[Federal Register Volume 67, Number 168 (Thursday, August 29, 2002)]
[Proposed Rules]
[Pages 55348-55357]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-21893]


 ========================================================================
 Proposed Rules
                                                 Federal Register
 ________________________________________________________________________
 
 This section of the FEDERAL REGISTER contains notices to the public of 
 the proposed issuance of rules and regulations. The purpose of these 
 notices is to give interested persons an opportunity to participate in 
 the rule making prior to the adoption of the final rules.
 
 ========================================================================
 

  Federal Register / Vol. 67, No. 168 / Thursday, August 29, 2002 / 
Proposed Rules  

[[Page 55348]]



FEDERAL ELECTION COMMISSION

11 CFR Parts 100, 110, 111, and 113

[Notice 2002-15]


Disclaimers, Fraudulent Solicitation, Civil Penalties, and 
Personal Use of Campaign Funds

AGENCY: Federal Election Commission.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Federal Election Commission seeks comments on proposed 
changes to its rules relating to disclaimers in political 
communications, fraudulent solicitations, civil penalties, and personal 
use of campaign funds under the Federal Election Campaign Act of 1971, 
as amended (``FECA'' or ``the Act''). The proposed rules implement the 
Bipartisan Campaign Reform Act of 2002 (``BCRA''), which specifies new 
requirements for disclaimers accompanying radio, television, and print 
campaign communications; expands the scope of FECA's fraudulent 
misrepresentation prohibition; increases FECA's civil penalties for 
violating the prohibition on contributions made in the name of another; 
and codifies the ``irrespective'' test for permissible use of campaign 
funds by candidates and Federal office holders. The Commission had 
planned to address BCRA-related rules for inaugural committees in this 
rulemaking; however, inaugural committees will now instead be addressed 
in a future rulemaking.
    Please note that the draft rules that follow do not represent a 
final decision by the Commission on the issues presented by this 
rulemaking. Further information is provided in the supplementary 
information that follows.

DATES: Comments must be received on or before September 27, 2002.

ADDRESSES: All comments should be addressed to Mr. John C. Vergelli, 
Acting Assistant General Counsel, and must be submitted in either 
electronic or written form. Electronic mail comments should be sent to 
[email protected] and must include the full name, electronic mail 
address, and postal service address of the commenter. Electronic mail 
comments that do not contain the full name, electronic mail address, 
and postal service address of the commenter will not be considered. 
Faxed comments should be sent to (202) 219-3923, with printed copy 
follow-up to ensure legibility. Written comments and printed copies of 
faxed comments should be sent to the Federal Election Commission, 999 E 
Street, NW., Washington, DC 20463. Commenters are strongly encouraged 
to submit comments electronically to ensure timely receipt and 
consideration. The Commission will make every effort to post public 
comments on its web site within ten business days of the close of the 
comment period.

FOR FURTHER INFORMATION CONTACT: Mr. John C. Vergelli, Acting Assistant 
General Counsel, or Attorneys, Ms. Ruth Heilizer (personal use), Ms. 
Dawn Odrowski (fraudulent solicitations), Mr. Mark Allen (civil 
penalties), Mr. Richard Ewell (disclaimers), 999 E Street, NW., 
Washington, DC 20463, (202) 694-1650 or (800) 424-9530.

