any mailing by United States mail or
facsimile of more than 500 pieces of mail matter of an identical or
substantially similar nature within any 30-day period. For the reasons
explained in the Explanation and Justification for 11 CFR 100.26, the
term ``mass mailing'' excludes communications sent over the Internet.
It also excludes ``electronic mail.'' Cf. 47 U.S.C. 231(e)(4)
(``electronic mail'' is included in the definition of ``Internet access
service'').
The term ``substantially similar'' is also used in the Commission's
disclaimer regulations at 11 CFR 110.11(a)(3). When the disclaimer
rules were adopted in 1995, the Commission explained that technological
advances now permit what is basically the same communication to be
personalized to include the recipient's name, occupation, geographic
location, and similar variables. Communications are considered
``substantially similar'' for purposes of the disclaimer rules if they
would be the same but for such individualization. See Explanation and
Justification for Regulations on Communications Disclaimer
Requirements, 60 FR 52069, 52070 (Oct. 5, 1995). The Commission
proposed in the NPRM that the term ``substantially similar'' in 11 CFR
100.27 have the identical meaning.
Several commenters expressed the view that this definition of
``substantially similar'' is too narrow as applied to mass mailings.
They pointed out, for example, that the sponsoring group could change
an internal sentence every 490 letters and thereby escape coverage
under this definition. Also, many communications are largely identical
but contain a separate paragraph addressing a targeted group, such as
retired teachers or those with a particular hobby. The Commission has
therefore revised the final rules to state that communications are
considered substantially similar for purposes of this section if they
include substantially the same template or language, but vary in non-
material respects such as communications customized by the recipient's
name, occupation, or geographic location.
11 CFR 100.28 Definition of ``Telephone Bank''
BCRA amends 2 U.S.C. 431 by adding a new definition of the term
``telephone bank'' at section 431(24). This definition, which is set
out in new 11 CFR 100.28, includes more than 500 telephone calls of an
identical or substantially similar nature within any 30-day period. A
telephone bank does not include electronic mail sent over telephone
lines. See 47 U.S.C. 231(e)(4) (distinguishing ``electronic mail'' from
``telecommunications services''). Nor does it include Internet
communications transmitted over telephone lines, for the reasons
discussed above in the Explanation and Justification for 11 CFR 100.26.
[[Page 49073]]
The Commission also proposed addressing the meaning of
``substantially similar'' in the text of the rules. See discussion of
11 CFR 100.27, above. As with the definition of ``mass mailing,''
discussed above, several commenters urged the Commission to broaden the
definition of ``substantially similar'' contained in the proposed
rules. They pointed out that, even more so than with mass mailings,
phone conversations, even those where the caller is using a prepared
script, are likely to vary somewhat from call to call. The Commission
accordingly has revised the language of section 100.28 as proposed in
the NPRM to provide that, consistent with the definition of ``mass
mailing'' contained in section 100.27, communications are considered
substantially similar for purposes of section 100.28 if they include
substantially the same template or language, but vary in non-material
respects such as communications customized by the recipient's name,
occupation, or geographic location.
IV. Part 102--Registration, Organization, and Recordkeeping by
Political Committees
11 CFR 102.5 Organizations Financing Political Activity in Connection
With Federal and Non-Federal Elections, Other Than Through Transfers
and Joint Fundraisers: Accounts and Accounting
This section continues to set out requirements for accounts or
accounting methods that must be established and maintained by
organizations, including political committees, that fund activities in
connection with Federal elections and non-Federal elections. The
section has, however, been revised in several respects. 2 USC 441i(a)
expressly prohibits national party committees from raising and spending
non-Federal funds. Paragraph 102.5(c) addresses the application of this
section to national party committees, while corresponding changes have
been made to other portions of 11 CFR 102.5 to clarify that various
provisions are now applicable to only State, district, and local party
committees and organizations. While this section will continue to apply
to all these party committees between November 6, 2002 and December 31,
2002, after the latter date, national party committees will no longer
be covered by its provisions.
Paragraph (a)(1) remains largely unchanged except for the addition
of language clarifying that State, district, and local party committees
are the party organizations covered in these provisions, the addition
of certain citations to other regulatory provisions, including 11 CFR
part 300, and the separate discussions of administrative expenses
incurred by party committees and by other political committees that are
not party committees.
Paragraph (a)(2) is revised to require committees to meet at least
one of the three listed conditions for depositing contributions into
their Federal accounts. The purpose of this regulation is to assure
that funds placed in this account are from contributors who know the
intended use of their contributions, and the Commission believes that
this purpose can be fulfilled by means of either contributor
designations, solicitations for express purposes, or solicitations or
notifications that inform contributors that their contributions are
subject to the prohibitions and limitations of the Act.
New paragraph (a)(3) addresses the new category of ``Levin funds''
created by BCRA to be used by State, district, and local party
committees for certain Federal election activity. These funds are
subject to certain prohibitions and limitations pursuant to 11 CFR
300.31 and may be used by these party committees to pay allocable
shares of particular Federal election activities under particular
circumstances, including voter registration, voter identification, get-
out-the-vote and generic campaign activities. See also 11 CFR 100.24
and 11 CFR 300.32(b) and 300.33.
The NPRM proposed requiring State, district, and local party
committees to establish separate Levin accounts. Responses to the NPRM
from the principal Congressional sponsors of BCRA urged retention of
this requirement; however, several other responses, in particular those
from party committees, requested the Commission to make such separate
accounts an option rather than a requirement. One commenter stated that
``although it would seem generally prudent to establish separate `Levin
accounts,' imposing such a requirement in the regulations would be
problematic,'' noting that some States prohibit party committees from
establishing more than one depository account. In light of theses
concerns, and because BCRA's statutory provisions do not mandate the
creation of separate Levin accounts, revised paragraphs (a)(3)(i) and
(ii) set out generally two alternative methods of accounting for Levin
funds: a separate Levin account and the use of a reasonable accounting
method approved by the Commission that will permit the committee to
demonstrate that funds received and disbursed by the party committee in
its existing non-Federal account meet the requirements of the Act as
amended by BCRA. Paragraph (a)(3)(ii) also requires those party
committees electing not to establish a separate Levin account to
maintain records of funds used for Levin activities and to make these
records available to the Commission upon request. Party committees
intending to undertake activities pursuant to 11 CFR 300.32(b) are
urged to consult 11 CFR 300.30(c) for more detailed rules regarding
alternative required accounts and accounting methods.
A comment submitted in response to the NPRM expressed concern that
the draft regulations could have been construed as allowing Federal
candidates and officeholders to solicit funds that would be excessive
or prohibited under Federal law, if the solicitation being used stated
that the funds would be used for a non-Federal purpose. To address this
concern, paragraph (a)(4) has been added to emphasize that the
restrictions on solicitations by Federal candidates and Federal
officeholders in 11 CFR 300.31(e) and 11 CFR part 300, subpart D, apply
to solicitations for State, district, and local party committees.
The final rules also include a new paragraph (a)(5) that clarifies
the permissibility of State, district, and local party committees and
organizations creating separate allocation accounts to be used for
funding Levin activities that are allocable between Federal and Levin
funds pursuant to 11 CFR 300.33 and for funding other activities
allocable between a committee's Federal and non-Federal funds pursuant
to 11 CFR 106.7. See also the Explanation and Justification below for
new 11 CFR 106.7 and for new 11 CFR 300.33.
11 CFR 102.5(b) addresses organizations that are not political
committees. Pursuant to paragraph (b)(1), when such organizations make
contributions and expenditures or payments for exempt activities under
11 CFR 100.7(b)(9), (15), and (17) and 100.8(b)(10), (16), and (18),
they must maintain records of the related receipts and disbursements
and must make those records available to the Commission upon request.
These organizations must also be able to demonstrate through a
reasonable accounting method that funds used to make contributions,
expenditures, and payments for exempt activities meet the requirements
of the Act.
Paragraph (b)(2) of 11 CFR 102.5 applies to those State, district,
and local party organizations that are not political committees but
that wish to undertake Federal election activities pursuant to
[[Page 49074]]
11 CFR 300.32(b). Pursuant to 11 CFR 102.5(b)(2)(i) and (ii), these
party organizations are given a choice of accounting methods:
establishment of a separate Levin account or use of a reasonable
accounting method approved by the Commission that will permit the
organization to demonstrate that permissible funds from its existing
accounts were used for permissible activities. They must also make
their records of funds received and expended for these activities
available to the Commission upon request. Party organizations that
intend to undertake activities pursuant to 11 CFR 300.32(b) are urged
to consult 11 CFR 300.30(c) for more detailed rules regarding
alternative required accounts and accounting methods.
11 CFR 102.17 Joint Fundraising by Committees Other Than Separate
Segregated Funds
The ban on national party non-Federal fundraising affects the
Commission's joint fundraising rules at 11 CFR 102.17. The Commission
is, therefore, adding introductory language to this section, advising
readers that ``[n]othing in this section shall supersede 11 CFR part
300, which prohibits any person from soliciting, receiving, directing,
transferring, or spending any non-Federal funds, or from transferring
Federal funds for Federal election activities.'' Part 300 is discussed
below.
V. Part 104--Reports by Political Committees
11 CFR 104.8 and 104.9 Uniform Reporting of Receipts and Disbursements
As of November 6, 2002, BCRA prohibits national committees of
political parties and entities directly or indirectly established,
financed, maintained, and controlled by them, including their
subordinate committees, from raising and spending non-Federal funds.
BCRA further requires that national party committees, including
subordinate committees thereof, dispose of all non-Federal funds by
December 31, 2002 in accordance with 11 CFR 300.12, and report the
disposition of those funds pursuant to section 300.13. Since national
party committees will no longer maintain non-Federal accounts,
including office building and facility accounts, the national party
non-Federal account reporting rules at 11 CFR 104.8(e) and (f), and 11
CFR 104.9(c), (d) and (e) will no longer be necessary. Therefore, the
final rules covering receipts by non-Federal accounts at 11 CFR
104.8(e) and (f), and disbursements in the form of transfers to State
and local party committees at 11 CFR 104.9(e), have been amended so
that they apply to reports covering non-Federal account activity
through December 31, 2002. In contrast, the final rules governing
disbursements of non-Federal funds at 11 CFR 104.9(c) and (d) are
amended to remain in effect for reports covering activity on or before
March 31, 2003, rather than December 31, 2002 as provided in the NPRM.
This change is prompted by the Commission's decision to permit national
party committees to refund to donors by December 31, 2002 any excess
non-Federal funds as provided in 11 CFR 300.12(c) and (d). Any refund
checks not cashed by February 28, 2003, must be disgorged to the United
States Treasury by March 31, 2003. Consequently any such disgorgements
must be reported in disclosure reports covering activity through that
date.
11 CFR 104.10 Reporting by Separate Segregated Funds and Nonconnected
Committees of Expenses Allocated Among Candidates and Activities
Section 104.10 of the pre-BCRA regulations addressed the reporting
of expenses that are allocated among more than one clearly identified
candidate (paragraph (a)) and expenses that are allocated among
specific types of mixed Federal/non-Federal activities by political
party committees and by separate segregated funds and nonconnected
committees (paragraph (b)). However, allocation with respect to certain
mixed party activities has changed as a result of BCRA, notably in the
introduction of the use of Levin funds. Some of the activity that was
allocable under former 11 CFR 106.5 (allocation of mixed Federal/non-
Federal activities by party committees) is now Federal election
activity under certain circumstances. In addition, most of the
categories are now allocated according to specified percentages.
Moreover, the use of non-Federal funds by national party committees has
been eliminated.
In view of these new circumstances, the rules for reporting of
allocable expenses are being divided into three sections: 11 CFR 104.10
applies to political committees that are separate segregated funds or
nonconnected committees; new 11 CFR 104.17 applies to payments
allocated between the Federal and non-Federal accounts of State,
district, and local party committees; and new 11 CFR 300.36 covers
payments allocated by those party committees between Federal funds and
Levin funds, pursuant to 11 CFR 300.32(b)(1) and 300.33.
Pre-BCRA section 104.10(a), which addressed payments entailing
combined expenditures and disbursements on behalf of more than one
clearly identified Federal and non-Federal candidate, is being changed
very little at this point. Paragraph (a) is being amended to specify
that it applies only to separate segregated funds and nonconnected
committees, and to delete references to section 106.5(g) (now section
106.7(f)), which addresses non-Federal to Federal transfers made by
party committees for the purpose of mixed payments.
Similar changes are being made to paragraph (b) of section 104.10.
In view of the removal of party committees from this section, other
adjustments are being made. In the discussion of itemization of
allocated disbursements for administrative and generic voter drive
expenses, the references to the Senate and House campaign committees of
a political party are being deleted from paragraph (b)(1)(i) and (ii).
In paragraph (b)(1)(ii), the specific reference to the types of
committees using the funds expended method is being deleted because all
committees addressed in this regulation would use the funds expended
method for those two allocation categories. References to exempt
activities are also deleted because those exemptions do not apply to
the activities of separate segregated funds and nonconnected
committees.
The only specific comments received on section 104.10 were general
expressions of support from the principal Congressional sponsors of
BCRA and two commenters on behalf of State party committees.
Consequently, the final rules follow the proposed rules, except for two
small reversions back to the pre-BCRA regulation. Instead of citing to
11 CFR 106.1 specifically as the regulation providing instructions on
allocation for candidate support, the revised citation is to 11 CFR
part 106 because 11 CFR 106.4 is applicable to the allocation of
polling costs.
11 CFR 104.17 Reporting of Allocable Expenses by Party Committees
As indicated in the Explanations and Justifications for 11 CFR
104.10 and 106.1, pre-BCRA section 104.10 has been divided into two
sections for the reporting of allocable payments. Section 104.10 now
addresses reporting of allocable expenses by separate segregated funds
and non-connected committees. Section 104.17, which had been a reserved
section prior to the enactment of BCRA, now addresses reporting of
allocable expenses by party committees.
[[Page 49075]]
Paragraph (a) of new section 104.17 addresses allocation of the
support of candidates, including Federal and non-Federal candidates, by
national party committees and by State, district, and local party
committees. As indicated below, national party committees must use all
Federal funds, while State, district, and local party committees may
use a mixture of Federal and non-Federal funds under certain
circumstances. Paragraph (b) of this section addresses the reporting of
the allocation of expenditures and disbursements for mixed Federal/non-
Federal activities that are not Federal election activities undertaken
by State, district, and local party committees. These include, for
example, administrative costs and the costs of exempt activities that
do not fall within the definition of Federal election activity.
Reporting requirements with regard to specific Federal election
activities allocable between Federal and Levin funds pursuant to 11 CFR
300.33 are addressed separately in 11 CFR 300.36.
The NPRM included proposed 11 CFR 104.17(a) to address payments on
behalf of more than one clearly identified candidate, including
payments that entail an expenditure on behalf of one or more Federal
candidates and a disbursement on behalf of one or more non-Federal
candidates. The NPRM explained that all such payments must be made with
Federal funds and must be reported.
Proposed paragraphs (a)(1) and (a)(2) provided for the use of a
unique identifying title or code for each program or activity conducted
on behalf of more than one candidate and for the retention of records
in accordance with 11 CFR 104.14. These requirements were in pre-BCRA
11 CFR 104.10.
The Commission sought comments on the proposed requirement that a
State, district, or local party use only Federal funds for the combined
payments on behalf of clearly identified Federal and clearly identified
non-Federal candidates. As indicated in the Explanation and
Justification of 11 CFR 106.1, a number of commenters noted that
materials and communications that refer to both Federal and non-Federal
candidates, but are not public communications and do not otherwise meet
the definition of Federal election activity, should continue to be
subject to allocation based on the time or space devoted to each
candidate. Other commenters asserted that only Federal funds could be
used.
The final rule in 11 CFR 104.17 clarifies the issue as to the use
of Federal funds. Paragraph (a) makes clear that, where a national
party committee makes a payment that consists of both an expenditure on
behalf of a Federal candidate and a disbursement on behalf of a non-
Federal candidate, the amounts attributed to each candidate must be
disclosed, but only a Federal account may be used.
Paragraph (a) changes the approach taken in the NPRM with respect
to State, district, and local party committees, which, unlike national
party committees, may have non-Federal accounts under BCRA. The
application of the new Federal election activity provisions of BCRA
means that many disbursements by State, district, and local party
committees mentioning Federal candidates that in the past were
allocable between Federal and non-Federal accounts pre-BCRA must now be
paid solely with Federal funds. There will still be, however, other
payments entailing expenditures by State, district, and local party
committees on behalf of Federal candidates and disbursements by these
committees on behalf of non-Federal candidates that will not be Federal
election activities; these will continue to be allocable between
Federal and non-Federal accounts.
Accordingly, paragraph (a)(1) in the final rule generally follows
pre-BCRA 11 CFR 104.10(a)(1), including the retention of the
requirement of unique identifying titles or codes. All report entries
that reflect the same allocable program or activity will share the same
title or code to better track the particular program or activity. The
use of unique identifiers for other various categories of mixed party
activities is discussed below.
Paragraphs (a)(2) and (a)(3) of 11 CFR 104.17 follow pre-BCRA 11
CFR 104.10 with a minor citation change. Paragraph (a)(2) includes
reporting of transfers to allocation accounts, which did not appear in
either paragraph (a) or (b) of proposed 11 CFR 104.17. Proposed
paragraph (a)(2), addressing recordkeeping, is re-numbered as (a)(4) in
the final rules.
Section 104.17(b) in the NPRM addressed the reporting of all
allocations of disbursements for activities of State, district, and
local party committees, including disbursements for allocable Federal
election activities, i.e., certain activities eligible to be paid in
part with Levin funds pursuant to 11 CFR 300.33. For purposes of
clarity, the final rule covers only the reporting of disbursements for
allocable party activities that are not Federal election activities.
The reporting of allocable Federal election activities is subject to
the rules in 11 CFR 300.36.
Section 104.17(b) establishes that State, district, and local party
committees that have set up Federal and non-Federal accounts, including
any allocation accounts being used to make disbursements for allocable
activities, must report all payments that are allocated pursuant to 11
CFR 106.7.
Paragraph (b)(1)(i) requires statements by State, district, and
local party committees in their initial reports at the beginning of a
calendar year of the percentages the committee will use for payments to
be allocated between Federal and non-Federal accounts for specific
categories of party activity. Paragraph (b)(1)(ii) requires a statement
of the category for each allocable disbursement and the total amounts
spent that year for each category. These requirements are similar to
those contained in the pre-BCRA regulations.
With regard to a requirement of unique identifiers in the reports
of allocable activities, the NPRM asked for comments as to whether such
identifying codes would be useful. The principal Congressional sponsors
of BCRA in their comments left this decision to the Commission,
although they stated that identifying codes would be of ``significant
utility in greater specificity in reporting.'' Two of the comments from
party committees argued against such a requirement, arguing that the
purpose of the codes in the past had been to distinguish among
activities that had differing allocation ratios and that use of the
same allocation ratio made the codes unnecessary.
The final rule at paragraph (b)(1)(iii) of 11 CFR 104.17 requires
party committees to assign unique identifiers to certain allocable
activities, excluding allocable administrative costs. This requirement
follows requirements in the pre-BCRA regulations at 11 CFR 104.10(b)(2)
with regard to the reporting of the direct costs of fundraising and the
costs of exempt activities. Paragraph (b)(1)(iii) also specifies that
unique identifying titles or codes are not required for salaries and
wages under 11 CFR 106.7(c)(1) because salaries and wages are not
allocable.
The Commission recognizes that, as noted by certain party
committees in their comments, the rules will now require use of the
same set of percentages in a given year for almost all allocable party
activity categories, thereby weakening one of the previous rationales
for using unique identifiers for some categories of activities. Such
identifying mechanisms are, however, still needed to enable reviewers
of a party committee's reports, including members of the public, to
track
[[Page 49076]]
accurately the specific transactions involved in a particular allocable
activity. It is significant that party committees frequently make many
disbursements to the same vendor for differing purposes and that a
number of vendors may be paid for similar activities. Thus, the
Commission is requiring that certain allocable activities or programs
carry a unique identifying title or code. The Commission has also
concluded that, while unique identifiers for administrative costs would
be of some utility, it will continue the practice of not requiring them
in order to avoid imposing an additional administrative burden on party
committees. All entries of disbursements to pay for an allocated
program or activity must include a reference to the unique identifier,
if an identifier is required for that allocation category. In addition,
each reporting entry of a transfer (from the non-Federal account to the
Federal or allocation account) for a program or activity must include a
reference to the unique identifier, if an identifier is required for
that allocation category.
Paragraph (b)(2) of 11 CFR 104.17 addresses the reporting of
transfers from the non-Federal to the Federal account, or from both
accounts into the allocation account, of funds to be used for allocable
expenses. As did the pre-BCRA rules, this paragraph requires memo
entries on reports as to the allocable expenses for which the transfer
is being made and the date of the transfer. If more than one activity
is covered by a transfer, the report must itemize the amounts
designated for each category of expense. The Commission received no
comments on this provision.
Section 104.17(b)(3)(i) sets out the details required in the
reporting of disbursements for allocable activity by State, district,
and local committees of political parties.
Section 104.17(b)(3)(ii) addresses the reporting of State,
district, and local party disbursements for activity that is allocable
between a committee's Federal and Levin funds by referring the reader
to the requirements of 11 CFR 300.36.
Section 104.17(b)(4) requires the retention of all documents
supporting allocations of expenditures and disbursements for three
years, consistent with FECA.
VI. Part 106--Allocations of Candidate and Committee Activities
11 CFR 106.1 Allocation of Expenses Between Candidates
Pre-BCRA 11 CFR 106.1 addressed the allocation of expenditures and/
or disbursements among more than one candidate. Paragraph (a)(1) set
out the general rule for allocation of an expenditure made on behalf of
more than one clearly identified Federal candidate. It also addressed
allocation of a payment involving both an expenditure made on behalf of
one or more clearly identified Federal candidates and a disbursement on
behalf of one or more non-Federal candidates. The proposed regulation
in the NPRM added language indicating that a party committee must use
only Federal funds for both kinds of situations, not just the first
one. This was based on proposed 11 CFR 300.33(c)(1), which stated that
only Federal funds could be used for activities that referred to a
Federal candidate. It was also based on BCRA and proposed 11 CFR
100.24(a)(3), which provided that only Federal funds may be used for a
public communication that refers to a clearly identified Federal
candidate and that promotes, attacks, supports, or opposes the
candidate (regardless of whether a non-Federal candidate is also
mentioned).
The NPRM divided pre-BCRA section 104.10, which addressed reporting
of allocation by nonconnected committees and separate segregated funds,
as well as by party committees, into two sections: 11 CFR 104.10 for
nonconnected committees and separate segregated funds, and 11 CFR
104.17 for party committees. In view of this rearrangement, the
proposed rules in paragraph (a)(2) of section 106.1 added a reference
to 11 CFR 104.17(a) to cover party committee reporting. In addition,
the pre-BCRA rules addressing allocation among Federal and non-Federal
candidates was modified in the NPRM to delete the citation to party
committee transfer procedures. This was premised on the position that
such payments had to be made entirely with Federal funds.
The NPRM proposed no changes to pre-BCRA paragraphs (b), (c), and
(d) of 11 CFR 106.1. Paragraph (e) is a signpost to the sections that
address allocation of specific types of mixed Federal/non-Federal
activity, other than expenditures and/or disbursements on behalf of
clearly identified candidates. The NPRM proposed to delete from this
paragraph a reference to 11 CFR 106.5, to add a reference to 11 CFR
300.33, and to amend the list of allocation categories to conform to
other proposed regulations, including a deletion of exempt activities.
The NPRM narrative asked whether the proposed requirement that a
State, district, or local party committee use only Federal funds for
all payments made on behalf of both clearly identified Federal and
clearly identified non-Federal candidates is appropriate under BCRA.
The NPRM also asked for comments on, and discussed whether exempt party
activities \3\ for both Federal and non-Federal candidates (i.e.,
entailing disbursements for Federal candidates that were exempt from
the definition of contribution or expenditure) still exist as an
allocable category after passage of BCRA.
---------------------------------------------------------------------------
\3\ For discussion of exempt activities, see Explanation and
Justification for 11 CFR 100.24, above; see also 2 U.S.C.
431(8)(B)(v), (ix), and (xi), and 431(9)(B)(iv),(viii), and (ix).
---------------------------------------------------------------------------
Three commenters on behalf of party committees stated that not
every activity that mentions a clearly identified Federal candidate
must be paid for exclusively with Federal funds. They argued that
materials and communications that refer to both Federal and non-Federal
candidates but are not public communications and do not otherwise meet
the definition of Federal election activity should continue to be
subject to allocation based on time or space devoted to the Federal and
non-Federal candidates as under the pre-BCRA regulations. One of these
commenters also argued that the costs of ``non-communicative
activities'' that result in an in-kind contribution and donation to
Federal and non-Federal candidates respectively should continue to be
allocable between Federal and non-Federal accounts.
The principal Congressional sponsors of BCRA stated that BCRA
required the proposed result for such payments by State, district, and
local party committees. Another commenter referred to several specific
provisions in BCRA to support the view that only Federal funds can be
used for the payment on behalf of both a Federal and non-Federal
candidate: (1) 2 U.S.C. 441i(b)(1), which provides that costs for
Federal election activity shall be paid for with Federal funds; and (2)
2 U.S.C. 441i(b)(2)(A) and (B), which allow for allocation of some
Federal election activities but not when the activity refers to a
clearly identified Federal candidate. A third commenter agreed that
national party committees must use only Federal funds for payments
involving both expenditures on behalf of a Federal candidate and
disbursements on behalf of a non-Federal candidate but did not comment
on State, district, or local party committees.
The comments on the relationship of Federal election activities to
exempt activities are summarized in the
[[Page 49077]]
Explanation and Justification of 11 CFR 100.24, above. Some commenters
concluded that exempt activities should not be included within Federal
election activity at all or that many exempt activities are not
redefined as Federal election activity. Thus, they concluded that there
are a number of exempt activities that are not Federal election
activity. Others believe that exempt activities are nearly or
completely subsumed by, or redefined as, Federal election activity.
Within both groups, there was a variety of opinion as to the precise
relationship.
The final rule at 11 CFR 106.1 has been changed from the proposed
regulation with respect to the use by a party committee of both Federal
and non-Federal funds for a payment that is an expenditure on behalf of
a clearly identified Federal candidate and a disbursement on behalf of
a clearly identified non-Federal candidate. Any such payment that is
for a Federal election activity requires the use of Federal funds only,
as set out in 11 CFR 106.1(a)(2). The final rule, in paragraph (a)(2),
also includes references to other sections to the effect that payments
for Federal election activities that are also attributable to clearly
identified candidates are subject to new 11 CFR 300.33 and that the
allocation among the particular candidates must be reported, in
accordance with 11 CFR 104.17(a).
However, a payment that is not for Federal election activities but
that is an expenditure on behalf of a clearly identified Federal
candidate and also a disbursement on behalf of a clearly identified
non-Federal candidate is either allocable between Federal and non-
Federal accounts or payable with Federal funds only. Hence, the last
sentence of proposed paragraph (a)(1), indicating that only Federal
funds can be used, is deleted from the final rules. In addition, the
final rule does not include language from proposed paragraph (a)(2) to
the effect that only separate segregated funds and nonconnected
committees may make a payment that includes an expenditure of Federal
funds on behalf of a Federal candidate and a disbursement on behalf of
a non-Federal candidate. Moreover, the reference to party committee
transfer procedures for allocable expenses is added back into paragraph
(a)(2).
Paragraph (a)(1) of the final rule includes also the appropriate
method for attributing expenditures and disbursements among candidates
in the case of a phone bank. This method is derived from pre-BCRA 11
CFR 106.5(e) (re-numbered 11 CFR 106.7), which addressed Federal/non-
Federal allocation in the analogous situation of exempt activities.
This method, which has provided guidance for allocation of expenditures
and disbursements for direct candidate support, is no longer in the new
regulations after December 31, 2002 for other mixed party activities.
Therefore, the regulations at 11 CFR 106.1 directly address phone
banks.
Federal election activity includes some of the activities that also
meet the definition of exempt activities. As indicated in the
Explanation and Justification of 11 CFR 100.24, a Federal election
activity that, pre-BCRA, would have been allocable as an exempt
activity, is now a Federal election activity covered by the allocation
rules at 11 CFR 300.33. Under 11 CFR 106.7, however, exempt activities
still exist as an allocable category of expenses in a number of
situations. Hence, a complete list of particular allocable costs other
than those addressed in 11 CFR 106.1 should include exempt activities.
The final rule at 11 CFR 106.1(e) does not list individual allocation
categories but still serves as a signpost to sections addressing the
allocation of mixed Federal/non-Federal or mixed Federal/Levin
payments.
Exempt party activities also relate to section 106.1 as follows. If
an activity supporting clearly identified Federal and non-Federal
candidates is a Federal election activity and is not also an exempt
activity, the portion of the payment attributable to each Federal
candidate is an expenditure for that candidate, and may constitute an
in-kind contribution, an independent expenditure, or a coordinated
expenditure. If the payment is for a Federal election activity that is
also an exempt activity, the amounts are exempted from the definition
of ``expenditure'' or ``contribution.'' Although the expense must be
paid for entirely with Federal funds, only the amounts that are
attributable to the Federal candidates or Federal elections (but using
the new percentages in 11 CFR 106.7) count toward the political
committee registration threshold at 2 U.S.C. 431(4)(C) for local party
committees, which is more than $5,000 in exempt activity payments. See
11 CFR 100.5(c) and the Explanation and Justification for 11 CFR
100.24(a) and 11 CFR 300.36(a).
11 CFR 106.5 Allocation of Expenses Between Federal and Non-Federal
Activities by National Party Committees
The NPRM proposed amending 11 CFR 106.5 to explain the allocation
rules for State, district, and local party committees. Proposed
paragraph (a) also stated that because national party committees would
no longer be able to raise and spend non-Federal funds, they would no
longer be able to allocate their expenses between their Federal and
non-Federal accounts. See 67 FR 35679. While this is true after
December 31, 2002, national party committees will be able to spend non-
Federal funds for limited purposes during the transition period of
November 6, 2002, through December 31, 2002. For discussion of the
transition period, see the Explanation and Justification for 11 CFR
300.12, below. The Commission realizes that the regulations need to
contain allocation rules for national party committees during this
transition period. Therefore, the final rules include several technical
amendments to section 106.5 to make it applicable solely to national
party committees and only during the transition period. The current
allocation rules remain unchanged for national party committees. The
final rules that apply to State, district, and local party committees,
set out in proposed 11 CFR 106.5, are being designated as new 11 CFR
106.7 in the final rules. See below.
Consistent with this reorganization, the word ``national'' is
placed before ``party committees'' in several places in 11 CFR 106.5,
including the title of the section, to clarify that this section only
applies to national party committees. A title is added to paragraph
(a)(1) for consistency because all other paragraphs under paragraph (a)
have titles. Paragraphs (a)(2)(iii), (d), and (e) are removed and
reserved because they apply to State, district, and local party
committees. Paragraph (h) is added to be a sunset provision. Paragraph
(h) states that section 106.5 only applies during the transition period
and will no longer be effective after December 31, 2002.
11 CFR 106.7 Allocation of Expenses Between Federal and Non-Federal
Accounts by Party Committees, Other Than for Federal Election
Activities
Section 106.7 sets forth rules governing the allocation of certain
expenses between the Federal and non-Federal accounts of political
parties. Much of new section 106.7 covers topics formerly addressed in
pre-BCRA 11 CFR 106.5. The final rules addressing allocation of
expenditures and disbursements at 11 CFR 106.7 and 11 CFR 300.33
separate between the two sections respectively those activities that
are not ``Federal election activity'' and those that are. This
reorganization is based in large part upon the need to clarify in the
rules the relationship between ``exempt activities'' and ``Federal
election activities,'' particularly given certain timing
[[Page 49078]]
parameters involved in the sub-set of Federal election activities that
may be paid in part with Levin funds. See 11 CFR 300.32 and 300.33.
Therefore, 11 CFR 106.7 addresses allocation of expenses for all State,
district, and local party activity that falls outside the definition of
Federal election activity, which are allocable between Federal and non-
Federal accounts. In contrast, 11 CFR 300.33 addresses the allocation
of those types of Federal election activity that may be allocated
between Federal and Levin accounts.
A. Allocable Activities That Are Not FEA
The content of 11 CFR 106.7(a) and (b) remains much the same as the
NPRM, when it was designated 11 CFR 106.5(a) and (b), although new
language has been added to emphasize that these provisions address
activities other than Federal election activities. These paragraphs
state the general principles that after December 31, 2002: (1) National
party committees are no longer permitted to raise and spend non-Federal
funds,\4\ and thus are unable to allocate expenses between Federal and
non-Federal accounts; and (2) State, district, and local party
committees that make expenditures and disbursements for activities
other than Federal election activities in connection with both Federal
and non-Federal elections must either use only Federal funds for these
purposes or must establish separate Federal and non-Federal accounts
and allocate expenditures between or among those accounts.
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\4\ The actual ban on this activity takes effect on November 6,
2002.
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The prohibitions on national party committee use of non-Federal
funds has resulted in the complete elimination of pre-BCRA 11 CFR
106.5(b) and (c). Thus, the provisions in new 11 CFR 106.7(b) through
(f) only apply to State, district, and local party committees, and do
not apply to national party committees.
B. Salaries and Wages
Paragraph 106.7(c) addresses costs that must be either paid totally
from Federal accounts or allocated by State, district, and local party
committees between their Federal and non-Federal accounts. Under
paragraph (c)(1), however, State, district, and local party committees
must pay entirely with funds that comply with State law the salaries
and wages of employees who spend 25% or less of their compensated time
on Federal election activity or an activity in connection with Federal
elections. The inclusion of ``wages'' is intended to include hourly
employees. The compensation of other employees who spend more time on
Federal election activity or activity in connection with Federal
elections is addressed in paragraph (d)(1)(ii) and new 11 CFR 300.33.
BCRA defines ``Federal election activity'' to include the cost of all
services provided by an employee in any month in which the individual
spends more than 25% of his or her compensated time on activities in
connection with a Federal election. 2 U.S.C. 431(20)(A)(iv). This
federalizes a high proportion of salary payments that were previously
paid for with an allocation of Federal and non-Federal dollars. By
requiring the salaries and wages related to many activities that are
primarily, or even entirely, State or local in their orientation to be
paid for with Federal funds, when the amount of time spent on them
exceeds 25%, Congress clearly expressed its desire to federalize these
costs. By implication, Congress appears to have concluded that salaries
for employees spending 25% or less of their time on activities in
connection with a Federal election or on Federal election activities do
not have to be paid from any mix of Federal funds. Thus, this new
regulation in 11 CFR 106.7(c) is in accord with Congressional intent,
and it comports with Congress's expectation that the Commission would
develop allocation regulations for Federal election activity paid for
in part with Levin funds.
The proposed regulations at 11 CFR 300.33(b)(1) would have required
State, district, and local party committees to keep time records for
all employees, the purpose being to provide documentation for
allocation purposes. The NPRM set out three possible alternative
methods by which a committee could collect such documentation. In
response to the NPRM, a State party committee asserted that time sheets
would be ``burdensome,'' that written certifications by employees would
be ``equally impractical,'' but that a tally sheet kept by the employer
would be ``more reasonable.'' The same commenter nonetheless urged the
Commission not to require any particular method of documentation. For
the reasons noted by the commenters, the final rule at 11 CFR
106.7(d)(1) requires only that a monthly log be kept of the percentage
of time each employee spends in connection with a Federal election.
C. Administrative Costs
One category of allocable expenses in 11 CFR 106.7 is
``administrative costs.'' Under paragraph (c)(2), these costs cover
administrative expenses except for employee salaries and wages. The
final rule requires allocation of these costs between a party
committee's Federal and non-Federal accounts, unless they can be
attributed to a clearly identified Federal candidate, in which case
they are totally Federal costs to be paid with Federal funds.
A number of the comments received in response to the NPRM argued
that, because BCRA does not address administrative costs, State,
district, and local party committees should be able to pay them totally
out of their non-Federal accounts. One commenter representing a State
party emphasized the many State and local elections and ballot
initiatives with which his party is involved as compared to the number
of Federal elections. Other commenters, however, including the
principal Congressional sponsors of BCRA, argued that BCRA was never
intended to change the allocations required by the pre-BCRA
regulations, and that administrative costs should continue to be
allocable between Federal and non-Federal accounts.
While the Commission recognizes that non-Federal activity consumes
a large portion of State party time and finances, there is no doubt
that Federal candidates benefit from such party committees' efforts to
reach and motivate potential voters. The Commission also agrees that
nothing in BCRA or the legislative history suggests that Congress
intended the Commission to abandon its longstanding allocation
requirement for these expenses. Therefore, the final rules continue to
require allocation of administrative costs under a simplified
allocation method discussed below.
D. Exempt Activities
Under the Act, as amended by BCRA, how the costs of voter
registration, voter identification, get-out-the-vote (``GOTV'') and
other campaign activities that may promote or oppose a political party
without promoting or opposing a candidate are allocated depends on
whether such activities come within the definition of ``Federal
election activity'' or not. See 11 CFR 100.24(a), (b). Numerous
commenters focused upon the relationship between the provisions in FECA
and in the Commission's regulations that exempt certain party
activities from the definitions of ``contribution'' and ``expenditure''
and the provisions in BCRA establishing ``Federal election activities''
as a general category, and activities for which Levin funds may be
used. The comments and the Commission's determinations in this regard
are discussed in the Explanation
[[Page 49079]]
and Justification for 11 CFR 100.24 defining ``Federal election
activity.''
The final rules in 11 CFR 106.7(c)(3) set out the permitted
allocations of costs for categories of party expenditures and
disbursements for activities that are exempt party activities but are
not Federal election activities. The party committee must either pay
the costs of this activity from its Federal account or allocate the
costs between its Federal and non-Federal accounts.
E. Fundraising Costs
11 CFR 106.7(c)(4) addresses the direct costs of a fundraising
program or event when the State, district, or local party committee is
raising both Federal and non-Federal funds for itself. The NPRM
indicated that all direct fundraising costs must be paid from a Federal
account, while other fundraising-related costs not directly related to
particular fundraising programs or events could be allocated between
Federal and non-Federal accounts as administrative costs.
There was no consensus among the public comments addressing this
topic. The principal Congressional sponsors of BCRA supported the
proposed rules that would have required entirely Federal funds to be
used for these purposes. A public interest group and a party committee
urged the Commission to continue to use the previous funds received
method for allocating these fundraising costs. Two party committees
urged allocation of only those fundraising costs that are directly
associated with a particular fundraising program or event.
The Commission observes that BCRA requires the use by State,
district, and local party committees of funds ``subject to the
limitations, prohibitions, and reporting requirements of this Act.'' 2
U.S.C. 441i(c). Thus, the Commission has concluded that not only
Federal funds, but Levin funds as well, may be used to raise funds that
are used, in whole or in part, for Federal election activities. See 11
CFR 300.33(c)(3). Non-Federal funds may not be used. The reasons for
this conclusion are set out in greater details in the Explanation and
Justification for 11 CFR 300.32 below.
With regard to fundraising purposes other than Federal election
activity, the final rule at 11 CFR 106.7(c)(4) permits the direct costs
of fundraising to be allocated between Federal and non-Federal funds,
provided that none of the proceeds so raised will ever be used for
Federal election activities. In addition, the rule requires the
segregation of the proceeds in bank accounts that are never used for
Federal election activity. Paragraph (c)(4) specifies that direct costs
of fundraising include the solicitation costs and the costs of planning
and administering a particular fundraising event or program.
F. Certain Voter Drive Activities
11 CFR 106.7(c)(5), which did not appear in the version of the
regulation published in the NPRM, addresses expenses, other than
salaries and wages, for voter-drive activities and other party
committee activities that are not candidate-specific and that do not
qualify as Federal election activities. These may include, for example,
certain voter identification, GOTV, or other activities that do not
promote or oppose a Federal candidate or non-Federal candidate, and
that do not qualify as Federal election activities because they are not
in connection with an election in which a Federal candidate appears on
the ballot. See 11 CFR 100.24(a)(1) and (b)(2). Paragraph (c)(5)
provides that the costs of such activities may be allocated between the
Federal and non-Federal accounts of the State, district, or local party
committee.
G. Allocation Percentages and Recordkeeping
One goal of the final rule is to assure that activities deemed
allocable are not paid for with a disproportionate amount of non-
Federal funds. Another goal is to simplify the allocation process, in
particular by establishing formulas that do not vary from State to
State. Therefore, in lieu of the State-by-State ballot composition
ratios for administrative costs and generic campaign activity and in
lieu of the time or space method applied to exempt State activities,
which were required by the pre-BCRA regulations, the rules at 11 CFR
106.7(d)(2) and (3) establish fixed percentages for all States for
certain activities. The percentages vary only in terms of whether or
not a Presidential campaign and/or a Senate campaign is to be held in a
particular election year.
In the NPRM, the Commission set out proposed required allocation
percentages for the Federal shares of salaries and other compensation
paid employees who spend 25% or less of their time on Federal
elections, for administrative expenses, and for exempt party activities
that are not Federal election activities. For the reasons explained
above, the Commission has decided that no salaries and wages are to be
allocated. With regard to administrative costs and exempt activities,
State, district, and local party committees must allocate no less than
the following amounts to their Federal accounts during the following
years (and in the preceding year):
(i) Presidential only election year--28% of costs
(ii) Presidential and Senate election year--36% of costs
(iii) Senate only election year--21% of costs
(iv) Non-Presidential and Non-Senate election year--15% of costs.
These figures were derived by taking averages of the ballot
composition-based allocation percentages reported by State party
committees in four groupings of States selected for their diversities
of size and geographic location and for the particular elections held
in each State in 2000 and 2002. The groupings were: (1) Six States
(Alabama, Colorado, Illinois, New Hampshire, Oklahoma, and Oregon) in
which there was a Presidential but no Senate campaign in 2000; (2) 10
States (California, Delaware, Georgia, Florida, Michigan, New York,
North Dakota, Texas, Vermont, and Wyoming) in which there were both a
Presidential campaign and a Senate campaign in 2000; (3) six States
(Delaware, Georgia, Michigan, Oklahoma, Texas, and Wyoming) in which
there will be a Senate campaign in 2002; and (4) six States
(California, Florida, New York, North Dakota, Vermont, and Washington)
in which there will be no Senate campaign in 2002.
In 2000, the Federal percentages for the two parties in six States
with only a Presidential campaign ranged from 20% to 33.33%, with an
average of 28%, while the Federal percentages for the two parties in
ten States which held both Presidential and Senate campaign that year
ranged from 30% to 43%, with an average of 36%. In 2002, the Federal
percentages for the two parties in six States with a Senate campaign
ranged from 20% to 25%, with an average of 21%, while the Federal
percentages for the two parties in six States with no Senate campaign
ranged from 11.11% to 16.67%, with an average of 15%. The rules apply
the average percentages in each of the four groupings of States to all
50 States.
One comment on the proposed rules from a public interest
organization addressed the Commission's proposed fixed percentages by
providing two alternatives to the Commission's figures. The first
alternative would have set a flat 33% requirement for Federal shares of
what the commenter termed ``Levin expenditures'' (see 11 CFR 300.33)
and for allocable costs other than administrative costs in odd-numbered
years or in non-Presidential election years, and a flat 40% requirement
for Federal shares of these same categories
[[Page 49080]]
of activities in Presidential election years. This alternative would
also have required a 25% allocation for administrative costs in all
years. The commenter based these percentages on what were termed ``the
current assumption'' as to what State party committees spend in certain
years.