SUPPLEMENTARY INFORMATION: The Bipartisan Campaign Reform Act of 2002 
(``BCRA''), Pub. L. 107-155, 116 Stat. 81 (March 27, 2002), contains 
extensive detailed amendments to the Federal Election Campaign Act of 
1971 (``FECA'' or ``the Act''), as amended, 2 U.S.C. 431 et seq. This 
Notice of Proposed Rulemaking (``NPRM'') is part of a continuing series 
of rulemakings the Commission is publishing over the next several 
months in order to meet the rulemaking deadlines set out in BCRA.
    This NPRM addresses changes to: disclaimer requirements for 
campaign communications (2 U.S.C. 441d); fraudulent misrepresentation 
for purposes of soliciting contributions or donations (2 U.S.C. 441h); 
civil penalties for a specific knowing and willful violation of FECA (2 
U.S.C. 437g); permissible uses of campaign funds by candidates and 
officeholders (2 U.S.C. 439a); and a technical amendment to the 
definition of ``Act'' to include BCRA amendments to FECA. The changes 
to the Act addressed in this NPRM are only a few of many changes made 
to the Act by BCRA. Other rulemakings have addressed or will address: 
(1) Non-Federal funds or ``soft money'' (promulgated on June 22, 2002, 
67 FR 49064 (July 29, 2002)); (2) reorganization of ``contribution'' 
and ``expenditure'' definitions (promulgated on August 5, 2002, 67 FR 
50582); (3) electioneering communications (Notice of Proposed 
Rulemaking, 67 FR 51131 (August 7, 2002)); (4) coordinated and 
independent expenditures; \1\ (5) new or amended contribution 
limitations and prohibitions; (6) 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; and (7) consolidated reporting. The consolidated reporting 
NPRM will contain the reporting rules proposed in each of the other 
NPRMs and will restructure 11 CFR part 104 to make the reporting rules 
more user-friendly. Section 402(c) of BCRA establishes a 270-day 
deadline for the Commission to promulgate the remaining rules. The 270-
day deadline is December 22, 2002.
---------------------------------------------------------------------------

    \1\ This NPRM will also address electioneering communications 
coordinated with candidate and political party committees.
---------------------------------------------------------------------------

Disclaimers

I. Introduction

    Under the Act, certain communications must include disclaimers 
identifying who paid for and, where applicable, who authorized the 
communication. In BCRA, Congress added new specificity to these 
requirements, expanded the disclaimer requirement to reach ``any 
communication'' made by political committees, and required that 
``electioneering communications'' include disclaimers. See 2 U.S.C. 
441d.
    The Commission proposes to implement these statutory changes by 
deleting pre-BCRA 11 CFR 110.11 in its entirety, and adopting a new 
section 110.11. As explained in detail below, proposed section 110.11 
would incorporate many substantive provisions from the pre-BCRA version 
of the section. By deleting pre-BCRA section 110.11 and adopting a new 
section 110.11, the Commission would be able to implement the changes 
necessitated by BCRA, and to reorganize 11 CFR 110.11 into a more 
easily understandable rule.

[[Page 55349]]