The second alternative urged by this commenter adopted the
Commission's calculations, but called for the use of the higher
percentages in the sample States for what the response termed ``Levin
spending'' and for voter registration outside the 120 day period before
an election, plus the average percentages for non-Levin expenses such
as administrative costs. The commenter also urged the Commission to be
clear that its allocation percentages apply to a two-year election
cycle, not just to the year of a Federal election.
The comment submitted on behalf of the principal Congressional
sponsors of BCRA with regard to fixed allocation percentages was very
similar to that of the public interest organization's response cited
above in that, as one alternative approach, it called for at least a
33% Federal allocation of what it termed ``Levin activities'' and of
voter registration activities outside the 120 period before an
election, plus 25% Federal allocations for administrative expenses. It
also called for 40% Federal allocations of Levin activities and of
voter registration activities that are not Federal election activities
in Presidential election years. This alternative assumed the
application of the percentages to two-year Federal election cycles. As
a second alternative, this commenter also agreed to use of the
Commission's percentages for administrative costs in a two year cycle,
but urged the application over that cycle of the highest, not the
average, Federal percentages for what it termed ``Levin activities and
voter registration activities that are not `Federal election activity'
* * * .'' Another comment from a public interest organization also
called for use of the highest percentages in the identified States, not
the average percentages.
The comments received from party committees with regard to fixed
percentages for Federal allocations ranged from support for the
Commission's position to giving party committees a choice at the
beginning of each cycle between the proposed formula and ballot
composition ratios.
The final rules at 11 CFR 106.7(d) include the phrase, ``and in the
preceding year,'' to clarify that the allocation formula in this
section apply to both years of a Federal election cycle.
With regard to the amounts of the fixed minimum Federal
allocations, the final rules adopt the percentages contained in the
NPRM because they represent averages of actual allocation ratios used
in specific States at specific times, not assumptions as to possible
State, district, and local party behavior in the future. These
percentages represent a clear, bright line test intended to be more
easily understood and applied than the previous regulations, consistent
with statutory intent. As noted above, the percentages apply throughout
a two-year cycle--i.e., from January 1st of odd-numbered years through
December 31st of even-numbered years.
H. Allocable Fundraising Costs
The NPRM sought comment as to whether costs of fundraising, other
than fundraising for Federal election activities, should be allocated
under the ``funds received'' method in previous 11 CFR 106.5(f). Two
commenters, a political party organization and a public interest
organization, supported the idea of using the ``funds received'' method
for fundraising where the funds raised are not used for Federal
election activity.
The Commission has decided to continue the use of the ``funds
received'' method for allocating direct costs of fundraising. This is
set out in a new 11 CFR 106.7(d)(4). Under this method, the State,
district, or local party committee must allocate based on the ratio of
funds received into the Federal account to the total receipts for the
fundraising program or event. The ratio must be estimated prior to each
such program or event based upon a reasonable prediction and, as
provided in the rule, subsequent adjustments must be made, if
necessary. New 11 CFR 106.7(e)(4) clarifies that fundraising costs for
Federal election activities are governed by new 11 CFR 300.32.
I. Non-Allocable Costs
Section 106.7(e) sets out those activities that are not allocable
between Federal and non-Federal accounts. Paragraph (e)(1) requires
that a payment for any activity that refers only to one or more
candidates for Federal office must not be allocated between Federal and
non-Federal accounts. These costs must be paid for entirely with funds
from a Federal account. Paragraphs (e)(2) and (3) indicate that
employee salaries and wages under certain conditions must not be
allocated between Federal and non-Federal accounts, but must be paid
for entirely with non-Federal funds.
J. Transfers
Section 106.7(f), which addresses transfers to pay for allocable
activities, is similar to the proposed rule, with the addition of
language providing for allocation accounts as an alternative to the use
of Federal accounts for initial payments of allocable expenditures and
disbursements. This provision tracks for the most part the language and
requirements of pre-BCRA 11 CFR 106.5(g). No comments addressed the
continuation of this requirement. Reimbursements from a non-Federal
account to a Federal account must take place within a specified number
of days. The continuation of these timing provisions will ensure that
party committees need not change this aspect of their operations.
Section 106.7(f)(2)(ii), like former 11 CFR 106.5(g)(2)(B)(iii),
explains that any payment outside this time frame, absent the need for
an advance payment of a reasonably estimated amount, could result,
depending on the circumstances, in a loan of non-Federal funds to the
Federal account and a violation of the Act. No commenters addressed
this provision.
VII. Part 108--Filing Copies of Reports and Statements With State
Officers
11 CFR 108.7 Effect of State Law
Section 108.7 addresses Federal preemption of State law based on 2
U.S.C. 453(a) and its legislative history. Paragraph (c) lists the
types of State laws that are not preempted or superseded by the Act and
the regulations. BCRA amended the Act at 2 U.S.C. 453(b), providing for
the application of State law to the use of non-Federal funds for the
purchase or construction by a State or local party of its office
building. Federal preemption continues to exist when Federal funds are
used. This amendment is implemented in new section 300.35. Paragraph
(c) of section 108.7 is therefore being amended to include the
application of State law to the use of non-Federal funds for the
purchase or construction of a State or local party office building in
accordance with 11 CFR 300.35.
VIII. Part 110--Contribution and Expenditure Limitations and
Prohibitions
11 CFR 110.1 Contributions by Persons Other than Multicandidate
Political Committees
BCRA amended 2 U.S.C. 441a(a)(1) to raise the amount that
individuals may donate to State committees of political parties from
$5,000 to $10,000 in any
[[Page 49081]]
calendar year. New 11 CFR 110.1(c)(5) incorporates this increased
contribution limitation, which is effective January 1, 2003. The
principal Congressional sponsors of BCRA included in their comment an
emphasis upon the fact that this is an increase in the limitation on
Federal funds. No other comments on this provision were received.
IX. Part 114--Corporate and Labor Organization Activity
11 CFR 114.1 Definitions
The pre-BCRA text of 11 CFR 114.1(a)(2)(ix) follows the repealed
statutory provision as to the purchase or construction by a national or
State party committee of an office facility. It is therefore being
deleted and replaced with an annotated cross-reference to new 11 CFR
300.35 which describes how the purchase or construction of an office
building by a State or local party committee may be funded. A national
committee's office building must be purchased or constructed only with
Federal funds. See new section 300.10. The texts of the regulations
currently at 11 CFR 100.7(b)(12) and 100.8(b)(13), which are similar to
the pre-BCRA text of section 114.1(a)(2)(ix), are the subject of a
separate rulemaking. See Notice of Proposed Rulemaking, 67 FR 40881
(June 14, 2002).
X. Part 300--Non-Federal Funds
11 CFR 300.1 Scope and Effective Date, and Organization
The bulk of the new rules that address non-Federal funds of
political party committees are contained in 11 CFR part 300. Section
300.1 addresses the scope of new part 300, sets forth the effective
date of the provisions contained in the new part, and outlines the
organization of the new part. Specifically, paragraph (a) of section
300.1 states that new part 300 implements changes to the FECA enacted
by Title I of BCRA. It also notes that nothing in part 300 is intended
to alter the definitions, restrictions, liabilities, and obligations
imposed by sections 431-455 of Title 2 of the United States Code or in
the regulations prescribed thereunder in 11 CFR parts 100-116.
The effective date of BCRA, except where otherwise stated, is
November 6, 2002. See 2 U.S.C. 431 note, section 402(a). Consistent
with BCRA, paragraph (b) of section 300.1 states that part 300 takes
effect on November 6, 2002, except for the following: (1) Where
otherwise stated in part 300; (2) subpart B of part 300 relating to
State, district, and local party committees does not apply with respect
to runoff elections, recounts, or election contests resulting from
elections held prior to November 6, 2002; (3) the increase in
individual contribution limits to State party committees as set forth
in proposed 11 CFR 110.1(c)(5) applies to contributions made on or
after January 1, 2003; and (4) national parties must spend any
remaining non-Federal funds received before November 6 and in their
possession on that date before January 1, 2003, subject to the
transition rules set forth in proposed 11 CFR 300.12.
Finally, paragraph (c) of section 300.1 explains that part 300 is
organized into five subparts, with each subpart addressing a specific
category of persons affected by BCRA. Subpart A of part 300 prescribes
rules pertaining to national party committees; subpart B prescribes
rules pertaining to State, district, and local party committees and
organizations; subpart C addresses rules affecting certain tax-exempt
organizations; subpart D prescribes rules pertaining to Federal
candidates and Federal officeholders; and subpart E prescribes rules
pertaining to State and local candidates. In addition, BCRA requires
changes in other parts of Title 11 of the Code of Federal Regulations,
which are also addressed in this rulemaking. One commenter supported
the provisions of this section. The final rules follow the proposed
rules, with the exception of minor revisions to clarify the scope of
each subpart.
11 CFR 300.2 Definitions
A. 11 CFR 300.2(a) Definition of ``501(c) organization that makes
expenditures or disbursements in connection with a Federal Election''
New 11 CFR 300.2(a) defines a 501(c) organization ``that makes
expenditures or disbursements in connection with a Federal election.''
BCRA prohibits national and State party committees, their officers and
agents, and certain entities associated with them, from soliciting any
funds for, or making or directing any donations to, 501(c)
organizations that fit this definition.
The NPRM sought comments on whether the definition of 501(c)
organizations affected by the prohibition on party fundraising and
donations should contain a temporal requirement so that this
prohibition is not overbroad and does not encompass, for example, an
organization that made expenditures and disbursements in connection
with a Federal election many years ago but has not done so recently and
does not plan to do so in the future.
Commenters were in general agreement that a temporal requirement
was a good idea. Several commenters suggested that the prohibition
should encompass organizations that have made expenditures and
disbursements in connection with a Federal election during the past
three election cycles, or six years. Other commenters stated that the
definition was overbroad without a temporal requirement but offered no
suggestion for a specific time frame.
The final rule at 11 CFR 300.2(a) defines a 501(c) organization
``that makes expenditures or disbursements in connection with a Federal
election'' as one that plans to make such expenditures or
disbursements, including for Federal election activity, within the
current election cycle or plans to pay a debt incurred in a prior
election cycle for making such expenditures or disbursements. Because
BCRA uses the present tense in referring to affected 501(c)
organizations, the Commission believes that the prohibition on party
fundraising should only apply to Section 501(c) organizations that
undertake such spending within the current two-year election cycle. The
definition in new 11 CFR 300.2(a) also includes organizations that plan
to pay debts incurred in a prior election cycle for such expenditures
or disbursements. This will prevent, for example, an organization from
certifying that it does not plan to make expenditures or disbursements
in connection with a Federal election in the current 2-year election
cycle, if it receives donations or fundraising assistance from a party
committee and uses those funds to pay off debt incurred for such
expenditures or disbursements relating to a prior election cycle.
The proposed definition in the NPRM would have also delineated the
types of activity that constitute expenditures or disbursements in
connection with a Federal election. One commenter expressed support for
this proposed rule. The final rule does not, however, set out specific
activities that constitute such expenditures or disbursements. Federal
election activity is defined at new 11 CFR 100.24 so that one component
of the definition is clear. Moreover, the Commission believes that
advisory opinions and closed enforcement matters provide guidance as to
what constitutes activities in connection with a Federal election.
Attempting to include specific activities in the definition in 11 CFR
300.2(a) might result in an overbroad definition.
B. 11 CFR 300.2(b) Definition of ``Agent''
Many of the prohibitions and restrictions of BCRA apply to a
principal entity, such as a political party
[[Page 49082]]
committee or a candidate, and to the ``agents'' of such principals
where they act on behalf of those principals. See, e.g., 2 U.S.C.
441i(a)(1), (2); 2 U.S.C. 441i(b)(1); 2 U.S.C. 441i(e)(1). Congress did
not define the term, ``agent,'' in BCRA. In the NPRM, the Commission
proposed a regulatory definition framed in terms of ``a person who has
actual express oral or written authority'' to act on behalf of a
principal. This definition would have defined ``actual authority'' as
``instructions, either oral or written,'' from the principal. The
Commission solicited comments on several aspects of this proposed
definition, such as the potential applicability of the definition to
volunteers, whether the principal's actual knowledge of the putative
agent's activities is relevant, and the potential applicability of the
concept of apparent authority.
The Commission received many comments on the proposed definition of
agent. Several commenters found the proposed definition ``too narrow.''
One described the requirement that an agent's authority must be actual
and express to be a ``loophole that would utterly swallow the rule,''
arguing that in the ``real world'' fundraising is accomplished largely
through agents without express authority in a ``technical'' or
``legal'' sense. The principal Congressional sponsors of BCRA commented
that the proper definition of ``agent'' is critical to prevent evasion
of the ``soft-money'' prohibitions at the center of Title I of BCRA.
The definition, they believe, should encompass ``anyone who has an
agency relationship under common law,'' including apparent authority.
The principal Congressional sponsors and a public interest group
commented that the new definition should not be narrower than the
definition of agent currently used by the Commission in regulating
independent expenditures. See 11 CFR 109.1(b)(5). The sponsors also
commented that the Commission should not exclude volunteers and vendors
per se. A public interest group also urged the Commission to include
apparent authority within the definition. This group argued that
``bestowing'' a title or position on an individual implies that the
individual is working on behalf of the principal who bestowed the title
or position.
In contrast, other commenters, comprised of national and State
political party committees and labor organizations, applauded the
proposed rule's conjunctive requirement that the agent's authority must
be actual and express. Three national party committees commented that
the definition should be further limited to individuals with
``substantive decision-making authority.'' Many of these commenters
stressed that the Commission should consider two issues in implementing
the regulatory definition of ``agent.'' The first issue is the nature
of an agent's ``individual liability'' for his or her own actions. The
second issue is the perceived ``vicarious liability'' of the principal.
With regard to the first issue, several commenters, including a State
party committee, an association of State party officials, and several
national party committees, suggested the Commission use 11 CFR
109.1(b)(5) as a model for the new definition, presumably modified to
provide that authority must be actual and express. Regarding the second
issue, several commenters urged the Commission to give full effect to a
requirement that the agent must be acting on behalf of the principal
before the principal incurs liability derived from the agent's actions.
Two labor organizations commented that the principal's derivative
liability should not extend beyond activities the agent has been
specifically authorized to conduct. Two national party committees
commented that the final definition must impose liability only when a
principal exercises actual control over the actions of the agent,
arguing that it would be unfair to impose liability for actions beyond
the principal's control. Another commenter, a State party committee,
framed its suggestion in terms of limiting a principal's liability to
actions taken by an agent on the principal's ``explicit instructions.''
The final rules define ``agent'' for purposes of Title I of BCRA as
``any person who has actual authority, either express or implied.'' The
final rules make clear that the definition of ``agent'' is limited to
those individuals who have actual authority, express or implied, to act
on behalf of their principals and does not apply to individuals who do
not have any actual authority to act on their behalf, but only
``apparent authority'' to do so. The final regulation thus differs from
the regulation proposed in the NPRM. The Commission makes this change
for reasons articulated by the United States Supreme Court. In
Community for Creative Non-Violence v. Reid, 490 U.S. 730, 739 (1989)
the High Court held that the defining of statutory terms should be
guided by ``settled meaning under * * * the common law * * * unless the
statute otherwise dictates.'' In this regard, the Commission notes that
under the common law of agency, an ``agent's authority may be actual or
apparent.'' Moriarty v. Glueckert Funeral Home, Ltd., 155 F.3d 859,
865-866 (7th Cir. 1998) (quoting Restatement (Second) of Agency, 26).
But the Supreme Court has made it equally clear that not every nuance
of agency law should be incorporated into Federal statutes where full
incorporation is not necessary to effect the statute's underlying
purpose. See Faragher v. City of Boca Raton, 524 U.S. 775, 802 n.3
(1998) (The ``obligation is not to make a pronouncement of agency law
in general or to transplant [the Restatement (Second) of Agency into a
Federal statute, but] is to adapt agency concepts to the [statute's]
practical objectives.'')
For these reasons, the definition of ``agent'' in the final
regulation does not incorporate apparent authority. ``[A]pparent
authority to do an act is created as to a third party by written or
spoken words or any other conduct of the principal which, reasonably
interpreted, causes the third party to believe that the principal
consents to have the act done on his behalf by the person purporting to
act for him.'' Restatement (Second) of Agency, 27. As has been noted by
commenters, apparent authority is largely a concept created to protect
innocent third parties who have suffered monetary damages as a result
of reasonably relying on the representations of individuals who
purported to have, but did not actually have, authority to act on
behalf of principals. Unlike other legislative areas, such as consumer
protection and anti-fraud legislation, BCRA does not affect individuals
who have been defrauded or have suffered economic loss due to their
detrimental reliance on unauthorized representations. Rather, the
Commission interprets Title I of BCRA to use agency concepts to prevent
evasion or avoidance of certain prohibitions and restrictions by
individuals who have actual authority and who do act on behalf of their
principals. In this light, apparent authority concepts are not
necessary to give effect to BCRA.
It is necessary, however, to define ``agent'' to include implied
and express authority in order to fully implement Title I of BCRA.
Otherwise, agents with actual authority would be able to engage in
activities that would not be imputed to their principals so long as the
principal was careful enough to confer authority through conduct or a
mix of conduct and spoken words. The comments and testimony received by
the Commission perhaps reveal some confusion about the term ``implied
authority.'' Implied authority is a form of actual authority. Moriarty,
supra, 155 F.3d at 865-866 (7th Cir. 1998) (quoting Restatement
(Second) of Agency, 26)
[[Page 49083]]
(actual authority may be express or implied). Implied authority should
not be confused with apparent authority, which is a distinct concept.
Restatement (Second) of Agency, 8, cmt a. It is well settled that
whether an agent has implied authority is within the control of the
principal. Thus, the Commission emphasizes that a principal may not be
held liable, under an implied actual authority theory, unless the
principal's own conduct reasonably causes the agent to believe that he
or she had authority. For example, a party committee cannot be held
liable for the actions of a rogue or misguided volunteer who purported
to act on behalf of the committee, unless the committee's own written
or spoken word, or other conduct, caused the volunteer to reasonably
believe that the committee desired him or her to so act. Once an agent
has actual authority, however, ``[u]nless otherwise agreed, authority
to conduct a transaction includes authority to do acts which are
incidental to it, usually accompany it, or are reasonably necessary to
accomplish it.'' Restatement (Second) of Agency, 35; see U.S. v.
Flemmi, 225 F.3d 78, 85 (1st Cir. 2000).
Title I of BCRA refers to ``agents'' in order to implement specific
prohibitions and limitations with regard to particular, enumerated
activities on behalf of specific principals. The final regulation
limits the scope of the definition accordingly in paragraphs (b)(1)
through (b)(4). Each provision in paragraphs (b)(1) through (b)(4) is
tied to a specific provision in Title I of BCRA that relies on agency
concepts to implement a specific prohibition or limitation. The
Commission emphasizes that, under the Commission's final regulation, a
principal cannot be held liable for the actions of an agent unless (1)
the agent has actual authority, (2) the agent is acting on behalf of
his or her principal, and (3) the agent is engaged in one of the
specific activities described in paragraphs (b)(1) through (4).
Paragraph (b)(1) limits a national party committee's liability to
an agent's authorized actions with regard to two activities. The first
is soliciting, directing, or receiving any contribution, donation, or
transfer of funds on behalf of the national party committee. 2 U.S.C.
441i(a)(1), (2). The second is soliciting funds for, or making or
directing donations to, section 501(c) and 527 organizations. 2 U.S.C.
441i(d).
Paragraph (b)(2) limits the liability of State, district, or local
political party committees to the actions of an agent who has actual
authority in four particular areas. The first is to make expenditures
or disbursements of any funds for Federal election activity on behalf
of the State, district or local party committee. 2 U.S.C. 441i(b)(1).
The second is to transfer, or to accept a transfer of, funds to make
expenditures or disbursements for Federal election activity on behalf
of the State, district or local party committee. 2 U.S.C.
441i(b)(2)(B)(iv). The third is to engage in joint fundraising
activities on behalf of the State, district or local party committee
with any person if any part of the funds raised are used, in whole or
in part, to pay for Federal election activity. 2 U.S.C. 441i(b)(2)(C).
The fourth is to solicit funds for, or to make or direct donations to,
section 501(c) and 527 organizations. 2 U.S.C. 441i(d).
Paragraph (b)(3) limits the liability of a Federal candidate to the
actions of an agent who has actual authority to solicit, receive,
direct, transfer, or spend funds in connection with any election on
behalf of the Federal candidate. 2 U.S.C. 441i(e)(1). The Commission
notes that the exception to 2 U.S.C. 441i(e)(1)'s general rule found in
paragraph (e)(2) of that section also applies to agents of such Federal
candidates who are or were State or local candidates.
Paragraph (b)(4) applies to State candidates, and limits their
liability to actions taken by their agents who have actual authority to
spend funds for public communications on their behalf. 2 U.S.C.
441i(f).
Under the Commission's final rules defining ``agent,'' a principal
can only be held liable for the actions of an agent when the agent is
acting on behalf of the principal, and not when the agent is acting on
behalf of other organizations or individuals. Specifically, it is not
enough that there is some relationship or contact between the principal
and agent; rather, the agent must be acting on behalf of the principal
to create potential liability for the principal. This additional
requirement ensures that liability will not attach due solely to the
agency relationship, but only to the agent's performance of prohibited
acts for the principal. In light of the foregoing, it is clear that
individuals, such as State party chairmen and chairwomen, who also
serve as members of their national party committees, can, consistent
with BCRA, wear multiple hats, and can raise non-Federal funds for
their State party organizations without violating the prohibition
against non-Federal fundraising by national parties.
C. 11 CFR 300.2(c) Definition of ``Directly or Indirectly Established,
Financed, Maintained, or Controlled''
11 CFR 300.2(c) defines ``directly or indirectly establish,
finance, maintain, or control,'' a term that is used in several
provisions of BCRA. The term appears in BCRA in the context of national
party committees (see 2 U.S.C. 441i(a)(2)), of State, district, and
local political party committees (see, e.g., 2 U.S.C.
441i(b)(2)(B)(iii)), and of Federal candidates and Federal
officeholders (see, e.g., 2 U.S.C. 441i(e)(1)). The phrase
``established, financed, maintained, or controlled,'' without the
modifier ``directly or indirectly,'' was already used in the anti-
proliferation provisions of the FECA and in the Commission's
``affiliation'' regulation. See 2 U.S.C. 441a(a)(5); 11 CFR 100.5(g),
and 110.3.
Paragraph (c)(1) of section 300.2 enumerates the persons to whom
the regulation applies, and employs the shorthand ``sponsor'' to refer
collectively to these persons. A public interest group commented that
the regulation should apply to national, as well as to State, district,
and local political party committees. Accordingly, given that the term,
``directly or indirectly established, financed, maintained, or
controlled,'' is applied to national party committees in 2 U.S.C.
441i(a)(2), the Commission is incorporating this suggestion in the
final regulation. Another commenter suggested that agents should be
included in the description of the term ``sponsor,'' rather than
addressed in another part of the rule. The final rules also adopt this
suggestion. In paragraph (c)(1), the statutory concept of ``indirect''
establishment, financing, maintenance, or control is addressed by
including actions taken by a sponsor's agents on behalf of the sponsor.
The version of 11 CFR 300.2(c) proposed in the NPRM defining the
term ``directly or indirectly establish, finance, maintain, or
control'' included factors that extended beyond the affiliation
provisions of 11 CFR 100.5(g). Several commenters, including an
association of State party officials, several national party
committees, and two State party committees, objected to this portion of
the regulation proposed in the NPRM, and suggested uniformly that the
final regulation should be based solely upon the existing affiliation
regulation in 11 CFR 100.5(g), which one commenter described as
``relatively well-established and well-understood.'' A Latino rights
group and a taxpayers' organization concurred with this approach. In
addition, a civil rights
[[Page 49084]]
organization stated that the regulation proposed in the NPRM was ``not
only vague as to provide no practical guidance, but also is likely to
deem entities as being 'controlled' by a party committee when the BCRA
never intended to reach such entities.'' On the other hand, two public
interest groups supported the Commission's proposed use of factors
extending beyond the reach of 11 CFR 100.5(g), one of whom argued that
Congress used the term, ``directly or indirectly established, financed,
maintained, or controlled,'' in several contexts to ``make it clear
that Congress wanted to move beyond the current affiliation rules.''
The Commission has concluded that the affiliation factors laid out
in 11 CFR 100.5(g) properly define ``directly or indirectly
established, financed, maintained, or controlled'' for purposes of
BCRA. Therefore, in paragraph (c)(2), the affiliation factors found at
11 CFR 100.5(g)(4)(ii) have been recast in the terminology demanded by
the BCRA context. Paragraphs (c)(2)(i) through (x) of section 300.2
generally correspond to paragraphs (g)(4)(ii)(A) through (J) of section
100.5. This change in terminology, for example, substituting ``entity''
for ``committee,'' and ``sponsor'' for ``sponsoring organization,''
recognizes that affiliation concepts are being applied in a different
context. Besides the changes in terminology, the words ``and otherwise
lawfully'' have been added to the phrase about joint fundraising in
paragraphs (c)(2)(vii) and (viii) of section 300.2(c). This addition is
intended to preclude any confusion that might arise between these
provisions and the joint fundraising restrictions in subpart B of part
300.
In the NPRM, the Commission sought comment on whether this
regulation should be based on the actions and activities of entities
occurring solely after November 6, 2002, the effective date of BCRA.
The Commission considered taking this course of action to prevent a
retroactive application of BCRA or, specifically, to prevent the
actions and activities of entities before November 6, 2002, that are
legal under current law from creating potential legal liability based
on the new requirements of BCRA, which do not take effect until after
November 5, 2002. The Commission also asked, alternatively, whether
there should be a rebuttable presumption that entities organized before
a given date are not directly or indirectly established by a sponsor,
provided that the sponsor and the entity are not affiliated. 67 FR
35658.
The principal Congressional sponsors of BCRA and two public
interest groups opposed these options. The principal Congressional
sponsors stated, ``There is nothing in the statutory language that
permits the term * * * to apply only to entities established after the
effective date of the Act * * *.'' Such a rebuttable presumption, they
continued, would ``create an obvious loophole for organizations
established or controlled by members of Congress that are currently
raising soft money.'' One of the public interest groups commented that
``grandfathering'' existing entities would ``effectively prop the
[soft-money] loophole open.'' The other public interest group opposing
this idea said: ``This would, as a practical matter, allow the activity
sought to be regulated by BCRA to continue on an unregulated basis
through the preexisting entity.''
A non-profit organization commented that the Commission should not
apply the new regulation to existing entities that may have been
directly or indirectly established, financed, maintained, or controlled
by a sponsor because, ``otherwise, the rule would go against any
conceivable precept of the BCRA having an effective date after the 2002
general elections.'' This organization asserted, ``the only relevant
question * * * is whether an entity is controlled by a sponsor after
the effective date of BCRA.'' This organization supported the idea of a
rebuttable presumption. Several party committees urged the Commission
to apply the regulation if there is affiliation ``on or after the
effective date of BCRA.'' Notably, a civil rights organization
concluded that ``the only relevant question for the purposes of BCRA is
whether an entity is controlled by a sponsor after the effective date
of BCRA.'' The civil rights organization further stated that ``we agree
with the Commission's suggestion that there should be a rebuttable
presumption that entities `organized' before a given date are not
directly or indirectly established by a sponsor. [To proceed otherwise]
would go against any conceivable precept of the BCRA having an
effective date after the 2002 elections.''
For the foregoing reasons, the Commission has concluded that BCRA
should not be interpreted in a manner that penalizes people for the way
they ordered their affairs before the effective date of BCRA. This will
help ensure that BCRA is not enforced in a retroactive manner with
respect to activities that were legal when performed. Therefore, the
Commission has added, in the final rules, a new paragraph (c)(3). The
paragraph, under the heading, ``safe harbor,'' provides that on or
after November 6, 2002 (the effective date of BCRA), an entity shall
not be deemed to be directly or indirectly established, maintained, or
controlled by another entity unless, based on the entities' actions and
activities solely after November 6, 2002, they satisfy the requirements
of 11 CFR 300.2(c). The Commission notes that financing, within the
meaning of this definition, presents special considerations. Therefore,
with regard to financing, paragraph (c)(3) provides that if an entity
receives funds from another entity prior to November 6, 2002, and the
recipient entity disposes of the funds prior to November 6, 2002, the
receipt of such funds prior to November 6, 2002 shall have no bearing
on determining whether the recipient entity is financed by the
sponsoring entity within the meaning of 11 CFR 300.2(c). If funds
received from another entity prior to November 6, 2002, are spent by
the recipient entity on or after that date, that fact will be relevant
to a determination under section 300.2(c).
In the NPRM, the Commission sought comment as to whether there
should be an exception for a de minimis level of funding by a sponsor.
67 FR 35659. Only one commenter, a State party committee, supported
this idea and suggested $5,000 for this purpose. The Commission has not
included a de minimis exception in the final regulation. Such an
exception does not square with the overall, situation-specific approach
of the regulation, which is to weigh factors such as ``[w]hether a
sponsor or its agent provides funds or goods in a significant amount or
on an ongoing basis to the entity'' ``in the context of the overall
relationship between sponsor and the entity.'' See 11 CFR 300.2(c)(2),
(c)(2)(vi). Nor does a de minimis exception appear to be supported by
the plain language of the statute.
Paragraph (c)(4) (which was labeled (c)(2) in the version of the
regulation proposed in the NPRM) provides a mechanism for a sponsor or
an entity to request a determination by the Commission through the
advisory opinion process that the sponsor is no longer deemed to
finance, maintain, or control an entity, even if the sponsor
established the entity. There have been several changes from the
version of the regulation published in the NPRM. In paragraph
(c)(4)(i), the Commission has clarified that the requestor of an
advisory opinion must demonstrate that the entity is not directly or
indirectly financed, maintained, or controlled by the sponsor. Under
paragraph (c)(4)(ii) of the final rules, the requestor must demonstrate
that all material connections between the sponsor and
[[Page 49085]]
the entity have been severed for two years.
The Commission notes that nothing in paragraph (c)(4) should be
construed to require any given entity that has not directly or
indirectly established, financed, maintained, or controlled another
entity to obtain a determination to that effect before the two entities
may operate independently of each other. Therefore, in the final rules,
the Commission has added a new paragraph (c)(4)(iii), which provides
that nothing in section 300.2(c) should be construed to require
entities that are separate organizations on November 6, 2002, to obtain
an advisory opinion to operate separately from one another.
D. 11 CFR 300.2(d) Definition of ``Disbursement''
Both FECA and BCRA use the term ``disbursement,'' but do not
provide a definition. The NPRM contained a proposed definition of
``disbursement'' as ``any purchase or payment made by a political
committee or organization that is not a political committee.'' One
commenter pointed out that this term should not be limited to payments
by political parties or organizations, since it covers spending by
individuals or entities that do not constitute political parties or
organizations. See, for example, 2 U.S.C. 441i(b)(1), which refers to
disbursements by (among others) ``an association or similar group of
candidates * * * or of individuals.'' The Commission, therefore, is
revising the proposed definition in the final rule to clarify that it
covers purchases and payments by a political party or other person,
including an organization that is not a political committee, that is
nevertheless subject to FECA or BCRA.
E. 11 CFR 300.2(e) Definition of ``donation''
In BCRA, Congress uses but does not define the term ``donation.''
The Commission proposed in the NPRM to define a ``donation,'' in 11 CFR
300.2(e), as a payment, gift, subscription, loan, advance, deposit, or
anything of value given to a non-Federal candidate, party committee,
501(c) organization, or 527 organization, but not including a
contribution or transfer.
Comments were sought on specifically excluding from ``donation''
some of the exemptions to ``contribution'' set forth in existing 11 CFR
100.7(b). The comments were split on this approach.
The Commission did not include these exemptions, or any others, in
the final rule, because donations in many cases will be essentially a
matter of State law, and thus the inclusion or exclusion of certain
payments should be left to State campaign finance law. For example, in
the Levin Amendment, donations of Levin funds must be in accordance
with State law, with one Federal limitation: a $10,000 amount
limitation per year per donor. 2 U.S.C. 441i(b)(2)(B)(iii). The
Commission believes States should be free to craft their own exemptions
to donations of Levin funds, subject only to the $10,000 overall
limitation imposed by BCRA.
Several commenters asked the Commission to specifically incorporate
additional exemptions, such as money spent for redistricting, election
recounts, FECA civil penalties, and legal defense funds. The exemption
for recounts is addressed in the Commission's current rules at 11 CFR
100.7(b)(20); as are payments for civil penalties, cf. 11 CFR
9034.4(b)(4). The Commission's interpretations on the raising and
spending of funds for the purposes of redistricting were done in the
context of Advisory Opinions that interpreted the terms
``contribution'' and ``expenditure.'' See Advisory Opinions 1990-23 and
1982-37. The question of legal defense funds implicates not only the
definition of ``contribution,'' but also the Commission's personal use
regulations at 11 CFR 113.1(g) in the case of a candidate legal defense
fund. With respect to legal defense funds or any other legal expenses
incurred by national party committees, the Commission does not
interpret the broad language of 2 U.S.C. 441i(a) to permit the receipt
or use of any non-Federal funds for such purposes.
As with the exemptions in 11 CFR 100.7(b), discussed above, State
laws may address each of these payments in a variety of different ways.
In addressing these issues, the Commission does not believe it is
appropriate to require States to follow the Commission's precedents,
which were established to implement the specific, detailed provisions
of the FECA regarding ``contributions'' and ``expenditures'' for the
purpose of influencing Federal elections. Moreover, to do so could
present issues involving the preemption of State law.
Several commenters suggested that the definition of ``donation'' be
expanded to include anything of value given to a ``person,'' to conform
with the use of this term in 11 CFR 300.10, 300.11, 300.37, 300.50, and
300.51. The Commission has made this change to 11 CFR 300.2(e), given
the broad statutory reach of the term ``donation'' in 2 U.S.C.
441i(a)(1). The Commission has also deleted the reference to
``transfers,'' because those are covered elsewhere in these rules. See
11 CFR 300.34.
F. 11 CFR 300.2(f) Definition of ``Federal Account''
Paragraph (f) of section 300.2 defines ``Federal account'' as an
account at a campaign depository that contains funds to be used in
connection with a Federal election. The term ``financial depository
institution'' proposed in the NPRM has been changed to the more
accurate term ``campaign depository.'' See 2 U.S.C. 432(h) and 11 CFR
103.2.
Some commenters asked the Commission to include in this definition
the requirement that only Federal funds and funds transferred for the
purpose of paying the non-Federal share of allocated expenditures may
be deposited into these accounts. This topic is treated elsewhere in
the Commission's rules and in this rulemaking. See 11 CFR 103.3,
106.5(g), 300.30, and 300.33.
G. 11 CFR 300.2(g) Definition of ``Federal Funds''
Paragraph (g) of section 300.2 defines ``Federal funds'' to mean
funds that comply with the limitations, prohibitions, and reporting
requirements of the FECA. The Commission received no comments regarding
this definition.
H. 11 CFR 300.2(h) Definition of ``Levin Account''
Section 300.2(h) defines ``Levin account'' as an account
established by a State, district, or local committee of a political
party pursuant to 11 CFR 300.30 for purposes of making expenditures or
disbursements for Federal election activity or non-Federal activity
(subject to State law) under 11 CFR 300.32(b). The Commission revised
the definition proposed in the NPRM to clarify that these accounts must
be established at a campaign depository in accordance with 2 U.S.C.
432(h).
The NPRM raised substantive questions on the operation of these
accounts. The comments that addressed these questions are discussed in
connection with 11 CFR 300.30, below.
I.11 CFR 300.2(i) Definition of ``Levin Funds''
As explained above, BCRA's Levin Amendment provides that State,
district, and local political party committees may spend certain non-
Federal funds for Federal election activities if those funds comply
with certain requirements. 2 U.S.C. 441i(b)(2)(A)(ii). Thus, these
funds are unlike Federal funds, which are fully subject to the Act's
requirements, and unlike ordinary non-Federal funds because they are
subject to certain additional requirements under BCRA.
[[Page 49086]]
Section 300.2(i) defines these funds as ``Levin funds,'' with the
intention that ``Levin funds'' become a definite, unambiguous reference
to such funds. The Commission has slightly modified the definition
proposed in the NPRM for streamlining purposes, but has made no
substantive changes.
One commenter requested that the Commission use a ``functionally
descriptive'' term, such as ``specially allocated,'' for these funds,
rather than the name of their legislative sponsor. It proved difficult,
however, to draft a term that clearly and unambiguously includes these
funds, while excluding all others. For that reason, the Commission has
retained the term ``Levin funds'' in the final rules.
Two commenters suggested that the definition should include the
limits on the use of the term ``Levin funds'' found at 2 U.S.C.
441i(b)(2)(A). These restrictions go to the use of the funds, and are
implemented in 11 CFR 300.32, to which the definition in 11 CFR
300.2(i) already expressly refers. Therefore, these restrictions are
not repeated in this definitional paragraph.
J. 11 CFR 300.2(j) Definition of ``Non-Federal Account''
Section 300.2(j) defines ``non-Federal account'' as an account that
contains funds to be used in connection with a State or local election
or allocable expenses under 11 CFR 106.7, 300.30, or 300.33. The term
``financial depository institution'' proposed in the NPRM has been
deleted because non-Federal accounts are not required to comply with 2
U.S.C. 432(h).
Consistent with the revisions to 11 CFR 106.7 discussed above, the
definition has been expanded to include accounts used for payment of
certain allocable activities. The account may also serve as a
depository for Levin funds, provided that the committee complies with
the requirements of 11 CFR 300.30, below.
No commenters addressed this paragraph.
K. 11 CFR 300.2(k) Definition of ``Non-Federal Funds''
This section defines ``non-Federal funds'' as funds that are not
subject to the limitations and prohibitions of the Act. No commenters
addressed this definition.
L. 11 CFR 300.2(m) and (n) Definitions of ``To Solicit,'' and ``To
Direct''
The NPRM proposed a definition of ``to solicit or direct'' a
contribution or donation, which would be located at 11 CFR 300.2(m).
The proposed definition included a request, suggestion, or
recommendation to make a contribution or donation, including those made
through a conduit or intermediary. The Commission's final rule defines
``to solicit'' as ``to ask another person to make a contribution or
donation, or transfer of funds, or to provide anything of value,
including through a conduit or intermediary.'' Similarly, the
Commission defines ``to direct'' as ``to ask a person who has expressed
an intent to make a contribution, donation, or transfer of funds, or to
provide anything of value, to make that contribution, donation, or
transfer of funds, or to provide that thing of value, including through
a conduit or intermediary.''
Comment was sought as to whether the proposed definition was too
broad or narrow, as well as to whether the term ``direct'' in BCRA
should be interpreted to follow the earmarking rules regarding
contributions directed through a conduit or intermediary under 2 U.S.C.
441a(a)(8). Comment was also sought as to whether the passive providing
of information in response to an unsolicited request for information
should be specifically excluded from this definition.
Two commenters, a labor organization and a public interest
organization, expressed qualified support for the proposed rule. The
labor organization stated that it concurred with the proposed rule, and
that it particularly endorsed the express acknowledgment that the mere
provision of information or guidance as to applicable legal
requirements does not fall within the statutory language. The public
interest organization stated that the proposed rule was ``generally
consistent'' with the letter and spirit of BCRA. For purposes of
clarity, it suggested that the proposed rule be revised to read:
``Merely providing information or guidance as to the requirements of
applicable law is not a solicitation.''
In contrast, five commenters argued that the proposed rule was too
vague or broad. A group representing certain State parties stated that
the phrase ``request, suggest and recommend'' is an invitation for
endless Commission investigation. This commenter urged that ``solicit''
be limited to an explicit request that a person make a contribution.
This commenter also supported including examples in the Explanation and
Justification of what is not soliciting or directing. Likewise,
national party political organizations asserted that the final rule
should not contain a reference to ``suggestion'' because that is too
vague a term, and compels inquiry into whether a communication conveys
a sense, or creates an impression, of a solicitation. These commenters
believed BCRA's rules should be concrete. This group further urged that
clear exclusions should be provided, such as for inquiries into
positions or issues, as well as political speech or commentary to an
audience who may respond with contributions in the absence of an
express request for them.
Another commenter, a public interest organization, stated that
``ambiguous standards'' such as ``suggest[ion]'' or ``series of
conversations'' will merely lead to confusion. This commenter suggested
that the Commission look to past advisory opinions for guidance.
Similarly, a State and a national political party argued that
``request, suggest and recommend'' is unconstitutionally vague and
potentially overbroad, as it would involve an investigation into what a
person meant in a series of conversations, and would thus chill
political speech. A Latino rights group and a taxpayers' organization
commented that in light of the ``severe restrictions now imposed by
BCRA,'' there need to be ``clear definitive guidelines'' in this area.
Specifically, the Latino rights group and the taxpayers' organization
argued that ``[a]mbiguous standards such as `suggestion' or a `series
of conversations which taken together constitute a request for a
contribution or donation, but which do not do so individually' will
lead to more confusion and allegations of violations.'' Several party
committee commenters argued that solicitation should be confined to an
explicit request that an entity make a contribution.
Three commenters argued that the proposed rule was too lenient. One
public interest organization stated that the discussion should include
scenarios where a person suggests where a contributor, who has already
decided to make a contribution, should send their contribution. This
commenter read the proposed rule as confining itself to candidates,
committees and nonprofits, and suggested it should also apply to
solicitations from individuals, partnerships, labor organizations, and
corporations. Another public interest organization agreed with the
first point of the previous response. The sponsors of BCRA stated that
the proposed definition failed to capture the plain meaning of the
words and to effectuate the central goal of the law. They supported the
position regarding suggestions to already-willing contributors. These
commenters read the proposed rule in the same manner as the public
interest organization, as if
[[Page 49087]]
it only applies to candidates, committees and nonprofits. They stated
that, ``certain provisions in the Act apply to soliciting contributions
from any `person,' which would obviously include individuals and
corporations.'' They urged that the rule be modified to reflect this.
The Commission has determined that the concepts of ``to solicit''
and ``to direct'' embody different activity, and they thus should be
separately defined. Accordingly, 11 CFR 300.2(m) defines ``to
solicit,'' and 11 CFR 300.2(n) contains the definition of ``to
direct.'' Both definitions include ``transfer of funds'' and ``anything
of value'' in addition to ``contribution'' and ``donation,'' because
the phrases ``transfer of funds'' and ``anything of value'' or ``any
other thing of value'' appear several times in seriatim with
``contribution'' and ``donation'' in applicable rules. See, e.g., 11
CFR 300.2(b)(1)(i).
Comments were sought as to whether the concept of soliciting should
apply to a series of conversations which, when taken together,
constitute a request for contributions or donations. BCRA's sponsors
and several public interest organizations supported applying the
definition to a series of conversations if, when taken as a whole, they
are consistent with a solicitation, stating that, otherwise,
restrictions will be easily circumvented. One group of national
political party organizations opposed applying the rule to a series of
conversations, stating that it would involve heavy government
involvement in deciphering political speech and that the Commission
should look only at express statements.
The Commission does not believe it is appropriate to promulgate a
regulation that would require examination of a private conversation to
impute intent when the conversation is not clear on its face. The
Commission is concerned that the ability to impute intent could lead to
finding a violation when the individual who made the comment may have
had no intention whatever of soliciting a contribution. Such a result
is not dictated by BCRA's statutory language, and would raise
constitutional concerns.
For the reasons set forth above, the Commission is not defining
``to solicit'' in terms of a series of conversations.
Regarding the definition of the term ``to direct,'' the Commission
sought comment as to whether it should be interpreted to follow
earmarking rules under 2 USC 441a(a)(8). A group of State party leaders
supported limiting ``to direct'' to the definition at 11 CFR
110.6(b)(2), as did one of the national political parties. One of the
public interest organizations opposed this approach, stating that this
was inconsistent with BCRA and far too narrow an approach. None of the
commenters explained their criticisms in detail.
This issue of the meaning of ``to direct'' is also tied to another
question asked by the Commission: whether the passive providing of
information in response to an unsolicited request for information
should be specifically excluded in this definition. Two commenters, a
public interest organization and the sponsors, felt that the Commission
should not exclude providing information if that information includes
the names of organizations to which contributions can be made. One
commenter, a national political party, said that such information
should be excluded, because any other approach would be unworkable and
would lead to endless accusations and investigations.
The Commission concludes that a precise definition in this context
is necessary to avoid vague and overbroad application of the term.
Therefore, the regulation defines ``to direct'' as ``to ask a person
who has expressed an intent to make a contribution, donation, or
transfer of funds, or to provide anything of value, to make that
contribution, donation, or transfer of funds, or to provide that thing
of value.''
The final rules in 11 CFR 300.2(m) and (n) each include a statement
indicating that merely providing information or guidance as to the
requirements of particular law is not solicitation or direction. Each
rule confines itself to defining the term as it appears in part 300 of
the Commission's regulations.
M. 11 CFR 300.2(o) Definition of ``Individual Holding Federal Office''
New section 300.2(o), which parallels 11 CFR 100.4 (definition of
``Federal office'') and 11 CFR 113.1(c) (definition of ``Federal
officeholder''), has been added for the reader's convenience.
Consistent with those sections and 2 U.S.C. 431(3), it states that
``individual holding Federal office'' means an individual elected to or
serving in the office of President or Vice President of the United
States; or a Senator or a Representative in, or Delegate or Resident
Commissioner to, the Congress of the United States. It does not,
however, include officeholders who are appointed to positions such as
the secretaries of departments in the executive branch, or other
positions that are not filled by election.
Subpart A--National Party Committees
11 CFR 300.10 General Prohibitions on Raising and Spending Non-Federal
Funds
BCRA prohibits national party committees from raising and spending
non-Federal funds, that is, funds that are not subject to the
prohibitions, limitations, and reporting requirements of the Act. See 2
U.S.C. 441i(a). The Commission is placing the regulations that address
this prohibition in a new part of the Code of Federal Regulations, 11
CFR part 300, subpart A. In addition to this new subpart, the
Commission is amending several sections of its current rules to conform
to these prohibitions. See Explanation and Justification for 11 CFR
102.5 and 106.5.
Paragraph (a) of new section 300.10 tracks the language of BCRA,
which prohibits national party committees from soliciting, receiving,
or directing to another person ``a contribution, donation, or transfer
of funds or any other thing of value,'' or spending funds that are not
subject to the Act's prohibitions, limitations, and reporting
requirements. Accordingly, as of November 6, 2002, BCRA's effective
date, national party committees must not receive or solicit or direct
to another person contributions or donations from corporations, labor
organizations or other prohibited sources, and must not receive or
solicit or direct to another person contributions or donations from
individuals and others that exceed the amount limitations of the Act.
Additionally, after a brief transition period set forth in 11 CFR
300.12, discussed below, all expenditures and disbursements made by a
national party committee, including donations to State and local
candidates and donations and transfers to State party committees, must
be made with funds that comply with the limitations, prohibitions, and
reporting requirements of the Act.
BCRA's ban on the raising and spending of non-Federal funds by
national party committees has widespread application. Tracking the
language in 2 U.S.C. 441i(a)(1) and (2), 11 CFR 300.10(a) and (c)
provide that the ban on raising and spending non-Federal funds also
applies to the national congressional campaign committees (currently,
the Democratic Senatorial Campaign Committee, the National Republican
Senatorial Committee, the Democratic Congressional Campaign Committee,
and the National Republican Congressional Committee), to officers and
agents acting on behalf of a national party committee or a national
congressional campaign committee, and
[[Page 49088]]
to any entities directly or indirectly established, financed,
maintained, or controlled by either. As noted by one of BCRA's
congressional co-sponsors during the congressional debate, ``[t]he
provision is intended to be comprehensive at the national party level.
Simply put, the national parties and anyone operating on behalf of them
are not to raise or spend, nor to direct or control, soft money.'' 148
Cong. Rec. H408-409 (daily ed. February 13, 2002) (statement of Rep.
Shays).
Thus, under BCRA and 11 CFR 300.10, a Federal candidate or a
Federal officeholder acting on behalf of a national congressional
campaign committee must not solicit or direct to any person funds from
corporations or labor organizations, or funds from individuals or
entities in amounts that exceed the Act's contribution limits.
Section 300.10(a)(3) makes clear that national parties cannot
raise, spend, or direct to another person Levin funds. See 2 U.S.C.
441i(b)(2)(A) and (B) and 11 CFR 300.31, discussed below.
Section 300.10(b) tracks the statutory language at 2 U.S.C.
441i(c). It provides that national parties and others covered by
section 300.10(a) must use only Federal funds to finance Federal
election activity.
The NPRM noted that the Commission would address in a subsequent
rulemaking whether BCRA bans national party committees, and their
officers and agents, from directing non-Federal funds to a host
committee for a national party convention in light of the statutory
language that they are not permitted to direct non-Federal funds to
other persons. See 2 U.S.C. 441i(a)(1). In comments submitted to the
NPRM, BCRA's sponsors stated that since BCRA prohibits national parties
and their agents from soliciting or directing non-Federal funds to any
person, they could not raise or direct non-Federal funds to host
committees. 2 U.S.C. 431(11) of FECA defines ``person'' to include ``a
committee * * * or any other organization or group of persons * * * ''
It has also been suggested that no further rulemakings are necessary,
as a host committee would be treated as any other 501(c) organization
under the Act. The Commission has decided that the sponsor's
interpretation of BCRA and additional issues concerning BCRA's effect
on conventions will be addressed, if necessary, in a future rulemaking
on national party conventions.
Virtually all of the commenters opined that the definition of
``agent'' was critically important to many of BCRA's provisions,
including 11 CFR 300.10.
The breadth of the national party non-Federal funds prohibition is
limited in 2 U.S.C. 441i(a)(2) and in 11 CFR 300.11(c) to the extent
that the prohibition applies to officers and agents ``acting on
behalf'' of national parties. This limiting construction appears in
other Federal statutes and indeed, in some State campaign finance laws.
The Commission also has decided to limit the definition of ``agent'' to
those individuals who have actual authority to act on behalf of their
principals. See Explanation and Justification for 11 CFR 300.2(b)
above.
Several party committee commenters expressed the view that, despite
BCRA's broad prohibition on national parties' raising and spending non-
Federal funds, the Commission should consider a rule that would permit
national parties to continue to maintain non-Federal accounts devoted
specifically to support State and local candidates as long as funds
raised for such an account meet the source and contribution limits of
the Act. The party committees' position is based on the NPRM's
discussion of ``leadership PACs'' maintained by Federal candidates and
on statements made by a principal BCRA sponsor during the Senate
debate. 148 Cong. Rec. S2140 (daily ed. February 20, 2002) (statement
of Senator McCain). Specifically, Senator McCain interpreted 2 U.S.C.
441i(e)(1)(A) and (B) (see 11 CFR 300.61 and 300.62) to permit a
Federal candidate or officeholder to raise funds for both a Federal and
non-Federal account of a leadership PAC, provided that the funds raised
for the non-Federal account met the source and contribution limits of
the Act. The party committees' comments specifically referenced another
statement made by Senator McCain suggesting that an officeholder could
solicit a donation up to the Act's contribution limits for the non-
Federal account of a leadership PAC, even if the donor had already
contributed to the PAC's Federal account. The application of these
statutory provisions to leadership PACs and candidate PACs is discussed
below. See Explanation and Justification for 11 CFR 300.62. Regardless
of the application of BCRA to leadership PACs and candidate PACs under
2 U.S.C. 441i(e)(1), however, the plain language of the ban on national
party non-Federal fundraising at 2 U.S.C. 441i(a) cannot be plausibly
construed to allow party committees to continue to raise non-Federal
funds for any purpose. The language is broad in prohibiting a national
party committee from soliciting, receiving, or directing to another
person ``a contribution, donation, or transfer of funds or any other
thing of value'' or spending funds that are not subject to the Act's
limitation, prohibitions, and reporting requirements. A separate ``non-
Federal'' account, even if it contained funds that complied with the
prohibitions of the Act, would not contain funds complying with the
amount limitations of the Act, if for example, individuals gave $20,000
per year to a national party's account and also gave another $20,000 to
the party's ``non-Federal'' account as suggested by the party committee
commenters.
The legislative history supports this statutory interpretation. As
noted above, a primary sponsor of BCRA in the House specifically
explained the national party non-Federal funds ban as follows: ``The
soft money provisions of the Shays-Meehan bill regarding the national
political parties operate in a straight-forward way. The national
parties are prohibited entirely from raising or spending any soft money
* * * The purpose of these provisions is simple: to put the national
parties entirely out of the soft money business.'' 148 Cong. Rec. H408
(daily ed. February 13, 2002) (statement of Rep. Shays). According to
Congressman Shays, the prohibition ``covers all activities of the
national party committees, even those that might appear to affect only
non-federal elections.'' Shays further explained the reason for the
ban: ``Because the national parties operate at the national level, and
are inextricably intertwined with Federal officeholders and candidates,
who raise money for the national party committees, there is a close
connection between the funding of the national parties and the
corrupting dangers of soft money on the federal political process.''
Id. at H409.
In addition, a comment by one of BCRA's principal sponsors stated
that Congress' intent was absolutely clear that BCRA prohibits national
party committees from raising, spending or directing non-Federal funds.
He further pointed out that an amendment that would have allowed party
committees to continue to raise ``soft money'' subject to limits on the
amounts and purposes failed. The Commission notes that a House
amendment that would have continued to permit national parties to raise
non-Federal funds for certain activities in amounts not exceeding
$20,000 per year per person was defeated. See 148 Cong. Rec. H459-H465
(daily ed. February 13, 2002).
Finally, the party committee commenters also maintained that the
Commission should define the term ``donation,'' which is not defined in
BCRA, to exclude funds received by
[[Page 49089]]
national party committees for certain purposes such as funds provided
for redistricting, legal expense funds, and the payment of civil
penalties for violations of the Act. The parties argued that the
Commission has, over time, recognized these activities as wholly exempt
from the reach of FECA.
As discussed in the Explanation and Justification for the
definition of ``donation'' at 300.2(e), the plain language of BCRA,
supported by the legislative history, indicates that the ban on
national party raising and spending non-Federal funds was intended to
be broad, prohibiting a party from raising, receiving, or directing to
another person `` a contribution, donation or transfer of funds, or any
other thing of value'' or spending ``any funds'' that are not subject
to the Act's limitations, prohibitions, and reporting requirements
(emphasis added). Consequently, neither 11 CFR 300.10 nor the
definition of ``donation'' in 11 CFR 300.2(e) contains a sweeping
exclusion of donations that would permit national parties to raise
funds for these purposes under any and all circumstances. See the
Explanation and Justification for 11 CFR 300.2(e) (definition of
``donation'').
11 CFR 300.11 Prohibitions on Fundraising for and Donating to Certain
Tax-Exempt Organizations
BCRA prohibits national party committees, their officers and
agents, and entities directly or indirectly established, financed,
maintained, or controlled by them from raising any funds for, or making
or directing any donations to, certain tax-exempt organizations. 2
U.S.C. 441i(d). BCRA's prohibition on this type of donor and
fundraising activity extends only to tax-exempt organizations with a
political purpose or that conduct activities in connection with a
Federal election. Specifically, this prohibition extends to
organizations exempt from taxation under 26 U.S.C. 501(c) that ``[make]
expenditures or disbursements in connection with an election for
Federal office (including expenditures or disbursements for Federal
election activity).'' Id. (Organizations formed under 26 U.S.C. 501(c)
are referred to as ``501(c) organizations'' below.) The ban also
extends to political organizations exempt from taxation under 26 U.S.C.
527 (referred to as ``section 527 organizations'' below). These
entities are defined in the Internal Revenue Code as parties,
committees, associations, funds, or other organizations organized and
operated primarily to directly or indirectly accept contributions and
make expenditures for the ``exempt function'' of influencing or
attempting to influence the selection, nomination, election or
appointment of an individual to a Federal, State, or local public
office, political organization office, or election of Presidential and
Vice Presidential electors. 26 U.S.C. 527(e)(1) and (2). BCRA excludes
from the prohibition certain section 527 organizations as discussed
below.
The regulations implementing this provision are set forth in new 11
CFR 300.11. A parallel provision of this regulation, 11 CFR 300.50, and
others affecting tax-exempt organizations that appear elsewhere in part
300, have been placed together in subpart C for the convenience of
those interested in locating rules pertaining to fundraising and
donations to tax-exempt organizations.
Section 300.11 as proposed closely tracked the language of BCRA.
The final rule has taken into account comments received on questions
posed in the NPRM, as discussed below. The Commission also notes that
since 11 CFR 300.37 contains a comparable provision applicable to
State, district, and local party committees, the discussion below also
applies to those entities unless otherwise indicated.
A. General Prohibition
Paragraphs (a)(1) and (2) of the final rules in section 300.11
remain unchanged from the proposed rule except for minor language
changes to the description of national congressional campaign
committees to conform with other formulations of the phrase.
Paragraph (a)(3) of the final rules implements BCRA's prohibition
on national party committee fundraising for, and donating to, a section
527 organization unless the organization is a ``political committee,''
a State or local party committee, or an authorized committee of a State
or local candidate. In the context of a parallel provision in 11 CFR
300.37 applicable to State, district, and local party committees, the
NPRM asked whether ``political committee'' should mirror the definition
of that term in 2 U.S.C. 431(4), which would encompass only
organizations that make contributions and expenditures in connection
with Federal elections, or whether the term should be interpreted to
also encompass State-registered political committees that support only
State and local candidates.
As discussed in the Explanation and Justification for 11 CFR
300.37, commenters supported a broader interpretation of ``political
committee'' in the context of donations by State and local party
committees. None of the commenters addressed this issue in the context
of the national party prohibition, however. The Commission concludes
that the broad prohibition applicable to national party fundraising and
spending in 2 U.S.C. 441i(a) (see 11 CFR 300.10) prevents a broader
construction of ``political committee'' in 11 CFR 300.11. Thus, 2
U.S.C. 441i(a) prohibits national party committees from soliciting or
directing to another person ``a contribution, donation or transfer of
funds or any other thing of value'' or spending any funds that are not
subject to the limitations, prohibitions and reporting requirements of
the Act. Funds solicited or directed by a national party committee to a
State-registered section 527 organization are not subject to the
reporting requirements of the Act. Accordingly, in the final rules,
paragraph (a)(3)(i) of 11 CFR 300.11 prohibits national party
committees from soliciting funds for, or making donations to a section
527 ``political committee'' unless the organization is a ``political
committee'' as defined in 11 CFR 100.5.
Paragraph (b) of 11 CFR 300.11, which describes the other persons
and entities to whom the prohibition applies, remains unchanged from
the proposed rule. The NRPM asked whether the final rule should provide
examples of the types of persons and entities covered by this
provision, and sought specific examples that might illuminate the scope
of this provision. Although many commenters expressed approval for
including examples as to who is covered by the provision, none provided
specific examples. The final rule does not include specific examples.
The NPRM also sought comments on whether the regulations should
contain a temporal requirement so that the prohibition on national and
State party fundraising and donations to non-profits is appropriately
circumscribed and does not encompass, for example, an organization that
made expenditures and disbursements in connection with a Federal
election many years ago but has not done so recently and does not plan
to do so in the future. After further consideration, the Commission has
determined that a temporal requirement is unnecessary because the
statutory language, ``makes expenditures and disbursements * * * '' is
in the present tense. Thus, the final rules do not contain a temporal
requirement. The definition of a 501(c) organization ``that makes
expenditures and disbursements in connection with a Federal election''
at 11 CFR 300.2(a) encompasses an organization's activities in the
current two-year election cycle only. See the
[[Page 49090]]
Explanation and Justification of 11 CFR 300.2(a) for further
discussion.
One non-profit organization urged the Commission to exclude
501(c)(3) organizations from the party committee fundraising/donation
prohibition. This commenter argued that because 501(c)(3) organizations
are required by tax law to undertake only election-related activity
that cannot benefit any particular candidate or party, they should not
be subject to the prohibition. However, the plain language of BCRA
applies to all 501(c) organizations that make disbursements or
expenditures in connection with Federal elections, including
expenditures and disbursements for Federal election activity. Financing
certain voter registration and GOTV activities are considered Federal
election activities under BCRA and new 11 CFR 100.24. Moreover, even
nonpartisan voter registration and GOTV activities are capable of
having an impact on Federal elections. Indeed, BCRA's co-sponsors
specifically indicated in their comments that nonpartisan voter
registration drives or GOTV activities were not intended to be excluded
from the definition of Federal election activity. The Commission notes
that this provision does not prohibit non-profit organizations from
undertaking any type of voter registration or GOTV activities. Because
Congress clearly could have excluded 501(c)(3) organizations from this
provision but chose not to do so, the final rules do not include any
such exclusion or exemption.
B. Safe Harbor Provisions
The NPRM asked whether a safe harbor provision should be provided
so that a national or State party committee and others affected by the
prohibition may raise funds for or make donations to a section 501(c)
or a section 527 organization if they take certain steps to ensure that
the organization is not one that falls within the prohibition. The NPRM
listed examples of possible safe harbors such as requiring party
committees to: (1) Obtain and examine a 501(c) organization's
application for tax-exempt status or annual IRS Form 990 returns to
determine whether the organization has reported making, or indicates
plans to make, expenditures or disbursements in connection with a
Federal election, or (2) with respect to current or planned activity,
obtain and examine a certification from the organization that indicates
it does not make, or plan to make, such expenditures.
The commenters agreed that the regulations should provide a safe
harbor for national and State party committees. The commenters split,
however, on what the safe harbor should be. The primary sponsors of
BCRA and one public interest group suggested that section 501(c) and
section 527 organizations be required to file sworn certifications with
the Commission, enforceable under 18 U.S.C. 1001, upon which a party
committee could rely in determining whether it could solicit funds for,
or make or direct donations to, such organizations. The sponsors of
BCRA urged that party committees be held strictly liable for any
violations of the Act if, in the absence of such a certification, an
organization misrepresents itself.
Without addressing the concept of a safe harbor, another public
interest group commented that a party committee should be required to
obtain a sworn certification from a section 501(c) or a section 527
organization for whom it wishes to solicit or to whom it wishes to
donate or direct funds.
Several party committee commenters expressed approval for a safe
harbor that would permit a party committee to obtain and rely on
applications for tax-exempt status or IRS Form 990 returns to determine
whether it could permissibly fundraise for, or donate to, a tax-exempt
organization. One commenter suggested that party committees be given a
choice between obtaining certifications or relying upon publicly
available tax documents. A labor organization argued that the
regulations should not require party committees to investigate non-
profits it wishes to donate to or assist. Rather, this commenter urged
that the Commission adopt specific language that a party committee
could use, presumably in a cover letter, when it makes a donation to a
501(c) to serve as a safe harbor ``from prosecution.'' The commenter
suggested that the party committee merely be required to state to the
section 501(c) organization that any funds it donated cannot be used
for activities that would ``constitute an expenditure in a Federal
election.''
In considering how to implement these BCRA provisions, the
Commission has concluded that a safe harbor is an appropriate way to
help ensure that party committees, and others to whom 11 CFR 300.11 and
300.37 apply, comply with the Act. The Commission believes that
requiring a 501(c) organization to file a certification with the
Commission would be burdensome. However, requiring party committees and
others covered by this provision to obtain a written certification from
an official with knowledge of an organization's activities is the best
way to ensure that the party committee or other person has information
as to whether a particular organization engages in certain election-
related activities. IRS Form 990s may not clearly show whether an
organization has undertaken specific election-related activities.
Moreover, these forms do not provide information on current activities.
Accordingly, new paragraph (c) of the final rule provides that a party
committee may obtain and rely upon a certification from a section
501(c) organization to determine whether it may permissibly raise funds
for, or make or direct donations to, the organization.
New paragraph (d) of the final rule sets forth specific criteria a
certification must include. These criteria are: (1) That the
certification is a signed written statement by an officer or other
authorized representative with knowledge of the organization's
activities; (2) that the certification states that, within the current
two-year election cycle, the organization has not made, and does not
intend to make, expenditures or disbursements in connection with an
election for Federal office (including for Federal election activity);
and (3) that the certification states that the organization does not
intend to pay debts incurred from the making of expenditures or
disbursements in connection with an election for Federal office
(including for Federal election activity) in a prior two-year election
cycle. The Commission believes that a requirement that the
certification be sworn to is unnecessary and that a certification is
sufficiently reliable if it is made in writing by an official of a tax-
exempt organization with knowledge of the organization's activities.
Moreover, requiring that the certification contain a statement that an
organization does not intend to pay Federal-election related debts from
a prior cycle will help ensure that the prohibition is not evaded.
New paragraph (e) states that a certification cannot be relied upon
if a national party committee, its officers or agents, or others
covered by the prohibition has actual knowledge that the certification
is false.
Finally, the NPRM sought comments on whether it would be considered
``directing'' a donation if a party committee responded to an
unsolicited request for information about organizations that share a
party's political, social, or philosophical goals. Commenters who
addressed this point stated that sharing such information would be
permissible. One party commenter opined that it would be
unconstitutional to try to prohibit this sharing of information as well
as
[[Page 49091]]
difficult to enforce. A public interest group commenter noted that
responding to such requests was permissible but would amount to
``directing'' a donation if the donor's request or the party's response
was in connection with a proposed ``or potential'' donation.
The Commission agrees that a rule prohibiting this type of
information-sharing is not necessary to enforce BCRA and would create
significant constitutional concerns. Therefore, new paragraph (f) of
the final rules states that it is not prohibited for a national party
or its agents to respond to a request for information about a tax-
exempt group that shares the party's political or philosophical goals.
11 CFR 300.12 Transition Rules
One of the BCRA amendments to the FECA prohibits national party
committees from raising and spending non-Federal funds after November
5, 2002, the effective date of BCRA.\5\ 2 U.S.C. 431 note. BCRA,
however, created a transition period between November 6, 2002 and
December 31, 2002, that permits national party committees to spend non-
Federal funds in their accounts as of November 5, 2002, for certain
expenses and debts. The rules governing the use of non-Federal funds by
national party committees, including national congressional campaign
committees, during this transition period are set forth in 11 CFR
300.12.
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\5\ The raising and spending of non-Federal funds by State,
district, and local committees or organizations are addressed in 11
CFR part 300, subpart B, discussed below.
---------------------------------------------------------------------------
A. Permissible Uses of Excess Non-Federal Funds During the Transition
Period
Paragraph (a) of section 300.12 describes the two permissible uses
of funds in a national committee's non-Federal accounts, other than an
office building or facility account, as of November 5, 2002. They are:
(1) To retire outstanding non-Federal debts or non-Federal obligations
incurred solely in connection with an election held before November 6,
2002; or (2) to pay non-Federal expenses or retire outstanding non-
Federal debts or obligations incurred solely in connection with any
run-off election, recount, or election contest resulting from an
election held prior to November 6, 2002. BCRA expressly provides that,
subject to the restrictions incorporated into paragraph (b) of 11 CFR
300.12, these non-Federal funds must be used solely for the two
enumerated purposes and must be spent before January 1, 2003. 2 U.S.C.
431 note.
The NPRM sought comments on whether the use of the word ``solely''
in the enumeration of the permissible uses of non-Federal funds in
paragraph (a) during the transition period precluded permitting any
funds remaining thereafter to be disgorged to the United States
Treasury or donated to a charitable organization. The Commission
received several comments on this issue as well as suggestions for
other permissible uses under paragraph (a).
The commenters split on whether the Commission should permit
remaining non-Federal funds in any non-Federal account to be donated to
charity. BCRA's sponsors and one public interest group stated that BCRA
provides no statutory basis for transferring any non-Federal funds as
of November 6, 2002, to non-profit organizations and doing so could
undermine a central purpose of the law which is to prohibit national
party non-Federal funds from being used in the 2004 elections. Since
charitable organizations under section 170 include section 501(c)(3)
organizations, the sponsors pointed out that there is a potential that
any donated funds could be used for Federal election purposes in the
next election. Section 501(c)(3) organizations are permitted to engage
in voter registration, get-out-the-vote activities, and other
activities defined as ``Federal election activities'' in BCRA.
The sponsors suggested, instead, that any funds remaining in a
national party committee's non-Federal accounts be either disgorged to
the United States Treasury or refunded to donors on a pro rata basis.
Another commenter concurred with this suggestion, pointing out that
because the statutory language only permitted specific uses during the
transition period, any funds remaining thereafter must be disgorged or
refunded.
On the other hand, other commenters believed that permitting
donations to at least some charitable organizations was permissible. A
public interest group commented that the Commission could require
disgorgement or permit donations to charitable organizations as long as
the charitable organization is not one that the national parties would
be prohibited from donating to under 11 CFR 300.10(b). A commenter from
a non-profit organization maintained that BCRA should be construed to
permit national parties to use any non-Federal funds remaining after
payment of non-Federal election-related debts for any purpose currently
permitted under FECA. According to this commenter such a construction
is warranted because BCRA is silent as to the disposition of funds
during the transition period after permissible debts are paid under
paragraph (a) of 11 CFR 300.12, and only specific uses are prohibited
in paragraph (b). The commenter further stated that the rules should
permit national parties to transfer non-Federal funds remaining after
non-Federal debt is paid to 501(c) organizations because these
organizations are required to engage in non-partisan charitable or
social welfare activity under tax law. None of the party committee
commenters addressed this issue.
The final rules address the disposal of excess non-Federal funds in
new paragraph (c), discussed below. Other minor changes made to
paragraph (a) in the final rules include: the word ``only'' has been
changed to ``solely'' to better track the language used in BCRA and a
reference to paragraph (e) has been deleted. Changes in the
organization of 11 CFR 300.12 are discussed below.
B. Prohibited Uses of Non-Federal Funds After November 5, 2002
BCRA provides that the permissible uses of non-Federal funds
enumerated in paragraph (a) are subject to certain restrictions. The
final rules at 11 CFR 300.12(b) set forth these restrictions.
Specifically, paragraph (b) states that national party committees will
no longer be able to use non-Federal funds for any of the following
activities after November 5, 2002: (1) To pay any expenditure as
defined in 2 U.S.C. 431(9); (2) to retire outstanding debts or
obligations that were incurred for any expenditure; or (3) to defray
the costs of the construction or purchase of any office building or
facility. The final rules track the language in the proposed rules. The
Commission did not receive any comments concerning this paragraph,
other than those pertaining to building funds, which are discussed
below.
C. Disposal of Remaining Non-Federal Funds
New paragraph (c) provides that any non-Federal funds remaining
after payment for permissible debts and obligations described in
paragraph (a) must be either disgorged to the United States Treasury or
returned by check to the donors by December 31, 2002. This approach
gives effect to the use of the word ``solely'' in 2 U.S.C. 431 note,
and to the legislative intent to prohibit national party non-Federal
money from being used in future Federal elections. The Commission did
not adopt the suggestion that refunds must be made to contributors on a
pro rata basis. National party committees have the
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option of making these refunds on a last-in, first-out (LIFO) or first-
in, first-out (FIFO) basis. Paragraph (c) further provides that all
refund checks not cashed by donors by February 28, 2003 must be
disgorged to the United States Treasury by March 31, 2003. The latter
provision ensures that the national party committees do not make use of
any uncashed refund checks. Requiring either disgorgement to the United
States Treasury or refunds to donors is consistent with the
Commission's practice in enforcement matters when a contributor has
made, and a political committee has accepted, funds prohibited under
the Act.
D. National Party Committee Office Building or Facility Accounts
BCRA treats non-Federal funds contained in national party building
fund accounts more stringently than non-Federal funds in the national
party committees' other non-Federal accounts. Under current law, funds
in a national party building fund account may be used only for the
purchase or construction of the national party committees' office
building or facility. Beginning November 6, 2002, however, any funds
remaining in a national party building fund account must not be used
for the purchase or construction of any office building or facility.
See 2 U.S.C. 431 note. Consequently, the Commission proposed requiring
that funds on deposit in any party office building or facility account
be disgorged to the United States Treasury or donated to a organization
described in 26 U.S.C. 170(c) no later than December 31, 2002.
As discussed above, although some commenters suggested that
national party committees be permitted to donate the remaining non-
Federal funds to a charitable organization, other commenters noted that
such organizations include organizations exempt under 26 U.S.C.
501(c)(3) which could result in non-Federal funds making their way into
future Federal elections since 501(c)(3) organizations may engage in
Federal election activity such as voter registration and get-out-the-
vote activities. For this reason, the final rule in 11 CFR 300.12(d)
follows the approach taken in paragraph (c) for disposal of excess non-
Federal funds: Paragraph (d) requires that non-Federal funds remaining
in national party building and office facility accounts on November 6,
2002 be disgorged or refunded to donors by December 31, 2002. As in
paragraph (c), any refund checks not cashed by donors by February 28,
2003, must be disgorged to the United States Treasury by March 31,
2003.
Additionally, in their comments, the sponsors pointed out that
while the proposed rule only prohibited excess building funds from
being used to construct or purchase a national party office building,
the statutory language prohibits the use of such funds to defray
construction or purchase costs for ``any'' office building or facility.
See 2 U.S.C. 431 note. Paragraph (d) of the final rules also
incorporates this change.
E. Application
The final rule at 11 CFR 300.12(e) clarifies that the transition
rules apply to officers and agents acting on behalf of a national party
committee or a national congressional campaign committee, and to
entities that are directly or indirectly established, financed,
maintained, or controlled by a national party committee or a national
congressional campaign committee. The Commission did not receive any
comments relating to this provision. The final rule follows the
proposed rule at 300.12(c) except that it has been redesignated as
paragraph (e).
F. Allocation and Payment of Expenses During the Transition Period
Section 300.12(f) clarifies that the allocation rules applicable to
national party non-Federal and Federal accounts in revised 11 CFR 106.5
remain in effect during the transition period. No comments addressed
this provision. The final rules in paragraph (f) are identical to
proposed paragraph (d).
11 CFR 300.13 Reporting
BCRA requires national party committees, including national
congressional campaign committees, and any subordinate committee of
either, to report all receipts and disbursements during regular
reporting periods. 2 U.S.C. 434(e). New 11 CFR 300.13(a) tracks the
statutory language.
The NPRM sought comment on whether this provision of BCRA was
intended to require reporting by existing entities that currently are
not required to report and sought the identity of any such entities.
The primary sponsors of BCRA commented that the term ``subordinate
committee'' was intended to ensure that any new committees created by
the national party committees would file required reports for all
receipts and disbursements. The sponsors further stated that this
provision requires existing entities that are subordinate to the
national parties to report all of their receipts and disbursements
whether or not they are required to do so under current law. The
sponsors and several other public interest group commenters identified
the College Democrats and College Republicans as subordinate committees
of the national parties. None of the party committee commenters
addressed this point.
Although neither BCRA nor FECA contains a definition of a
``subordinate committee'' of a national political party, the phrase is
used in 2 U.S.C. 441a(a)(4). That provision states that limitations on
contributions do not apply to transfers between and among political
committees that are national, State, district, or local committees of
the same political party ``including any subordinate committee
thereof.'' In Advisory Opinion 1976-112, the Commission concluded that
Democrats Abroad was a subordinate committee of the Democratic National
Committee for purposes of 2 U.S.C. 441a(a)(4). The advisory opinion
noted that the group was ``an organization of American citizens living
overseas who support the basic principles of the National Democratic
Party,'' had a central office in London, and local clubs in several
countries that anticipated reaching political committee status. The
Commission concluded that Democrats Abroad functioned as a part of the
official structure of the Democratic Party and represented the
Democratic Party to Americans living in foreign countries. Factors
relied upon in this conclusion included: the group held fundraisers,
the proceeds of which were donated to the DNC; the Democratic Party
charter authorized a voting delegate from the group to participate at
the 1976 party convention; the Call to Convention gave the group three
votes to be cast by six delegates elected by group members in
accordance with the rules of the party's Compliance Review Commission;
the group was allowed representation on the Standing Committee of the
Democratic Party; and the group functioned as a party committee by
participation in voter registration and GOTV drives for the Democratic
Party in 1976. The Commission specifically rejected the conclusion that
Democrats Abroad was the equivalent of a State party committee based on
the statutory definitions of ``State committee'' and ``State.''
Based on the prior construction of the term in Advisory Opinion
1976-112, the Commission concludes that a ``subordinate committee'' of
a national party committee is one that is affiliated with, and
participates in, the official party structure of the national party
committee. As applied to a particular group, whether an organization is
a subordinate committee of a national party is a factual determination.
Based on the broad legislative intent to
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prohibit national parties from raising and spending non-Federal funds,
however, the Commission further concludes that a subordinate committee
for purposes of 11 CFR 300.13(a) is an entity that is directly or
indirectly established, financed, maintained, or controlled by a
national committee of a political party.
Since national party committees and entities directly or indirectly
established, financed, maintained, or controlled by them cannot
solicit, receive, direct, or spend non-Federal funds as of November 6,
2002, and must dispose of all funds in their non-Federal accounts as of
December 31, 2002, 11 CFR 300.13(b) requires national party committees
and their subordinate committees to file termination reports for all
non-Federal accounts, whether or not a subordinate committee was
required to file disclosure reports under FECA prior to BCRA. Paragraph
(b) of the final rule also takes into consideration the Commission's
determination that excess non-Federal funds must be either refunded to
donors or disgorged to the United States Treasury. If a national party
committee does not issue refund checks, the national party committee
must file a termination report for all non-Federal accounts, including
building fund accounts by January 31, 2003. If a national party
committee issues refund checks to donors, it must file a termination
report covering the period ending March 31, 2003 disclosing the refunds
and the disgorgement of any refund checks not cashed by February 28,
2003.
Paragraph (c) of Sec. 300.13 makes clear that the reporting
regulations at 11 CFR 104.8 and 104.9 applicable to non-Federal
accounts, including building funds, will remain in effect during the
transition period. Paragraph (c)(2) provides that reporting
requirements at 11 CFR 104.9(c) and (d) covering disbursements from
non-Federal account and building fund accounts remain in effect for
reports covering the period through March 31, 2003. In contrast, under
paragraph (c)(1), the reporting requirements at 11 CFR 104.8(e) and
(f), covering receipts of non-Federal and building fund accounts and 11
CFR 104.9(e) covering non-Federal account transfers to State party
committees, remain in effect only until December 31, 2002.
Subpart B--State, District, and Local Party Committees and
Organizations
11 CFR 300.30 Accounts
Under proposed 11 CFR 300.30 in the NPRM, State, district, and
local party organizations would have been required to maintain certain
separate Levin accounts in depositories if they paid for the costs of
voter registration within a fixed time period or for certain voter
identification, GOTV, and generic campaign activity pursuant to 11 CFR
100.24 and 300.32(b)(1). Several of the comments received in response
to the NPRM agreed with the proposal that all State, district, and
local party committees and organizations be required to maintain
separate Levin accounts, no matter the organization's size, level of
activity and political committee status, if they desired to undertake
certain Federal election activities pursuant to 11 CFR 300.32(b). Other
comments raised directly or indirectly the issue of whether the
Commission should or even could require such accounts, particularly in
light of laws in certain States either limiting the number of non-
Federal accounts that a State party organization may hold or, more
often, requiring numerous such accounts for varying purposes. It was
also argued that the number of non-Federal accounts held by a party
committee or party organization is a State, not a Federal issue.
The final rules do not require a separate Levin account. Instead,
State, district, and local party organizations that decide to undertake
activities pursuant to 11 CFR 300.32(b) may deposit Levin funds in
either a separate Levin account or their non-Federal account. If a
committee's non-Federal account also functions as its Levin account, it
must demonstrate through a reasonable accounting method approved by the
Commission (including any method embedded in software provided or
approved by the Commission) that it has sufficient Levin funds to cover
the non-Federal share of any disbursement it makes for allocable
Federal election activity.
The Commission recognizes that some States already require multiple
accounts, while a few may prohibit more than one account for all
activity. Most importantly, the Commission is very aware of, and
concerned about, the complexities of FECA as amended by BCRA, and wants
to provide party organizations with procedural flexibility to
facilitate compliance with the substantive conditions and restrictions
arising from the Levin Amendment.
The NPRM proposed a requirement that, in order for donations to be
placed in a Levin account, either the solicitations for the donations
must have expressly stated that donations will be subject to the
special limitations and prohibitions of section 300.31, or there must
have been an express designation to the Levin account by the donors.
Several commenters objected to these requirements, arguing that they
are not in BCRA and would be unnecessary, inappropriate, and could make
it difficult for State, district and local party committees to engage
in bona fide Levin activities. The Commission agrees, and the final
rules contain no such requirement.
Paragraph (a) provides an overview of the section and specifies
that 11 CFR 300.30 applies to any State, district, or local committee
or organization of a political party that has receipts or makes
disbursements for Federal election activity, whether or not such
committee is a political committee under 11 CFR 100.5.
Paragraph (b) describes the requirements for four different types
of accounts: Federal accounts, Levin accounts, non-Federal accounts,
and allocation accounts. Paragraph (b)(1) provides for the use of non-
Federal accounts by State, district, and local party committees, to the
extent permitted by State law, and lists the provisions under which
non-Federal funds may be used in connection with Federal elections.
Paragraph (b)(2) provides for an account solely for Levin funds, and
references 11 CFR 300.31 and 300.32(b), which track the statutory
requirements for raising Levin funds and disbursing Levin funds,
respectively.
Paragraph (b)(3)(i) requires that only contributions permissible
under the Act be deposited into a State, district, or local party
committee's Federal account, even when such funds may be used in
connection with both Federal and non-Federal elections. It also
provides a cross-reference to 11 CFR 103.3, which explains the
procedure for dealing with impermissible funds. Paragraph (b)(3)(ii)
describes the information that must be provided to or received from
contributors regarding contributions deposited in a Federal account.
Paragraph (b)(3)(iii) requires that only Federal accounts or allocation
accounts be used to make disbursements, contributions, or expenditures
in connection with Federal elections. This procedure tracks the
longstanding requirements at 11 CFR 106.5 for transfers to Federal
accounts or to allocation accounts for shared Federal and non-Federal
activity.
Paragraph (b)(3)(iv) provides that, when a Federal rather than an
allocation account is to be used to make allocable expenditures, the
initial payment must be made from the Federal account with timely
reimbursements from other accounts involved in a transaction. Paragraph
(b)(3)(v) prohibits transfers
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into a party committee's Federal account from other accounts of the
same party committee or from other party committees or party
organizations to pay for Federal election activity, except as permitted
by 11 CFR 300.30(b)(3)(iv), 300.33, and 330.34. The language of this
paragraph in the NPRM has been changed to better track the requirements
of BCRA.
The NPRM requested comments on whether the Commission should
continue to permit the use of allocation accounts for purposes of
making allocable expenditures. The consensus of those responding to
this question was in the affirmative. Therefore, a new paragraph (b)(4)
is being added expressly permitting the establishment of such
allocation accounts in lieu of making all allocated expenditures from a
Federal account and setting out the requirements for the use of such
allocation accounts. Paragraphs (b)(4)(i) and (ii) state that only
certain funds may be deposited in each allocation account, depending
upon whether the purpose of the account is to make expenditures and
disbursements that have been allocated between a party committee's
Federal and non-Federal accounts or to make expenditures and
disbursements that have been allocated between its Federal and Levin
accounts. This rule is necessitated by the requirements in BCRA that
define the specific funds that can and cannot be used for such
activities. Paragraph (b)(4)(iii) requires that, once allocation
accounts are established, they must be used for all allocable expenses
so long as the accounts are maintained. Pursuant to paragraph
(b)(4)(iv) and (v), only the amount needed to meet the allocable share
of expenses may be transferred into these allocation accounts and no
funds from these accounts may be transferred out to other accounts.
Paragraph (c) provides three different options for paying for
Federal election activity. Paragraph (c)(1) requires that one or more
Federal account be established, which would need to be used to pay for
Federal election activity that is not allocable, as well as to pay the
Federal portion of Federal election activity that is allocable.
Paragraph (c)(1) also allows Federal funds to be used in non-Federal
elections, provided that the contributors of the Federal funds have
been informed that their contributions will be subject to the
limitations and prohibitions of the Act and provided that the
disbursements are reported pursuant to section 300.36. The phrase
``subject to State law'' has been added in response to a comment on the
NPRM.
Paragraph (c)(2) provides the option of having at least three
separate accounts: one or more Federal, Levin, and non-Federal
accounts.
Paragraph (c)(3) provides that if a committee opts not to have a
separate Levin account, but instead uses its non-Federal account for
depositing and disbursing Levin funds, the committee must demonstrate
through a reasonable accounting method approved by the Commission
(including any method embedded in software provided or approved by the
Commission) that the committee has sufficient Levin funds on hand to
cover disbursements for Levin activity.
Paragraph (d) requires all party organizations to keep records and
to make them available to the Commission upon request.
11 CFR 300.31 Receipt of Levin Funds
In BCRA, Congress placed several restrictions on how State,
district, and local political party committees raise Levin funds. New
11 CFR 300.31 implements these statutory restrictions. Paragraph (a)
states as a general proposition a key point in the statute: a State,
district, or local political party committee that spends Levin funds
must raise those funds solely by itself. 2 U.S.C. 441i(b)(2)(B)(iv).
Paragraphs (b) and (c) of section 300.31 elaborate on the statutory
requirement that Levin funds must be raised from donations that comply
with the laws of the State in which the State, district, or local party
committee is organized. 2 U.S.C. 441i(b)(2)(B)(iii). Paragraph (b)
states this as a general requirement. More specifically, paragraph (c)
clarifies the status of donations from sources that are permitted under
State law, but prohibited by the Act. A prime example is donations from
corporations and labor organizations. Under 2 U.S.C. 441b of the Act,
``[i]t is unlawful * * * for any corporation whatever, or any labor
organization, to make a contribution or expenditure in connection with
any election'' for Federal office. 2 U.S.C. 441b(a). Under the campaign
finance laws of several States, however, donations by corporations or
labor organizations to political party committees are legal. Section
300.31(c) clarifies that in such States, a political party committee
may solicit and accept donations of Levin funds from corporations and
labor organizations, subject to the other conditions of the Act. (Of
course, if donations from corporations or labor organizations to a
political party committee are illegal in a State, political party
committees in that State would not be able to accept Levin fund
donations from those sources.)
Three commenters expressed concern that section 300.31(c), as
published in the NPRM, could be misinterpreted to allow donations from
foreign nationals. One of these commenters suggested adding the phrase,
``other than 2 U.S.C. 441e,'' after the word ``chapter.'' Although the
sweeping nature of the 2 U.S.C. 441e as amended by BCRA seems to
preclude the possibility that a donation by a foreign national to a
party committee could be lawful under any State law, the Commission has
revised paragraph (c) of section 300.31 as suggested.
The principal Congressional sponsors commented that paragraph (c)
should not be misinterpreted to allow a donation of Levin funds to a
State, district, or local political party committee from a person
established, financed, maintained, or controlled by a person forbidden
from providing Levin funds to the committee. The Commission has
addressed this concern in paragraphs (e) and (f) of section 300.31.
(See discussion below.)