II. Applicability and Definitions

    Proposed paragraph (a)(1) would set out the applicability of the 
section, and would define certain terms used in the section. Proposed 
paragraph (a)(1) would explain that the disclaimer requirements of this 
section would apply only to communications through any broadcast, 
cable, or satellite transmission, newspaper, magazine, outdoor 
advertising facility, mailing, or any other type of general public 
political advertising. This wording would generally follow 2 U.S.C. 
441d(a), with one change from the statutory language. Whereas the 
statute refers only to ``any broadcasting station,'' the regulation 
would cover ``any broadcast, cable, or satellite transmission.'' This 
change is based on Congress' intent, apparent in 2 U.S.C. 441d(d), to 
regulate communications in the mass media of radio and television, and 
the Commission's judgment that it would be unsupportable to regulate a 
television communication that was broadcast, while not regulating the 
same communication merely because it was carried on cable or satellite.
    The Commission seeks comment on whether the term communication, as 
used in this section, should have the same scope as the term public 
communication. See 2 U.S.C. 431(22) and 11 CFR 100.26. The two terms 
differ in some respects. A ``public communication,'' as defined in 2 
U.S.C. 431(22), includes a telephone bank to the general public, 
whereas telephone banks are not mentioned in section 441d(a). A 
``public communication'' includes a mass mailing, which is defined as 
more than 500 pieces of substantially similar mail. 2 U.S.C. 431(22), 
(23). Section 441d(a) refers to a ``mailing,'' without any adjective. 
(See below for a discussion of the proposed definition of ``mailing'' 
for purposes of the disclaimer requirements.)
    The Commission notes, however, that the definitions of ``public 
communication'' (2 U.S.C. 431(22)) and ``communication'' (2 U.S.C. 
441d(a)) have a fundamental similarity in that both use virtually 
identical phrases, ``or any other type [form] of general public 
political advertising,'' to summarize the respective definitions. 
(Section 431(22) uses the word ``form,'' while section 441d(a) uses the 
word ``type;'' the Commission discerns no substantive differences 
arising from the choice of synonyms.) Also, conforming the definitions 
would appear to promote consistent use of terminology throughout the 
regulations.
    Proposed paragraphs (a)(1)(i) through (iv) would enumerate the 
particular types of such communications to which the disclaimer 
requirements would apply. Throughout proposed section 110.11, the word 
``type'' would be used, rather than ``form,'' as in the pre-BCRA 
version of the regulation. This change would have no substantive effect 
and would be done only to conform the regulation to the language of the 
statute. See 2 U.S.C. 441d.
    In BCRA, Congress provided that ``any communication'' for which a 
political committee makes a disbursement must include a disclaimer, 
expanding the scope of the disclaimer requirement for political 
committee communications. 2 U.S.C. 441d(a). Proposed paragraph 
(a)(1)(i) would read, ``[a]ll such communications for which a political 
committee makes a disbursement,'' with the qualifier ``such'' intended 
to clarify that only communications by a political committee through 
one or more of the media enumerated in the first sentence of proposed 
paragraph (a)(1) must have a disclaimer.
    Proposed paragraph (a)(1)(ii) would require that ``[a]ll such 
communications by any person that expressly advocate the election or 
defeat of a clearly identified candidate'' must include a disclaimer. 2 
U.S.C. 441d(a). The proposed rule would not substantively change the 
disclaimer requirement for express advocacy communications from the 
pre-BCRA version of the regulation.
    Proposed paragraph (a)(1)(iii) would require ``[a]ll such 
communications by any person'' that solicit a contribution to include a 
disclaimer. 2 U.S.C. 441d(a). The proposed rule would not change the 
disclaimer requirement for solicitations from the pre-BCRA version of 
the rule.
    Congress amended 2 U.S.C. 441d(a) to require that ``electioneering 
communications'' include disclaimers. The Commission proposes new 
paragraph (a)(1)(iv), which would require that ``[a]ll electioneering 
communications'' include a disclaimer.
    Proposed paragraph (a)(2) would define two terms used in the 
section. In a separate rulemaking, the Commission has proposed a 
definition of the term ``electioneering communication,'' as that term 
is used in BCRA. Proposed 11 CFR 100.29(a), see ``Electioneering 
Communications,'' 67 FR 51131 (Aug. 7, 2002). Proposed paragraph 
(a)(2)(i) would state that electioneering communication has the same 
meaning as set forth at proposed 11 CFR 100.29.
    In BCRA, Congress amended 2 U.S.C. 441d(a)(1) by removing the 
adjective ``direct'' from the pre-BCRA term ``direct mailing.'' The 
Commission proposes to define mailing, for purposes of this section, by 
redesignating the definition of direct mailing in pre-BCRA 110.11(a)(3) 
to proposed paragraph (a)(2)(ii), deleting the adjective ``direct,'' 
and simplifying the syntax of the pre-BCRA definition. For purposes of 
the disclaimer requirements, mailing would mean more than 100 pieces of 
substantially similar mail. Thus, the definition of mailing, post-BCRA, 
would substantively correspond to the definition of direct mailing, 
pre-BCRA. Given that Congress defined ``mass mailing'' in BCRA as more 
than 500 pieces of mail, see 2 U.S.C. 431(23), and given that a 
``mailing'' is presumably less than a ``mass mailing,'' the continued 
use of a threshold of 100 pieces of mail, which is, of course, fewer 
than 500 pieces, seems appropriately matched to the statutory language.