Paragraph (d), in general, addresses amount limitations on
donations of Levin funds to a State, district, or local party
committee. In the Levin Amendment, Congress placed a $10,000 per
calendar year per donor limitation on donations to a State, district,
and local political party committee to be used as Levin funds. This
statutory amount limitation applies to a person, including ``any person
established, financed, maintained, or controlled by such person.'' 2
U.S.C. 441i(b)(2)(B)(iii). Paragraph (d)(1) clarifies that this is an
aggregate limit per recipient committee (i.e., the aggregate limit
applies separately to each party committee) and, therefore, a person
may contribute to an unlimited number of State, district, and local
committees of a political party. See discussion of 11 CFR 300.31(d)(3),
below. Paragraph (d)(1) did not draw comment. In the NPRM, the
Commission sought comment on whether its current ``affiliation''
regulation (11 CFR 100.5(g)) would appropriately determine whether a
person is ``established, financed, maintained, or controlled,'' within
the meaning of this paragraph. The Commission received no comments on
this point. The Commission, in this rulemaking, is adopting 11 CFR
300.2(c), which is based on 11 CFR 100.5(g), which should be applied to
determine whether certain persons share a $10,000 per year per
committee contribution amount limitation under paragraph (d)(1).
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Paragraph (d)(2) addresses those cases in which State law imposes
an amount limitation on donations to a State, district, or local party
committee that differs from the amount limitation in 2 U.S.C.
441i(b)(2)(B)(iii) and paragraph (d)(1). Paragraph (d)(2) strikes a
balance between respect for State law and protecting the integrity of
the Levin Amendment amount limitation. It makes clear that lower State
law amount limitations prevail over the $10,000 limitation in the Levin
Amendment, but that the Levin Amendment $10,000 limit controls where
State law amount limitations exceed $10,000. There were no public
comments on paragraph (d)(2).
Paragraph (d)(3) of section 300.31 addresses the question of
whether State, district, and local committees of the same political
party are affiliated for purposes of applying the donation amount
limitation as set forth in paragraphs (d)(1) and (d)(2) of section
300.31. See generally 11 CFR 110.3. The paragraph clarifies that such
committees are not considered affiliated only for the purpose of
determining compliance with paragraph (d)(1). See 148 Cong. Rec. H410
(daily ed. Feb. 13, 2002) (statement of Rep. Shays).
The last sentence of paragraph (d)(3) is intended to make clear
that there is no limit to the number of State, district, and local
committees to which a person may donate Levin funds. The phrase
``individually or together with'' in paragraph (d)(3) is intended to
clarify that the amount limitations in paragraphs (d)(1) and (d)(2)
apply collectively to the amounts donated to a particular party
committee by a person and by any entities established, financed,
maintained, or controlled by such person.
Three commenters discussed paragraph (d)(3). A national party
committee supported the provision. Another commenter suggested that
there should be a ``rebuttable presumption'' of affiliation of party
organizations ``at the same political or geographic unit'' in order to
prevent a possible proliferation of party organizations each with its
own $10,000 per donor limit. The legislative history indicates,
however, that Congress contemplated the possibility of such a
proliferation of party committees and chose to address it by imposing a
ban on transfers of Levin funds between party committees rather than by
affiliating the committees under a single contribution limit. 148 Cong.
Rec. H410 (daily ed. Feb. 13, 2002) (statement of Rep. Shays); see 2
U.S.C. 441i(b)(2)(B)(iv). Therefore, the Commission has not adopted
this suggestion.
As mentioned above in the discussion of paragraph (a) of section
300.31, a key point made in the statute is that expenditures and
disbursements of Levin funds by a State, district, or local political
party committees must be ``made solely from funds raised by the * * *
committee which makes such expenditure or disbursement * * *.'' 2
U.S.C. 441i(b)(2)(B)(iv). Congress elaborated on this fundamental
requirement by specifically providing that Levin funds must not be
``solicited, received, directed, transferred, or spent by or in the
name of'' a national committee of a political party, including a
national Congressional campaign committee, or a Federal candidate or
individual holding Federal office. 2 U.S.C. 441i(b)(2)(C)(i). This
statutory prohibition extends to an agent acting on behalf of a
national party committee or a candidate or Federal officeholder, and to
any entity that is directly or indirectly established, financed,
maintained, or controlled by a national party committee or a candidate
or Federal officeholder. 2 U.S.C. 441i(a)(2), and (e)(1); see 2 U.S.C.
441i(b)(2)(C).
Paragraph (e) of section 300.31 implements these specific statutory
restrictions. Paragraph (e)(1) provides that a State, district, or
local political party committee must not ``accept or use'' as Levin
funds any funds ``solicited, received, directed, transferred or spent''
by a national committee of a political party, including a national
Congressional campaign committee. Paragraph (e)(2) extends the same
prohibition to funds ``solicited, received, directed, transferred or
spent'' by a Federal candidate or officeholder. Two commenters pointed
out that paragraphs (e)(1) and (e)(2), as published in the NPRM, did
not consistently or expressly refer to agents of, or to entities
directly or indirectly established, financed, maintained, or controlled
by, national party committees and Federal candidates and officeholders.
The prohibition in paragraph (e)(1) has been revised in the final
regulation to extend explicitly to agents of, and to entities directly
or indirectly established, financed, maintained, or controlled by,
national party committees and by Federal candidates and officeholders.
Similarly, paragraph (e)(2) has been revised to refer expressly to
agents of Federal candidates and officeholders.
Confusion could arise about the relationship of the Commission's
long standing joint fundraising regulation, 11 CFR 102.17, and the
restrictions imposed in paragraphs (e)(1) and (e)(2) of section 300.31.
Therefore, both paragraphs (e)(1) and (e)(2) explicitly provide that 11
CFR 102.17 does not permit joint fundraising of Levin funds by a State,
district, or local political party committee, and a national party
committee or a Federal candidate or officeholder. Paragraph (e)(1) also
clarifies that a State, district, or local political party committee
may jointly raise, under 11 CFR 102.17, Federal funds not to be used
for Federal election activity.
Congress specifically addressed other joint fundraising of Levin
funds by providing that a State, district, or local political party
committee must not use as Levin funds any amounts ``solicited,
received, or directed through fundraising activities conducted jointly
by two or more State, local, or district committees of any political
party or their agents.'' 2 U.S.C. 441i(b)(2)(C)(ii). This prohibition
extends across State lines. Ibid. New paragraph (f) implements this
statutory prohibition against joint fundraising of Levin funds by more
than one State, district, or local committee of a political party,
including such parties from more than one State. Paragraph (f) also
clarifies that nothing in BCRA forbids two or more State, district, or
local political party committees from jointly raising Federal funds
that are not to be used for Federal election activity.
The provisions of paragraphs (e)(1), (e)(2), and (f) of section
300.31 regarding joint fundraising drew several comments. A national
party committee suggested that the Commission clarify that these joint
fundraising prohibitions extend only to Levin funds. In response, the
Commission emphasizes that the section heading and the language in the
introduction to paragraph (e) explicitly limit the scope of these
provisions to ``Levin funds.'' Similarly, the Commission emphasizes
that paragraph (f) explicitly refers to ``Levin funds.''
One commenter approved of the scope of joint fundraising provisions
of paragraphs (e)(1), (e)(2), and (f), stating that the joint
fundraising prohibition should extend beyond particular ``events'' to
all fundraising activities for Levin funds that are conducted jointly.
Conversely, three commenters, a national party committee, a State party
committee, and an association of State party officials, urged the
Commission to limit the reach of the joint fundraising prohibition in
paragraphs (e)(1), (e)(2), and (f) to ``specific joint fundraising
events,'' in contrast to joint fundraising ``activities.'' They urge
that such joint fundraising ``activities'' for Levin funds should be
permitted. In support, they quote Rep. Shays, who said, ``joint
fundraisers between state committees or state and local committees are
not
[[Page 49096]]
permitted * * * The joint fundraising prohibition will prevent a single
fundraiser for multiple state and local party committees.'' 148 Cong.
Rec. H410 (daily ed. Feb. 13, 2002). These commenters apparently have
focused upon Rep. Shays' use of the term ``single fundraiser,'' which
they seem to interpret to mean a dinner, a speech, or similar
``event.'' Presumably, a fundraising ``activity,'' such as a direct
mail campaign, would be permitted under the commenters' suggested
interpretation. In response, the Commission notes that statements by
any member of Congress during the floor debate should not be used to
contradict the plain language of the statute. BCRA itself broadly
refers to ``fundraising activities conducted jointly'' by State,
district, or local political party committees. 2 U.S.C.
441i(b)(2)(C)(ii) (emphasis added). In addition, the specific statement
made by Rep. Shays, referring to a ``single fundraiser,'' could easily
encompass either a dinner or a specific direct mail campaign.
In the final rules, the Commission has added as a separate
paragraph (g) a rule stated in the NPRM as the final sentence of
paragraph (f). Paragraph (g), under the heading ``Safe harbor,''
provides that the use of a common vendor by more than one State,
district, or local political party committees does not constitute joint
fundraising within the meaning of section 300.31. In the version of the
regulation published in the NPRM (then in paragraph (f)), the rule
would have provided that the use of a common vendor would not, by
itself, be deemed joint fundraising. The Commission revised this
language in order to provide a ``bright-line'' rule. The principal
Congressional sponsors of BCRA, responding to the NPRM, agreed with
this provision in principle, but noted that use of a common vendor may,
in some circumstances, be a means of carrying out actual `joint
fundraising' schemes. The sponsors urged the Commission to be ``highly
attentive'' to this practice.
11 CFR 300.32 Expenditures and Disbursements
11 CFR part 300, subpart B, generally addresses expenditures and
disbursements of Federal funds and of Levin funds for Federal election
activities. 11 CFR 300.32 specifically addresses both kinds of spending
by a State, district, or local political party committee, and clarifies
that BCRA does not affect spending of non-Federal funds for purely
State or local activity. 11 CFR 300.32 also implements part of 2 U.S.C.
441i(b)(1), which requires that an association or similar group of
candidates for State or local office, or an association of State or
local officeholders, must make expenditures or disbursements for
Federal election activity solely with Federal funds.
In the NPRM, the Commission solicited comments about the term,
``association or similar group of candidates for State or local office,
or an association of State or local officeholders,'' specifically
asking whether it should be further defined in the regulations, and if
so, about examples of such associations or groups to include in the
final regulations. The Commission received no comments on this point,
nor did the Commission receive any other comments about paragraph
(a)(1).
Paragraph (a)(1) requires that an association or similar group of
candidates for State or local office, or an association of State or
local officeholders, must make expenditures or disbursements for
Federal election activity solely with Federal funds. Paragraph (a)(2)
makes clear that the general rule in BCRA is that a State, district, or
local political party committee spending on Federal election activity
must use Federal funds for that spending, except as provided in 2
U.S.C. 441i(b)(1). The Commission received no comments regarding this
provision.
Paragraphs (a)(3) and (a)(4) address how State, district, or local
party committees must pay the costs of raising funds used to pay for
Federal election activities. In BCRA, Congress required that spending
by a State, district, or local committee of a political party ``to
raise funds that are used, in whole or in part, for expenditures and
disbursements for a Federal election activity shall be made from funds
subject to the limitations, prohibitions, and reporting requirements of
this Act.'' 2 U.S.C. 441i(c). As published in the NPRM, paragraphs
(a)(3) and (a)(4) sought to implement section 441i(c) as it applied to
Federal funds raised for Federal election activity and Levin funds
raised for Federal election activity, respectively.
In the NPRM, the Commission sought comment about section 441i(c)
with regard to Levin funds. In particular, the Commission sought
comment on (1) whether proposed paragraph (a)(4) could be limited to
the direct costs (see pre-BCRA 11 CFR 106.5(a)(2)(ii)) of raising Levin
funds; and (2) whether the costs of fundraising for Levin funds could
be allocated between a party committee's Federal and non-Federal
accounts under the ``funds received'' method. See pre-BCRA 11 CFR
106.5(f). Comments were also sought as to whether, generally, greater
specificity should be provided in proposed section 300.32 as to the
nature of fundraising costs in this section. 67 FR 35664.
The Commission received several comments about paragraphs (a)(3)
and (a)(4). The principal Congressional sponsors of BCRA and a public
interest group suggested that both paragraphs (a)(3) and (a)(4) should
be clarified by including the statutory language, ``in whole or in
part.'' The Commission has included this suggestion in the final
regulation. The added language better conforms the scope of the
regulation to the scope of the statute.
Another commenter suggested that both paragraphs (a)(3) and (a)(4)
should be limited to the direct costs of raising funds to be spent for
Federal election activity, in contrast to the regulation proposed in
the NPRM, which would have covered all costs of fundraising. The
Commission has included this suggestion in the final rules. The
purposes of 2 U.S.C. 441i(c) are adequately served by regulating only
the direct costs of raising funds for Federal election activity. This
limitation also avoids unnecessary confusion about allocation of
administrative costs in the fundraising context in that covering the
direct costs of fundraising is consistent with the Commission's
longstanding regulation of fundraising costs. Given this change in the
final regulation, the Commission has imported language from its pre-
BCRA allocation regulation describing what constitutes direct costs.
A public interest group supported paragraph (a)(4) of the NPRM,
while a State party committee objected to paragraph (a)(4) to the
extent that it forbids a State, district, or local political party
committee from spending Levin funds to raise Levin funds. This
commenter suggests that Levin funds are subject to the limitations,
prohibition, and reporting requirements of the Act, as specified in 2
U.S.C. 441i(c).
The Commission notes that 2 U.S.C. 441i(b)(2)(A), which addresses
the use of Levin funds for certain Federal election activity, refers to
``amounts which are not subject to the limitations, prohibitions, and
reporting requirements of this Act (other than any requirements of this
subsection).'' Although that statutory phrase is somewhat incomplete,
in that it omits any reference to the reporting requirements for Levin
activity that are found in a different section of the Act (2 U.S.C.
434(e)), it is nonetheless a recognition that Levin funds are subject
to requirements of the Act.
Yet even without this phrase, the Commission would find that Levin
[[Page 49097]]
funds are subject to the limitations and prohibitions found in the Act
at 2 U.S.C. 441i(b)(2), and the reporting requirements found in the Act
at 2 U.S.C. 434(e)(2)(A). The Commission notes that 2 U.S.C.
441i(b)(2)(B) places a $10,000 limit on Levin funds donated to any one
State, district, or local committee of a political party, which is
greater than the amount limitation for contributors to authorized
committees under 2 U.S.C. 441a(a)(1)(A), but less than the amount
limitation for contributors to national committees under 2 U.S.C.
441a(a)(1)(B). The Commission finds that even though there are
different amount limitations that apply to different contexts in the
Act, that does not cause any of those limitations to not be limitations
``of the Act.'' Similarly, 2 U.S.C. 441i(b)(2)(B) and 441i(b)(2)(C)--
which, among other things, prohibit the use of Levin funds for activity
that refers to a Federal candidate and prohibit the receipt of Levin
funds raised by other party committees--contain different prohibitions
than other sections of the Act (see, e.g., 2 U.S.C. 441b), but are
prohibitions ``of the Act'' nonetheless. And finally, reporting
requirements under the Act can vary depending on the amount and nature
of the receipt or disbursement, as well as on the nature of the entity
that is receiving and disbursing the amount at issue. See 2 U.S.C. 434.
The same variables apply to the reporting requirements for funds raised
and disbursed for Federal election activity. See 2 U.S.C. 434(e). In
light of the statutory limitations, prohibitions and reporting
requirements to which Levin funds are subject, the Commission concludes
that State, district, and local party committees or organizations may
spend Levin funds to raise Levin funds.
Paragraph (b) of section 300.32 lists the types of activities for
which a State, district, or local political party committee may spend
Levin funds. Paragraph (b)(1) spells out the two kinds of Federal
election activity for which Levin funds may be spent, see 2 U.S.C.
441i(b)(2)(A), and provides that such spending must be made subject to
the conditions set out in paragraph (c) of section 300.32. The
principal Congressional sponsors of BCRA suggested that the word
``only'' be included to preclude any possible misinterpretation of the
provision. The Commission has adopted this suggestion in the final
regulation.
Paragraph (b)(2) of section 300.32, as proposed in the NPRM, drew
several comments. A national party committee and a State party
committee supported the provision. The principal Congressional sponsors
of BCRA and a public interest group expressed concern that paragraph
(b)(2) could be misinterpreted to allow spending of Levin funds for the
Federal election activities described in 2 U.S.C. 431(20)(A)(iii) and
(iv). In response to this concern, the Commission has added the
language, ``other than the Federal election activities defined in 11
CFR 100.24(b)(3) and (4),'' which implement section 431(20)(A)(iii) and
(iv).
As published in the NPRM, paragraph (b)(2) of section 300.32 would
have allowed a State, district, or local political party committee to
spend Levin funds for any purposes allowed by State law, and would have
also provided that such spending was not subject to paragraph (c) (see
below). The principal Congressional sponsors of BCRA expressed concern
that the latter provision could be misinterpreted to allow fundraising
and unallocated spending of Levin funds otherwise forbidden in other
regulations. The Commission agrees. Therefore, the final rule,
paragraph (b)(2), exempts spending of Levin funds for purposes
permissible under State law from only paragraphs (c)(1) and (c)(2) of
section 300.32 because those two paragraphs are specifically focused on
spending for Federal election activities. As revised, the final rule
subjects all spending of Levin funds to paragraphs (c)(3) and (c)(4).
The heading for paragraph (c) has been changed slightly in the final
rule to conform with this change.
While the Levin Amendment permits the spending of Levin funds for
the purposes set out in paragraphs (b)(1) and (2), it places
restrictions and conditions on that spending when it is for Federal
election activity. Paragraph (c) sets out in one place important
restrictions and conditions that are stated in different sections of
BCRA. Paragraph (c)(1) implements the restriction that the Federal
election activity paid for partly with Levin funds must not refer to a
clearly identified Federal candidate. See 2 U.S.C. 441i(b)(2)(B)(i).
Paragraph (c)(2) implements the restriction that the Federal election
activity paid for partly with Levin funds must not be for any
broadcast, cable, or satellite communications, other than a
communication that refers solely to a clearly identified candidate for
State or local office. See 2 U.S.C. 441i(b)(2)(B)(ii). Paragraph (c)(3)
ties together the provisions of this regulation with 11 CFR 300.31,
which covers the raising of Levin funds. Paragraph (c)(4) requires
allocable Federal election activity (i.e., voter registration, voter
identification, GOTV, or generic campaign activity that does not refer
to a clearly identified Federal candidate and is not a broadcast,
cable, or satellite communication) that exceeds in the aggregate $5,000
in a calendar year to be paid for either entirely with Federal funds,
or with a combination of Federal funds and Levin funds pursuant to the
allocation percentages set forth in 11 CFR 300.33. Disbursements that
aggregate $5,000 or less in a calendar year for this restricted
category of Federal election activity may be paid for entirely with
Federal funds, entirely with Levin funds, or pursuant to the allocation
percentages set forth in 11 CFR 300.33.
In implementing 2 U.S.C. 441i(b)(2)(A), the Commission chose to
permit a greater amount of Levin funds to be used when disbursements
for allocable Federal election activity do not exceed in the aggregate
$5,000 in a calendar year for several reasons. First, the Commission
notes that the reporting requirements for Federal election activity
contain an exception for activity below $5,000 in the aggregate in a
calendar year. See 2 U.S.C. 434(e)(2)(A). While that exception applies
to aggregate receipts and disbursements, rather than just aggregate
disbursements, it does suggest that Congress did not take a rigid
approach to low levels of Federal election activity. Second, the
Commission is particularly sensitive to the nature of the Federal
election activity to which this provision applies: Grassroots
activities for which references to Federal candidates are prohibited.
There is a far weaker nexus between Federal candidates and this
category of Federal election activity than other types of Federal
election activity for which Levin funds are prohibited. Finally, the
Commission notes that $5,000 is only half of what any single donor may
donate (subject to State law) to each and every State, district, and
local party committee under 2 U.S.C. 441i(b)(2), so there is no danger
that allowing a committee to use entirely Levin funds for allocable
Federal election activity that aggregates $5,000 or less in a calendar
year will somehow lead to circumvention of the amount limitations set
forth in 2 U.S.C. 441i(b)(2). The distinction in paragraph (c)(4)
between allocable Federal election activity below $5,000 and allocable
Federal election activity above $5,000 reflects these considerations.
Paragraph (d) serves as a clarifying reminder that spending of non-
Federal funds by a State, district, or local political party committee
for State or local political activity, including the raising of non-
Federal funds, remains a matter of State law. In response to
[[Page 49098]]
several comments, the Commission is making two minor clarifications to
this paragraph in the final rules. First, the paragraph heading has
been changed to refer to ``activities,'' rather than ``funds,'' as it
read in the NPRM, to be more descriptive of the actual subject of the
paragraph. Second, the first sentence of the paragraph now refers to
spending ``Federal, Levin, or non-Federal'' funds to conform this
paragraph with paragraph (b)(2) of section 300.32.
11 CFR 300.33 Allocation of Costs of Federal Election Activity
The final regulations in this section address only the allocations
of expenditures and disbursements by State, district, and local party
committees for Federal election activity, pursuant to the requirements
of BCRA. The requirements for allocations by these committees of other
categories of expenditures and disbursements that are not Federal
election activity are to be found at 11 CFR 106.7. This division of
rules represents an attempt to clarify how different categories of
activities are addressed with regard to allocation, depending upon
their nature, timing and, in certain instances, the presence or absence
of a Federal candidate on the ballot, i.e., whether they come or do not
come within the definition of ``Federal election activity'' at 11 CFR
100.24. Provisions at proposed 11 CFR 300.33 that addressed activities
not within the definition of Federal election activity now appear in
new 11 CFR 106.7. See also the Explanation and Justification for 11 CFR
106.7.
Section 441i(b)(1) of Title 2, United States Code, states that
State, district, and local party committees must make all disbursements
and expenditures for Federal election activity with Federal funds, with
one exception. This requirement holds even when the expenses involved
are also related to activities in connection with non-Federal
elections. The exception to the required use of Federal funds in
connection with Federal election activity involves certain activities
to be paid in part with Levin funds, pursuant to 2 U.S.C. 441i(b)(2).
Section 441i(b)(2)(A) permits State, district, and local party
committees, under certain conditions, to use Levin funds from a Levin
or non-Federal account for particular categories of activity, including
voter registration, voter identification, get-out-the-vote (``GOTV''),
and generic campaign activities during the time periods when they
constitute Federal election activity. These funds must have been
received by a party committee pursuant to specific limitations, and are
to be used to meet expenses related to voter registration activity that
takes place within 120 days of a Federal election and/or expenses
related to voter identification, GOTV activities, and generic campaign
activities that are conducted when a Federal candidate appears on the
ballot. Such activities must not refer to a clearly identified
candidate for Federal office. Section 441i(b)(2)(A) permits the use of
Levin funds for these purposes ``to the extent that'' the costs of the
activities are allocated. Levin funds may also be used for non-Federal
purposes permissible under State law. See 11 CFR 300.32(b)(2).
Paragraphs 300.33(a)(1) and (2) of the proposed regulations, which
addressed the costs of salaries and wages paid to employees who spend
less than 25% of their time in connection with Federal elections and of
other administrative costs, are being replaced by new 11 CFR
106.7(c)(1) and (d)(1) for the reasons explained in the Explanation and
Justification for that section.
In the final rules, 11 CFR 300.33(a) addresses costs that may be
allocated between Federal and Levin funds. Paragraphs (a)(1) and (a)(2)
represent a division of the proposed rule into two parts, the first
addressing voter registration within 120 days of the date of an
election and the second the costs of voter identification, GOTV, and
generic campaign activities occurring during time periods when they
constitute Federal election activity. The relevant time periods for the
latter categories of activity are set out at 11 CFR 100.24(a)(1). Both
paragraphs (a)(1) and (a)(2) are subject to 11 CFR 300.32(c), which
permits committees to fund these activities entirely with Levin funds
only when the disbursements for the activities do not exceed $5,000 in
the aggregate in a calendar year.
Paragraph (b) of section 300.33 sets out fixed minimum amounts of
Federal funds to be required for the Federal portions of costs of the
specified activities for which allocation between Federal and Levin
funds is permissible. One goal of the allocation rules is to assure
that activities deemed allocable are not paid for with a
disproportionate amount of Levin funds. Another goal is to simplify the
allocation process, in particular by establishing formulas that do not
vary from State to State and that do not require measurements of time
or space. Therefore, in lieu of the State-by-State ballot composition
ratios for generic campaign activity and in lieu of the time or space
method applied to exempt State party activities in the pre-BCRA
regulations, the rules establish a fixed formula for all States that
would vary only in terms of whether or not a Presidential campaign and/
or a Senate campaign is to be held in a particular election year.
In the NPRM, the Commission set out allocation percentages for the
Federal shares of the allocable Federal election activities described
in paragraph (a). The final rules at 11 CFR 300.33(b)(1) through (4)
use the same minimum Federal percentages. Thus, State, district, and
local party committees and organizations must allocate no less than the
following amounts to their Federal accounts:
(i) Presidential only election year--28% of costs
(ii) Presidential and Senate election year--36% of costs
(iii) Senate only election year--21% of costs
(iv) Non-Presidential and Non-Senate election year--15% of costs.
As with the percentages used in 11 CFR 106.7 for the allocation of
activities that are not Federal election activities, the percentages
for those allocable Federal election activities that may be paid for in
part with Levin funds were derived by taking averages of the ballot
composition-based allocation percentages reported by State party
committees in four groupings of States selected for their diversities
of size and geographic location and for the particular elections held
in each State in 2000 and 2002. The groupings were: (1) Six States
(Alabama, Colorado, Illinois, New Hampshire, Oklahoma, and Oregon) in
which there was a Presidential but no Senate campaign in 2000; (2) ten
States (California, Delaware, Georgia, Florida, Michigan, New York,
North Dakota, Texas, Vermont, and Wyoming) in which there were both a
Presidential campaign and a Senate campaign in 2000; (3) six States
(Delaware, Georgia, Michigan, Oklahoma, Texas, and Wyoming) in which
there will be a Senate campaign in 2002; and (4) six States
(California, Florida, New York, North Dakota, Vermont, and Washington)
in which there will be no Senate campaign in 2002.
In 2000, the Federal percentages for the two parties in six States
with only a Presidential campaign ranged from 20% to 33.33%, with an
average of 28%, while the Federal percentages for the two parties in
the ten States that held both Presidential and Senate campaigns that
year ranged from 30% to 43%, with an average of 36%. In 2002, the
Federal percentages for the two parties in six States with a Senate
campaign ranged from 20% to 25%, with an average of 21%, while the
Federal percentages for the two parties in six States with no Senate
campaign ranged from 11.11% to
[[Page 49099]]
16.67%, with an average of 15%. The rules apply the average percentages
in each of the four groupings of States to all 50 States.
As discussed in the Explanation and Justification for 11 CFR 106.7,
one comment on the NPRM from a public interest organization addressed
the Commission's proposed fixed percentages by providing two
alternatives to the Commission's figures. The first alternative would
have set a flat 33% requirement for Federal shares of what the response
termed ``Levin expenditures'' and for allocable costs other than
administrative costs in odd-numbered years or in non-Presidential
election years, and a flat 40% requirement for Federal shares of these
same categories of activities in Presidential election years. The
commenter based these percentages on what was termed ``the current
assumption'' as to what State party committees spend in certain years.
The second alternative posed by the same commenter adopted the
Commission's calculations, but called for the use of the higher
percentages in the sample States for what the response termed ``Levin
spending'' and for voter registration outside the 120 day period before
an election, plus the average percentages for certain non-Levin
expenses. The commenter also urged the Commission to apply the
allocation percentages to a two-year election cycle, not just to the
year of a Federal election.
The comment submitted on behalf of the principal Congressional
sponsors of BCRA with regard to fixed allocation percentages was very
similar to that of the public interest organization's response cited
above in that, as one alternative approach, it called for at least a
33% Federal allocation of what it termed ``Levin activities'' and of
voter registration activities outside the 120 day period before an
election. It also called for 40% Federal allocations of Levin
activities and of voter registration activities that are not Federal
election activities in Presidential election years. This alternative
urged the application of the percentages to two-year Federal election
cycles. As a second alternative, this commenter also agreed to use of
the Commission's percentages for administrative costs in a two year
cycle, but urged the application over that cycle of the highest, not
the average, Federal percentages for what it termed ``Levin
activities'' and voter registration activities that are not `Federal
election activity'. * * *'' Another comment from a public interest
organization also called for use of the highest percentages in the
identified States, not the average percentages.
Comments on the NPRM received from party committees with regard to
fixed percentages for Federal allocations ranged from support for the
Commission's position to giving party committees a choice at the
beginning of each cycle between the proposed formula and ballot
composition ratios.
The final rules at paragraph 300.33(b) retain the fixed percentage
approach to allocation proposed in the NRPM and adopt the percentages
proposed in the NPRM to disbursements for Federal election activities.
As discussed above, disbursements for salaries and wages, and
allocations of administrative costs, are addressed at 11 CFR 106.7. The
final rules at 11 CFR 300.33(b) also contain additional language to
clarify that the allocation percentages must be used for activities
that occur within the time periods described in 11 CFR 100.24, time
periods that establish when specific activities are to be treated as
``Federal election activity'' under BCRA. The time periods differ
between voter registration on the one hand and voter identification,
GOTV, and generic campaign activities on the other. See 11 CFR
100.24(a) and (b). As explained in the Explanation and Justification
for 11 CFR 100.24, the complete two-year cycle approach urged by some
commenters has not been adopted for Federal election activities.
With regard to the amounts of the fixed minimum Federal
allocations, the Commission has retained the percentages contained in
the NPRM because they represent averages of actual allocation ratios
used in specific States at specific times, not assumptions of State,
district, and local party behavior. The Explanation and Justification
for 11 CFR 106.7 explains the basis for this approach in greater
detail.
Paragraphs (c)(1) and (2) of section 300.33 set out the categories
of Federal election activity costs that must not be allocated between
Federal funds and Levin funds. These categories include: (1) The costs
of public communications as defined at 11 CFR 100.26, which must be
paid with all Federal funds, and (2) the costs of salaries and wages
for employees who spend more than 25% of their compensated time in a
month on activities in connection with a Federal election, which must
also be paid entirely with Federal funds. The costs of salaries and
wages for employees that spend 25% or less of their compensated time in
a month on activities in connection with a Federal election must be
paid entirely with non-Federal funds that comply with State law. See 11
CFR 106.7(c)(1). This approach to salaries and wages is explained more
fully in the Explanation and Justification for 11 CFR 106.7.
Section 300.33(c)(3) requires that the direct costs of raising
funds for Federal election activities be paid solely from the party
committee's Federal funds, pursuant to 2 U.S.C. 441i(e), or with Levin
funds. The Explanation and Justification for 11 CFR 106.7 and 300.32
explain the reasons for this approach. The proposed rules had indicated
that non-Federal funds could be used in certain limited fundraising
situations involving non-Federal activity. This language has been
deleted from the final rules for the reasons explained in the
accompanying Explanation and Justification for 11 CFR 106.7.
Paragraph 300.33(d) addresses transfers of Levin funds from a
State, district, or local party committee's Levin account or from its
non-Federal account to its Federal account or to an allocation account
to meet the Levin fund portion of the costs of allocable expenditures
made pursuant to 2 U.S.C. 441i(b)(2). The final rule largely tracks
pre-BCRA 11 CFR 106.5(g) by requiring that reimbursements from a Levin
account or from a non-Federal account to a Federal account or to an
allocation account take place within a specified number of days. New
paragraph (d), like former 11 CFR 106.5(g)(2)(B)(iii), states that any
payment outside this time frame, absent the need for an advance payment
of a reasonably estimated amount, could result, depending upon the
circumstances, in a loan to the Federal account and a violation of the
Act. No commenters addressed this provision.
11 CFR 300.34 Transfers
As explained above, the Levin Amendment permits spending on certain
Federal election activities subject to restrictions and conditions, one
of which is that the spending must be allocated between Levin funds and
Federal funds. 2 U.S.C. 441i(b)(2)(A)(i), (ii). A State, district, or
local committee must raise by itself all money spent under the Levin
Amendment. 2 U.S.C. 441i(b)(2)(B)(iv). Congress expressly stated that a
State, district, or local committee must not use as Levin funds ``any
funds provided to such committee'' by certain enumerated entities.
These entities are: any other State, district, or local committee; any
national political party committee; any agent of a political party
committee; and any entity directly or indirectly established, financed,
maintained, or controlled by a political party committee. 2 U.S.C.
441i(b)(2)(B)(iv)(I) through (IV). By the plain language of these
provisions, these restrictions
[[Page 49100]]
extend to the Federal funds component of the disbursement allocated
between Levin funds and Federal funds. See 148 Cong. Rec. H410 (daily
ed. February 13, 2002) (Rep. Shays).
This provision of the Levin Amendment could cause confusion given
the pre-existing rule that party committees of the same political party
may transfer Federal funds among themselves without limit on amount.
See 11 CFR 102.6(a)(1)(ii).\6\ Paragraph (a) of section 300.34 makes
clear that 11 CFR 102.6(a)(1)(ii) does not override the Levin Amendment
as to transfers of Federal funds. Specifically, the committee must not
use such transferred Federal funds to pay the Federal portion of
Federal election activity. A State party committee and an association
of State party officials commented that this provision about
transferred Federal funds should apply only to transferred Federal
funds ``earmarked'' for spending under the Levin Amendment by the
transferring committee. The Commission has not adopted this suggestion
in the final rules. Congress, at 2 U.S.C. 441i(b)(2)(B)(iv),
specifically bars a State, district, or local committee spending
Federal funds (and Levin funds) for Federal election activity from
using transferred funds. How a transferring committee may or may not
characterize the transfer is irrelevant to this prohibition.
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\6\ The Commission emphasizes that revisions to section 102.6(a)
regarding transfers may be forthcoming in a future rulemaking to
implement changes to 2 U.S.C. 441a(d) made by BCRA. The present
discussion and this rulemaking extend only to Title I of BCRA. Pub
L. 107-155, March 27, 2002.
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In response to the NPRM, a public interest group noted that a
State, district, or local political party committee's Federal account
may commingle Federal funds raised by the committee itself, which are
eligible for spending for Federal election activities, and transferred
Federal funds, which are not so eligible. This commenter suggested that
the Commission should require party committees to use ``a reasonable
and industry-accepted accounting method'' to ensure that they have
sufficient self-raised, non-transferred Federal funds to cover
expenditures for Federal election activities as the expenditures are
made. The Commission has responded to this suggestion in the final
rules. Paragraph (a) of section 300.34 is organized into two
paragraphs. Paragraph (a)(1) contains the language published in the
NPRM, without change. Paragraph (a)(2) provides that a State, district,
or local political party committee must demonstrate through a
reasonable accounting method approved by the Commission (including any
method embedded in software provided or approved by the Commission)
that its Federal account has sufficient Federal funds raised by the
committee itself to make a given disbursement of Federal funds for
Federal election activity. Paragraph (a)(2) alternatively permits, but
does not require, a State, district, or local political party committee
to establish a separate Federal account to use for spending on Federal
election activities, and into which it deposits only Federal funds it
has raised by itself.
The principal Congressional sponsors of BCRA commented that 11 CFR
300.34 should not be interpreted to forbid a State, district, or local
political party committee from using Federal funds raised lawfully on
its behalf by a Federal or State candidate or officeholder as long as
the funds are contributed directly to the party committee. The
Commission agrees with the sponsors' interpretation, and emphasizes
that 11 CFR 300.34 applies to transfers of funds from the persons
described in paragraphs (b)(1) and (b)(2).
The final sentence of paragraph (a)(1) states as a positive
requirement that a State, district, or local political party committee
that spends Levin funds must raise the Federal funds component of those
funds by itself. As already mentioned above, the Levin Amendment
imposes this fundraising requirement. 2 U.S.C. 441i(b)(2)(B)(iv).
The Levin Amendment specifically forbids particular transfers of
Levin funds; that is, a State, district, or local party committee may
not use as Levin funds any funds transferred to it by certain persons.
2 U.S.C. 441i(b)(2)(B)(iv)(I) through (IV). 11 CFR 300.34(b)(1) and
(b)(2) implement these transfer prohibitions by expressly identifying
these persons to, and from, which transfers must not be made.
Paragraph (c) of section 300.34 cross-refers to 11 CFR 300.30,
which sets forth the permissible account structures for Levin funds,
and 11 CFR 300.33, in which are the rules for allocation transfers
between the accounts of a given State, district, or local political
party committee.
11 CFR 300.35 Office Buildings
BCRA repealed 2 U.S.C. 431(8)(B)(viii), which had exempted from the
definition of contribution any donation of money or anything of value,
or loan, to a national or State party committee that is specifically
designated to ``defray any cost for construction or purchase of any
office facility not acquired for the purpose of influencing the
election of any candidate in any particular election for Federal
office.'' In subsequent technical amendments, however, Congress enacted
2 U.S.C. 453(b), which states: ``Notwithstanding any other provision of
this Act, a State or local committee of a political party may, subject
to State law, use exclusively funds that are not subject to the
prohibitions, limitations, and reporting requirements of the Act for
the purchase or construction of an office building for such State or
local committee.'' 2 U.S.C. 453(b).
New section 300.35 addresses three areas in implementing 2 U.S.C.
453(b). Paragraphs (a) and (b) provide for the application of State law
to the source and use of funds, and provide that Federal law will not
preempt the application of State law with respect to the use of non-
Federal funds and Levin funds, but that Federal law will preempt State
law if Federal funds are used. Paragraph (c) specifically allows a
party committee to lease space in its office building to others with
conditions on the deposit of funds into a Federal or non-Federal
account. Finally, paragraph (d) addresses the transitional requirements
for the current State party office building funds established under the
repealed statutory section.
A. Application of State Law
A principal sponsor of the technical amendments described the party
office building provision as ``[r]especting the primacy of State law in
financing State and local party buildings.'' 148 Cong. Rec. S2339
(daily ed. March 22, 2002) (statement of Sen. McConnell). A principal
sponsor of BCRA described the proposal as providing that Federal law
would no longer allow a State or local party committee to receive non-
Federal donations to purchase or construct an office building where
such donations violated State law, that State law governs the receipt
and disbursement of non-Federal donations used by State or local
parties for such purposes, and that there is no ``required match
consisting of Federal contributions.'' 148 Cong. Rec. S2143-2144 (daily
ed. March 20, 2002) (statement of Sen. Feingold).
The final rule at paragraph (a) of new section 300.35 provides that
a State or local party committee may spend either Federal funds or non-
Federal funds that are not subject to the limitations, prohibitions, or
disclosure provisions of the Act, so long as such funds are not
contributed or donated by a foreign national. If non-Federal funds are
used, they are subject to State law. If Federal funds are used, they
are subject to
[[Page 49101]]
Federal law. The paragraph also incorporates language from the repealed
statute and deleted regulations to the effect that the exemptions from
Federal limits and prohibitions are based on the building not being
purchased or constructed for the purpose of any particular Federal
candidacy, but, rather, for the functioning of the party, which entails
the support of most or all of the party's candidates over a number of
years. The purchase or construction of the building to assist the
campaign of a particular Federal candidate would entail the use of
impermissible funds in a manner contrary to the basic purpose of the
Federal law.
Paragraph (b) explains the coverage of State law with respect to
non-Federal funds or Levin funds received by a State or local party
that are spent for the purchase or construction of its office building.
Other than with respect to donations by foreign nationals, Federal law
would not preempt State law as to the source of non-Federal funds,
State restrictions on the use of those funds (i.e., the State can
prohibit or limit the use of funds with respect to the purchase or
construction), or the reporting of the receipt and disbursement of
those funds. In addition, Levin funds (which also exclude foreign
national funds) may be used for purchase or construction, subject to
State law.
The application of State law to the use of non-Federal funds is
derived directly from the wording of 2 U.S.C. 453(b) and from
Congressional statements. Commission advisory opinions have addressed
the question of whether the repealed contribution exemption, which
permitted donations to a building fund from such Federally
impermissible sources as corporations, preempted State law prohibitions
on the use of such funds for campaign purposes. Advisory Opinions 2001-
12, 1998-8, 1998-7, 1997-14, 1993-9, 1991-5, and 1986-40. The
Commission stated in these opinions that: (1) Congress decided not to
place restrictions on the subject even though it could have determined
that the purchase of the facility was for the purpose of influencing a
Federal election; (2) Congress took the affirmative step of deleting
the receipt and disbursement of funds for such activity from the
proscriptions of the Act; and (3) there is no indication that Congress
intended to limit the preemptive effect to some allocable portion of
the purchase costs. New section 300.35 supersedes these Commission
advisory opinions to the extent that they might pertain to Federal
preemption with respect to use of funds from a State (and now local)
party committee's non-Federal account for the purchase or construction
of its office building. For example, corporate donations and donations
that are excessive under Federal law, and that are in a non-Federal
account, may be used for the purchase or construction of a State party
office building where State law permits, and if State law forbids
corporate donations and donations in excess of a particular amount,
Federal law would not preempt the application of State law prohibiting
the use of funds from a party committee's non-Federal account.
Although receipts and disbursements from the non-Federal accounts
must comply with State law, section 300.35 does not contemplate that
the Commission would take enforcement action against a party committee
for violating State law with respect to the purchase or construction of
its office building. Such an action is the State's responsibility.
Moreover, although section 300.35 does not require the establishment of
a separate bank account or book account for the receipt and
disbursement of non-Federal funds for purchase or construction of the
office building, Federal law does not preempt a State law requirement
to establish such an account.
Paragraphs (a) and (b) of the proposed rules in the NPRM differed
from the final rules. They were revised, in part, in response to public
comments. Proposed paragraph (a) did not refer to the prohibition on
contributions or donations from foreign nationals. In addition,
paragraphs (a) and (b) provided that if the party committee used funds
from the Federal account, Federal law would not preempt State law as to
the permissibility of the disbursements and as to the source of funds
where State law establishes additional limits or prohibitions.
Several commenters remarked on the provisions in proposed
paragraphs (a) and (b) relating to the application of State law. Two
commenters representing party committees expressed the concern that,
with respect to the use of Federal account funds, Federal law would not
supersede a State law that would further limit or prohibit
contributions. They stated that this could conceivably prevent a party
committee from using 100 percent Federal funds to pay for a building.
They asserted that there is no support in the BCRA legislative history
for this proposition, and that BCRA's intent was simply to allow State
and local parties to pay for their buildings entirely with non-Federal
funds and would not require them to use non-Federal funds.
Three comments, including one from the four principal sponsors of
BCRA, stated that the provisions regarding application of State law
should not be read to allow for the use of contributions or donations
by foreign nationals to pay for the purchase or construction of the
party office buildings. They indicated that BCRA was not intended to
allow for such funds to be used. Two of those commenters recommended
that these rules should make this prohibition clear.
As indicated above, the final rules reflect commenter input on both
of these issues. The Commission notes that the exemption from Federal
preemption at section 453(b) refers to the use of ``exclusively funds
that are not subject to the prohibitions, limitations, and reporting
requirements of the Act,'' subject to State law. It did not extend non-
preemption to Federal funds. The Commission concurs with those
commenters who interpret BCRA as allowing use of funds from the
committee's non-Federal account, so long as they complied with State
law, but as not subjecting funds from the committee's Federal account
to State law. Hence, funds in the Federal account (that are lawful
under Federal law) may be used, even if they are not in compliance with
the limitations and prohibitions of State law.
The final rules in paragraphs (a) and (b) also reflect the comments
on the explicit inclusion of a ban on the use of funds contributed or
donated by foreign nationals, and incorporate such a ban. The
prohibition at 2 U.S.C. 441e is so sweeping and explicit (including an
explicit prohibition of donations ``to a committee of a political
party'') that it would be difficult to read the intent of BCRA as
allowing for the use of such funds by a party committee for those
activities. One of BCRA's principal sponsors stated that BCRA
``prohibits foreign nationals from making any contribution to a
committee of a political party or any contribution in connection with
federal, state or local elections * * * This clarifies that the ban on
contributions [by] foreign nationals applies to soft money donations.''
148 Cong. Rec. S1994 (daily ed. March 18, 2002) (statement of Senator
Feingold). See also United States v. Kanchanalak, 192 F.3d 1037 (D.C.
Cir. 1999). This ban also applies to any in-kind contribution or
donation by a foreign national such as a direct payment to a seller,
builder, or other vendor for purchase or construction.
Paragraphs (a) and (b) of the final rules include technical changes
to state more clearly than the proposed rule that
[[Page 49102]]
the pertinent funds include funds that are in the accounts but were not
received specifically for the purchase or construction, as well as
funds specifically received for that purpose. In addition, the sentence
in paragraph (a) discussing the application of State law is changed to
conform to other parts of the regulation emphasizing that this
exemption is meant to apply only to a State or local committee paying
for its own building.
B. Proposals Excluded From the Final Rule
The proposed rule included two paragraphs, (c) and (d), which are
not included in the final rule. Proposed paragraph (c) would have
defined ``purchase or construction of an office building'' by defining
the individual terms, ``office building,'' ``purchase,'' and
``construction.'' The terms were defined to explicitly include and
exclude certain items or actions. The proposed definition of ``office
building,'' particularly as it pertained to the explicit exclusion of
certain items, would have treated the use of the term ``building'' in 2
U.S.C. 453(b), instead of the term ``facility'' in the repealed
exemption, as signifying a Congressional intent to narrow the scope of
the covered costs. Recent advisory opinions stated that expenses that
were ``capital expenditures'' under the Internal Revenue Code would be
payable by the building fund (as opposed to business expenses). These
opinions have been interpreted to allow building fund payments to
purchase office equipment, furniture, and similar items. See Advisory
Opinions 2002-12, 2001-01, and 1998-7; see also 26 CFR 1.263(a)-(1) and
1.263(a)-(2).
Proposed exclusions explicitly listed in the draft definitions of
``purchase'' and ``construction'' were drawn from exclusions specified
in previous Commission advisory opinions (in those aspects of the
opinions that did not pertain to Federal preemption). The NPRM
narrative for these definitions also included examples of what would
and would not constitute ``construction.'' Proposed paragraph (d) would
have stated that an expense that did not fit within the definition of
``purchase or construction of an office building'' would be an
allocable administrative cost unless it fell within another category,
such as a support of a Federal candidate.
The Commission sought comment on whether the proposed definition of
``building'' should include, rather than explicitly exclude, items such
as office equipment, machinery, or furniture. More generally, the
Commission sought comment on whether BCRA's use of the term
``building'' instead of ``facility'' contemplated a narrowing of the
range of expenses falling within the exemption.
Three commenters representing party committees asserted that BCRA
did not intend the change in terminology from ``facility'' to
``building'' to represent a change in the expenses covered by the
exemption. One commenter noted that the McCain-Feingold bill as passed
by the Senate in 2001 eliminated the building fund exemption for
national and State parties and also provided that ``Federal election
activity'' would specifically not include ``the cost of constructing or
purchasing an office facility or equipment for a State, district, or
local committee.'' An amendment adopted by the House eliminated a
transition provision allowing national party committees to spend
building fund donations raised prior to the effective date of the new
law, and that amendment also eliminated the language as to the purchase
of an office facility or equipment. The commenter characterized the
technical amendment now in effect as merely a restoration of the
deleted provision on the State and local office facility or equipment,
noting that one of BCRA's principal sponsors characterized this as a
non-substantive amendment.
One of the party committee commenters urged the Commission to
continue to use principles from the Internal Revenue Code ``such that
capital expenditures would be allowed from the building fund (subject
to state law) and ongoing expenses would not.'' Two of the party
committee commenters maintained that the question of narrowing the
definition is a moot point because they believe that if certain costs
were not deemed to be within the definition, they would be classified
as administrative costs and should be payable with 100% non-Federal
funds.
In contrast, three comments, including one from the principal
sponsors, maintained that the change from ``facility'' to ``building''
indicated a Congressional intent to narrow the scope of the exemption
and that items such as office equipment, machinery, or furniture should
not be included within the exemption. They agreed with the proposed
definition of ``office building.'' The sponsors also stated that it was
their intent that administrative expenses related to office buildings
should be allocable between Federal and non-Federal accounts or Federal
and Levin accounts.
The Commission also sought comment on whether more examples should
be included in the sub-definitions of ``purchase'' or ``construction,''
or whether the advisory opinion process would best suit that purpose.
Specifically, it asked whether payments for a long-term lease with an
option to purchase the rented building should be included within the
definition of purchase. One commenter stated that, to avoid abuses, the
Commission should establish a bright line rule that treats purchases as
falling within the exemption and leases as administrative expenses.
The final rule does not include the proposed definitions of
``office building,'' ``purchase,'' or ``construction,'' or the proposed
allocation provision. The Commission does not view section 453(b) as
evidence of any Congressional intent to narrow or otherwise change the
scope of the activities (from that of the repealed exemption) for which
building fund monies may be donated or spent. Specifically, the
Commission concludes that BCRA does not supercede or in any way
displace the Commission's various advisory opinions regarding building
fund activities as applied to State, district or local political party
committees. Accordingly, those advisory opinions remain in force and
effect. The Commission believes that State and local party committees
needing information as to the scope of the costs covered can receive
guidance from the Commission's previous advisory opinions.
C. Leasing a Portion of the Office Building to Others
Paragraph (c) of the final rule allows a State or local party
committee to lease a portion of its office building to others at the
usual and normal rental charge. The sources of funds will determine the
account in which the rent revenues can be deposited.
This provision did not appear in the NPRM. The Commission requested
comments, however, on whether a party that owned an entire office
building would also be able to lease space in the building to others at
fair market rates in order to generate income. The Commission also
sought comments on whether the sources of the funds used to purchase or
construct the office building should govern or guide the Commission in
the determination of the lawful uses of such income.
One commenter, speaking on behalf of party committees, stated that
party committees should be permitted to rent space in their office
buildings to State and local candidates regardless of the source of
funds used to purchase the buildings. The comment from the principal
sponsors of BCRA stated that
[[Page 49103]]
BCRA permits a party committee to generate income by leasing parts of
its building and describes how to determine whether the funds may be
deposited in a Federal or non-Federal account. Specifically, a purchase
in whole or in part with non-Federal funds would require the deposit of
rental income into the non-Federal account to be used only for non-
Federal purposes. Rental income generated from a building purchased
solely with Federal funds may be deposited in the committee's Federal
account only if all the revenues collected comply with the limitations,
prohibitions, and reporting requirements of the Act.
The Commission has concluded that the source of funds used to
construct or purchase the building must determine where the rental
revenues may be deposited. If only Federal funds were used, the
revenues may be deposited in the Federal account. If any non-Federal
funds were used, the revenues must be deposited in a non-Federal
account, provided that State law permits. These requirements ensure
that the committee's Federal account is not indirectly funded (through
rental payments) by donations that do not meet the requirements of the
Act, such as corporate donations.
Consistent with the jurisdiction of State law over non-Federal
accounts, the rule provides that the revenue received by the non-
Federal account must comply with State law. The rental amounts
deposited in the Federal account would have to be disclosed as an
``other receipt,'' pursuant to 11 CFR 104.3(a)(4)(vi). The Commission
notes that the purchase or rental of a committee asset is considered a
contribution, unless excepted through the advisory opinion process with
respect to specific types of assets or particular circumstances (e.g.,
isolated sales of specific committee assets developed or purchased for
the committee's own use, rather than for fundraising, and campaign
equipment and leftover supplies of an authorized committee wishing to
terminate). See, e.g., Advisory Opinions 1992-24, 1991-34, 1990-26,
1989-4, and 1986-14; see also 11 CFR 100.7(a)(2). Commission advisory
opinions have also interpreted the regulations to allow a committee to
invest its funds and to treat the interest, dividends, or other returns
on the investment (under particular circumstances) as ``other
receipts.'' See Advisory Opinions 1999-8, 1989-6, and 1986-18. The
Commission views the leasing of portions of the building as the
equivalent of obtaining income through the investment of committee
assets or funds. Under particular circumstances, such leasing out may
also be viewed as an isolated sale of a unique committee asset
purchased for the committee's own use. Hence, the payment of rent for
office building space to the party committee at the usual and normal
charge is not a contribution. If the tenant pays rent in excess of the
usual and normal charge and the rent is deposited in the Federal
account, then the amount in excess would be a contribution and
reportable as such. An excess payment from a corporate tenant would be
in violation of 2 U.S.C. 441b. See Advisory Opinions 1992-24 and 1990-
26.
D. Transitional Provisions for State Party Building or Facility Account
The final rule at 11 CFR 300.35(d) addresses office building
accounts set up by State party committees under repealed 2 U.S.C.
431(8)(B)(viii). The regulation states that up to and including
November 5, 2002, such accounts may accept funds that are ``designated
for the purchase or construction of an office building.'' The rule then
states that, starting on November 6, 2002, the funds in the account may
not be used for Federal account or Levin account purposes but may be
used for any other non-Federal purposes as permitted by State law.
The NPRM differed from the final rule in two respects. Like the
final rule, the proposed rule provided that, up until November 5, 2002,
a State party committee could accept funds into the account, but then
indicated that the funds in the account could only be used for the
construction or purchase of an office building or facility. In place of
the language on the use of the funds in the account, the final rule
states that it applies to funds ``designated for the purchase or
construction of an office building.'' Both the final rule and the
proposed rule provide that, starting on November 6, 2002, the funds are
not useable for Federal account or Levin account purposes but may be
used for any other non-Federal purposes, as permitted by State law.
However, the proposed rule also would have provided that the funds
would be subject to specific paragraphs of the proposed rule, including
the definitional paragraph that is now deleted.
Two commenters from the party committees criticized the NPRM
version of the transitional provisions, stating that unlike the
national party building and facility fund transition provisions in
BCRA, there is no BCRA provision covering the spending of funds by the
already existing State party office facility fund. One of those
commenters criticized the State law limitation on the use of the funds
from the account once BCRA goes into effect, noting that the funds had
been lawfully raised under the exemption in the repealed statutory
section.
The final rule as to the use of building fund accounts prior to the
effective date of BCRA is not meant to deviate from any current
permissible uses of those accounts. As to the use of those accounts
after the effective date, the regulation was written to conform the
treatment of the funds in the accounts established under the repealed
statutory section with BCRA and still allow their use for election
purposes. As unlimited non-Federal funds, they could not be used for
Federal account or Levin account purposes. As such, however, they may
be used for non-Federal purposes, and the Commission also recognizes
the control by State law over the permissibility of such funds.
11 CFR 300.36 Reporting Federal Election Activity; Recordkeeping
BCRA establishes certain reporting requirements for State,
district, and local committees that are political committees and that
finance Federal election activities. See 2 U.S.C. 434(e)(2). This
requirement for these political committees extends generally to all
receipts and disbursements for Federal election activities if the
aggregate amount of receipts and disbursements for such activity is
$5,000 or more per calendar year, 2 U.S.C. 434(e)(2)(A), and
specifically extends to receipts and disbursements of Levin funds. 2
U.S.C. 434(e)(2)(B). These requirements added by BCRA are in addition
to the existing FECA requirements to report expenditures of Federal
funds under 2 U.S.C. 434. See also 11 CFR part 104.
Paragraph (a) of new section 300.36 applies to two types of
entities. The first is a State, district, or local political party
committee that has not qualified as a political committee under 2
U.S.C. 431(4) or 11 CFR 100.5. The second is an association or similar
group of candidates for State or local office or of individuals holding
State or local office (see 2 U.S.C. 441i(b)(1)) that has not qualified
as a political committee under 11 CFR 100.5. In the NPRM, the
Commission sought comments as to what, if any, reporting requirements
an association or similar group of candidates for, or holders of, State
and local office may have under 2 U.S.C. 434(e)(2) if it is not a
political committee. The Commission received one comment, from a public
interest group, which suggested that the result should depend on
whether the association or similar group has attained
[[Page 49104]]
political committee status under 11 CFR 100.5. The Commission has
concluded that such an association or similar group that has not
qualified as a political committee has no reporting requirements under
2 U.S.C. 434(e)(2) because that section, by its own terms, applies to
``political committees.'' The Commission further concludes such an
association or similar group is in a position analogous to a political
party organization that is not a political committee under 11 CFR 100.5
to the extent both engage in Federal election activity. Therefore, in
the final rules, such an association or similar group that has not
qualified as a political committee under 11 CFR 100.5 must comply with
paragraph (a) of section 300.36.
Paragraph (a) recognizes that neither type of organization has
reporting requirements under BCRA because it is not a political
committee. See 2 U.S.C. 434(e)(2). Under paragraph (a)(1), both types
of organizations must demonstrate through a reasonable accounting
method that they have sufficient Federal funds on hand to pay the
required Federal portion of the costs of Federal election activity
under 11 CFR 300.32 and 300.33. Paragraph (a)(1) also requires each
type of organization to keep records of Federal receipts and
disbursements and to make those records available to the Commission
upon request. A State party committee and an association of State party
officials commented in support of paragraph (a)(1), to the extent that
it applies to political party committees.
A national party committee commented in opposition to proposed
paragraph (a)(2), which would have required a payment for Federal
election activity to be treated as an expenditure, regardless of
whether it qualified as an expenditure under the statutory definition.
See 2 U.S.C. 431(9). This commenter objected to characterizing a
payment of Federal funds for Federal election activity as an
expenditure ``even if such activity does not reference any Federal
candidate.'' A State party committee and an association of State party
officials made very similar comments, citing Advisory Opinion 1999-4.
The State party committee characterizes this advisory opinion as
``rul[ing] that only disbursements that influence a specific Federal
election count towards the dollar thresholds in [11 CFR 100.5(c)].''
The State party committee's primary concern is that ``thousands'' of
local and district committees not currently required to register and
file reports with the Commission will be required to do so. One of the
commenters stated that the Commission has ``effectively acknowledged''
in paragraph (a)(1) of section 300.36 that ``Congress did not intend
first-dollar disclosure of'' Federal election activity spending.
Conversely, a public interest group commented in support of this
paragraph.
Paragraph (a)(2) clarifies that a payment of Federal funds or Levin
funds for the costs of Federal election activity does not constitute an
expenditure for purposes of determining whether or not a State,
district, or local political party committee, or an association or
similar group of candidates for State or local office or of individuals
holding State or local office, becomes a political committee, under 11
CFR 100.5, unless the payment otherwise qualifies as an expenditure
under 2 U.S.C. 431(9). Paragraph (a)(2) also states that a payment of
Federal funds for the costs of Federal election activity that refers to
a clearly identified Federal candidate and that meets the definition of
``exempt activities'' (see 11 CFR 100.8(b)(10), (16), and (18)) is to
be treated as a payment for exempt activities for the purposes of
determining political committee status under 2 U.S.C. 431(4)(C) and 11
CFR 100.5(c).
Paragraph (b) of section 300.36 applies to State, district, and
local political party committees, and to an association or similar
group of State and local candidates and officeholders, that disburse
Federal funds for Federal election activities and that have qualified
as political committees under 11 CFR 100.5. The heading of paragraph
(b)(1) is revised from the version of the regulation published in the
NPRM. The new heading makes clear that paragraph (b)(1) applies to
State, district, and local political party committees that have
qualified as political committees and that have less than $5,000 in
total receipts and disbursements for Federal election activity (see 2
U.S.C. 434(e)(2)(A)), and to an association or similar group of
candidates for State or local office or of individuals holding State or
local office at all times. Paragraph (b)(1) provides that such
committees must report all receipts and disbursements of Federal funds
for all or part of the costs of Federal election activity. Paragraph
(b)(1) goes on to state that this requirement applies even if the
committee has less than $5,000 of aggregate receipts and disbursements
for Federal election activity. See 2 U.S.C. 434(e)(2)(A). A national
party committee and a State party committee commented in opposition to
the requirement of itemization of Federal receipts for Levin activity,
because ``Federal receipts will be used fungibly for multiple
purposes.'' The Commission points out that Federal receipts are not
fungible, as far as spending for Federal election activity goes, to the
extent that receipts include transfers from other party committees. A
State, district, or local committee must not use transferred funds for
Federal election activity spending. 2 U.S.C. 441i(b)(2)(B)(iv).
Moreover, Congress has specifically required itemization of these
receipts. 2 U.S.C. 434(e)(3). The final sentence of 11 CFR 300.36(b)(1)
provides that a disbursement of Federal funds or Levin funds for
Federal election activity will not be deemed an expenditure and
reported as such, unless it satisfies the definition of expenditure in
2 U.S.C. 431(9).
In the final rules, the Commission has corrected an inadvertent
omission that appeared in the version of paragraph (b)(1) of section
300.36 published in the NPRM. The words ``receipts and'' have been
inserted before the word ``disbursement'' in the second sentence. The
preamble of 11 CFR 300.36(b)(1) correctly discussed the paragraph,
referring to ``receipts and disbursements.'' 67 FR 35671. The
Commission has also deleted an unnecessary and potentially confusing
introductory clause in one of the sentences in this paragraph.
Paragraph (b)(2) implements the broader reporting provisions of 2
U.S.C. 434(e)(2)(A) and (B) with regard to State, district, and local
political party committees. The heading of this paragraph has been
revised from the version of the regulation published in the NPRM. The
change is intended to make clear that this paragraph applies to State,
district, and local political party committees that are political
committees and that have $5,000 or more of total receipts and
disbursements for Federal election activity. 2 U.S.C. 434(e)(2)(A) and
(B). Paragraph (b)(2) does not apply to an association or similar group
of State and local candidates and officeholders that disburses Federal
funds for Federal election activities because such groups are not
authorized to raise and spend Levin funds, and thus may not allocate
disbursements for Federal election activity between Federal funds and
Levin funds. See 2 U.S.C. 441i(b)(2), which applies only to party
committees. These committees always report under part 104 of Title 11
because they may have no Levin funds to report pursuant to paragraph
(a), discussed above.
The first sentence of paragraph (b)(2) states the basic rule that
all receipts and disbursements for Federal election activity must be
reported if the political committee has an aggregate of $5,000 or more
of such receipts and
[[Page 49105]]
disbursements in a calendar year. The second sentence makes it clear
that this basic reporting rule extends to Levin funds used for Federal
election activity.
Paragraphs (b)(2)(i) through (iv) have been revised, or added,
since the version of the regulation published in the NPRM. As published
in the NPRM, the regulation would have referred the reader to 11 CFR
104.17(b) to identify important elements of information that must be
reported under this section 300.36. Instead, paragraphs (b)(2)(i)
through (iv), as adopted in the final rules, state these requirements
expressly, for the convenience of the reader. These requirements
generally parallel the requirements adopted in 11 CFR 104.17(b) with
certain modifications appropriate to the context of expenses allocated
among Federal election activities.
Paragraph (b)(2)(i) pertains to disclosure of the methods State,
district, or local committees use to report allocating expenses for
Federal election activity between Federal funds and Levin funds.
Paragraph (b)(2)(i)(A) of section 300.36 specifies that a committee
must state the allocation percentages for Federal election activity
disbursements that are used in its reports. This paragraph includes a
specific cross-reference to 11 CFR 300.33(b), where these allocation
percentages for Federal election activity are set out.
Paragraph (b)(2)(i)(B) of section 300.36 requires the committee to
report which allocable category of Federal election activity a given
allocated disbursement falls into. In paragraph (b)(2)(i)(B), the
reference to allocable category of Federal election activity means the
type of Federal election activity as defined in 11 CFR 100.24 (e.g.,
voter registration activity as defined in section 100.24(b)(1), or
voter identification as defined in section 100.24(b)(2)(i)). Note that
expenses for certain categories of Federal election activity are not
allocable between Federal funds and Levin funds (e.g., public
communications that promote or support, or attack or oppose, a clearly
identified Federal candidate under 11 CFR 100.24(b)(3)). See 11 CFR
300.33(a).
Paragraph (b)(2)(ii) pertains to reporting of allocation transfers
between a Levin or non-Federal account and a Federal account, or among
a Levin or non-Federal account, a Federal account, and a designated
allocation account for allocated Federal election activity. All
transfers related to a category of Federal election activity must
identify that category. Paragraph (b)(2)(iii) specifies the elements of
information that must be reported for an allocated disbursement for
Federal election activity, including the name and address of the payee,
the date of the payment, and the purpose of the payment. This paragraph
also sets out itemization requirements for disbursements covering more
than one program or activity. Paragraph (b)(2)(iv) covers itemization
of disbursements of more than $200. 2 U.S.C. 434(e)(3).
Paragraph (b)(3) alerts the reader to the rules for reporting
payments allocated between Federal funds and non-Federal funds that are
not covered in paragraph (b)(2). As explained above, paragraph (b)(2)
applies only to payments for Federal election activity allocated
between Federal funds and Levin funds under 11 CFR 300.33. The
reporting regulation for payments allocated between Federal funds and
non-Federal funds are contained in 11 CFR 104.17. For example, section
104.17 addresses reporting of administrative expenses.
Paragraph (c)(1) implements BCRA's new requirement for monthly
filing by party committees that come under new section 434(e) of the
Act. 2 U.S.C. 434(e)(4). This is accomplished by referring to the
Commission's existing regulation specifying monthly reporting, e.g., 11
CFR 104.5(c)(3).
In the NPRM, the Commission sought comments on the applicability of
the $50,000 annual threshold for electronic filing to receipts and
disbursements for Federal election activities. See 11 CFR 104.18. The
Commission received two comments. An association of State party
officials opposed applying receipts and disbursements for Federal
election activities toward the electronic filing threshold because
these ``will also be disclosed on the party committee's regularly filed
reports.'' The Commission notes that this comment, while true, could be
applied to any committee with regard to electronic filing. A public
interest group commented that receipts and disbursements for Federal
election activity should apply to the electronic filing threshold.
Consistent with 2 U.S.C. 434(a)(11), paragraph (c)(2) of section
300.36 provides that contributions and expenditures of Federal funds
for Federal election activity apply to the $50,000 threshold for
mandatory electronic filing. When determining whether a receipt of
Federal funds for Federal election activities is a contribution, the
Commission's regulation at 11 CFR 100.7, including the exclusions in
paragraph (b) of that section, must be applied. Similarly, when
determining whether a disbursement of Federal funds for Federal
election activity is an expenditure, the Commission's regulation at 11
CFR 100.8, including the exclusions in paragraph (b) of that section,
must be applied. The Commission discerns no reason why a contribution
or expenditure should be treated differently for this purpose simply
because it is related to a Federal election activity. The Commission
emphasizes that this provision does not apply to receipts and
disbursements of Levin funds for Federal election activity, and does
not apply to receipts and disbursements that are not ``contributions''
or ``expenditures'' as defined by the FECA.
Finally, paragraph (d) of section 300.36 supports the disclosure
provisions outlined above by adding a recordkeeping requirement.
Paragraph (d) refers to the Commission's existing regulation on
recordkeeping, 11 CFR 104.14. This requirement is necessary to ensure
that sufficient documentation exists to ensure compliance with the
disclosure provisions of BCRA.
11 CFR 300.37 Prohibitions on Fundraising for and Donating to Certain
Tax-Exempt Organizations
BCRA prohibits State, district, and local party committees, their
officers and agents acting on their behalf, and entities directly or
indirectly established, maintained, financed, or controlled by them,
from soliciting any funds for, or making or directing any donations to
certain tax exempt organizations engaged in certain election-related
activity. 2 U.S.C. 441i(d). Except as discussed below, the ban on State
party fundraising for tax-exempt organizations at new 11 CFR 300.37
mirrors the provision applicable to the prohibition on national party
committee fundraising for these organizations at new 11 CFR 300.11. See
Explanation and Justification for 11 CFR section 300.11 above for a
discussion of comments received in response to specific questions
raised in the NPRM.
Paragraph (a)(3) implements BCRA's prohibition on State party
committee fundraising for, and donations to, a section 527 organization
unless the organization is a ``political committee,'' a State or local
party committee, or an authorized committee of a State or local
candidate. The NPRM asked whether the term ``political committee'' in
11 CFR 300.37 should mirror the definition of that term in 2 U.S.C.
431(4), which would encompass only organizations that make
contributions and expenditures in connection with Federal elections or
whether it should be interpreted to also encompass State-registered
political committees that support only State and local candidates.
[[Page 49106]]
BCRA's cosponsors stated that it would be in keeping with the
intent of BCRA to permit State, district, and local party committees
``to make a non-federal donation to a section 527 organization
registered as a State PAC as long as such a State PAC does not make
expenditures and disbursements in connection with an election for
Federal office, including expenditures and disbursements for Federal
election activity.'' Several party committee commenters and at least
one public interest group agreed with this approach. One public
interest commenter disagreed, stating that permitting State and local
party committees to fundraise for, or donate to, State political
committees ``would be contrary to the letter and spirit of BCRA.''
Accordingly, in the final rules, new paragraph (a)(3)(iv) of
section 300.37 permits a State, District or local party committee to
solicit funds for, or donate to, a political committee registered under
State law that supports only State or local candidates and does not
make expenditures or disbursements in connection with an election for
Federal office, including expenditures and disbursements for Federal
election activity. The Commission agrees with the sponsors and other
commenters that this new paragraph is consistent with the major purpose
of BCRA--to prohibit non-Federal funds from being used in connection
with Federal elections. As long as the section 527 organization for
which funds are being raised exclusively supports non-Federal
candidates and does not finance activities that could benefit Federal
candidates, such as get-out-the-vote activities in connection with an
election in which a Federal candidate appears on the ballot, BCRA's
intent is preserved.
As discussed in the Explanation and Justification for 11 CFR
300.11, a safe harbor provision has been added at 11 CFR 300.37(c).
Because 11 CFR 300.37(a) permits State, district and local party
committees to solicit funds for, or donate funds to, section 527
organizations that are State-registered political committees and that
meet certain other requirements, paragraph (c)(2) of the final rules
contains an additional safe harbor provision applicable to those
organizations. This safe harbor is similar to the safe harbor provision
applicable to section 501(c) organizations in paragraph (c)(1). The
safe harbor provides that a State, district, and local party committee
may obtain and rely upon a certification from certain section 527
organizations to determine whether such organizations fall outside the
fundraising/donations prohibition.
Paragraph (d) of 11 CFR 300.37 sets forth the criteria for the
certification for both 501(c) organizations and certain section 527
organizations. This paragraph for the most part tracks the criteria for
certifications by section 501(c) organizations set forth in 11 CFR
300.11(d). See Explanation and Justification for 11 CFR 300.11.
Additionally, paragraph (d)(1) of 11 CFR 300.37 provides that in the
case of a section 527 organization that is a State-registered political
committee pursuant to paragraph (a)(3)(iv), the certification is a
written statement signed by the committee treasurer. As the individual
who oversees expenditures of a political committee, the treasurer has
knowledge of the types of activities undertaken by the organization.
The remaining certification requirements are identical to those for
section 501(c) organizations.
New paragraphs (e) and (f) of 11 CFR 300.37 mirror the provisions
in 11 CFR 300.11(e) and (f) as applied to State, district, and local
party committees and other covered persons rather than national party
committees. See Explanation and Justification for 11 CFR 300.11.
Subpart C--Tax-exempt Organizations
For the convenience of readers interested in locating rules
pertaining to fundraising and donations to tax-exempt organizations,
subpart C of new part 300 combines in a single place the prohibitions
on national, State, district, and local party committee donations to,
and fundraising for, certain 501(c) and 527 tax-exempt organizations
and the rules governing fundraising by Federal candidates and
officeholders for 501(c) organizations.
The proposed rules for 11 CFR 300.50 (national party prohibition)
and 11 CFR 300.51 (State party prohibition) were identical to proposed
11 CFR 300.11 (national party prohibition) and proposed 11 CFR 300.37
(State party prohibition), respectively.
The final rule at 11 CFR 300.50 (national party prohibition) is
identical to the final rule at 11 CFR 300.11; the final rule at 11 CFR
300.51 (State party prohibition) is identical to the final rule at 11
CFR 300.37; and the final rule at 11 CFR 300.52 (regulations governing
Federal candidate and officeholder solicitations for 501(c)
organizations) is identical to the final rule at 11 CFR 300.65. The
Explanation and Justification for 11 CFR 300.11, 300.37 and 300.65
apply to 11 CFR 300.50, 300.51 and 300.52, respectively.
Subpart D--Federal Candidates and Officeholders
11 CFR 300.60 Scope
BCRA places limits on the amounts and types of funds that can be
raised by Federal candidates and officeholders for both Federal and
State candidates. See 2 U.S.C. 441i(e). The Commission is placing the
regulations that address these limitations in 11 CFR part 300, subpart
D.
Section 300.60 explains that these restrictions apply to Federal
candidates and officeholders, their agents, and entities directly or
indirectly established, maintained, or controlled by, or acting on
behalf of, any such candidate(s) or officeholder(s). As defined in 2
U.S.C. 431(3) and existing 11 CFR 100.4, ``Federal office'' means the
elective office of President or Vice President of the United States,
Senator or Representative in, or Delegate or Resident Commissioner to,
the Congress of the United States. There is a similar definition of
``Federal officeholder'' in 11 CFR 113.1(c). As noted above, the
Commission is adding a comparable definition at 11 CFR 300.2(o).
Persons covered by the restrictions in this subpart may not ``solicit,
receive, direct, transfer or spend'' non-Federal funds unless certain
requirements are satisfied, and subject to certain exceptions explained
below.
No comments were received on this section.
11 CFR 300.61 Federal Elections
Section 300.61 as proposed in the NPRM prohibited any Federal
candidate or officeholder, his or her agent, or any person described in
section 300.60, above, from soliciting, receiving, directing,
transferring, or spending non-Federal funds in connection with an
election for Federal office, including funds for any Federal election
activity described in 11 CFR 100.24, discussed above. 2 U.S.C.
441i(e)(1)(A). One commenter urged the Commission to construe this
language to prohibit a candidate only from raising non-Federal funds
that would eventually benefit the candidate's own campaign. Because the
Commission does not find support in the statutory language for this
approach, it is not incorporating this recommendation.
The principal sponsors of BCRA asked the Commission to include
``disburse'' in the list of specified actions, so as to clarify that a
person described in 11 CFR 300.60 must use Federal funds when
disbursing funds in connection with an election for Federal office. The
Commission appreciates the desire for uniformity between sections
[[Page 49107]]
300.61 and 300.62, discussed below; and also notes that drawing a
distinction between funds that are ``spent'' and funds that are
``disbursed'' for certain purposes could prove problematic.
Accordingly, it is adding ``disburse'' to the list of covered
activities in section 300.61.
11 CFR 300.62 Non-Federal Elections
BCRA also prohibits any Federal candidate or officeholder, his or
her agent, or any other person described in Sec. 300.60, from raising,
receiving, directing, transferring, or spending or disbursing funds in
connection with any non-Federal election, unless the funds are not in
excess of the amounts permitted with respect to contributions to
candidates and political committees and are not from sources prohibited
by the Act from making contributions in connection with Federal
elections. 2 U.S.C. 441i(e)(1)(B).
The NPRM limited this restriction to Federal funds subject to the
limitations and prohibitions of the Act. One comment requested the
Commission to remove the term ``Federal'' from this definition, to make
it cover all funds that are subject to the limitations and prohibitions
of the Act. The Commission is making this change, which is consistent
with the statutory language; and is making additional changes to
further parallel the statutory language.
In discussing proposed 11 CFR 300.61 and 300.62, the NPRM stated
that these prohibitions encompassed ``leadership PACs'' and ``candidate
PACs'' because they are entities ``directly or indirectly established,
financed, maintained, or controlled by'' Federal candidates and/or
officeholders as defined in 11 CFR 300.2(c). Generally, ``leadership
PACs'' and ``candidate PACs'' are political organizations set up by
congressional leaders and other Federal candidates and officeholders,
in part, as a way to support other candidates' campaigns. Although
candidate PACs and leadership PACs are not specifically mentioned, the
legislative history indicates that 2 U.S.C. 441i(e)(1) is intended to
prohibit Federal officeholders and candidates from soliciting any funds
for these committees that do not comply with FECA's source and amount
limitations. See 148 Cong. Rec. S2140 (Daily ed. March 20, 2002)
(statement of Sen. McCain). Consequently, the NRPM stated that Federal
candidates and officeholders and their leadership and candidate PACs
must not solicit, receive, direct, transfer, or spend funds for such a
PAC's Federal or non-Federal account unless the funds complied with the
Act's source and limitations requirements.
The comments of the national party committees construed the NPRM
statements, in light of statements made in the Senate debates, to mean
that a person could contribute $5,000 to the Federal account of a
``leadership'' PAC and could donate an additional $5,000 to the non-
Federal account of the same committee. These commenters expressed
support for such an interpretation of the proposed rules and further
argued that the national party ban on raising and spending non-Federal
funds found at 2 U.S.C. 441i(a) should be construed similarly. As noted
elsewhere, the Commission believes that the plain language of 2 U.S.C.
441i(a) prevents such an interpretation as to the national party
committees. No other commenters addressed this point in their written
comments, although some commenters testified that the statutory
language could be interpreted either to permit solicitations of $5,000
each for a Federal and non-Federal account of a leadership PAC in light
of the floor statements, or not to permit such PACs to have non-Federal
accounts at all. Another commenter argued that the statutory language
did not include the term ``non-Federal accounts,'' but instead
permitted a Federal officeholder to solicit, receive, direct and spend
funds ``in connection with non-Federal elections.''
The Commission notes first that the definition of an entity
``directly or indirectly established, financed, maintained, or
controlled'' is being modified in the final rules from the definition
contained in the proposed rule at section 300.2(c). The final rule
defines this phrase by incorporating the affiliation factors set forth
at 11 CFR 100.5(g)(4)(ii). Consequently, 11 CFR 300.62, permitting
solicitations and spending for funds ``in connection with'' a non-
Federal election applies to a candidate PAC or leadership PAC to the
extent that the PAC comes within the new definition of 11 CFR 300.2(c).
Secondly, in discussing BCRA's restrictions on the solicitation and
spending of non-Federal funds by Federal candidates and officeholders,
the co-sponsors stated that these provisions were part of a ``system of
prohibitions and limitations on the ability of Federal officeholders
and candidates, to raise, spend and control soft money'' in order ``to
stop the use of soft money as a means of buying influence and access
with Federal officeholders and candidates.'' See 148 Cong. Rec. S2139
(Daily ed. March 20, 2002) (statement of Sen. McCain). In light of this
purpose, the Commission notes that new 11 CFR 300.62 permits Federal
candidates and officeholders to solicit, receive, direct, transfer,
spend, or disburse funds in connection with Federal and non-Federal
elections only from sources permitted under the Act and only when the
combined amounts solicited and received from any particular person or
entity do not exceed the amounts permitted under the Act's contribution
limits and are not from prohibited sources. In other words, a
Leadership PAC that comes within the definition of 11 CFR 300.2(c) can
raise up to a total of $5,000 from any particular person or entity,
regardless of whether the funds are contributed to the PAC's Federal
account, donated to its non-Federal account, or allocated between the
two. In addition, the Commission agrees with commenters who pointed out
that 11 CFR 300.62 does not permit Federal candidates and
officeholders, their agents and entities established, financed,
maintained, or controlled by them to solicit, receive, direct,
transfer, spend, or disburse non-Federal funds for Federal elections.
11 CFR 300.63 Exception for Non-Federal Candidates
An exception to the fundraising prohibition applies when a Federal
candidate or Federal officeholder is a candidate for State or local
office. 2 U.S.C. 441i(e)(2). Such candidates may raise and spend non-
Federal funds for their State campaign, as long as their activities are
consistent with State law and refer only to their status as a State or
local candidate, to other candidates for that same office, or both.
This exception is reflected in new 11 CFR 300.63. Please note that if a
State or local candidate is simultaneously a candidate for Federal
office, he or she must raise and spend only Federal funds in connection
with the Federal campaign. No comments addressed this provision.
11 CFR 300.64 Exemption for Attending, Speaking, or Appearing as a
Featured Guest at Fundraising Events
BCRA contains an exemption from the fundraising prohibition for
Federal candidates and officeholders who attend, speak, or appear as a
featured guest at a State, district, or local party committee
fundraising event. 2 U.S.C. 441i(e)(3). The NPRM sought comment on how
to construe and implement this exemption, particularly in light of the
separate general prohibition on Federal candidates and officeholders
soliciting non-Federal funds in connection with an election for
Federal, State, or local office. The NPRM sought comment on the
provision in light of Sen. McCain's
[[Page 49108]]
explanation in the Senate debate that Federal candidates and
officeholders ``cannot solicit soft money funds, funds that do not
comply with Federal contribution limits and source prohibitions, for
any party committee--national, State, or local.'' 148 Cong. Rec. S2139
(daily ed. March 20, 2002) (statement of Sen. McCain). The Commission
initially sought comment on a rule proposing that, while such
individuals could attend, speak, or be a featured guest at a State or
local party fundraising event, they could not say anything that could
be construed as soliciting or otherwise seeking non-Federal funds. In
the alternative, the NPRM sought comment on whether the fundraising
event provision was a total exemption from the general solicitation
ban, whereby Federal candidates and officeholders and their agents may
attend and speak freely at such events. The phrase ``featured guest''
strongly suggests that State, district, or local party committees may
publicize in advance that a Federal candidate or officeholder will be
attending and speaking at an event, and the Commission sought comments
on whether this means that Federal candidates and officeholders may be
referred to in invitation materials for the event, or appear as members
of a host committee, or be honored at the event.
The Commission received a range of comments on these issues. Some
advocated a restrictive approach, arguing that any other construction
would undercut the fundraising prohibition. Others noted that it could
be almost impossible for a Federal candidate or officeholder not to
become involved in at least indirect fundraising, such as thanking
people in a rope line for their support, by virtue of the fact that
they are appearing and speaking at a fundraising event, which the
statutory exemption expressly permits. Some claimed that monitoring
every word the speaker said could turn the Commission into ``speech
police,'' raising First Amendment concerns. U.S. CONST. amend. I
(``Congress shall make no law * * * abridging the freedom of speech * *
*''). Also, the fact that a candidate or officeholder is to be honored
at an event implies that his or her name or picture may appear
prominently on invitations, flyers, and other material distributed in
connection with the event.
The Commission has decided to construe the statutory exemption
permitting Federal candidates and officeholders to attend, speak, and
appear as a featured guest at State, district or local party committee
fundraising events without regulation or restriction. This conclusion
is compelled by the plain language of the section and the structure of
the section within BCRA. The structure of the statute requires the
Commission to construe the provision as a total exemption to the
solicitation prohibition, applicable to Federal candidates and
officeholders, when attending and speaking at party fundraising events,
because the statutory section is styled as such. To conclude otherwise
would require the Commission to read the restrictions itemized in the
general prohibition into a statutory exemption that clearly and
unambiguously excludes those restrictions by it own terms. It would
also require the Commission to regulate and potentially restrict what
candidates and officeholders say at political events, which is contrary
to the plain meaning of the statutory exemption and would raise serious
constitutional concerns. Accordingly, candidates and officeholders are
free under the rule to speak at such functions without regulation or
restriction. In addition, as several commenters urged, State, district,
and local party committees are free within the rule to publicize
featured appearances of Federal candidates and officeholders at these
events, including references to these individuals in invitations. The
Commission concludes, however, that Federal candidates and
officeholders are prohibited from serving on ``host committees'' for a
party fundraising event or from personally signing a solicitation in
connection with a State, local, or district party fundraising event, on
the basis that these pre-event activities are outside the permissible
activities described above flowing from a Federal candidate's or
officeholder's appearance or attendance at the event. The rule,
consistent with the statute, places no restriction on the speech of
Federal candidates and individuals holding Federal office at these
fundraising events.
11 CFR 300.65 Exceptions for Certain Tax-Exempt Organizations
In 2 U.S.C. 441i(e)(1), BCRA prohibits candidates and officeholders
from soliciting, receiving, directing, transferring, or spending funds
unless the funds meet the source and amount restrictions of the Act.
See also new 11 CFR 300.61 and 11 CFR 300.62. BCRA creates two
exceptions from that general rule in 2 U.S.C. 441i(e)(4): (1) It allows
candidates, officeholders, and individuals who are agents acting on
behalf of either to make general solicitations, without source or
amount restrictions for a 501(c) organization unless the ``principal
purpose'' of the organization is to conduct certain Federal election
activity, specifically voter registration, voter identification, GOTV
activities, or generic campaign activity, so long as the solicitation
is not to obtain funds in connection with a Federal election; and (2)
it permits Federal candidates and officeholders, and individuals who
are agents acting on their behalf, to make a solicitation explicitly to
obtain funds for a 501(c) organization whose principal purpose is to
conduct Federal election activity as described above or for a 501(c)
organization to conduct these activities provided that only individuals
are solicited for no more than $20,000 per calendar year. The final
rule at 11 CFR 300.65 implements these exceptions for Federal candidate
and officeholder solicitations for 501(c) organizations. It mirrors the
final rule at 11 CFR 300.52 contained in subpart C, discussed above.
In response to the NPRM, BCRA's principal sponsors and a public
interest group stated that the proposed rule at 11 CFR 300.52(a)(1)
(mirrored in 300.65(a)(1)) could be interpreted to prohibit candidate/
officeholder solicitations that were not meant to be prohibited. The
proposed rules stated that a Federal candidate or officeholder may make
a general solicitation on behalf of a 501(c) organization without
regard to source or amount restrictions ``only if the solicitation does
not specify how the funds will or should be spent,'' if the
solicitation is not for a 501(c) organization whose principal purpose
is to conduct certain enumerated Federal election activity, and if the
solicitation is not for that enumerated Federal election activity.
These commenters expressed concern that the proposed regulation could
be erroneously interpreted as prohibiting Federal candidates or
officeholders from making a general or specific solicitation, without
source or amount limitations, for an organization such as the Red
Cross, which engages in no ``electoral activities'' whatsoever. BCRA's
principal sponsors also argued that this provision could be interpreted
to prohibit specific solicitations, without source or amount
limitations, for a 501(c) organization whose principal purpose is not
to engage in Federal election activity, but who nonetheless engages in
some election activity, provided that the solicitation is not for
activity in connection with an election. The sponsors argued that the
final rules should permit such specific solicitations. The examples
given by the sponsors to illustrate this point included a specific
solicitation for the
[[Page 49109]]
NAACP College Fund or the NRA firearms training program, even though
the NAACP and the NRA engage in certain election activity.
The Commission agrees that 11 CFR 300.65 should not be
misinterpreted to prohibit candidates, officeholders, or their agents
from soliciting funds for a 501(c) organization that engages in no
election activity, such as the Red Cross. Accordingly, the final rule
at 11 CFR 300.65 addresses the commenters' concerns by more
specifically setting forth the circumstances under which Federal
candidates, officeholders, and their agents can make general
solicitations on behalf of 501(c) organizations, without regard to
source or limitation, and by setting forth in paragraph (b) the
circumstances under which they can made specific, limited solicitations
to individuals to obtain funds to carry out certain Federal election
activities.
In response to a question in the NRPM regarding the scope of the
term ``agent'' in 2 U.S.C. 441i(e), the sponsors stated that it was
their intent that the restrictions on candidate/officer holder
solicitations apply to an agent ``acting on behalf of'' either.
Accordingly, the final rule states throughout that it applies to an
individual who is an agent ``acting on behalf of'' a Federal candidate
or officeholder. BCRA's sponsors and the same public interest commenter
also pointed out that proposed 11 CFR 300.52(b)(2) (mirrored in
proposed 11 CFR 300.65(b)(2)) did not make clear that the specific
solicitations permitted for Federal election activity or organizations
principally engaged in such activities applies only to 501(c)
organizations and not to other tax exempt organizations, such as
section 527 organizations. The Commission agrees. Accordingly, the
introductory language in the final rule specifically states that the
requirements for solicitations in the rule apply to 501(c)
organizations.