III. General Content Requirements

    Proposed paragraph (b) would set out the general content 
requirements for disclaimers, depending on who paid for the 
communication and, where applicable, who authorized the communication. 
Pre-BCRA paragraphs (a)(1)(i) and (ii) of section 110.11, which apply 
to communications authorized and paid for by a candidate and 
communications authorized by a candidate but paid for by another 
person, respectively, would be redesignated as proposed paragraphs 
(b)(1) and (2), respectively, without substantive revision.
    Proposed paragraph (b)(3) would apply to a communication, including 
any solicitation, that is not paid for or authorized by a candidate. 
The provisions of pre-BCRA 11 CFR 110.11(a)(1)(iii) would be replaced 
with proposed paragraph (b)(3), with one substantive change. In BCRA, 
Congress provided that a covered communication not authorized by a 
candidate, his or her authorized committees or agents must have a 
disclaimer that includes the ``permanent street address, telephone 
number, or World Wide Web address'' of the person who paid for the 
communication. 2 U.S.C. 441d(a)(3). Similar language would be added in 
proposed paragraph (b)(3).
    The Commission proposes not to continue pre-BCRA 11 CFR 
110.11(a)(1)(iv) in proposed section 110.11. This paragraph, pre-BCRA, 
applies to ``solicitations directed to the general public on behalf of 
a political committee which is not an authorized committee of a 
candidate.'' Pre-BCRA paragraph (a)(1)(iv) thus appears to be redundant 
with proposed paragraph (b)(3), see above, which would apply to 
communications, including solicitations, not authorized by a

[[Page 55350]]

candidate. Given this apparent redundancy, the pre-BCRA provision would 
not be included in the proposed section.

IV. Disclaimer Specifications

A. Specifications for All Disclaimers

    In BCRA, Congress created a number of specific requirements for 
disclaimers to be included in communications covered by the statute. 
These statutory requirements vary, depending on whether the 
communication was printed or broadcast through radio or television, and 
on whether a candidate or another person paid for the communication. 2 
U.S.C. 441d(c), (d). Proposed paragraph (c) would combine the 
disclaimer requirements in pre-BCRA 11 CFR 110.11(a)(5) with the new 
requirements Congress added in BCRA.
    Proposed paragraph (c)(1) would set forth a general, ``clear and 
conspicuous'' requirement applicable to all disclaimers, regardless of 
the medium in which the communication is transmitted. Proposed 
paragraph (c)(1) would be a slightly revised version of the ``clear and 
conspicuous'' requirement in pre-BCRA 11 CFR 110.11(a)(5). The final 
sentence of proposed paragraph (c)(1) would provide that a disclaimer 
is not clear and conspicuous if it is difficult to read or hear, or if 
its placement is easily overlooked. This would modify the corresponding 
pre-BCRA provision, which was focused on print communications only, by 
generalizing it to apply to radio and television communications, as 
well. The Commission seeks comment on this proposed paragraph.