Paragraph (c) of the final rule enumerates the specific types of
Federal election activity for which a Federal candidate or officeholder
can make specific solicitations and incorporates the definitions of
those activities at 11 CFR 100.24(a). Because BCRA permits limited
solicitations only for specific Federal election activities, new
paragraph (d) of the final rule makes clear that solicitations are not
permitted for other election activities, including Federal election
activity such as public communications promoting or opposing clearly
identified Federal candidates. See 11 CFR 100.24(b)(3).
In response to questions raised in the NPRM, BCRA's principal
sponsors, a public interest group, and a non-profit organization agreed
that 11 CFR 300.65 should include a safe harbor provision for Federal
candidates, officeholders, and their agents, similar to the one for
party committees in 11 CFR 300.11 and 11 CFR 300.37. Accordingly, new
paragraph (e) provides that a Federal candidate, officeholder, or agent
acting on behalf of either, may obtain and rely upon a certification
from a section 501(c) organization in determining the scope of the
permissible solicitations they may make on behalf of the organization.
Paragraph (e) also sets forth the requirements for such a
certification: the certification is a written statement signed by an
officer or other authorized representative of the organization with
knowledge of the organization's activities; the certification states
the organization's principal purpose is not to conduct election
activities, including Federal election activities described in
paragraph (c) of this section; and the certification states that the
organization does not intend to pay debts incurred in a prior election
cycle for expenditures and disbursements made in connection with an
election for Federal office (including for Federal election activity).
A non-profit organization raised several concerns about the
restrictions on Federal officeholders soliciting for 501(c)
organizations. First, the non-profit group maintained that the
regulations should create a presumption that the principal purpose of
any 501(c) organization is not to conduct election activity because
``under federal tax law, no 501(c) organization may conduct partisan
electoral activity as its primary purpose.'' The commenter was
concerned that requiring a candidate or officeholder to verify whether
or not an organization engages in election activity as its principal
purpose will ``result in an unnecessary chilling effect on their
assistance'' to 501(c) organizations. The commenter was also concerned
that IRS Form 990 tax returns and other tax forms mentioned in the NPRM
as possible ways to determine an organization's activities or principal
purpose would not provide a candidate or officeholder with the
necessary information. Second, the commenter urged that any definition
of ``principal purpose'' be based on a multi-year average of an
organization's expenditures for Federal election activity to more
accurately capture an organization's actual level of electoral
activity, which necessarily occurs closer to elections. Finally, the
group urged that the regulations include a safe harbor permitting
candidates and officeholders to appear at a Section 501(c)
organization's fundraiser or convention as long as no solicitations are
made for funds for election activities, or alternatively, for any
funds.
Determining whether a particular organization's principal purpose
is to conduct election activities, such as voter registration or GOTV,
is a fact-based determination that must be made as to a particular
organization. Thus, creating a presumption that the principal purpose
of any 501(c) organization is not to engage in election activity is
inappropriate and could conflict with IRS determinations. As for
including a definition of ``principal purpose'' that is based on a
multi-year average of an organization's election expenditures, the
Commission lacks sufficient information to establish a particular
percentage or average at this time. Finally, the Commission notes that
the general and specific solicitations contemplated in 11 CFR 300.65
may take place at a fundraising event conducted by the 501(c)
organization.
The Commission agrees with the commenter that IRS Form 990s may not
clearly indicate whether or not an organization engages in specific
election activities. Therefore, the safe harbor provision in the final
rule does not require a Federal candidate or office holder to obtain or
rely upon such forms.
As for the concern that Federal candidates and officeholders will
be chilled from assisting 501(c) organizations in fundraising, the safe
harbor provided in paragraph (e) is intended to ease concerns as to
inadvertent violations of the Act, as amended by BCRA. On the other
hand, new paragraph (f) of the final rules makes clear that a Federal
candidate, Federal officeholder, or individual agents acting on behalf
of either may not rely upon a certification obtained from an
organization if the individual has actual knowledge that the
certification is false. This provision is identical to the provisions
applicable to party committees in 11 CFR 300.11 and 300.37.
Subpart E--State and Local Candidates
11 CFR 300.70 Scope
Subpart E implements two provisions of BCRA regarding State and
local candidates. 2 U.S.C. 441i(f)(1), (2). Section 300.70 explains
that this subpart applies to any candidate for State or local office,
individual holding State or local office, or an agent acting on behalf
of any such candidate or individual. 2 U.S.C. 441i(f)(1). For example,
the subpart applies to an
[[Page 49110]]
individual holding Federal office who is a candidate for State or local
office. It does not, however, apply to an association or similar group
of candidates for State or local office, or of individuals holding
State or local office, because they are not addressed in this section
of BCRA. The Commission received no comments on this section.
11 CFR 300.71 Federal Funds Required for Certain Communications
BCRA prohibits State and local candidates and officeholders from
funding certain public communications with non-Federal funds. 2 U.S.C.
441i(f)(1). This prohibition is contained in new 11 CFR 300.71. The
prohibition on use of non-Federal funds encompasses public
communications that refer to a clearly identified candidate for Federal
office, if the communication promotes, supports, attacks, or opposes
any candidate for that Federal office, regardless of whether the
communication expressly advocates voting for or against any candidate.
See 2 U.S.C. 431(20)(A)(iii). The section contains a cross reference to
section 11 CFR 100.26, which defines the new term public communication
for purposes of the Act. State and local candidates and officeholders
may, however, use Federal funds for these public communications.
No commenters addressed this section.
11 CFR 300.72 Federal Funds Not Required for Certain Communications
BCRA contains an exception to the prohibition on the use of Federal
funds for certain public communications that permits State and local
candidates and officeholders to use non-Federal funds for public
communications that refer to Federal candidates but do not promote,
support, attack, or oppose any candidate for Federal office. 2 U.S.C.
441i(f)(2). This exception is set forth at new 11 CFR 300.72. Section
300.72 follows the statutory language.
XI. Part 9034--Entitlements
11 CFR 9034.8 Joint Fundraising
The ban on national party non-Federal fundraising affects the
Commission's joint fundraising rules under the Presidential Primary
Matching Payment Act at 11 CFR 9034.8. The Commission is, therefore,
adding introductory language to this section, advising readers that
``[n]othing in this section shall supersede 11 CFR part 300, which
prohibits any person from soliciting, receiving, directing,
transferring, or spending any non-Federal funds, or from transferring
Federal funds for Federal election activities.''
Certification of No Effect Pursuant to 5 U.S.C. 605(b) [Regulatory
Flexibility Act]
The Commission certifies that the attached proposed rules, if
promulgated, will not have a significant economic impact on a
substantial number of small entities. The basis for this certification
is that the national, State, and local party committees of the two
major political parties are not small entities under 5 U.S.C. 601, and
the number of other small entities to which the rules would apply is
not substantial.
List of Subjects
11 CFR Part 100
Elections.
11 CFR Part 102
Political committees and parties, reporting and recordkeeping
requirements.
11 CFR Part 104
Campaign funds, political committees and parties, reporting and
recordkeeping requirements.
11 CFR Part 106
Campaign funds, political committees and parties, political
candidates.
11 CFR Part 108
Elections, reporting and recordkeeping.
11 CFR Part 110
Campaigns, political parties and committees.
11 CFR Part 114
Business and industry, elections, labor.
11 CFR Part 300
Campaign funds, nonprofit organizations, political committees and
parties, political candidates, reporting and recordkeeping
requirements.
11 CFR Part 9034
Campaign funds, reporting and recordkeeping requirements.
For reasons set out in the preamble, 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 11 CFR part 100 continues to read as
follows:
Authority: 2 U.S.C. 431; 434(a)(11), 438(a)(8).
2. Section 100.14 is revised to read as follows:
Sec. 100.14 State committee, subordinate committee, district, or local
committee (2 U.S.C. 431(15)).
(a) State committee means the organization that by virtue of the
bylaws of a political party or the operation of State law is part of
the official party structure and is responsible for the day-to-day
operation of the political party at the State level, including an
entity that is directly or indirectly established, financed,
maintained, or controlled by that organization, as determined by the
Commission.
(b) District or local committee means any organization that by
virtue of the bylaws of a political party or the operation of State law
is part of the official party structure, and is responsible for the
day-to-day operation of the political party at the level of city,
county, neighborhood, ward, district, precinct, or any other
subdivision of a State.
(c) Subordinate committee of a State, district, or local committee
means any organization that at the level of city, county, neighborhood,
ward, district, precinct, or any other subdivision of a State or any
organization under the control or direction of the State committee, and
is directly or indirectly established, financed, maintained, or
controlled by the State, district, or local committee.
3. Sections 100.24, 100.25, 100.26, 100.27, and 100.28 are added to
read as follows:
Sec. 100.24 Federal election activity (2 U.S.C. 431(20)).
(a) As used in this section, and in part 300 of this chapter,
(1) In connection with an election in which a candidate for Federal
office appears on the ballot means:
(i) The period of time beginning on the date of the earliest filing
deadline for access to the primary election ballot for Federal
candidates as determined by State law, or in those States that do not
conduct primaries, on January 1 of each even-numbered year and ending
on the date of the general election, up to and including the date of
any general runoff.
(ii) In an odd-numbered year, the period beginning on the date on
which the date of a special election in which a candidate for Federal
office appears on the ballot is set and ending on the date of the
special election.
(2) Voter registration activity means contacting individuals by
telephone, in person, or by other individualized means to assist them
in registering to vote. Voter registration activity
[[Page 49111]]
includes, but is not limited to, printing and distributing registration
and voting information, providing individuals with voter registration
forms, and assisting individuals in the completion and filing of such
forms.
(3) Get-out-the-vote activity means contacting registered voters by
telephone, in person, or by other individualized means, to assist them
in engaging in the act of voting. Get-out-the-vote activity shall not
include any communication by an association or similar group of
candidates for State or local office or of individuals holding State or
local office if such communication refers only to one or more State or
local candidates. Get-out-the-vote activity includes, but is not
limited to:
(i) Providing to individual voters, within 72 hours of an election,
information such as the date of the election, the times when polling
places are open, and the location of particular polling places; and
(ii) Offering to transport or actually transporting voters to the
polls.
(4) Voter identification means creating or enhancing voter lists by
verifying or adding information about the voters' likelihood of voting
in an upcoming election or their likelihood of voting for specific
candidates. This paragraph shall not apply to an association or similar
group of candidates for State or local office or of individuals holding
State or local office if the association or group engages in voter
identification that refers only to one or more State or local
candidates.
(b) As used in part 300 of this chapter, Federal election activity
means any of the activities described in paragraphs (b)(1) through
(b)(4) of this section.
(1) Voter registration activity during the period that begins on
the date that is 120 calendar days before the date that a regularly
scheduled Federal election is held and ends on the date of the
election. For purposes of voter registration activity, the term
``election'' does not include any special election.
(2) The following activities conducted in connection with an
election in which one or more candidates for Federal office appears on
the ballot (regardless of whether one or more candidates for State or
local office also appears on the ballot):
(i) Voter identification.
(ii) Generic campaign activity, as defined in 11 CFR 100.25.
(iii) Get-out-the-vote activity.
(3) A public communication that refers to a clearly identified
candidate for Federal office, regardless of whether a candidate for
State or local election is also mentioned or identified, and that
promotes or supports, or attacks or opposes any candidate for Federal
office. This paragraph applies whether or not the communication
expressly advocates a vote for or against a Federal candidate.
(4) Services provided during any month by an employee of a State,
district, or local committee of a political party who spends more than
25 percent of that individual's compensated time during that month on
activities in connection with a Federal election.
(c) Exceptions. Federal election activity does not include any
amount expended or disbursed by a State, district, or local committee
of a political party for any of the following activities:
(1) A public communication that refers solely to one or more
clearly identified candidates for State or local office and that does
not promote or support, or attack or oppose a clearly identified
candidate for Federal office; provided, however, that such a public
communication shall be considered a Federal election activity if it
constitutes voter registration activity, generic campaign activity,
get-out-the-vote activity, or voter identification.
(2) A contribution to a candidate for State or local office,
provided the contribution is not designated to pay for voter
registration activity, voter identification, generic campaign activity,
get-out-the-vote activity, a public communication, or employee services
as set forth in paragraphs (a)(1) through (4) of this section.
(3) The costs of a State, district, or local political convention,
meeting or conference.
(4) The costs of grassroots campaign materials, including buttons,
bumper stickers, handbills, brochures, posters, and yard signs, that
name or depict only candidates for State or local office.
Sec. 100.25 Generic campaign activity (2 U.S.C. 431(21)).
Generic campaign activity means a public communication that
promotes or opposes a political party and does not promote or oppose a
clearly identified Federal candidate or a non-Federal candidate.
Sec. 100.26 Public communication (2 U.S.C. 431(22)).
Public communication means a communication by means of any
broadcast, cable or satellite communication, newspaper, magazine,
outdoor advertising facility, mass mailing or telephone bank to the
general public, or any other form of general public political
advertising. The term public communication shall not include
communications over the Internet.
Sec. 100.27 Mass mailing (2 U.S.C. 431(23)).
Mass mailing means a mailing by United States mail or facsimile of
more than 500 pieces of mail matter of an identical or substantially
similar nature within any 30-day period. A mass mailing does not
include electronic mail or Internet communications. For purposes of
this section, substantially similar includes communications that
include substantially the same template or language, but vary in non-
material respects such as communications customized by the recipient's
name, occupation, or geographic location.
Sec. 100.28 Telephone bank (2 U.S.C. 431(24)).
Telephone bank means more than 500 telephone calls of an identical
or substantially similar nature within any 30-day period. A telephone
bank does not include electronic mail or Internet communications
transmitted over telephone lines. For purposes of this section,
substantially similar includes communications that include
substantially the same template or language, but vary in non-material
respects such as communications customized by the recipient's name,
occupation, or geographic location.
4. Sections 100.29 through 100.50 are added and reserved.
5. Sections 100.1 through 100.50 are designated as subpart A--
General Definitions.
PART 102--REGISTRATION, ORGANIZATION, AND RECORDKEEPING BY
POLITICAL COMMITTEES (2 U.S.C. 433)
6. The authority citation for part 102 continues to read as
follows:
Authority: 2 U.S.C. 432, 433, 434(a)(11), 438(a)(8), 441d.
7. Section 102.5 is revised to read as follows:
Sec. 102.5 Organizations financing political activity in connection
with Federal and non-Federal elections, other than through transfers
and joint fundraisers: Accounts and Accounting.
(a) Organizations that are political committees under the Act,
other than national party committees.
(1) Each organization, including a State, district, or local party
committee, that finances political activity in connection with both
Federal and non-Federal elections and that qualifies as a political
committee under 11 CFR 100.5 shall either:
(i) Establish a separate Federal account in a depository in
accordance with 11 CFR part 103. Such account shall be treated as a
separate Federal
[[Page 49112]]
political committee that must comply with the requirements of the Act
including the registration and reporting requirements of 11 CFR parts
102 and 104. Only funds subject to the prohibitions and limitations of
the Act shall be deposited in such separate Federal account. See 11 CFR
103.3. All disbursements, contributions, expenditures, and transfers by
the committee in connection with any Federal election shall be made
from its Federal account, except as otherwise permitted for State,
district, and local party committees by 11 CFR part 300 and paragraph
(a)(5) of this section. No transfers may be made to such Federal
account from any other account(s) maintained by such organization for
the purpose of financing activity in connection with non-Federal
elections, except as provided by 11 CFR 300.33, 300.34, 106.6(c), and
106.7(f). Administrative expenses for political committees other than
party committees shall be allocated pursuant to 11 CFR 106.6 between
such Federal account and any other account maintained by such committee
for the purpose of financing activity in connection with non-Federal
elections. Administrative expenses for State, district, and local party
committees are subject to 11 CFR 106.7 and 11 CFR part 300; or
(ii) Establish a political committee that shall receive only
contributions subject to the prohibitions and limitations of the Act,
regardless of whether such contributions are for use in connection with
Federal or non-Federal elections. Such organization shall register as a
political committee and comply with the requirements of the Act.
(2) Only contributions meeting any of the conditions set forth in
paragraphs (a)(2)(i), (ii), or (iii) of this section may be deposited
in a Federal account established under paragraph (a)(1)(i) of this
section, see 11 CFR 103.3, or may be received by a political committee
established under paragraph (a)(1)(ii) of this section:
(i) Contributions designated for the Federal account;
(ii) Contributions that result from a solicitation which expressly
states that the contribution will be used in connection with a Federal
election; or
(iii) Contributions from contributors who are informed that all
contributions are subject to the prohibitions and limitations of the
Act.
(3) State, district, and local party committees that intend to
expend Levin funds raised pursuant to 11 CFR 300.31 for activities
identified in 11 CFR 300.32(b)(1) must either:
(i) Establish one or more separate Levin accounts pursuant to 11
CFR 300.30(c)(2); or
(ii) Demonstrate through a reasonable accounting method approved by
the Commission (including any method embedded in software provided or
approved by the Commission) that whenever such organization makes a
payment that organization has received sufficient funds subject to the
limitations and prohibitions of the Act or the requirements of 11 CFR
300.30(c)(1) or (3) to make such payment. Such organization shall keep
records of amounts received or expended under this paragraph and, upon
request, shall make such records available for examination by the
Commission.
(4) Solicitations by Federal candidates and Federal officeholders
for State, district, and local party committees are subject to the
restrictions in 11 CFR 300.31(e) and 11 CFR part 300, subpart D.
(5) State, district, and local party committees and organizations
may establish one or more separate allocation accounts to be used for
activities allocable pursuant to 11 CFR 106.7 and 11 CFR 300.33.
(b) Organizations that are not political committees under the Act.
(1) Any organization that makes contributions, expenditures, and
exempted payments under 11 CFR 100.7(b)(9), (15) and (17) and 11 CFR
100.8(b)(10), (16) and (18), but that does not qualify as a political
committee under 11 CFR 100.5, must keep records of receipts and
disbursements and, upon request, must make such records available for
examination by the Commission. The organization must demonstrate
through a reasonable accounting method that, whenever such an
organization makes a contribution or expenditure, or payment, the
organization has received sufficient funds subject to the limitations
and prohibitions of the Act to make such contribution, expenditure, or
payment.
(2) Any State, district, or local party organization that makes
payments for certain Federal election activities under 11 CFR 300.32(b)
must either:
(i) Establish one or more Levin accounts pursuant to 11 CFR
300.30(b) into which only funds solicited pursuant to 11 CFR 300.31 may
be deposited and from which payments must be made pursuant to 11 CFR
300.32 and 300.33. See 11 CFR 300.30(c)(2)(i); or
(ii) Demonstrate through a reasonable accounting method approved by
the Commission (including any method embedded in software provided or
approved by the Commission) that whenever such organization makes a
payment that organization has received sufficient funds subject to the
limitations and prohibitions of the Act or the requirements of 11 CFR
300.31 to make such payment. Such organization shall keep records of
amounts received or expended under this paragraph and, upon request,
shall make such records available for examination by the Commission.
See 11 CFR 300.30(c)(2)(ii).
(3) All such party organizations shall keep records of deposits to
and disbursements from such Federal and Levin accounts, and upon
request, shall make such records available for examination by the
Commission.
(c) National party committees. Between November 6, 2002, and
December 31, 2002, paragraphs (a) and (b) of this section apply to
national party committees. After December 31, 2002, national party
committees are prohibited from raising and spending non-Federal funds.
Therefore, this section does not apply to national party committees
after December 31, 2002.
8. Section 102.17 is amended by adding introductory language to
paragraph (a) to read as follows:
Sec. 102.17 Joint fundraising by committees other than separate
segregated funds.
(a) General. Nothing in this section shall supersede 11 CFR part
300, which prohibits any person from soliciting, receiving, directing,
transferring, or spending any non-Federal funds, or from transferring
Federal funds for Federal election activities.
* * * * *
PART 104--REPORTS BY POLITICAL COMMITTEES (2 U.S.C. 434)
9. The authority citation for part 104 continues to read as
follows:
Authority: 2 U.S.C. 431(1), 431(8), 431(9), 432(i), 434,
438(a)(8), 438(b), 439a.
10. Section 104.8 is amended by revising paragraphs (e) and (f) to
read as follows:
Sec. 104.8 Uniform reporting of receipts.
* * * * *
(e) For reports covering activity on or before December 31, 2002,
national party committees shall disclose in a memo Schedule A
information about each individual, committee, corporation, labor
organization, or other entity that donates an aggregate amount in
excess of $200 in a calendar year to the committee's non-Federal
account(s). This information shall include the donating individual's or
entity's name,
[[Page 49113]]
mailing address, occupation or type of business, and the date of
receipt and amount of any such donation. If a donor's name is known to
have changed since an earlier donation reported during the calendar
year, the exact name or address previously used shall be noted with the
first reported donation from that donor subsequent to the name change.
The memo entry shall also include, where applicable, the information
required by paragraphs (b) through (d) of this section.
(f) For reports covering activity on or before December 31, 2002,
national party committees shall also disclose in a memo Schedule A
information about each individual, committee, corporation, labor
organization, or other entity that donates an aggregate amount in
excess of $200 in a calendar year to the committee's building fund
account(s). This information shall include the donating individual's or
entity's name, mailing address, occupation or type of business, and the
date of receipt and amount of any such donation. If a donor's name is
known to have changed since an earlier donation reported during the
calendar year, the exact name or address previously used shall be noted
with the first reported donation from that donor subsequent to the name
change. The memo entry shall also include, where applicable, the
information required by paragraphs (b) through (d) of this section.
11. Section 104.9 is amended by revising paragraphs (c), (d), and
(e) to read as follows:
Sec. 104.9 Uniform reporting of disbursements.
* * * * *
(c) For reports covering activity on or before March 31, 2003,
national party committees shall report in a memo Schedule B the full
name and mailing address of each person to whom a disbursement in an
aggregate amount or value in excess of $200 within the calendar year is
made from the committee's non-Federal account(s), together with the
date, amount, and purpose of such disbursement, in accordance with
paragraph (b) of this section. As used in this section, purpose means a
brief statement or description as to the reasons for the disbursement.
See 11 CFR 104.3(b)(3)(i)(A).
(d) For reports covering activity on or before March 31, 2003,
national party committees shall report in a memo Schedule B the full
name and mailing address of each person to whom a disbursement in an
aggregate amount or value in excess of $200 within the calendar year is
made from the committee's building fund account(s), together with the
date, amount, and purpose of such disbursement, in accordance with
paragraph (b) of this section. As used in this section, purpose means a
brief statement or description as to the reasons for the disbursement.
See 11 CFR 104.3(b)(3)(i)(A).
(e) For reports covering activity on or before December 31, 2002,
national party committees shall report in a memo Schedule B each
transfer from their non-Federal account(s) to the non-Federal accounts
of a State or local party committee.
12. Section 104.10 is revised to read as follows:
Sec. 104.10 Reporting by separate segregated funds and nonconnected
committees of expenses allocated among candidates and activities.
(a) Expenses allocated among candidates. A political committee that
is a separate segregated fund or a nonconnected committee making an
expenditure on behalf of more than one clearly identified candidate for
Federal office shall allocate the expenditure among the candidates
pursuant to 11 CFR part 106. 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 shall also be allocated pursuant to 11 CFR part 106. For
allocated expenditures, the committee shall report the amount of each
in-kind contribution, independent expenditure, or coordinated
expenditure attributed to each Federal candidate. If a payment also
includes amounts attributable to one or more non-Federal candidates,
and is made by a political committee with separate Federal and non-
Federal accounts, then the payment shall be made according to the
procedures set forth in 11 CFR 106.6(e), but shall be reported pursuant
to paragraphs (a)(1) through (a)(4) of this section, as follows:
(1) Reporting of allocation of expenses attributable to specific
Federal and non-Federal candidates. In each report disclosing a payment
that includes both expenditures on behalf of one or more Federal
candidates and disbursements on behalf of one or more non-Federal
candidates, the committee shall assign a unique identifying title or
code to each program or activity conducted on behalf of such
candidates, shall state the allocation ratio calculated for the program
or activity, and shall explain the manner in which the ratio was
derived. The committee shall also summarize the total amounts
attributed to each candidate, to date, for each joint program or
activity.
(2) Reporting of transfers between accounts for the purpose of
paying expenses attributable to specific Federal and non-Federal
candidates. A political committee that pays allocable expenses in
accordance with 11 CFR 106.6(e) shall report each transfer of funds
from its non-Federal account to its Federal account or to its separate
allocation account for the purpose of paying such expenses. In the
report covering the period in which each transfer occurred, the
committee shall explain in a memo entry the allocable expenses to which
the transfer relates and the date on which the transfer was made. If
the transfer includes funds for the allocable costs of more than one
program or activity, the committee shall itemize the transfer, showing
the amounts designated for each program or activity conducted on behalf
of one or more clearly identified Federal candidates and one or more
clearly identified non-Federal candidates.
(3) Reporting of allocated disbursements attributable to specific
Federal and non-Federal candidates. A political committee that pays
allocable expenses in accordance with 11 CFR 106.6(e) shall also report
each disbursement from its Federal account or its separate allocation
account in payment for a program or activity conducted on behalf of one
or more clearly identified Federal candidates and one or more clearly
identified non-Federal candidates. In the report covering the period in
which the disbursement occurred, the committee shall state the full
name and address of each person to whom the disbursement was made, and
the date, amount, and purpose of each such disbursement. If the
disbursement includes payment for the allocable costs of more than one
program or activity, the committee shall itemize the disbursement,
showing the amounts designated for payment of each program or activity
conducted on behalf of one or more clearly identified Federal
candidates and one or more clearly identified non-Federal candidates.
The committee shall also report the amount of each in-kind
contribution, independent expenditure, or coordinated expenditure
attributed to each Federal candidate, and the total amount attributed
to the non-Federal candidate(s). In addition, the committee shall
report the total amount expended by the committee that year, to date,
for each joint program or activity.
(4) Recordkeeping. The treasurer shall retain all documents
supporting the committee's allocation on behalf of specific Federal and
non-Federal candidates, in accordance with 11 CFR 104.14.
[[Page 49114]]
(b) Expenses allocated among activities. A political committee that
is a separate segregated fund or a nonconnected committee and that has
established separate Federal and non-Federal accounts under 11 CFR
102.5(a)(1)(i) shall allocate between those accounts its administrative
expenses and its costs for fundraising and generic voter drives
according to 11 CFR 106.6, and shall report those allocations according
to paragraphs (b) (1) through (5) of this section, as follows:
(1) Reporting of allocation of administrative expenses and costs of
generic voter drives.
(i) In the first report in a calendar year disclosing a
disbursement for administrative expenses or generic voter drives, as
described in 11 CFR 106.6(b), the committee shall state the allocation
ratio to be applied to these categories of activity according to 11 CFR
106.6(c), and the manner in which it was derived.
(ii) In each subsequent report in the calendar year itemizing an
allocated disbursement for administrative expenses or generic voter
drives:
(A) The committee shall state the category of activity for which
each allocated disbursement was made, and shall summarize the total
amount spent by the Federal and non-Federal accounts that year, to
date, for each such category.
(B) The committees shall also report in a memo entry the total
amounts expended in donations and direct disbursements on behalf of
specific State and local candidates, to date, in that calendar year.
(2) Reporting of allocation of the direct costs of fundraising. In
each report disclosing a disbursement for the direct costs of a
fundraising program, as described in 11 CFR 106.6(b), the committee
shall assign a unique identifying title or code to each such program or
activity, shall state the allocation ratio calculated for the program
or activity according to 11 CFR 106.6(d), and shall explain the manner
in which the ratio was derived. The committee shall also summarize the
total amounts spent by the Federal and non-Federal accounts that year,
to date, for each such program or activity.
(3) Reporting of transfers between accounts for the purpose of
paying allocable expenses. A political committee that pays allocable
expenses in accordance with 11 CFR 106.6(e) shall report each transfer
of funds from its non-Federal account to its Federal account or to its
separate allocation account for the purpose of paying such expenses. In
the report covering the period in which each transfer occurred, the
committee shall explain in a memo entry the allocable expenses to which
the transfer relates and the date on which the transfer was made. If
the transfer includes funds for the allocable costs of more than one
activity, the committee shall itemize the transfer, showing the amounts
designated for administrative expenses and generic voter drives, and
for each fundraising program, as described in 11 CFR 106.6(b).
(4) Reporting of allocated disbursements. A political committee
that pays allocable expenses in accordance with 11 CFR 106.6(e) shall
also report each disbursement from its Federal account or its separate
allocation account in payment for a joint Federal and non-Federal
expense or activity. In the report covering the period in which the
disbursement occurred, the committee shall state the full name and
address of each person to whom the disbursement was made, and the date,
amount, and purpose of each such disbursement. If the disbursement
includes payment for the allocable costs of more than one activity, the
committee shall itemize the disbursement, showing the amounts
designated for payment of administrative expenses and generic voter
drives, and for each fundraising program, as described in 11 CFR
106.6(b). The committee shall also report the total amount expended by
the committee that year, to date, for each category of activity.
(5) Recordkeeping. The treasurer shall retain all documents
supporting the committee's allocated disbursements for three years, in
accordance with 11 CFR 104.14.
13. Part 104 is amended by adding Sec. 104.17 to read as follows:
Sec. 104.17 Reporting of allocable expenses by party committees.
(a) Expenses allocated among candidates. A national party committee
making an expenditure on behalf of more than one clearly identified
candidate for Federal office must report the allocation between or
among the named candidates. A national party committee making
expenditures and disbursements on behalf of one or more clearly
identified Federal candidates and on behalf of one or more clearly
identified non-Federal candidates must report the allocation among all
named candidates. These payments shall be allocated among candidates
pursuant to 11 CFR part 106, but only Federal funds may be used for
such payments. A State, district, or local party committee making
expenditures and disbursements for Federal election activity as defined
at 11 CFR 100.24 on behalf of one or more clearly identified Federal
and one or more clearly identified non-Federal candidates must make the
payments from its Federal account and must report the allocation among
all named candidates. A State, district, or local party committee
making expenditures and disbursements on behalf of one or more clearly
identified Federal and one or more clearly identified non-Federal
candidates where the activity is not a Federal election activity may
allocate the payments between its Federal and non-Federal account and
must report the allocation among all named candidates. For allocated
expenditures, the committee must report the amount of each in-kind
contribution, independent expenditure, or coordinated expenditure
attributed to each candidate. If a payment also includes amounts
attributable to one or more non-Federal candidates, and is made by a
State, district, or local party committee with separate Federal and
non-Federal accounts, and is not for a Federal election activity, then
the payment shall be made according to the procedures set forth in 11
CFR 106.7(f), but shall be reported pursuant to paragraphs (a)(1)
through (a)(4) of this section, as follows:
(1) Reporting of allocation of expenses attributable to specific
Federal and non-Federal candidates. In each report disclosing a payment
that includes both expenditures on behalf of one or more Federal
candidates and disbursements on behalf of one or more non-Federal
candidates, the committee must assign a unique identifying title or
code to each program or activity conducted on behalf of such
candidates, state the allocation ratio calculated for the program or
activity, and explain the manner in which the ratio applied to each
candidate was derived. The committee must also summarize the total
amounts attributed to each candidate, to date, for each program or
activity.
(2) Reporting of transfers between accounts for the purpose of
paying expenses attributable to specific Federal and non-Federal
candidates. A State, district, or local party committee that pays
allocable expenses in accordance with 11 CFR 106.7(f) shall report each
transfer of funds from its non-Federal account to its Federal account
or to its separate allocation account for the purpose of paying such
expenses. In the report covering the period in which each transfer
occurred, the State, district, or local party committee shall explain
in a memo entry the allocable expenses to which the transfer relates
and the date on which the transfer was made. If the transfer includes
funds for the allocable costs of more than one
[[Page 49115]]
program or activity, the State, district, or local party committee must
itemize the transfer, showing the amounts designated for each program
or activity conducted on behalf of one or more clearly identified
Federal candidates and one or more clearly identified non-Federal
candidates.
(3) Reporting of allocated disbursements attributable to specific
Federal and non-Federal candidates. A State, district, or local
committee that pays allocable expenses in accordance with 11 CFR
106.7(f) shall also report each disbursement from its Federal account
or its separate allocation account in payment for a program or activity
conducted on behalf of one or more clearly identified Federal
candidates and one or more clearly identified non-Federal candidates.
In the report covering the period in which the disbursement occurred,
the State, district, or local party committee shall state the full name
and address of each person to whom the disbursement was made, and the
date, amount, and purpose of each such disbursement. If the
disbursement includes payment for the allocable costs of more than one
program or activity, the committee shall itemize the disbursement,
showing the amounts designated for payment of each program or activity
conducted on behalf of one or more clearly identified Federal
candidates and one or more clearly identified non-Federal candidates.
The State, district, or local party committee must also report the
amount of each in-kind contribution, independent expenditure, or
coordinated expenditure attributed to each Federal candidate, and the
total amount attributed to the non-Federal candidate(s). In addition,
the State, district, or local party committee must report the total
amount expended by the committee that year, to date, for each joint
program or activity.
(4) Recordkeeping. The treasurer of a State, district, or local
party committee must retain all documents supporting the committee's
allocations on behalf of specific Federal and non-Federal candidates,
in accordance with 11 CFR 104.14.
(b) Allocation of activities that are not Federal election
activities. A State, district, or local committee of a political party
that has established separate Federal and non-Federal accounts,
including related allocation accounts, under 11 CFR 102.5 must report
all payments that are allocable between these accounts pursuant to the
allocation rules in 11 CFR 106.7. Disbursements for activities that are
allocable between Federal and Levin accounts, including related
allocation accounts, must be reported pursuant to 11 CFR 300.36.
(1) Reporting of allocations of expenses for activities that are
not Federal election activities.
(i) In the first report in a calendar year disclosing a
disbursement allocable pursuant to 11 CFR 106.7, a State, district, or
local committee shall state and explain the allocation percentages to
be applied to each category of allocable activity (e.g., 36% Federal/
64% non-Federal in Presidential and Senate election years) pursuant to
11 CFR 106.7(d).
(ii) In each subsequent report in the calendar year itemizing an
allocated disbursement, the State, district, or local party committee
shall state the category of activity for which each allocated
disbursement was made, and shall summarize the total amounts expended
from Federal and non-Federal accounts, or from allocation accounts,
that year to date for each such category.
(iii) In each report disclosing disbursements for allocable
activities as described in 11 CFR 106.7, the State, district, or local
party committee shall assign a unique identifying title or code to each
such program or activity, and shall state the applicable Federal/non-
Federal percentage for any direct costs of fundraising. Unique
identifying titles or codes are not required for salaries and wages
pursuant to 11 CFR 106.7(c)(1), or for other administrative costs
allocated pursuant to 11 CFR 106.7(c)(2).
(2) Reporting of transfers between the accounts of State, district,
and local party committees and into allocation accounts for allocable
expenses. A State, district, or local committee of a political party
that pays allocable expenses in accordance with 11 CFR 106.7 shall
report each transfer of funds from its non-Federal account to its
Federal account, or each transfer from its Federal account and its non-
Federal account into an allocation account, for the purpose of payment
of such expenses. In the report covering the period in which each
transfer occurred, the State, district, or local party committee must
explain in a memo entry the allocable expenses to which the transfer
relates and the date on which the transfer was made. If the transfer
includes funds for the allocable costs of more than one activity, the
State, district, or local party committee must itemize the transfer,
showing the amounts designated for each category of expense as
described in 11 CFR 106.7.
(3) Reporting of allocated disbursements for certain allocable
activity that is not Federal election activity.
(i) A State, district, or local committee of a political party that
pays allocable expenses in accordance with 11 CFR 106.7 shall report
each disbursement from its Federal account for allocable expenses, or
each payment from an allocation account for such activity. In the
report covering the period in which the disbursement occurred, the
State, district, or local committee shall state the full name and
address of each individual or vendor to which the disbursement was
made, the date, amount, and purpose of each such disbursement, and the
amounts allocated to Federal and non-Federal portions of the allocable
activity. If the disbursement includes payment for the allocable costs
of more than one activity, the State, district, or local party
committee must itemize the disbursement, showing the amounts designated
for payments of particular categories of activity as described in 11
CFR 106.7. The State, district, or local party committee must also
report the total amount paid that calendar year to date for each
category of allocable activity.
(ii) A State, district, or local committee of a political party
that pays allocable expenses from a Federal account and a Levin account
in accordance with 11 CFR 300.33 shall report disbursements from those
accounts according to the requirements of 11 CFR 300.36.
(4) Recordkeeping. The treasurer of a State, district, or local
party committee must retain all documents supporting the committee's
allocations of expenditures and disbursements for the costs and
activities cited at paragraph (b) of this section, in accordance with
11 CFR 104.14.
PART 106--ALLOCATIONS OF CANDIDATE AND COMMITTEE ACTIVITIES
14. The authority citation for part 106 continues to read as
follows:
Authority: 2 U.S.C. 438(a)(8), 441a(b), 441a(g).
15. Section 106.1 is amended by revising paragraphs (a)(1), (a)(2),
and (e) to read as follows:
Sec. 106.1 Allocation of expenses between candidates.
(a) General rule.
(1) Expenditures, 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
[[Page 49116]]
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. In the case of a phone bank, the
attribution shall be determined by the number of questions or
statements devoted to each candidate as compared to the total number of
questions or statements devoted to 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.
(2) An expenditure made on behalf of more than one clearly
identified Federal candidate shall be reported pursuant to 11 CFR
104.10(a) or 104.17(a), as appropriate. A payment that also includes
amounts attributable to one or more non-Federal candidates, and that is
made by a political committee with separate Federal and non-Federal
accounts, shall be made according to the procedures set forth in 11 CFR
106.6(e) or 106.7(f), but shall be reported pursuant to 11 CFR
104.10(a) or 104.17(a). If a State, district, or local party
committee's payment on behalf of both a Federal candidate and a non-
Federal candidate is for a Federal election activity, only Federal
funds may be used for the entire payment. For Federal election
activities, the provisions of 11 CFR 300.33 and 104.17(a) will apply to
payments attributable to candidates.
* * * * *
(e) State, district, and local party committees, separate
segregated funds, and nonconnected committees that make mixed Federal/
non-Federal payments for activities other than an activity entailing an
expenditure for a Federal candidate and disbursement for a non-Federal
candidate, or that make mixed Federal/Levin fund payments, shall
allocate those expenses in accordance with 11 CFR 106.6, 106.7, or
300.33, as appropriate.
16. Section 106.5 is revised to read as follows:
Sec. 106.5 Allocation of expenses between federal and non-federal
activities by national party committees.
(a) General rules.
(1) Disbursements from Federal and non-Federal accounts. National
party committees that make disbursements in connection with Federal and
non-Federal elections shall make those disbursements entirely from
funds subject to the prohibitions and limitations of the Act, or from
accounts established pursuant to 11 CFR 102.5. Political committees
that have established separate Federal and non-Federal accounts under
11 CFR 102.5(a)(1)(i) shall allocate expenses between those accounts
according to this section. Organizations that are not political
committees but have established separate Federal and non-Federal
accounts under 11 CFR 102.5(b)(1)(i), or that make Federal and non-
Federal disbursements from a single account under 11 CFR
102.5(b)(1)(ii), shall also allocate their Federal and non-Federal
expenses according to this section. This section covers:
(i) General rules regarding allocation of Federal and non-Federal
expenses by party committees;
(ii) Percentages to be allocated for administrative expenses and
costs of generic voter drives by national party committees;
(iii) Methods for allocation of administrative expenses, costs of
generic voter drives, and of fundraising costs by national party
committees; and
(iv) Procedures for payment of allocable expenses. Requirements for
reporting of allocated disbursements are set forth in 11 CFR 104.10.
(2) Costs to be allocated. National party committees that make
disbursements in connection with Federal and non-Federal elections
shall allocate expenses according to this section for the following
categories of activity:
(i) Administrative expenses including rent, utilities, office
supplies, and salaries, except for such expenses directly attributable
to a clearly identified candidate;
(ii) The direct costs of a fundraising program or event including
disbursements for solicitation of funds and for planning and
administration of actual fundraising events, where Federal and non-
Federal funds are collected by one committee through such program or
event; and
(iii) [Removed and reserved]
(iv) Generic voter drives including voter identification, voter
registration, and get-out-the-vote drives, or any other activities that
urge the general public to register, vote or support candidates of a
particular party or associated with a particular issue, without
mentioning a specific candidate.
(b) National party committees other than Senate or House campaign
committees; fixed percentages for allocating administrative expenses
and costs of generic voter drives.
(1) General rule. Each national party committee other than a Senate
or House campaign committee shall allocate a fixed percentage of its
administrative expenses and costs of generic voter drives, as described
in paragraph (a)(2) of this section, to its Federal and non-Federal
account(s) each year. These percentages shall differ according to
whether or not the allocable expenses were incurred in a presidential
election year. Such committees shall allocate the costs of each
combined Federal and non-Federal fundraising program or event according
to paragraph (f) of this section, with no fixed percentages required.
(2) Fixed percentages according to type of election year. National
party committees other than the Senate or House campaign committees
shall allocate their administrative expenses and costs of generic voter
drives according to paragraphs (b)(2) (i) and (ii) as follows:
(i) Presidential election years. In presidential election years,
national party committees other than the Senate or House campaign
committees shall allocate to their Federal accounts at least 65% each
of their administrative expenses and costs of generic voter drives.
(ii) Non-presidential election years. In all years other than
presidential election years, national party committees other than the
Senate or House campaign committees shall allocate to their Federal
accounts at least 60% each of their administrative expenses and costs
of generic voter drives.
(c) Senate and House campaign committees of a national party;
method and minimum Federal percentage for allocating administrative
expenses and costs of generic voter drives.
(1) Method for allocating administrative expenses and costs of
generic voter drives. Subject to the minimum percentage set forth in
paragraph (c)(2) of this section, each Senate or House campaign
committee of a national party shall allocate its administrative
expenses and costs of generic voter drives, as described in paragraph
(a)(2) of this section, according to the funds expended method,
described in paragraphs (c)(1)(i) and (ii) as follows:
(i) Under this method, expenses shall be allocated based on the
ratio of Federal expenditures to total Federal and non-Federal
disbursements made by the committee during the two-year
[[Page 49117]]
Federal election cycle. This ratio shall be estimated and reported at
the beginning of each Federal election cycle, based upon the
committee's Federal and non-Federal disbursements in a prior comparable
Federal election cycle or upon the committee's reasonable prediction of
its disbursements for the coming two years. In calculating its Federal
expenditures, the committee shall include only amounts contributed to
or otherwise spent on behalf of specific federal candidates.
Calculation of total Federal and non-Federal disbursements shall also
be limited to disbursements for specific candidates, and shall not
include overhead or other generic costs.
(ii) On each of its periodic reports, the committee shall adjust
its allocation ratio to reconcile it with the ratio of actual Federal
and non-Federal disbursements made, to date. If the non-Federal account
has paid more than its allocable share, the committee shall transfer
funds from its Federal to its non-Federal account, as necessary, to
reflect the adjusted allocation ratio. The committee shall make note of
any such adjustments and transfers on its periodic reports, submitted
pursuant to 11 CFR 104.5.
(2) Minimum Federal percentage for administrative expenses and
costs of generic voter drives. Regardless of the allocation ratio
calculated under paragraph (c)(1) of this section, each Senate or House
campaign committee of a national party shall allocate to its Federal
account at least 65% each of its administrative expenses and costs of
generic voter drives each year. If the committee's own allocation
calculation under paragraph (c)(1) of this section yields a Federal
share greater than 65%, then the higher percentage shall be applied. If
such calculation yields a Federal share lower than 65%, then the
committee shall report its calculated ratio according to 11 CFR
104.10(b), and shall apply the required minimum Federal percentage.