B. Specific Requirements for Printed Communications

    Several of the specific disclaimer requirements added by BCRA apply 
only to printed communications. 2 U.S.C. 441d(c)(1). Proposed paragraph 
(c)(2) would implement the new statutory specifications, and would 
incorporate three of the print-specific provisions of pre-BCRA section 
110.11.
    Given the specificity of the statutory requirements added by BCRA, 
proposed paragraphs (c)(2)(i), (ii), and (iii) would precisely track 2 
U.S.C. 441d(c)(1), (2), and (3), respectively. Proposed paragraph 
(c)(2)(i) would require that the disclaimer on printed communications 
be of sufficient type size to be clearly readable by the recipient. 2 
U.S.C. 441d(c)(1). The Commission seeks comment on whether the term, 
``sufficient type size,'' should be further addressed, either in a 
specific definition, or by providing a ``safe harbor'' for disclaimers 
of at least a specified size. For example, the disclaimer type size 
could be related, as a percentage or fraction, to the communication's 
core message text. If the core message text in the communication 
appears in an 18-point font, the regulation could require that the 
disclaimer text must appear in a type font, for example, at least two-
thirds the size of 18-point font, or 12-point font, or could deem it 
sufficient if it was of such size. Alternatively, the disclaimer type 
size could be related, as a percentage or fraction, to the largest type 
size that appears in the communication. For example, if the banner text 
or headline text on a newspaper advertisement is two inches tall by 
twelve inches wide, the disclaimer text must be 60% of the banner text 
or headline text, or 1.2 inches tall by 7.2 inches wide, or would be 
deemed sufficient if of at least that size. Or, alternatively, there 
could be a safe harbor for a disclaimer with a type size that is at 
least as large as the smallest type size in the communication. Or, 
there could be a safe harbor for a disclaimer with a type size that is 
at least as large as the smallest type size in the body of the text of 
the message.
    Proposed paragraph (c)(2)(ii) would specify that the disclaimer 
included in printed communications must be contained within a printed 
box set apart from the other contents of the communication. 2 U.S.C. 
441d(c)(2). Proposed paragraph (c)(2)(iii) would specify that the text 
of the disclaimer must be printed with a reasonable degree of color 
contrast between the background and the printed statement. 2 U.S.C. 
441d(c)(3). The Commission seeks comment on whether ``reasonable degree 
of color contrast'' should be further defined, and specifically whether 
the color contrast requirement should be related to the color contrast 
of the core message text.
    Proposed paragraphs (c)(2)(iv) and (v) would incorporate pre-BCRA 
provisions specific to print communications. Proposed paragraph 
(c)(2)(iv), to which the provisions of pre-BCRA paragraph (a)(5)(i) 
would be redesignated without substantive revision, would state that a 
disclaimer need not appear on the front cover of a communication, 
except for communications that only contain a front face, such as 
billboards. Proposed paragraph (c)(2)(v), to which the provisions of 
pre-BCRA paragraph (a)(5)(ii) would be redesignated without substantive 
change, would state that a communication that would require a 
disclaimer if distributed separately, and that is included in a package 
of materials, must contain the required disclaimer.

C. Specific Requirements for Radio and Television Communications That 
are Authorized by Candidates

    In BCRA, Congress added new requirements for disclaimers in radio 
and television communications paid for by candidates or persons 
authorized by candidates. 2 U.S.C. 441d(d)(1). Proposed paragraph 
(c)(3) would implement these specific statutory requirements.
    Proposed paragraph (c)(3)(i) would require that a communication 
that is paid for or authorized by a candidate and transmitted through 
radio must include an audio statement spoken by the candidate himself 
or herself. 2 U.S.C. 441d(d)(1)(A). The statement would have to 
identify the candidate, and state that the candidate has approved the 
communication. Id.
    Proposed paragraph (c)(3)(ii) would require that a communication 
that is paid for or authorized by a candidate and transmitted through 
television have an oral disclaimer spoken by the candidate himself or 
herself. 2 U.S.C. 441d(d)(1)(B). The provision would require the 
candidate to identify himself or herself, and state that he or she has 
approved the communication. In addition, proposed paragraph (c)(3)(ii) 
would require that a full-screen view or a picture of the candidate 
appear while the statement is conveyed. The proposed paragraph would 
also require the statement to appear in writing at the conclusion of 
the communication in a clearly readable manner, with a reasonable 
degree of color contrast between the statement and the background for a 
period of at least four (4) seconds. See 2 U.S.C. 441d(d)(2)(B)(ii).
    The pre-BCRA regulations provide that a written disclaimer 
appearing on the screen of a television communication ``shall be 
considered clear and conspicuous if [it] appear[s] in letters equal to 
or greater than four (4) percent of the vertical picture height for not 
less than four (4) seconds.'' 11 CFR 110.11(a)(5)(iii). The proposed 
regulations would not continue this ``safe harbor'' provision because 
Congress has added specific statutory requirements that render it 
incomplete. Specifically, the statute now requires that the written 
disclaimer in television communications appear ``with a reasonable 
degree of color contrast between the background and written 
statement.'' 2 U.S.C. 441d(d)(1)(B); proposed 11 CFR 110.11(c)(3)(ii), 
above. Neither the statute nor these proposed regulations define 
``reasonable degree of