(3) Allocation of fundraising costs. Senate and House campaign
committees shall allocate the costs of each combined Federal and non-
Federal fundraising program or event according to paragraph (f) of this
section, with no minimum percentages required.
(d) [Reserved].
(e) [Reserved].
(f) National party committees; method for allocating direct costs
of fundraising.
(1) If Federal and non-Federal funds are collected by one committee
through a joint activity, that committee shall allocate its direct
costs of fundraising, as described in paragraph (a)(2) of this section,
according to the funds received method. Under this method, the
committee shall allocate its fundraising costs based on the ratio of
funds received into its Federal account to its total receipts from each
fundraising program or event. This ratio shall be estimated prior to
each such program or event based upon the committee's reasonable
prediction of its Federal and non-Federal revenue from that program or
event, and shall be noted in the committee's report for the period in
which the first disbursement for such program or event occurred,
submitted pursuant 11 CFR 104.5. Any disbursements for fundraising
costs made prior to the actual program or event shall be allocated
according to this estimated ratio.
(2) No later than the date 60 days after each fundraising program
or event from which both Federal and non-Federal funds are collected,
the committee shall adjust the allocation ratio for that program or
event to reflect the actual ratio of funds received. If the non-Federal
account has paid more than its allocable share, the committee shall
transfer funds from its Federal to its non-Federal account, as
necessary, to reflect the adjusted allocation ratio. If the Federal
account has paid more than its allocable share, the committee shall
make any transfers of funds from its non-federal to its federal account
to reflect the adjusted allocation ratio within the 60-day time period
established by this paragraph. The committee shall make note of any
such adjustments and transfers in its report for any period in which a
transfer was made, and shall also report the date of the fundraising
program or event that serves as the basis for the transfer. In the case
of a telemarketing or direct mail campaign, the date for purposes of
this paragraph is the last day of the telemarketing campaign, or the
day on which the final direct mail solicitations are mailed.
(g) Payment of allocable expenses by committees with separate
Federal and non-Federal accounts.
(1) Payment options. Committees that have established separate
Federal and non-Federal accounts under 11 CFR 102.5(a)(1)(i) or
(b)(1)(i) shall pay the expenses of joint Federal and non-Federal
activities described in paragraph (a)(2) of this section according to
either paragraph (g)(1)(i) or (ii), as follows:
(i) Payment by Federal account; transfers from non-Federal account
to Federal account. The committee shall pay the entire amount of an
allocable expense from its Federal account and shall transfer funds
from its non-Federal account to its Federal account solely to cover the
non-Federal share of that allocable expense.
(ii) Payment by separate allocation account; transfers from Federal
and non-Federal accounts to allocation account.
(A) The committee shall establish a separate allocation account
into which funds from its Federal and non-Federal accounts shall be
deposited solely for the purpose of paying the allocable expenses of
joint Federal and non-Federal activities. Once a committee has
established a separate allocation account for this purpose, all
allocable expenses shall be paid from that account for as long as the
account is maintained.
(B) The committee shall transfer funds from its Federal and non-
Federal accounts to its allocation account in amounts proportionate to
the Federal or non-Federal share of each allocable expense.
(C) No funds contained in the allocation account may be transferred
to any other account maintained by the committee.
(2) Timing of transfers between accounts.
(i) Under either payment option described in paragraphs (g)(1)(i)
or (ii) of this section, the committee shall transfer funds from its
non-Federal account to its Federal account or from its Federal and non-
Federal accounts to its separate allocation account following
determination of the final cost of each joint Federal and non-Federal
activity, or in advance of such determination if advance payment is
required by the vendor and if such payment is based on a reasonable
estimate of the activity's final cost as determined by the committee
and the vendor(s) involved.
(ii) Funds transferred from a committee's non-Federal account to
its Federal account or its allocation account are subject to the
following requirements:
(A) For each such transfer, the committee must itemize in its
reports the allocable activities for which the transferred funds are
intended to pay, as required by 11 CFR 104.10(b)(3); and
(B) Except as provided in paragraph (f)(2) of this section, such
funds may not be transferred more than 10 days before or more than 60
days after the payments for which they are designated are made.
(iii) Any portion of a transfer from a committee's non-Federal
account to its Federal account or its allocation account that does not
meet the requirements of paragraph (g)(2)(ii) of this section shall be
presumed to be a loan or contribution from the non-Federal account to a
Federal account, in violation of the Act.
[[Page 49118]]
(3) Reporting transfers of funds and allocated disbursements. A
political committee that transfers funds between accounts and pays
allocable expenses according to this section shall report each such
transfer and disbursement pursuant to 11 CFR 104.10(b).
(h) Sunset provision. This section applies from November 6, 2002,
to December 31, 2002. After December 31, 2002, see 11 CFR 106.7(a).
17. Section 106.7 is added to part 106 to read as follows:
Sec. 106.7 Allocation of expenses between Federal and non-Federal
accounts by party committees, other than for Federal election
activities.
(a) National party committees are prohibited from raising or
spending non-Federal funds. Therefore, these committees shall not
allocate expenditures and disbursements between Federal and non-Federal
accounts. All disbursements by a national party committee must be made
from a Federal account.
(b) State, district, and local party committees that make
expenditures and disbursements in connection with both Federal and non-
Federal elections for activities that are not Federal election
activities pursuant to 11 CFR 100.24 may use only funds subject to the
prohibitions and limitations of the Act, or they may allocate such
expenditures and disbursements between their Federal and their non-
Federal accounts. State, district, and local party committees that are
political committees that have established separate Federal and non-
Federal accounts under 11 CFR 102.5(a)(1)(i) shall allocate expenses
between those accounts according to paragraphs (c) and (d) of this
section. Party organizations that are not political committees but have
established separate Federal and non-Federal accounts, or that make
Federal and non-Federal disbursements from a single account, shall also
allocate their Federal and non-Federal expenses according to paragraphs
(c) and (d) of this section. In lieu of establishing separate accounts,
party organizations that are not political committees may choose to use
a reasonable accounting method approved by the Commission (including
any method embedded in software provided or approved by the Commission)
pursuant to 11 CFR 102.5 and 300.30.
(c) Costs allocable by State, district, and local party committees
between Federal and non-Federal accounts.
(1) Salaries and wages. State, district, and local party committees
must pay salaries and wages from funds that comply with State law for
employees who spend 25% or less of their time in any given month on
Federal election activity or activity in connection with a Federal
election. See 11 CFR 300.33(c)(2).
(2) Administrative costs. State, district, and local party
committees may either pay administrative costs, including rent,
utilities, office equipment, office supplies, postage for other than
mass mailings, and routine building maintenance, upkeep and repair,
from their Federal account, or allocate such expenses between their
Federal and non-Federal accounts, except that any such expenses
directly attributable to a clearly identified Federal candidate must be
paid only from the Federal account.
(3) Exempt party activities that are not Federal election
activities. State, district, and local party committees may pay
expenses for party activities that are exempt from the definitions of
contribution and expenditure under 11 CFR 100.7(b)(9), (15), or (17),
and 100.8(b)(10), (16), or (18), that are conducted in conjunction with
non-Federal activity, and that are not Federal election activities
pursuant to 11 CFR 100.24, from their Federal accounts, or may allocate
these expenses between their Federal and non-Federal accounts.
(4) Certain fundraising costs. State, district, and local party
committees may allocate the direct costs of certain fundraising
programs or events between their Federal and non-Federal accounts
provided that none of the proceeds from the activities or events will
ever be used for Federal election activities. The proceeds of
fundraising allocated pursuant to this paragraph must be segregated in
bank accounts that are never used for Federal election activity. Direct
costs of fundraising include disbursements for the planning and
administration of specific fundraising events or programs.
(5) Voter-drive activities that do not qualify as Federal election
activities and that are not party exempt activities. Other than for
salaries and wages as described in paragraph (c)(1) of this section,
expenses for voter identification, voter registration, and get-out-the-
vote drives, and any other activities that urge the general public to
register or vote, or that promote or oppose a political party, without
promoting or opposing a candidate or non-Federal candidate, that do not
qualify as Federal election activities and that are not exempt party
activities, must be paid with Federal funds or may be allocated between
the committee's Federal and non-Federal accounts.
(d) Allocation percentages, ratios, and record-keeping.
(1) Salaries and wages. Committees must keep a monthly log of the
percentage of time each employee spends in connection with a Federal
election. Allocations of salaries and wages shall be undertaken as
follows:
(i) Salaries and wages paid for employees who spend 25% or less of
their compensated time in a given month on Federal election activities
or on activities in connection with a Federal election shall be paid
from funds that comply with State law.
(ii) Salaries and wages paid for employees who spend more than 25%
of their compensated time in a given month on Federal election
activities or on activities in connection with a Federal election must
be paid only from a Federal account. See 11 CFR 300.33(c)(2), and
paragraph (e)(2) of this section.
(2) Administrative costs. State, district, and local party
committees that choose to allocate administrative expenses may do so
subject to the following requirements:
(i) Presidential election years. In any even year in which a
Presidential candidate, but no Senate candidate appears on the ballot,
and in the preceding year, State, district, and local party committees
must allocate at least 28% of administrative expenses to their Federal
accounts.
(ii) Presidential and Senate election year. In any even year in
which a Presidential candidate and a Senate candidate appear on the
ballot, and in the preceding year, State, district, and local party
committees must allocate at least 36% of administrative expenses to
their Federal accounts.
(iii) Senate election year. In any even year in which a Senate
candidate, but no Presidential candidate, appears on the ballot, and in
the preceding year, State, district, and local party committees must
allocate at least 21% of administrative expenses to their Federal
account.
(iv) Non-Presidential and non-Senate year. In any even year in
which neither a Presidential nor a Senate candidate appears on the
ballot, and in the preceding year, State, district, and local party
committees must allocate at least 15% of administrative expenses to
their Federal account.
(3) Exempt party activities and voter drive activities that are not
Federal election activities. State, district, and local party
committees that choose to allocate expenses for exempt activities
conducted in conjunction with non-Federal activities and voter drive
activities, that are not Federal election activities, must do so
subject to the following requirements:
[[Page 49119]]
(i) Presidential election years. In any even year in which a
Presidential candidate, but no Senate candidate appears on the ballot,
and in the preceding year, State, district, and local party committees
must allocate at least 28% of these expenses to their Federal accounts.
(ii) Presidential and Senate election year. In any even year in
which a Presidential candidate and a Senate candidate appear on the
ballot, and in the preceding year, State, district, and local party
committees must allocate at least 36% of these expenses to their
Federal accounts.
(iii) Senate election year. In any even year in which a Senate
candidate, but no Presidential candidate, appears on the ballot, and in
the preceding year, State, district, and local party committees must
allocate at least 21% of these expenses to their Federal account.
(iv) Non-Presidential and non-Senate year. In any even year in
which neither a Presidential nor a Senate candidate appears on the
ballot, and in the preceding year, State, district, and local party
committee must allocate at least 15% of these expenses to their Federal
account.
(4) Fundraising for Federal and non-Federal accounts. If Federal
and non-Federal funds are collected by a State, district, or local
party committee through a joint fundraising activity, that committee
must allocate its direct fundraising costs using the funds received
method and according to the following procedures:
(i) The committee must allocate its fundraising costs based on the
ratio of funds received into its Federal account to its total receipts
from each fundraising program or event. This ratio shall be estimated
prior to each such program or event based upon the committee's
reasonable prediction of its Federal and non-Federal revenue from that
program or event, and must be noted in the committee's report for the
period in which the first disbursement for such program or event
occurred, submitted pursuant to 11 CFR 104.5. Any disbursements for
fundraising costs made prior to the actual program or event must be
allocated according to this estimated ratio.
(ii) No later than the date 60 days after each fundraising program
or event from which both Federal and non-Federal funds are collected,
the committee shall adjust the allocation ratio for that program or
event to reflect the actual ratio of funds received. If the non-Federal
account has paid more than its allocable share, the committee shall
transfer funds from its Federal to its non-Federal account, as
necessary, to reflect the adjusted allocation ratio. If the Federal
account has paid more than its allocable share, the committee shall
make any transfers of funds from its non-Federal to its Federal account
to reflect the adjusted allocation ratio within the 60-day time period
established by this paragraph. The committee shall make note of any
such adjustments and transfers in its report for any period in which a
transfer was made, and shall also report the date of the fundraising
program or event that serves as the basis for the transfer. In the case
of a telemarketing or direct mail campaign, the date for purposes of
this paragraph is the last day of the telemarketing campaign, or the
day on which the final direct mail solicitations are mailed.
(e) Costs not allocable by State, district, and local party
committees between Federal and non-Federal accounts. The following
costs incurred by State, district, and local party committees shall be
paid only with Federal funds:
(1) Disbursements for State, district, and local party committees
for activities that refer only to one or more candidates for Federal
office must not be allocated. All such disbursements must be made from
a Federal account.
(2) Salaries and wages. Salaries and wages for employees who spend
more than 25% of their compensated time in a given month on activities
in connection with a Federal election must not be allocated. All such
disbursements must be made from a Federal account. See 11 CFR
300.33(c)(2).
(3) Federal election activities. Activities that are Federal
election activities pursuant to 11 CFR 100.24 must not be allocated
between Federal and non-Federal accounts. Only Federal funds, or a
mixture of Federal funds and Levin funds, as provided in 11 CFR 300.33,
may be used.
(4) Fundraising Costs. Expenses incurred by State, district, and
local party committees directly related to programs or events
undertaken to raise funds to be used, in whole or in part, for
activities in connection with Federal and non-Federal elections that
are Federal election activities pursuant to 11 CFR 100.24 must not be
allocated between Federal and non-Federal accounts. Except as provided
in 11 CFR 300.32(a)(4), all such disbursements must be made from a
Federal account.
(f) Transfers between accounts to cover allocable expenses. State,
district, and local party committees may transfer funds from their non-
Federal to their Federal accounts or to an allocation account solely to
meet allocable expenses under this section and only pursuant to the
following requirements:
(1) Payments from Federal accounts or from allocation accounts.
(i) State, district, and local party committees must pay the entire
amount of an allocable expense from their Federal accounts and transfer
funds from their non-Federal account to the Federal account solely to
cover the non-Federal share of that allocable expense; or
(ii) State, district, or local party committees may establish a
separate allocation account into which funds from its Federal and non-
Federal accounts may be deposited solely for the purpose of paying the
allocable expenses of joint Federal and non-Federal activities.
(2) Timing.
(i) If a Federal or allocation account is used to make allocable
expenditures and disbursements, State, district, and local party
committees must transfer funds from their non-Federal to their Federal
or allocation account to meet allocable expenses no more than 10 days
before and no more than 60 days after the payments for which they are
designated are made from a Federal or allocation account, except that
transfers may be made more than 10 days before a payment is made from
the Federal or allocation account if advance payment is required by the
vendor(s) and if such payment is based on a reasonable estimate of the
activity's final costs as determined by the committee and the vendor(s)
involved.
(ii) Any portion of a transfer from a committee's non-Federal
account to its Federal or allocation account that does not meet the
requirement of paragraph (f)(2)(i) of this section shall be presumed to
be a loan or contribution from the non-Federal account to the Federal
or allocation account, in violation of the Act.
PART 108--FILING COPIES OF REPORTS AND STATEMENTS WITH STATE
OFFICERS (2 U.S.C. 439)
18. The authority citation for part 108 continues to read as
follows:
Authority: 2 U.S.C. 434(a)(2), 438(a)(8), 439, 453.
19. Section 108.7 is amended by revising paragraphs (c)(4) and
(c)(5) and adding paragraph (c)(6) to read as follows:
Sec. 108.7 Effect on State law (2 U.S.C. 453).
* * * * *
(c) * * *
(4) Prohibition of false registration, voting fraud, theft of
ballots, and similar offenses;
[[Page 49120]]
(5) Candidate's personal financial disclosure; or
(6) Application of State law to the funds used for the purchase or
construction of a State or local party office building to the extent
described in 11 CFR 300.35.
PART 110--CONTRIBUTION AND EXPENDITURE LIMITATIONS AND PROHIBITIONS
20. The authority citation for part 110 continues to be read as
follows:
Authority: 2 U.S.C. 431(8), 431(9), 432(c)(2), 437d(a)(8),
438(a)(8), 441a, 441b, 441d, 441e, 441f, 441g, 441h.
21. Section 110.1 is amended by adding new paragraph (c)(5) to read
as follows:
Sec. 110.1 Contributions by persons other than multicandidate
political committees
(2 U.S.C. 441a(a)(1)).
* * * * *
(c) * * *
(5) On or after January 1, 2003, no person shall make contributions
to a political committee established and maintained by a State
committee of a political party in any calendar year that, in the
aggregate, exceed $10,000.
* * * * *
PART 114--CORPORATE AND LABOR ORGANIZATION ACTIVITY
22. The authority citation for part 114 continues to read as
follows:
Authority: 2 U.S.C. 431(8)(B), 431(9)(B), 432, 434(a)(11),
437d(a)(8), 438(a)(8), 441b.
23. Section 114.1 is amended by revising paragraph (a)(2)(ix) to
read as follows:
Sec. 114.1 Definitions.
(a) * * *
(2) * * *
(ix) Donations to a State or local party committee used for the
purchase or construction of its office building are subject to 11 CFR
300.35. No exception applies to contributions or donations to a
national party committee that are made or used for the purchase or
construction of any office building or facility; or
* * * * *
24. Subchapter C consisting of part 300 is added to Chapter I to
read as follows:
SUBCHAPTER C--BIPARTISAN CAMPAIGN REFORM ACT OF 2002--(BCRA)
REGULATIONS
PART 300--NON-FEDERAL FUNDS
Sec.
300.1 Scope, effective date, and organization.
300.2 Definitions.
Subpart A--National Party Committees
300.10 General prohibitions on raising and spending non-Federal
funds (2 U.S.C. 441; (a) and (c)).
300.11 Prohibition on fundraising for and donating to certain tax-
exempt organizations (2 U.S.C. 441; (d)).
300.12 Transition rules.
300.13 Reporting (2 U.S.C. 431 note and 434 (e)).
Subpart B--State, District, and Local Party Committees and
Organizations
300.30 Accounts.
300.31 Receipt of Levin funds.
300.32 Expenditures and disbursements.
300.33 Allocation of costs of Federal election activity.
300.34 Transfers.
300.35 Office buildings.
300.36 Reporting Federal election activity; recordkeeping.
300.37 Prohibitions on fundraising for and donating to certain
tax-exempt organizations (2 U.S.C. 441i (d)).
Subpart C--Tax-Exempt Organizations
300.50 Prohibited fundraising by national party committees (2
U.S.C. 441i(d)).
300.51 Prohibited fundraising by State, district, and local party
committees (2 U.S.C. 441i(d)).
300.52 Fundraising by Federal candidates and Federal officeholders
(2 U.S.C. 441i(e)(4)).
Subpart D--Federal Candidates and Officeholders
300.60 Scope (2 U.S.C. 441i (e)(1)).
300.61 Federal elections (2 U.S.C. 441i (e)(1)(A)).
300.62 Non-Federal elections (2 U.S.C. 441i (e)(1)(B)).
300.63 Exception for State party candidates (2 U.S.C. 441i (e)(2))
300.64 Exemption for attending, speaking, or appearing as a
featured guest at fundraising events (2 U.S.C. 441i (e)(3)).
300.65 Exceptions for certain tax-exempt organizations (2 U.S.C.
441i (e)(1) and (4)).
Subpart E--State and Local Candidates
300.70 Scope (2 U.S.C. 441i (f)(1)).
300.71 Federal funds required for certain public communications (2
U.S.C. 441i(f)(1)).
300.72 Federal funds not required for certain communications (2
U.S.C. 441i(f)(2)).
Authority: 2 U.S.C. 434(e), 438(a)(8), 441a(a)(i), 441i, 453.
Sec. 300.1 Scope and effective date, and organization.
(a) Introduction. This part implements changes to the Federal
Election Campaign Act of 1971, as amended (``FECA'' or the ``Act''),
enacted by Title I of the Bipartisan Campaign Finance Reform Act of
2002 (``BCRA''). Public Law 107-155. Unless expressly stated to the
contrary, nothing in this part alters the definitions, restrictions,
liabilities, and obligations imposed by sections 431 to 455 of Title 2,
United States Code, or regulations prescribed thereunder (11 CFR parts
100 to 116).
(b) Effective dates.
(1) Except as otherwise specifically provided in this part, this
part shall take effect on November 6, 2002. However, subpart B of this
part shall not apply with respect to runoff elections, recounts, or
election contests resulting from elections held prior to such date. See
11 CFR 300.12 for transition rules applicable to subpart A of this
part.
(2) The increase in individual contribution limits to State
committees of political parties, as described in 11 CFR 110.1(c)(5),
shall apply to contributions made on or after January 1, 2003.
(c) Organization of part. Part 300, which generally addresses non-
Federal funds and closely related topics, is organized into five
subparts. Each subpart is oriented to the perspective of a category of
persons facing issues related to non-Federal funds.
(1) Subpart A of this part prescribes rules pertaining to national
party committees, including general non-Federal funds prohibitions,
fundraising, and donation prohibitions with regard to certain tax-
exempt organizations, transition rules as BCRA takes effect, and
reporting.
(2) Subpart B of this part pertains to State, district, and local
political party committees and organizations. Subpart B of this part
focuses on ``Levin Amendment'' to BCRA; office buildings; and
fundraising and donation prohibitions with regard to certain tax-exempt
organizations.
(3) Subpart C of this part addresses non-Federal funds from the
perspective of tax-exempt organizations, setting out rules about
prohibited fundraising for certain tax-exempt organizations by national
party committees, State, district, and local party committees, and
Federal candidates and officeholders.
(4) Subpart D of this part includes regulations pertaining to
soliciting non-Federal funds from the perspective of Federal candidates
and officeholders in Federal and non-Federal elections; including
exceptions for those who are also State candidates and exemptions for
those attending, speaking, and appearing as featured guests at
fundraising events, or who solicit for certain tax-exempt
organizations.
(5) Subpart E of this part focuses on State and local candidates,
including regulations about using Federal funds for certain public
communications, and
[[Page 49121]]
exceptions for entirely non-Federal communications.
(6) For rules pertaining to convention and host committees, see 11
CFR part 9008.
Sec. 300.2 Definitions.
(a) 501(c) organization that makes expenditures or disbursements in
connection with a Federal election. A 501(c) organization that makes
expenditures or disbursements in connection with a Federal election as
that term is used in 11 CFR 300.11, 300.37, 300.50, and 300.51 includes
an organization that, within the current election cycle, plans to:
(1) Make expenditures or disbursements in connection with an
election for Federal office including for Federal election activity; or
(2) Pay a debt incurred from the making of expenditures or
disbursements in connection with an election for Federal office
(including for Federal election activity) in a prior election cycle.
(b) Agent. For the purposes of part 300 of chapter I, agent means
any person who has actual authority, either express or implied, to
engage in any of the following activities on behalf of the specified
persons:
(1) In the case of a national committee of a political party:
(i) To solicit, direct, or receive any contribution, donation, or
transfer of funds; or,
(ii) To solicit any funds for, or make or direct any donations to,
an organization that is described in 26 U.S.C 501(c) and exempt from
taxation under 26 U.S.C. 501(a) (or has submitted an application for
determination of tax exempt status under 26 U.S.C. 501(a)), or an
organization described in 26 U.S.C. 527 (other than a political
committee, a State, district, or local committee of a political party,
or the authorized campaign committee of a candidate for State or local
office).
(2) In the case of a State, district, or local committee of a
political party:
(i) To expend or disburse any funds for Federal election activity;
or
(ii) To transfer, or accept a transfer of, funds to make
expenditures or disbursements for Federal election activity; or
(iii) To engage in joint fundraising activities with any person if
any part of the funds raised are used, in whole or in part, to pay for
Federal election activity; or
(iv) To solicit any funds for, or make or direct any donations to,
an organization that is described in 26 U.S.C. 501(c) and exempt from
taxation under 26 U.S.C. 501(a) (or has submitted an application for
determination of tax exempt status under 26 U.S.C. 501(a)), or an
organization described in 26 U.S.C. 527 (other than a political
committee, a State, district, or local committee of a political party,
or the authorized campaign committee of a candidate for State or local
office).
(3) In the case of an individual who is a Federal candidate or an
individual holding Federal office, to solicit, receive, direct,
transfer, or spend funds in connection with any election.
(4) In the case of an individual who is a candidate for State or
local office, to spend funds for a public communication (see 11 CFR
100.26).
(c) Directly or indirectly establish, maintain, finance, or
control.
(1) This paragraph (c) applies to national, State, district, and
local committees of a political party, candidates, and holders of
Federal office, including an officer, employee, or agent of any of the
foregoing persons, which shall be referred to as ``sponsors'' in this
section.
(2) To determine whether a sponsor directly or indirectly
established, finances, maintains, or controls an entity, the factors
described in paragraphs (c)(2)(i) through (x) of this section must be
examined in the context of the overall relationship between sponsor and
the entity to determine whether the presence of any factor or factors
is evidence that the sponsor directly or indirectly established,
finances, maintains, or controls the entity. Such factors include, but
are not limited to:
(i) Whether a sponsor, directly or through its agent, owns
controlling interest in the voting stock or securities of the entity;
(ii) Whether a sponsor, directly or through its agent, has the
authority or ability to direct or participate in the governance of the
entity through provisions of constitutions, bylaws, contracts, or other
rules, or through formal or informal practices or procedures;
(iii) Whether a sponsor, directly or through its agent, has the
authority or ability to hire, appoint, demote, or otherwise control the
officers, or other decision-making employees or members of the entity;
(iv) Whether a sponsor has a common or overlapping membership with
the entity that indicates a formal or ongoing relationship between the
sponsor and the entity;
(v) Whether a sponsor has common or overlapping officers or
employees with the entity that indicates a formal or ongoing
relationship between the sponsor and the entity;
(vi) Whether a sponsor has any members, officers, or employees who
were members, officers or employees of the entity that indicates a
formal or ongoing relationship between the sponsor and the entity, or
that indicates the creation of a successor entity;
(vii) Whether a sponsor, directly or through its agent, provides
funds or goods in a significant amount or on an ongoing basis to the
entity, such as through direct or indirect payments for administrative,
fundraising, or other costs, but not including the transfer to a
committee of its allocated share of proceeds jointly raised pursuant to
11 CFR 102.17, and otherwise lawfully;
(viii) Whether a sponsor, directly or through its agent, causes or
arranges for funds in a significant amount or on an ongoing basis to be
provided to the entity, but not including the transfer to a committee
of its allocated share of proceeds jointly raised pursuant to 11 CFR
102.17, and otherwise lawfully;
(ix) Whether a sponsor, directly or through its agent, had an
active or significant role in the formation of the entity; and
(x) Whether the sponsor and the entity have similar patterns of
receipts or disbursements that indicate a formal or ongoing
relationship between the sponsor and the entity.
(3) Safe harbor. On or after November 6, 2002, an entity shall not
be deemed to be directly or indirectly established, maintained, or
controlled by another entity unless, based on the entities' actions and
activities solely after November 6, 2002, they satisfy the requirements
of this section. If an entity receives funds from another entity prior
to November 6, 2002, and the recipient entity disposes of the funds
prior to November 6, 2002, the receipt of such funds prior to November
6, 2002 shall have no bearing on determining whether the recipient
entity is financed by the sponsoring entity within the meaning of this
section.
(4) Determinations by the Commission.
(i) A sponsor or entity may request an advisory opinion of the
Commission to determine whether the sponsor is no longer directly or
indirectly financing, maintaining, or controlling the entity for
purposes of this part. The request for such an advisory opinion must
meet the requirements of 11 CFR part 112 and must demonstrate that the
entity is not directly or indirectly financed, maintained, or
controlled by the sponsor.
(ii) Notwithstanding the fact that a sponsor may have established
an entity within the meaning of paragraph (c)(2) of this section, the
sponsor or the entity
[[Page 49122]]
may request an advisory opinion of the Commission determining that the
relationship between the sponsor and the entity has been severed. The
request for such an advisory opinion must meet the requirements of 11
CFR part 112, and must demonstrate that all material connections
between the sponsor and the entity have been severed for two years.
(iii) Nothing in this section shall require entities that are
separate organizations on November 6, 2002 to obtain an advisory
opinion to operate separately from each other.
(d) Disbursement. Disbursement means any purchase or payment made
by:
(1) A political committee; or
(2) Any other person, including an organization that is not a
political committee, that is subject to the Act.
(e) Donation. For purposes of part 300, donation means a payment,
gift, subscription, loan, advance, deposit, or anything of value given
to a person, but does not include contributions.
(f) Federal account. Federal account means an account at a campaign
depository that contains funds to be used in connection with a Federal
election.
(g) Federal Funds. Federal funds mean funds that comply with the
limitations, prohibitions, and reporting requirements of the Act.
(h) Levin account. Levin account means an account at a campaign
depository established by a State, district, or local committee of a
political party pursuant to 11 CFR 300.30, for purposes of making
expenditures or disbursements for Federal election activity or non-
Federal activity (subject to State law) under 11 CFR 300.32.
(i) Levin funds mean funds that are raised pursuant to 11 CFR
300.31 and are or will be disbursed pursuant to 11 CFR 300.32.
(j) Non-Federal account means an account that contains funds to be
used in connection with a State or local election or allocable expenses
under 11 CFR 106.7, 300.30, or 300.33.
(k) Non-Federal funds mean funds that are not subject to the
limitations and prohibitions of the Act.
(l) [Reserved].
(m) To solicit. For the purposes of part 300, to solicit means to
ask that another person make a contribution, donation, transfer of
funds, or otherwise provide anything of value, whether the
contribution, donation, transfer of funds, or thing of value, is to be
made or provided directly, or through a conduit or intermediary. A
solicitation does not include merely providing information or guidance
as to the requirement of particular law.
(n) To direct. For the purposes of part 300, to direct means to ask
a person who has expressed an intent to make a contribution, donation,
or transfer of funds, or to provide anything of value, to make that
contribution, donation, or transfer of funds, or to provide that thing
of value, including through a conduit or intermediary. Direction does
not include merely providing information or guidance as to the
requirement of particular law.
(o) Individual holding Federal office. Individual holding Federal
office means an individual elected to or serving in the office of
President or Vice President of the United States; or a Senator or a
Representative in, or Delegate or Resident Commissioner to, the
Congress of the United States.
Subpart A--National Party Committees
Sec. 300.10 General prohibitions on raising and spending non-Federal
funds (2 U.S.C. 441i(a) and (c)).
(a) Prohibitions. A national committee of a political party,
including a national congressional campaign committee, must not:
(1) Solicit, receive, or direct to another person a contribution,
donation, or transfer of funds, or any other thing of value that is not
subject to the prohibitions, limitations and reporting requirements of
the Act;
(2) Spend any funds that are not subject to the prohibitions,
limitations, and reporting requirements of the Act; or
(3) Solicit, receive, direct, or transfer to another person, or
spend, Levin funds.
(b) Fundraising costs. A national committee of a political party,
including a national congressional campaign committee, must use only
Federal funds to raise funds that are used, in whole or in part, for
expenditures and disbursements for Federal election activity.
(c) Application. This section also applies to:
(1) An officer or agent acting on behalf of a national party
committee or a national congressional campaign committee; and
(2) An entity that is directly or indirectly established, financed,
maintained, or controlled by a national party committee or a national
congressional campaign committee.
Sec. 300.11 Prohibitions on fundraising for and donating to certain
tax-exempt organizations (2 U.S.C 441i(d)).
(a) Prohibitions. A national committee of a political party,
including a national congressional campaign committee, must not solicit
any funds for, or make or direct any donations to the following
organizations:
(1) An organization that is described in 26 U.S.C. 501(c) and
exempt from taxation under section 26 U.S.C. 501(a) and that makes
expenditures or disbursements in connection with an election for
Federal office, including expenditures or disbursements for Federal
election activity;
(2) An organization that has submitted an application for tax-
exempt status under 26 U.S.C. 501(c) and that makes expenditures or
disbursements in connection with an election for Federal office,
including expenditures or disbursements for Federal election activity;
or
(3) An organization described in 26 U.S.C. 527, unless the
organization is:
(i) A political committee under 11 CFR 100.5;
(ii) A State, district, or local committee of a political party; or
(iii) The authorized campaign committee of a State or local
candidate;
(b) Application. This section also applies to:
(1) An officer or agent acting on behalf of a national party
committee, including a national congressional campaign committee;
(2) An entity that is directly or indirectly established, financed,
maintained, or controlled by a national party committee, including a
national congressional campaign committee, or an officer or agent
acting on behalf of such an entity; or
(3) An entity that is directly or indirectly established, financed,
maintained, or controlled by an agent of a national, State, district,
or local committee of a political party, including a national
congressional campaign committee.
(c) Determining whether a section 501(c) organization makes
expenditures or disbursements in connection with Federal elections. In
determining whether a section 501(c) organization is one that makes
expenditures or disbursements in connection with a Federal election,
including expenditures or disbursements for Federal election activity,
pursuant to paragraphs (a)(1) and (2) of this section, a national
committee of a political party, including a national congressional
campaign committee, or any other person described in paragraph (b) of
this section, may obtain and rely upon a certification from the
organization that satisfies the criteria described in paragraph (d) of
this section.
(d) Certification. A national committee of a political party,
including
[[Page 49123]]
a national congressional campaign committee, or any person described in
paragraph (b) of this section, may rely upon a certification that meets
all of the following criteria:
(1) The certification is a signed written statement by an officer
or other authorized representative of the organization with knowledge
of the organization's activities;
(2) The certification states that within the current election
cycle, the organization has not made, and does not intend to make,
expenditures or disbursements in connection with an election for
Federal office (including for Federal election activity); and
(3) The certification states that the organization does not intend
to pay debts incurred from the making of expenditures or disbursements
in connection with an election for Federal office (including for
Federal election activity) in a prior election cycle.
(e) If a national committee of a political party or any person
described in paragraph (b) of this section has actual knowledge that
the certification is false, the certification may not be relied upon.
(f) It is not prohibited for a national party or its agent to
respond to a request for information about a tax-exempt group that
shares the party's political or philosophical goals.
Sec. 300.12 Transition rules.
(a) Permissible uses of excess non-Federal funds. Non-Federal funds
received before November 6, 2002, by a national committee of a
political party, including a national congressional campaign committee,
and in its possession on that date, must be used before January 1,
2003. Subject to the restrictions in paragraph (b) of this section,
such funds may be used solely as follows:
(1) To retire outstanding debts or obligations that were incurred
solely in connection with an election held prior to November 6, 2002;
or
(2) To pay expenses, retire outstanding debts, or pay for
obligations incurred solely in connection with any run-off election,
recount, or election contest resulting from an election held prior to
November 6, 2002.
(b) Prohibited uses of non-Federal funds. Non-Federal funds
received by a national committee of a political party, including a
national congressional campaign committee, before November 6, 2002, and
in its possession on that date, may not be used for the following
purposes:
(1) To pay any expenditure as defined in 2 U.S.C. 431(9);
(2) To retire outstanding debts or obligations that were incurred
for any expenditure; or
(3) To defray the costs of the construction or purchase of any
office building or facility.
(c) Any non-Federal funds remaining after payment of debts and
obligations permitted in paragraph (a) of this section must be either
disgorged to the United States Treasury, or returned by check to the
donors, no later than December 31, 2002. Any refund checks not cashed
by February 28, 2003 must be disgorged to the United States Treasury by
March 31, 2003.
(d) National party committee office building or facility accounts.
Before November 6, 2002, a national committee of a political party,
including a national congressional campaign committee, may accept funds
into its party office building or facility account, established
pursuant to repealed 2 U.S.C. 431(8)(B)(viii), and may use the funds in
the account only for the construction or purchase of an office building
or facility. After November 5, 2002, the national party committees may
no longer accept funds into such an account and must not use such funds
for the purchase or construction of any office building or facility.
Funds on deposit in any party office building or facility account on
November 6, 2002, must be either disgorged to the United States
Treasury or returned by check to the donors no later than December 31,
2002. Any refund checks not cashed by February 28, 2003 must be
disgorged to the United States Treasury by March 31, 2003.
(e) Application. This section also applies to:
(1) An officer or agent acting on behalf of a national party
committee or a national congressional campaign committee; and
(2) An entity that is directly or indirectly established, financed,
maintained, or controlled by a national party committee or a national
congressional campaign committee.
(f) Treatment of Federal and non-Federal accounts during transition
period. The following provisions applicable to the allocation of, and
payment for, expenses between Federal and non-Federal accounts of
national party committees shall remain in effect between November 6 and
December 31, 2002: 11 CFR 106.5(a),(b), (c), (f) and (g).
Sec. 300.13 Reporting (2 U.S.C. 431 note and 434(e)).
(a) In general. The national committee of a political party, any
national congressional campaign committee of a political party, and any
subordinate committee of either, shall report all receipts and
disbursements during the reporting period.
(b) Termination report for non-Federal accounts. Unless a committee
described in paragraph (a) of this section issues refund checks to
donors as permitted by 11 CFR 300.12(c), each committee described in
paragraph (a) of this section must file a termination report disclosing
the disposition of funds in all non-Federal accounts and building fund
accounts by January 31, 2003. Each committee that issues refund checks
to donors must file a termination report covering the period ending
March 31, 2003 disclosing the disposition of any refund checks not
cashed by February 28, 2003, as required by 11 CFR 300.12(c) and (d).
(c) Transitional reporting rules.
(1) The reporting requirements covering receipts in 11 CFR 104.8(e)
and (f) and disbursements in 11 CFR 104.9(e) for national party
committee non-Federal accounts and building fund accounts shall remain
in effect for the reports covering activity between November 6 and
December 31, 2002.
(2) The reporting requirements covering disbursements in 11 CFR
104.9 (c) and (d) for national party committee non-Federal accounts and
building fund accounts shall remain in effect for the reports covering
activity between November 6, 2002 and March 31, 2003.
Subpart B--State, District, and Local Party Committees and
Organizations
Sec. 300.30 Accounts
(a) Scope and introduction. This section applies to State,
district, or local committees or organizations of a political party,
whether or not the committee is a political committee under 11 CFR
100.5, that have receipts or make disbursements for Federal election
activity. Paragraph (b) of this section describes and explains the
types of accounts available to a political party committee or
organization covered by this section. Paragraph (c) of this section
sets out the account structure that must be maintained by a political
party committee or organization covered by this section.
(b) Types of accounts. Each State, district, and local party
organization or committee that has receipts or makes disbursements for
Federal election activity must establish one or more of the following
types of accounts, pursuant to paragraph (c) of this section.
(1) Non-Federal accounts. The funds deposited into this account are
governed by State law. Disbursements, contributions, and expenditures
made wholly or in part in connection with
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Federal elections must not be made from any non-Federal account, except
as permitted by paragraph (c)(3)(ii) of this section, 11 CFR
102.5(a)(4), 11 CFR 106.7(d)(1)(i), 11 CFR 300.33 and 11 CFR 300.34.
(2) Levin account. The funds deposited into this account must
comply with 11 CFR 300.31. Such funds may be used for the categories of
activities described at 11 CFR 300.32(b).
(3) Federal account. Federal accounts may be used for the deposit
of contributions and the making of expenditures pursuant to the
following conditions:
(i) Only contributions that are permissible pursuant to the
limitations and prohibitions of the Act may be deposited into any
Federal account, regardless of whether such contributions are for use
in connection with Federal or non-Federal elections. See 11 CFR 103.3
regarding impermissible funds.
(ii) Only contributions solicited and received pursuant to the
following conditions may be deposited in a Federal account:
(A) Contributions must be designated by the contributors for the
Federal account;
(B) The solicitation must expressly state that contributions may be
used wholly or in part in connection with a Federal election; or
(C) The contributor must be informed that all contributions are
subject to the limitations and prohibitions of the Act.
(iii) All disbursements, contributions, and expenditures made
wholly or in part by any State, district, or local party organization
or committee in connection with a Federal election must be made from
either:
(A) A Federal account, except as permitted by 11 CFR 300.32; or
(B) A separate allocation account (see paragraph (b)(4) of this
section).
(iv) If all payments in connection with a Federal election,
including payments for Federal election activities, are to be made from
a Federal account, expenditures and disbursements for costs that are
allocable pursuant to 11 CFR 106.7 or 11 CFR 300.33 must be made from
the Federal account in their entirety, with the shares of a non-Federal
account or of a Levin account being transferred to the Federal account
pursuant to 11 CFR 106.7 and 11 CFR 300.33.
(v) No transfers may be made to a Federal account from any other
account(s) maintained by a State, district, or local party committee or
organization from any other party organization or committee at any
level for the purpose of financing activity in connection with Federal
elections, except as provided by paragraph (b)(3)(iv) of this section
or 11 CFR 300.33 and 300.34.
(4) Allocation accounts. At the discretion of the party committee
or organization, separate allocation accounts may be established for
purposes of making allocable expenditures and disbursements.
(i) Only funds from the party organization's or committee's Federal
and non-Federal accounts may be deposited into an allocation account
used to make allocable expenditures and disbursements for activities in
connection with Federal and non-Federal elections.
(ii) Only funds from the party organization's or committee's
Federal account and Levin funds from its non-Federal or Levin
account(s) may be deposited into an allocation account used to make
allocable expenditures and disbursements for activities undertaken
pursuant to 11 CFR 300.32(b).
(iii) Once a party organization or committee has established a
separate allocation account for activities in connection with Federal
and non-Federal elections and a separate account for activities
undertaken pursuant to 11 CFR 300.32(b), all allocable expenses must be
paid from the appropriate allocation account for as long as that
account is maintained.
(iv) The party organization or committee must transfer to the
appropriate allocation account funds from its Federal and non-Federal
or Levin accounts in amounts proportionate to the Federal, non-Federal
and Levin shares of each allocable expense pursuant to 11 CFR 106.7 and
11 CFR 300.33. The transfers must be made pursuant to 11 CFR 300.33 and
300.34.
(v) No funds contained in an allocation account may be transferred
to any other account maintained by the party committee or organization.
(vi) For reporting purposes, all allocation accounts must be
treated as Federal accounts.
(c) Required account or accounts. Each State, district, and local
party organization or committee that has receipts or makes
disbursements for Federal election activity must establish its accounts
in accordance with paragraphs (c)(1), or (c)(2), or (c)(3) of this
section.
(1) One or more Federal accounts in a campaign depository, in
accordance with 11 CFR part 103, which must be treated as a separate
political committee and be required to comply with the requirements of
the Act including the registration and reporting requirements of 11 CFR
part 102 and part 104. State, district, and local party organizations
or committees may choose to make non-Federal disbursements, subject to
State law, and disbursements for Federal election activity from a
Federal account provided that such disbursements are reported pursuant
to 11 CFR 104.17 and 11 CFR 300.36, and provided that contributors of
the Federal funds so used were notified that their contributions were
subject to the limitations and prohibitions of the Act.
(2) Establish at least three separate accounts in depositories as
follows--
(i) One or more Federal accounts;
(ii) One or more Levin accounts; and
(iii) One or more Non-Federal accounts.
(3) Establish two separate accounts in depositories as follows:
(i) One or more Federal accounts, and;
(ii) An account that must function as both a Non-Federal account
and a Levin account. If such an account is used, the State, district,
and local party must demonstrate through a reasonable accounting method
approved by the Commission (including any method embedded in software
provided or approved by the Commission) that whenever such organization
makes a disbursement for activities undertaken pursuant to 11 CFR
300.32(b), that organization had received sufficient contributions or
Levin funds to make such disbursement.
(d) Recordkeeping. All party organizations or committees must keep
records of deposits into and disbursements from such accounts, and,
upon request, must make such records available for examination by the
Commission.
Sec. 300.31 Receipt of Levin funds.
(a) General rule. Levin funds expended or disbursed by any State,
district, or local committee must be raised solely by the committee
that expends or disburses them.
(b) Compliance with State law. Each donation of Levin funds
solicited or accepted by a State, district, or local committee of a
political party must be lawful under the laws of the State in which the
committee is organized.
(c) Donations from sources permitted by State law but prohibited by
the Act. If the laws of the State in which a State, district, or local
committee of a political party is organized permit donations to the
committee from a source prohibited by the Act and this chapter, other
than 2 U.S.C. 441e, the committee may solicit and accept donations of
Levin funds from that source, subject to paragraph (d) of this section.
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(d) Donation amount limitation.
(1) General rule. A State, district, or local committee of a
political party must not solicit or accept from any person (including
any entity established, financed, maintained, or controlled by such
person) one or more donations of Levin funds aggregating more than
$10,000 in a calendar year.
(2) Effect of different State limitations. If the laws of the State
in which a State, district, or local committee of a political party is
organized limit donations to that committee to less than the amount
specified in paragraph (d)(1) of this section, then the State law
amount limitations shall control. If the laws of the State in which a
State, district, or local committee of a political party is organized
permit donations to that committee in amounts greater than the amount
specified in paragraph (d)(1) of this section, then the amount
limitations in paragraph (d)(1) of this section shall control.
(3) No affiliation of committees for purposes of this paragraph.
For purposes of determining compliance with paragraph (d) of this
section only, State, district, and local committees of the same
political party shall not be considered affiliated. Subject to the
amount limitations specified in paragraphs (d)(1) and (d)(2) of this
section, a person (including any entity directly or indirectly
established, financed, maintained, or controlled by such person) may
donate without additional limitation to each and every State, district,
and local committee of a political party.
(e) No Levin funds from a national party committee or a Federal
candidate or officeholder. A State, district, or local committee of a
political party disbursing Levin funds pursuant to 11 CFR 300.32 must
not accept or use for such purposes any donations or other funds that
are solicited, received, directed, transferred, or spent by or in the
name of any of the following persons:
(1) A national committee of a political party (including a national
congressional campaign committee of a political party), any officer or
agent acting on behalf of such a national party committee, or any
entity that is directly or indirectly established, financed,
maintained, or controlled by such a national party committee.
Notwithstanding 11 CFR 102.17, a State, district, or local committee of
a political party must not raise Levin funds by means of joint
fundraising with a national committee of a political party, any officer
or agent acting on behalf of such a national party committee, or any
entity that is directly or indirectly established, financed,
maintained, or controlled by such a national party committee. Nothing
in this section shall be construed to prohibit a State, district, or
local committee of a political party from jointly raising, under 11 CFR
102.17, Federal funds not to be used for Federal election activity with
a national committee of a political party, or its agent, or any entity
directly or indirectly established, financed, maintained, or controlled
by such a national party committee.
(2) A Federal candidate, or an individual holding Federal office,
or an agent of a Federal candidate or officeholder, or an entity
directly or indirectly established, financed, maintained, or controlled
by, or acting on behalf of, one or more Federal candidates or
individuals holding Federal office. Notwithstanding 11 CFR 102.17, a
State, district, or local committee of a political party must not raise
Levin funds by means of joint fundraising with a Federal candidate, an
individual holding Federal office, or an entity directly or indirectly
established, financed, maintained, or controlled by, or acting on
behalf of, one or more candidates or individuals holding Federal
office. A Federal candidate or individual holding Federal office may
attend, speak, or be a featured guest at a fundraising event for a
State, district, or local committee of a political party at which Levin
funds are raised. See 11 CFR 300.64.
(f) Certain joint fundraising prohibited. Notwithstanding 11 CFR
102.17, a State, district, or local committee of a political party must
not raise Levin funds by means of any joint fundraising activity with
any other State, district, or local committee of any political party,
the agent of such a committee, or an entity directly or indirectly
established, financed, maintained, or controlled by such a committee.
This prohibition includes State, district, and local committees of a
political party organized in another State. Nothing in this section
shall be construed to prohibit two or more State, district, or local
committees of a political party from jointly raising, under 11 CFR
102.17, Federal funds not to be used for Federal election activity.
(g) Safe Harbor. The use of a common vendor for fundraising by more
than one State, district, or local committee or a political party, or
the agent of such a committee does not constitute joint fundraising
within the meaning of this section.
Sec. 300.32 Expenditures and disbursements.
(a) Federal funds.
(1) An association or similar group of candidates for State or
local office, or an association or similar group of individuals holding
State or local office, must make any expenditures or disbursements for
Federal election activity solely with Federal funds.
(2) Except as provided in this part, a State, district, or local
committee of a political party that makes expenditures or disbursements
for Federal election activity must use Federal funds for that purposes,
subject to the provisions of this chapter.
(3) State, district, and local party committees that raise Federal
funds to be used, in whole or in part, for Federal election activities
must pay the direct costs of such fundraising only with Federal funds.
The direct costs of a fundraising program or event include expenses for
the solicitation of funds and for the planning and administration of
actual fundraising programs and events.
(4) State, district, and local party committees that raise Levin
funds to be used, in whole or in part, for Federal election activity
must pay the direct costs of such fundraising with either Federal or
Levin funds. The direct costs of a fundraising program or event include
expenses for the solicitation of funds and for the planning and
administration of actual fundraising programs and events.
(b) Levin funds. A State, district, or local committee of a
political party may spend Levin funds in accordance with this part on
the following types of activity:
(1) Subject to the conditions set out in paragraph (c) of this
section, only the following types of Federal election activity:
(i) Voter registration activity during the period that begins on
the date that is 120 days before the date a regularly scheduled Federal
election is held and ends on the date of the election; and
(ii) Voter identification, get-out-the-vote activity, or generic
campaign activity conducted in connection with an election in which a
candidate for Federal office appears on the ballot (regardless of
whether a candidate for State or local office also appears on the
ballot).
(2) Any use that is lawful under the laws of the State in which the
committee is organized, other than the Federal election activities
defined in 11 CFR 100.24(b)(3) and (4). A disbursement of Levin funds
under this paragraph need not comply with paragraphs (c)(1) and (c)(2)
of this section, except as required by State law.
(c) Conditions and restrictions on spending Levin funds.
(1) The Federal election activity for which the disbursement is
made must
[[Page 49126]]
not refer to a clearly identified candidate for Federal office.
(2) The disbursement must not pay for any part of the costs of any
broadcasting, cable, or satellite communication, other than a
communication that refers solely to a clearly identified candidate for
State or local office.
(3) The disbursement must be made from funds raised in accordance
with 11 CFR 300.31.
(4) The disbursements for allocable Federal election activity that
exceed in the aggregate $5,000 in a calendar year may be paid for
entirely with Federal funds or may be allocated between Federal funds
and Levin funds according to 11 CFR 300.33. Disbursements for Federal
election activity that may be allocated and that aggregate $5,000 or
less in a calendar year may be paid for entirely with Federal funds,
entirely with Levin funds, or may be allocated between Federal funds
and Levin funds according to 11 CFR 300.33.
(d) Non-Federal activities. A State, district, or local committee
of a political party that makes disbursements for non-Federal activity
may make those disbursements from its Federal, Levin, or non-Federal
funds, subject to the laws of the State in which it is organized. A
State, district, or local party committee that engages in fundraising
for solely non-Federal funds may pay the costs related to such
fundraising from any account, subject to State law, including a Federal
account.
Sec. 300.33 Allocation of costs of Federal election activity.
(a) Costs of Federal election activity allocable by State,
district, and local party committees and organizations.
(1) Costs of voter registration. Subject to the conditions of 11
CFR 300.32(c), State, district, and local party committees and
organizations may allocate disbursements or expenditures, except
salaries and wages for employees, between Federal funds and Levin funds
for voter registration activity, as defined in 11 CFR 100.24(a)(2),
that takes place during the period that begins on the date that is 120
days before the date of a regularly scheduled Federal election and that
ends on the date of the election, provided that the activity does not
refer to a clearly identified Federal candidate.
(2) Costs of voter identification, get-out-the-vote activity, or
generic campaign activities within certain time periods. Subject to the
conditions of 11 CFR 300.32(c), State, district, and local party
committees and organizations may allocate disbursements or
expenditures, except salaries and wages for employees, between Federal
funds and Levin funds for voter identification, get-out-the-vote
activity, or generic campaign activities, as defined in 11 CFR
100.24(a)(3) and (4) and 11 CFR 100.25, that are conducted in
connection with an election in which a candidate for Federal office is
on the ballot and within the time periods set forth in 11 CFR
100.24(a)(1), provided that the activity does not refer to a clearly
identified Federal candidate.
(b) Allocation percentages. State, district, and local party
committees and organizations that choose to allocate between Federal
funds and Levin funds their expenditures and disbursements, except for
salaries and wages, in connection with activities described in
paragraph (a) of this section that take place within the time periods
set forth in 11 CFR 100.24(a)(1) or paragraph (a) of this section must
allocate the following minimum percentages to their Federal funds:
(1) Presidential election years. If a Presidential candidate, but
no Senate candidate appears on the ballot, State, district, and local
party committees and organizations must allocate at least 28% of
expenses for activities described in paragraph (a) of this section to
their Federal funds.
(2) Presidential and Senate election year. If a Presidential
candidate and a Senate candidate appear on the ballot, State, district,
and local party committees and organizations must allocate at least 36%
of expenses for activities described in paragraph (a) of this section
to their Federal funds.
(3) Senate election year. If a Senate candidate, but no
Presidential candidate, appears on the ballot, State, district, and
local party committees and organizations must allocate at least 21% of
expenses for activities described in paragraph (a) of this section to
their Federal funds.
(4) Non-Presidential and non-Senate year. If neither a Presidential
nor a Senate candidate appears on the ballot, State, district, and
local party committees and organizations must allocate at least 15% of
expenses for activities described in paragraph (a) of this section to
their Federal funds.
(c) Costs of Federal election activity not allocable by State,
district, and local party committees. The following costs incurred by
State, district, and local party committees and organizations must be
paid only with Federal funds:
(1) Public communications. Expenditures for public communications
as defined in 11 CFR 100.26 by State, district, and local party
committees and organizations that refer to a clearly identified
candidate for Federal office and that promote, support, attack, or
oppose any such candidate for Federal office must not be allocated
between or among Federal, non-Federal, and Levin accounts. Only Federal
funds may be used.
(2) Salaries and wages. Salaries and wages for employees who spend
more than 25% of their compensated time in a given month on Federal
election activity or activities in connection with a Federal election
must not be allocated between or among Federal, non-Federal, and Levin
accounts. Only Federal funds may be used. Salaries and wages for
employees who spend 25% or less of their compensated time in a given
month on Federal election activity or activities in connection with a
Federal election shall be paid from funds that comply with State law.
(3) Fundraising costs. Disbursements for direct fundraising costs
incurred by State, district, and local party committees and
organizations for funds to be used, in whole or in part, for Federal
election activity, including the activities described in paragraph (a)
of this section, must not be allocated between or among Federal, non-
Federal and Levin funds. Only Federal or Levin funds may be used.
(d) Transfers between accounts to cover allocable expenses. State,
district, and local party committees and organizations may transfer
Levin funds from their Levin or non-Federal accounts to their Federal
accounts or to allocation accounts solely to meet expenses allocable
pursuant to paragraphs (a)(1) and (2) of this section and only pursuant
to the following methods:
(1) Payments from Federal accounts or from allocation accounts.
(i) If Federal accounts are used to make payments for allocable
activities, State, district, and local party committees and
organizations must pay the entire amount of allocable expenses from
their Federal accounts and transfer Levin funds from their Levin or
non-Federal accounts to their Federal accounts solely to cover the
portions of the expenses for which Levin funds may be used; or
(ii) State, district, and local party committees and organizations
may establish separate allocation accounts into which Federal funds and
Levin funds may be deposited solely for the purpose of paying allocable
expenses.
(2) Timing.
(i) If Federal or allocation accounts are used to make allocable
expenditures and disbursements, State, district, and local party
committees and organizations must transfer Levin funds
[[Page 49127]]
to their Federal or allocation accounts to meet allocable expenses no
more than 10 days before and no more than 60 days after the payments
for which they are designated are made from a Federal or allocation
account, except that transfers may be made more than 10 days before a
payment is made from the Federal or allocation account if advance
payment is required by the vendor(s) and if such payment is based on a
reasonable estimate of the activity's final costs as determined by the
committee and the vendor(s) involved.
(ii) Any portion of a transfer of Levin funds to a party committee
or organization's Federal or allocation account that does not meet the
requirement of paragraph (d)(2)(i) of this section shall be presumed to
be a loan or contribution from the Levin or non-Federal account to the
Federal or allocation account, in violation of the Act.
Sec. 300.34 Transfers.
(a) Federal funds.
(1) Notwithstanding 11 CFR 102.6(a)(1)(ii), a State, district, or
local committee of a political party must not use any Federal funds
transferred to it from, or otherwise accepted by it from, any of the
persons enumerated in paragraphs (b)(1) and (b)(2) of this section as
the Federal component of an expenditure or disbursement for Federal
election activity under 11 CFR 300.32. A State, district, or local
committee of a political party must itself raise the Federal component
of an expenditure or disbursement allocated between Federal funds and
Levin funds under 11 CFR 300.32 and 300.33.
(2) A State, district, or local committee of a political party that
makes an expenditure or disbursement of Federal funds for Federal
election activities must demonstrate through a reasonable accounting
method approved by the Commission (including any method embedded in
software provided or approved by the Commission) that the Federal funds
used to make the expenditure or disbursement do not include Federal
funds transferred to the committee in violation of this section.
Alternatively, a State, district, or local committee of a political
party may establish a separate Federal account into which the committee
deposits only Federal funds raised by the committee itself, and from
which all expenditures or disbursement of Federal funds for Federal
election activities are made.
(b) Levin funds. Levin funds must be raised solely by the State,
district, or local committee of a political party that expends or
disburses the funds. A State, district, or local committee of a
political party must not use as Levin funds any funds transferred or
otherwise provided to the committee by:
(1) Any other State, district, or local committee of any political
party, any officer or agent acting on behalf of such a committee, or
any entity directly or indirectly established, financed, maintained or
controlled by such a committee; or,
(2) The national committee of any political party (including a
national congressional campaign committee of a political party), any
officer or agent acting on behalf of such a committee, or any entity
directly or indirectly established, financed, maintained, or controlled
by such a committee.
(c) Allocation transfers. Transfers of Levin funds between the
accounts of a State, district, or local committee of a political party
for allocation purposes must comply with 11 CFR 300.30 and 11 CFR
300.33.
Sec. 300.35 Office buildings.
(a) General provision. For the purchase or construction of its
office building, a State or local party committee may spend Federal
funds or non-Federal funds that are not subject to the limitations,
prohibitions, and disclosure provisions of the Act, so long as such
funds are not contributed or donated by a foreign national. See 2
U.S.C. 441e. If non-Federal funds are used, they are subject to State
law. An office building must not be purchased or constructed for the
purpose of influencing the election of any candidate in any particular
election for Federal office. For purposes of this section, the term
local party committee shall include a district party committee.
(b) Application of State law. Non-Federal funds received by a State
or local party committee that are spent for the purchase or
construction of its office building are subject to State law as set
forth in paragraphs (b)(1) and (2) of this section.
(1) Non-Federal account. If a State or local party committee uses
non-Federal funds, Federal law does not preempt or supersede State law
as to the source of funds used, the permissibility of the
disbursements, or the reporting of the receipt and disbursement of such
funds, except as provided in paragraph (a) of this section.
(2) Levin funds. Levin funds may be used for the purchase or
construction of a State or local party committee office building, if
permitted by State law.
(c) Leasing a portion of the party office building. A State or
local party committee may lease a portion of its office building to
others to generate income at the usual and normal charge. If the
building is purchased or constructed in whole or in part with non-
Federal funds, all rental income shall be deposited in the committee's
non-Federal account and used only for non-Federal purposes. Such rental
income and its use must also comply with State law. If the building is
purchased or constructed solely with Federal funds, the rental income
may be deposited in the Federal account. The receipt of such funds
shall be reported in compliance with 11 CFR 104.3(a)(4)(vi).
(d) Transitional Provisions for State Party Building or Facility
Account. Up to and including November 5, 2002, the State committee of a
political party may accept funds into its party office building or
facility account, established pursuant to repealed 2 U.S.C.
431(8)(B)(viii), designated for the purchase or construction of an
office building. Starting on November 6, 2002, the funds in the account
may not be used for Federal account or Levin account purposes, but may
be used for any non-Federal purposes, as permitted under State law.
Sec. 300.36 Reporting Federal election activity; recordkeeping.
(a) Requirements for a State, district, or local committee of a
political party, or an association or similar group of candidates for
State or local office or of individuals holding State or local office,
that is not a political committee.
(1) A State, district, or local committee of a political party, or
an association or similar group of candidates for State or local office
or of individuals holding State or local office, that is not a
political committee (see 11 CFR 100.5) must demonstrate through a
reasonable accounting method that whenever it makes a payment of
Federal funds or Levin funds (if it is permitted to spend Levin funds)
for Federal election activity (see 11 CFR 300.32 and 300.33) it has
received sufficient funds subject to the limitations and prohibitions
of the Act to make the payment. Such an organization must keep records
of amounts received or expended under this paragraph and, upon request,
shall make such records available for examination by the Commission.
(2) Notwithstanding the foregoing, a payment of Federal funds or
Levin funds for Federal election activity shall not constitute an
expenditure for purposes of determining whether a State, district, or
local committee of a political party, or an association or similar
group of candidates for State or local office or of individuals holding
State or local office, qualifies as a
[[Page 49128]]
political committee under 11 CFR 100.5, unless the payment otherwise
qualifies as an expenditure under 2 U.S.C. 431(9). A payment of Federal
funds for Federal election activity that refers to a clearly identified
Federal candidate and that meets the criteria of 11 CFR 100.8(b)(10),
(16), or (18) (exempt activities) shall be treated as a payment for
exempt activity in accordance with all applicable provisions of this
chapter, including, but not limited to, 11 CFR 100.5(c).
(b) Requirements for a State, district, or local committee of a
political party, or an association or similar group of candidates for
State or local office or of individuals holding State or local office,
that is a political committee.
(1) Requirements for a State, district, or local committee of a
political party that has less than $5,000 of aggregate receipts and
disbursements for Federal election activity in a calendar year, and for
an association or similar group of candidates for State or local office
or of individuals holding State or local office at all times. This
paragraph applies to a State, district, or local committee of a
political party that is a political committee, and that has less than
$5,000 of aggregate receipts and disbursements for Federal election
activity in a calendar year; and, at all times, to an association or
similar group of candidates for State or local office or of individuals
holding State or local office that is a political committee (see 11 CFR
100.5). Such a party committee or association of candidates or
officeholders must report all receipts and disbursements of Federal
funds for Federal election activity, including the Federally allocated
portion of a payment for Federal election activity. A disbursement of
Federal funds or Levin funds for Federal election activity (see 11 CFR
300.32 and 300.33) by either such a party committee or association of
candidates or officeholders shall not be deemed an expenditure and
reported as such pursuant to 11 CFR part 104, unless the disbursement
otherwise qualifies as an expenditure under 2 U.S.C. 431(9).
(2) Requirements for a State, district, or local committee of a
political party that has $5,000 or more of aggregate receipts and
disbursements for Federal election activity in a calendar year. A
State, district, or local committee of a political party that is a
political committee (see 11 CFR 100.5) must report all receipts and
disbursements made for Federal election activity if the aggregate
amount of such receipts and disbursements is $5,000 or more during the
calendar year. The disclosure required by this paragraph must include
receipts and disbursements of Federal funds and of Levin funds used for
Federal election activity.
(i) Reporting of allocation of expenses between Federal funds and
Levin funds. A State, district, or local committee of a political party
that makes a disbursement for Federal election activity that is
allocated between Federal funds and Levin funds (see 11 CFR 300.33)
must report for each such disbursement:
(A) In the first report of a calendar year disclosing an allocated
disbursement for Federal election activity, the committee must state
the allocation percentages to be applied for allocable Federal election
activity pursuant to 11 CFR 300.33(b).
(B) In each subsequent report in the calendar year itemizing an
allocated disbursement for Federal election activity, the committee
must state the category of Federal election activity (see 11 CFR
100.24(b)) for which each allocated disbursement was made, and must
disclose the total amounts disbursed from Federal funds and Levin funds
for that year to date for each such category.
(ii) Reporting of allocation transfers. A committee that makes
allocated disbursements for Federal election activities in accordance
with 11 CFR 300.33(d) shall report each transfer of Levin funds from
its Levin or non-Federal account, to its Federal account, and each
transfer from its Federal account and its Levin or non-Federal account
into an allocation account, for the purpose of making such
disbursements. In the report covering the period in which each transfer
occurred, the committee must explain in a memo entry the allocated
disbursement to which the transfer relates and the date on which the
transfer was made. If the transfer includes funds for the allocable
costs of more than one category of Federal election activity, the
committee must itemize the transfer, showing the amounts designated for
each category.
(iii) Reporting of allocated disbursements. For each disbursement
allocated between Federal funds and Levin funds, the committee must
report the full name and address of each person to whom the
disbursement was made, the date of the disbursement, amount, and
purpose of the disbursement. If the disbursement is for the allocable
costs of more than one category of Federal election activity, the
committee must itemize the disbursement, showing the amounts designated
for each category. The committee must also disclose the total amount
disbursed from Federal funds and Levin funds for Federal election
activity that calendar year, to date, for each category of Federal
election activity.
(iv) Itemization. The disclosure required by paragraph (b)(2) of
this section must include, in addition to any other applicable
reporting requirement of this chapter, the itemized disclosure of
receipts and disbursements of $200 or more to or from any person for
Federal election activities.
(3) Reporting of disbursements allocated between Federal funds and
non-Federal funds, other than Levin funds. A State, district, or local
committee of a political party that makes a disbursement for costs
allocable between Federal and non-Federal funds, other than the costs
of Federal election activity that is allocated between Federal funds
and Levin funds under 11 CFR 300.33, must comply with 11 CFR 104.17.
(c) Filing.
(1) Schedule. A State, district, or local committee of a political
party, or an association or similar group of candidates for State or
local office or of individuals holding State or local office, that must
file reports under paragraph (b) of this section must comply with the
monthly filing schedule in 11 CFR 104.5(c)(3).
(2) Electronic filing. Receipts of Federal funds for Federal
election activity that constitute contributions under 11 CFR 100.7, and
disbursements of Federal funds for Federal election activity that
constitute expenditures under 11 CFR 100.8, apply when determining
whether a political committee must file reports in an electronic format
under 11 CFR 104.18.
(d) Recordkeeping. A State, district, or local committee of a
political party, or an association or similar group of candidates for
State or local office or of individuals holding State or local office,
that must file reports under paragraph (b) of this section must comply
with the requirements of 11 CFR 104.14.
Sec. 300.37 Prohibitions on fundraising for and donating to certain
tax-exempt organizations (2 U.S.C. 441i(d)).
(a) Prohibitions. A State, district, or local committee of a
political party must not solicit any funds for, or make or direct any
donations to:
(1) An organization that is described in 26 U.S.C. 501(c) and
exempt from taxation under section 26 U.S.C. 501(a) and that makes
expenditures or disbursements in connection with an election for
Federal office, including expenditures or disbursements for Federal
election activity;
[[Page 49129]]
(2) An organization that has submitted an application for tax-
exempt status under 26 U.S.C. 501(c) and that makes expenditures or
disbursements in connection with an election for Federal office,
including expenditures or disbursements for Federal election activity;
or
(3) An organization described in 26 U.S.C. 527, unless the
organization is:
(i) A political committee under 11 CFR 100.5;
(ii) A State, district, or local committee of a political party;
(iii) The authorized campaign committee of a State or local
candidate; or
(iv) A political committee under State law, that supports only
State or local candidates and that does not make expenditures or
disbursements in connection with an election for Federal office,
including expenditures or disbursements for Federal election activity.
(b) Application. This section also applies to:
(1) An officer or agent acting on behalf of a State, district, or
local committee of a political party;
(2) An entity that is directly or indirectly established, financed,
maintained, or controlled by a State, district, or local committee or a
political party or an officer or agent acting on behalf of such an
entity; or
(3) An entity that is directly or indirectly established, financed,
maintained, or controlled by an agent of a State, district, or local
committee of a political party.
(c) Determining whether an organization makes expenditures or
disbursements in connection with a Federal election.
(1) In determining whether a section 501(c) organization is one
that makes expenditures or disbursements in connection with a Federal
election, including expenditures or disbursements for Federal election
activity, pursuant to paragraphs (a)(1) and (2) of this section, a
State, district, or local committee of a political party or any other
person described in paragraph (b) of this section, may obtain and rely
upon a certification from the organization that satisfies the criteria
described in paragraph (d) of this section.
(2) In determining whether a section 527 organization is a State-
registered political committee that supports only State or local
candidates and does not make expenditures or disbursements in
connection with an Federal election, including expenditures or
disbursements for Federal election activity, pursuant to paragraph
(a)(3)(iv) of this section, a State, district, or local committee of a
political party or any other person described in paragraph (b) of this
section, may obtain and rely upon a certification from the organization
that satisfies the criteria described in paragraph (d) of this section.
(d) Certification. A State, district, or local committee of a
political party or any person described in paragraph (b) of this
section may rely upon a certification that meets all of the following
criteria:
(1) The certification is a signed written statement by an officer
or other authorized representative of the organization with knowledge
of the organization's activities or by the treasurer of the State-
registered political committee described in paragraph (a)(3)(iv) of
this section;
(2) The certification states that within the current election
cycle, the organization or political committee has not made, and does
not intend to make, expenditures or disbursements in connection with an
election for Federal office (including for Federal election activity);
and
(3) The certification states that the organization or political
committee does not intend to pay debts incurred from the making of
expenditures or disbursements in connection with an election for
Federal office (including for Federal election activity) in a prior
election cycle.
(e) If a State, district, or local committee of a political party
or any person described in paragraph (b) of this section has actual
knowledge that the certification is false, the certification may not be
relied upon.
(f) It is not prohibited for a State, district, or local committee
of a political party or its agents to respond to a request for
information about a tax-exempt group that shares the party's political
or philosophical goals.
Subpart C--Tax-Exempt Organizations
Sec. 300.50 Prohibited fundraising by national party committees (2
U.S.C. 441i(d)).
(a) Prohibitions on fundraising and donations. A national committee
of a political party, including a national congressional campaign
committee, must not solicit any funds for, or make or direct any
donations to the following organizations:
(1) An organization that is described in 26 U.S.C. 501(c) and
exempt from taxation under section 26 U.S.C. 501(a) and that makes
expenditures or disbursements in connection with an election for
Federal office, including expenditures or disbursements for Federal
election activity;
(2) An organization that has submitted an application for tax-
exempt status under 26 U.S.C. 501(c) and that makes expenditures or
disbursements in connection with an election for Federal office,
including expenditures or disbursements for Federal election activity;
or
(3) An organization described in 26 U.S.C. 527, unless the
organization is:
(i) A political committee under 11 CFR 100.5;
(ii) A State, district, or local committee of a political party; or
(iii) The authorized campaign committee of a State or local
candidate;
(b) Application. This section also applies to:
(1) An officer or agent acting on behalf of a national party
committee, including a national congressional campaign committee;
(2) An entity that is directly or indirectly established, financed,
maintained, or controlled by a national party committee, including a
national congressional campaign committee, or an officer or agent
acting on behalf of such an entity; or
(3) An entity that is directly or indirectly established, financed,
maintained, or controlled by an agent of a national, State, district,
or local committee of a political party, including a national
congressional campaign committee.
(c) Determining whether a section 501(c) organization makes
expenditures or disbursements in connection with Federal elections. In
determining whether a section 501(c) organization is one that makes
expenditures or disbursements in connection with a Federal election,
including expenditures or disbursements for Federal election activity,
pursuant to paragraphs (a)(1) and (2) of this section, a national
committee of a political party, including a national congressional
campaign committee, or any other person described in paragraph (b) of
this section, may obtain and rely upon a certification from the
organization that satisfies the criteria described in paragraph (d) of
this section.
(d) Certification. A national committee of a political party,
including a national congressional campaign committee, or any person
described in paragraph (b) of this section, may rely upon a
certification that meets all of the following criteria:
(1) The certification is a signed written statement by an officer
or other authorized representative of the organization with knowledge
of the organization's activities;
[[Page 49130]]
(2) The certification states that within the current election
cycle, the organization has not made, and does not intend to make,
expenditures or disbursements in connection with an election for
Federal office (including for Federal election activity); and
(3) The certification states that the organization or political
committee does not intend to pay debts incurred from the making of
expenditures or disbursements in connection with an election for
Federal office (including for Federal election activity) in a prior
election cycle.
(e) Reliance on false certification. If a national committee of a
political party or any person described in paragraph (b) of this
section has actual knowledge that the certification is false, the
certification may not be relied upon.
(f) Requests for information. It is not prohibited for a national
party or its agent to respond to a request for information about a tax-
exempt group that shares the party's political or philosophical goals.
Sec. 300.51 Prohibited fundraising by State, district, or local party
committees (2 U.S.C. 441i(d)).
(a) Prohibitions. A State, district, or local committee of a
political party must not solicit any funds for, or make or direct any
donations to:
(1) An organization that is described in 26 U.S.C. 501(c) and
exempt from taxation under section 26 U.S.C. 501(a) and that makes
expenditures or disbursements in connection with an election for
Federal office, including expenditures or disbursements for Federal
election activity;
(2) An organization that has submitted an application for tax-
exempt status under 26 U.S.C. 501(c) and that makes expenditures or
disbursements in connection with an election for Federal office,
including expenditures or disbursements for Federal election activity;
or
(3) An organization described in 26 U.S.C. 527, unless the
organization is:
(i) A political committee under 11 CFR 100.5;
(ii) A State, district, or local committee of a political party;
(iii) The authorized campaign committee of a State or local
candidate; or
(iv) A political committee under State law, that supports only
State or local candidates and that does not make expenditures or
disbursements in connection with an election for Federal office,
including expenditures or disbursements for Federal election activity.
(b) Application. This section also applies to:
(1) An officer or agent acting on behalf of a State, district, or
local committee of a political party;
(2) An entity that is directly or indirectly established, financed,
maintained, or controlled by a State, district, or local committee or a
political party or an officer or agent acting on behalf of such an
entity; or
(3) An entity that is directly or indirectly established, financed,
maintained, or controlled by an agent of a State, district, or local
committee of a political party.
(c) Determining whether an organization makes expenditures or
disbursements in connection with a Federal election.
(1) In determining whether a section 501(c) organization is one
that makes expenditures or disbursements in connection with a Federal
election, including expenditures or disbursements for Federal election
activity, pursuant to paragraphs (a)(1) and (2) of this section, a
State, district, or local committee of a political party or any other
person described in paragraph (b) of this section, may obtain and rely
upon a certification from the organization that satisfies the criteria
described in paragraph (d) of this section.
(2) In determining whether a section 527 organization is a State-
registered political committee that supports only State or local
candidates and does not make expenditures or disbursements in
connection with a Federal election, including expenditures or
disbursements for Federal election activity, pursuant to paragraph
(a)(3)(iv) of this section, a State, district, or local committee of a
political party or any other person described in paragraph (b) of this
section, may obtain and rely upon a certification from the organization
that satisfies the criteria described in paragraph (d) of this section.
(d) Certification. A State, district, or local committee of a
political party or any person described in paragraph (b) of this
section may rely upon a certification that meets all of the following
criteria:
(1) The certification is a signed written statement by an officer
or other authorized representative of the organization with knowledge
of the organization's activities or by the treasurer of the State-
registered political committee described in paragraph (a)(3)(iv) of
this section;
(2) The certification states that within the current election
cycle, the organization or political committee has not made, and does
not intend to make, expenditures or disbursements in connection with an
election for Federal office (including for Federal election activity);
and
(3) The certification states that the organization does not intend
to pay debts incurred from the making of expenditures or disbursements
in connection with an election for Federal office (including for
Federal election activity) in a prior election cycle.
(e) If a State, district, or local committee of a political party
or any person described in paragraph (b) of this section has actual
knowledge that the certification is false, the certification may not be
relied upon.
(f) It is not prohibited for a State, district, or local committee
of a political party or its agents to respond to a request for
information about a tax-exempt group that shares the party's political
or philosophical goals.
Sec. 300.52 Fundraising by Federal candidates and Federal
officeholders (2 U.S.C. 441i(e)(1)&(4)).
A Federal candidate, an individual holding Federal office, and an
individual agent acting on behalf of either may make the following
solicitations of funds on behalf of any organization described in 26
U.S.C. 501(c) and exempt from taxation under 26 U.S.C. 501(a), or an
organization that has submitted an application for determination of
tax-exempt status under 26 U.S.C. 501(c):
(a) General solicitations. A Federal candidate, an individual
holding Federal office, or an individual agent acting on behalf of
either, may make a general solicitation of funds, without regard to
source or amount limitation, if:
(1) The organization does not engage in activities in connection
with an election, including any activity described in paragraph (c) of
this section; or
(2)(i) The organization conducts activities in connection with an
election, but the organization's principal purpose is not to conduct
election activities or any activity described in paragraph (c) of this
section; and
(ii) The solicitation is not to obtain funds for activities in
connection with an election or any activity described in paragraph (c)
of this section.
(b) Specific solicitations. A Federal candidate, an individual
holding Federal office, or an individual agent acting on behalf of
either, may make a solicitation explicitly to obtain funds for any
activity described in paragraph (c) of this section or for an
organization whose principal purpose is to conduct that activity, if:
(1) The solicitation is made only to individuals; and
[[Page 49131]]
(2) The amount solicited from any individual does not exceed
$20,000 during any calendar year.
(c) Voter registration, voter identification, get-out-the-vote
activity and generic campaign activity. This section applies to only
the following types of Federal election activity:
(1) Voter registration activity, as described in 11 CFR
100.24(a)(2), during the period that begins on the date that is 120
days before the date a regularly scheduled Federal election is held and
ends on the date of the election; or
(2) The following activities conducted in connection with an
election in which one or more Federal candidates appear on the ballot
(see 11 CFR 100.24(a)(1)), regardless of whether one or more State
candidates also appears on the ballot:
(i) Voter identification as described in 11 CFR 100.24(a)(4);
(ii) Get-out-the-vote activity as described in 11 CFR 100.24(a)(3);
or
(iii) Generic campaign activity as defined in 11 CFR 100.25.
(d) Prohibited solicitations. A Federal candidate, an individual
holding Federal office, and an individual who is an agent acting on
behalf of either, must not make any solicitation on behalf of any
organization described in 26 U.S.C. 501(c) and exempt from taxation
under 26 U.S.C. 501(a), or an organization that has submitted an
application for determination of tax-exempt status under 26 U.S.C.
501(c) for any election activity other than a Federal election activity
as described in paragraph (c) of this section.
(e) Safe Harbor. In determining whether a 501(c) organization is
one whose principal purpose is to conduct election activities,
including activity described in paragraph (c) of this section, a
Federal candidate, an individual holding Federal office, or an
individual agent acting on behalf of either, may obtain and rely upon a
certification from the organization that satisfies the following
criteria:
(1) The certification is a signed written statement by an officer
or other authorized representative of the organization with knowledge
of the organization's activities;
(2) The certification states that the organization's principal
purpose is not to conduct election activities, including election
activity described in paragraph (c) of this section; and
(3) The certification states that the organization does not intend
to pay debts incurred from the making of expenditures or disbursements
in connection with an election for Federal office (including for
Federal election activity) in a prior election cycle.
(f) If a Federal candidate, an individual holding Federal office,
or an individual agent acting on behalf of either has actual knowledge
that the certification is false, the certification may not be relied
upon.
Subpart D--Federal Candidates and Officeholders
Sec. 300.60 Scope (2 U.S.C. 441i(e)(1)).
This subpart applies to:
(a) Federal candidates;
(b) Individuals holding Federal office (see 11 CFR 300.2(o));
(c) Agents acting on behalf of a Federal candidate or individual
holding Federal office; and
(d) Entities that are directly or indirectly established, financed,
maintained, or controlled by, or acting on behalf of, one or more
Federal candidates or individuals holding Federal office.
Sec. 300.61 Federal elections (2 U.S.C. 441i(e)(1)(A)).
No person described in 11 CFR 300.60 shall solicit, receive,
direct, transfer, spend, or disburse funds in connection with an
election for Federal office, including funds for any Federal election
activity as defined in 11 CFR 100.24, unless the amounts consist of
Federal funds that are subject to the limitations, prohibitions, and
reporting requirements of the Act.
Sec. 300.62 Non-Federal elections (2 U.S.C. 441i(e)(1)(B)).
A person described in 11 CFR 300.60 may solicit, receive, direct,
transfer, spend, or disburse funds in connection with any non-Federal
election, only in amounts and from sources that are consistent with
State law, and that do not exceed the Act's contribution limits or come
from prohibited sources under the Act.
Sec. 300.63 Exception for State party candidates (2 U.S.C.
441i(e)(2)).
Section 300.62 shall not apply to a Federal candidate or individual
holding Federal office who is a candidate for State or local office, if
the solicitation, receipt or spending of funds is permitted under State
law; and refers only to that State or local candidate, to any other
candidate for that same State or local office, or both. If an
individual is simultaneously running for both Federal and State or
local office, the individual must raise, accept, and spend only Federal
funds for the Federal election.
Sec. 300.64 Exemption for attending, speaking, or appearing as a
featured guest at fundraising events (2 U.S.C. 441i(e)(3)).
Notwithstanding the provisions of 11 CFR 100.24, 300.61 and 300.62,
a Federal candidate or individual holding Federal office may attend,
speak, or be a featured guest at a fundraising event for a State,
district, or local committee of a political party, including but not
limited to a fundraising event at which Levin funds are raised, or at
which non-Federal funds are raised. In light of the foregoing:
(a) State, district, or local committees of a political party may
advertise, announce or otherwise publicize that a Federal candidate or
individual holding Federal office will attend, speak, or be a featured
guest at a fundraising event, including, but not limited to,
publicizing such appearance in pre-event invitation materials and in
other party committee communications; and
(b) Candidates and individuals holding Federal office may speak at
such events without restriction or regulation.
Sec. 300.65 Exceptions for certain tax-exempt organizations (2 U.S.C.
441i(e)(1) and (4)).
A Federal candidate, an individual holding Federal office, and an
individual agent acting on behalf of either may make the following
solicitations of funds on behalf of any organization described in 26
U.S.C. 501(c) and exempt from taxation under 26 U.S.C. 501(a), or an
organization that has submitted an application for determination of
tax-exempt status under 26 U.S.C. 501(c):
(a) General solicitations. A Federal candidate, an individual
holding Federal office or an individual agent acting on behalf of
either, may make a general solicitation of funds, without regard to
source or amount limitation, if:
(1) The organization does not engage in activities in connection
with an election, including any activity described in paragraph (c) of
this section; or
(2)(i) The organization conducts activities in connection with an
election, but the organization's principal purpose is not to conduct
election activities or any activity described in paragraph (c) of this
section; and
(ii) The solicitation is not to obtain funds for activities in
connection with an election or any activity described in paragraph (c)
of this section.
(b) Specific solicitations. A Federal candidate, an individual
holding Federal office, or an individual agent acting on behalf of
either, may make a solicitation explicitly to obtain funds for any
activity described in paragraph (c)
[[Page 49132]]
of this section or for an organization whose principal purpose is to
conduct that activity, if:
(1) The solicitation is made only to individuals; and
(2) The amount solicited from any individual does not exceed
$20,000 during any calendar year.
(c) Voter registration, voter identification, get-out-the-vote
activity and generic campaign activity. This section applies to only
the following types of Federal election activity:
(1) Voter registration activity, as described in 11 CFR
100.24(a)(2), during the period that begins on the date that is 120
days before the date a regularly scheduled Federal election is held and
ends on the date of the election; or
(2) The following activities conducted in connection with an
election in which one or more Federal candidates appear on the ballot
(see 11 CFR 100.24(a)(1)), regardless of whether one or more State
candidates also appears on the ballot:
(i) Voter identification as described in 11 CFR 100.24(a)(4);
(ii) Get-out-the-vote activity as described in 11 CFR 100.24(a)(3);
or
(iii) Generic campaign activity as defined in 11 CFR 100.25.
(d) Prohibited solicitations. A Federal candidate, an individual
holding Federal office, and an individual who is an agent acting on
behalf of either, must not make any solicitation on behalf of any
organization described in 26 U.S.C. 501(c) and exempt from taxation
under 26 U.S.C. 501(a), or an organization that has submitted an
application for determination of tax-exempt status under 26 U.S.C.
501(c) for any election activity other than a Federal election activity
as described in paragraph (c) of this section.
(e) Safe Harbor. In determining whether a 501(c) organization is
one whose principal purpose is to conduct election activities,
including activity described in paragraph (c) of this section, a
Federal candidate, an individual holding Federal office, or an
individual agent acting on behalf of either may obtain and rely upon a
certification from the organization that satisfies the following
criteria:
(1) The certification is a signed written statement by an officer
or other authorized representative of the organization with knowledge
of the organization's activities;
(2) The certification states that the organization's principal
purpose is not to conduct election activities, including election
activities described in paragraphs (c) of this section.
(3) The certification states that the organization does not intend
to pay debts incurred from the making of expenditures or disbursements
in connection with an election for Federal office (including for
Federal election activity) in a prior election cycle.
(f) If a Federal candidate, an individual holding Federal office,
or an individual agent acting on behalf of either has actual knowledge
that the certification is false, the certification may not be relied
upon.
Subpart E--State and Local Candidates
Sec. 300.70 Scope (2 U.S.C. 441i(f)(1)).
This subpart applies to any candidate for State or local office,
individual holding State or local office, or an agent acting on behalf
of any such candidate or individual. For example, this subpart applies
to an individual holding Federal office who is a candidate for State or
local office. This subpart does not apply to an association or similar
group of candidates for State or local office or of individuals holding
State or local office.
Sec. 300.71 Federal funds required for certain public communications
(2 U.S.C. 441i(f)(1)).
No individual described in 11 CFR 300.70 shall spend any funds for
a public communication that refers to a clearly identified candidate
for Federal office (regardless of whether a candidate for State or
local office is also mentioned or identified), and that promotes or
supports any candidate for that Federal office, or attacks or opposes
any candidate for that Federal office (regardless of whether the
communication expressly advocates a vote for or against a candidate)
unless the funds consist of Federal funds that are subject to the
limitations, prohibitions, and reporting requirements of the Act. See
definition of public communication at 11 CFR 100.26
Sec. 300.72 Federal funds not required for certain communications (2
U.S.C. 441i(f)(2)).
The requirements of section 11 CFR 300.71 shall not apply if the
public communication is in connection with an election for State or
local office, and refers to one or more candidates for State or local
office or to a State or local officeholder but does not promote,
support, attack, or oppose any candidate for Federal office.
PART 9034--ENTITLEMENTS
25. The authority citation for Part 9034 continues to read as
follows:
Authority: 26 U.S.C. 9034 and 9039(b).
26. Section 9034.8 is amended by adding introductory language to
paragraph (a) to read as follows:
Sec. 9034.8 Joint fundraising.
(a) General. Nothing in this section shall supersede 11 CFR part
300, which prohibits any person from soliciting, receiving, directing,
transferring, or spending any non-Federal funds, or from transferring
Federal funds for Federal election activities.
* * * * *
Dated: July 16, 2002.
Karl J. Sandstrom,
Vice-Chairman, Federal Election Commission.
[FR Doc. 02-18311 Filed 7-26-02; 8:45 am]
BILLING CODE 6715-01-P