[[Page 55351]]

color contrast'' in the same manner that pre-BCRA paragraph (a)(5)(iii) 
defines the required vertical height of the written disclaimer. To 
continue the ``safe harbor'' approach of pre-BCRA paragraph 
(a)(5)(iii), the regulations would have to describe ``reasonable degree 
of color contrast'' in the same empirical manner. The Commission notes 
that this may be possible; for example, the regulation might be able to 
employ the standard ``color spaces'' used by professional printers and 
graphic artists (e.g., CMYK) to describe color contrast empirically. 
The disadvantage of this approach would be that it might add 
significant complexity to the regulation. The Commission seeks comment 
on whether a ``safe harbor'' approach to color contrast should be 
pursued, and, if so, how to define it.
    Proposed paragraph (c)(3)(iii) would set out two examples of spoken 
disclaimers that, if used by a candidate, would satisfy the 
requirements of proposed paragraphs (c)(3)(i) and (ii). The proposed 
examples would not be mandatory and would not be an exhaustive list of 
acceptable disclaimers. Proposed paragraph (c)(3)(iii) would be 
intended to provide a clear ``safe harbor'' for candidates attempting 
to comply with the regulation. The Commission seeks comment on the use 
of these or other examples.

D. Specific Requirements for Radio and Television Communications Paid 
for by Other Persons and Not Authorized by Candidates

    Congress set forth a scripted audio statement required for 
disclaimers in communications transmitted through radio or television 
and paid for by persons other than candidates or persons authorized by 
candidates. 2 U.S.C. 441d(d)(2). The Commission proposes new paragraph 
(c)(4), which would, tracking the statute, require the name of the 
political committee or other person responsible for the communication 
and any connected organization to be included in the communication. 
``Connected organization'' is defined in 11 CFR 100.6. The scripted 
statement would be: ``XXX is responsible for the content of this 
advertising.'' 2 U.S.C. 441d(d)(2). Furthermore, in the case of a 
television transmission the proposed rule would require that the 
statement be conveyed by a full-screen view of a representative of the 
political committee making the statement, or in a voice-over by such 
representative. The Commission seeks comment on whether the regulation 
should specify who may represent the payor for this purpose. The 
regulation could, for example, require that the representative be an 
officer or the treasurer, or it could allow a paid spokesperson, such 
as a celebrity or actor. In the case of a television transmission, the 
disclaimer statement would also have to appear in writing at the end of 
the communication in a clearly readable manner with a reasonable degree 
of color contrast between the background and the printed statement for 
a period of at least four (4) seconds. 2 U.S.C. 441d(d)(2).

V. Coordinated Party Expenditures and Independent Expenditures by 
Political Party Committees

    Proposed paragraph (d) of section 110.11 would cover disclaimers 
for communications that constitute coordinated party expenditures and 
independent expenditures by political party committees. The relevant 
pre-BCRA provisions of 11 CFR 110.11(a)(2) would be redesignated as 
proposed paragraph (d)(1), without substantive change. There would be a 
minor grammatical change.
    Proposed paragraph (d)(2) would cover communications that 
constitute independent expenditures by political party committees. See 
Colorado Republican Federal Campaign Committee v. FEC, 518 U.S. 604 
(1996). It would clarify that the disclaimer provisions apply to such 
communications, and that a ``non-authorization notice'' would be 
required, as with any other independent expenditure communication. See 
pre-BCRA 11 CFR 109.3.

VI. Exempt Activities

    The Commission proposes to redesignate the provisions of pre-BCRA 
11 CFR 110.11(a)(4), pertaining to communications that qualify as 
``exempt activities,'' as proposed paragraph (e) of section 110.11. 
Proposed paragraph (e) would include two minor revisions to its pre-
BCRA predecessor. In the first sentence, the word ``expenditure'' would 
be replaced with the word ``communication'' to conform this proposed 
paragraph to the wording of proposed paragraph (a). This proposed 
revision would not constitute a substantive change. Also, there would 
be a non-substantive revision to the cross-reference to the definitions 
of ``exempt activities,'' which would be updated to reflect changes to 
part 100 made in a recent reorganization rulemaking. ``Reorganization 
of Regulations on `Contribution' and `Expenditure,' '' 67 FR 50582 
(Aug. 5, 2002). Overall, the relocation and the minor revisions would 
not be intended to change the substantive operation of these 
provisions.

VII. Exceptions

    Exceptions to the disclaimer requirements would be set out in 
proposed paragraph (f). The exceptions in pre-BCRA paragraphs 
(a)(6)(i), (ii), and (iii) would be redesignated as proposed paragraphs 
(f)(1)(i), (ii), and (iii), respectively, without any other revision.
    The Commission proposes incorporating the provisions of pre-BCRA 11 
CFR 110.11(a)(7), regarding certain communications by a separate 
segregated fund or its connected organization, in proposed paragraph 
(f)(2), because this provision is essentially an exception. In 
addition, in proposed paragraph (f)(2), the word ``form'' would be 
changed to ``type.'' This change would have no substantive effect, and 
would be done only to conform to the language of the statute. See 2 
U.S.C. 441d(a).

VIII. Comparable Rate for Campaign Purposes

    Proposed paragraph (g) of section 110.11 would continue the pre-
BCRA rule pertaining to comparable rates for print advertising. That 
is, the contents of pre-BCRA 11 CFR 110.11(b) would be redesignated as 
proposed paragraph (g). Other than the addition of a heading for the 
paragraph, there would be no revisions to the pre-BCRA rule. Proposed 
paragraph (g) would, as does its pre-BCRA predecessor, track 2 U.S.C. 
441d(b).

Prohibitions on Fraudulent Solicitations

    In BCRA, Congress adds a subsection to the fraudulent 
misrepresentation statute at 2 U.S.C. 441h. The new provision, 2 U.S.C. 
441h(b), prohibits a person from fraudulently misrepresenting that the 
person is acting for or on behalf of a Federal candidate or political 
party, or an employee or agent of either, for the purpose of soliciting 
contributions or donations. It also prohibits persons from 
participating in, or conspiring to participate in, plans, schemes, or 
designs to make such fraudulent misrepresentations in soliciting 
contributions and donations. BCRA also non-substantively amends the 
existing fraudulent misrepresentation statute by redesignating it as 
subsection (a) of 2 U.S.C. 441h. The Commission proposes to implement 
the new statutory provision, together with the pre-BCRA fraudulent 
misrepresentation regulation found at 11 CFR 110.9(b), by combining 
them in a new section 11 CFR 110.16.

[[Page 55352]]

    The pre-BCRA misrepresentation statute, now codified at 2 U.S.C. 
441h(a), is aimed at fraudulent misrepresentation of campaign 
authority. For additional background, see Legislative History of 
Federal Election Campaign Act Amendments of 1974 at 521. The statute 
prohibited a candidate, his or her employee or agent, or an 
organization under the candidate's control, from purporting to speak, 
write, or act for another candidate or party on a matter that damages 
the other candidate or party. Section 441h(a) encompasses, for example, 
a candidate who distributes letters containing statements damaging to 
an opponent and fraudulently attributes them to the opponent.
    Because the language and purpose of the pre-BCRA misrepresentation 
statute encompasses only misrepresentations by a candidate or the 
candidate's employee or agent, the Commission has historically been 
unable to take action in enforcement matters where persons unassociated 
with a candidate or candidate committee have solicited funds by 
purporting to act on behalf of a specific candidate or party. 
Candidates have complained that contributions which contributors 
believed were going to benefit the candidate were diverted to other 
purposes, harming both the candidate and contributor. Consequently, the 
Commission has frequently included in its annual legislative 
recommendations to Congress a recommendation that 2 U.S.C. 441h be 
amended to specifically prohibit any person from fraudulently 
misrepresenting a candidate or political party in solicitations. See 
Federal Election Commission Annual Reports for 2000 at 39, for 1999 at 
47-48, for 1998 at 52, and 1997 at 47. BCRA's prohibition on fraudulent 
solicitations of contributions and donations implements those 
legislative recommendations. 2 U.S.C. 441h(b); see 148 Cong. Rec. S3122 
(daily ed. March 29, 2001) (statement of Sen. Nelson).
    Proposed 11 CFR 110.16(a) would amend the pre-BCRA fraudulent 
misrepresentation regulation at 11 CFR 110.9(b) by adding the title 
``in general,'' following BCRA, which added a similar heading to 
section (a) of 2 U.S.C. 441h. Technical amendments would also make the 
language of proposed paragraph (a) gender-neutral. Finally, proposed 
paragraph (a)(2) would be amended to include the word ``schemes'' to 
more closely track the statutory language.
    Proposed 11 CFR 110.16(b) would track the statutory language in 
BCRA. Proposed paragraph (b)(1) would prohibit a person from 
fraudulently misrepresenting that the person speaks, writes, or 
otherwise acts for or on behalf of a candidate, political party, or an 
employee or agent of either, in soliciting contributions or donations. 
Proposed paragraph (b)(2) would prohibit a person from willfully and 
knowingly participating in, or conspiring to participate in, any plan, 
scheme, or design to violate proposed paragraph (b)(1).
    The Commission emphasizes that section 441h and proposed 11 CFR 
110.16 are different from common law fraud. First, section 441h is part 
of a Federal statute designed to address campaign finance abuses, not 
common law fraud. Congress enacted FECA to protect the public interest. 
Unlike common law fraudulent misrepresentation, section 441h gives rise 
to no tort action; it is part of an enforcement scheme enacted to 
promote the integrity of the financing of Federal elections, and to 
prevent corruption or the appearance of corruption. See generally 
Buckley v. Valeo, 424 U.S. 1, 26-27 (1976).
    Thus, the Supreme Court has recognized that statutes that address 
schemes to defraud do not require proof of the common law requirements 
of ``justifiable reliance'' and ``damages.'' Neder v. United States, 
527 U.S. 1, 24-25 (1999) (``The common law requirements of `justifiable 
reliance' and `damages,' for example, plainly have no place in federal 
fraud statutes.''* * * ``By prohibiting the `scheme to defraud' rather 
than the completed fraud, the elements of reliance and damage would 
clearly be inconsistent with the statutes Congress enacted''), citing 
United States v. Stewart, 872 F.2d 957, 960 (10th Cir. 1989).
    Second, section 441h(a) states that the fraudulent 
misrepresentation must be ``on a matter which is damaging to [the 
misrepresented] candidate or political party.'' If this includes proof 
of damage as required by common law fraudulent misrepresentation, then 
the phrase ``on a matter damaging'' is superfluous. Courts construe 
statutes so ``as to avoid rendering superfluous any parts thereof.'' 
Astoria Fed. Sav. & Loan Ass'n v. Solimino, 501 U.S. 104 (1991); see 
also Federal Election Commission v. Arlen Specter `96, 150 F. Supp.2d 
797, 806 (2001), quoting Bennett v. Spear, 520 U.S. 154, 173 (1997). 
``Damaging'' means ``causing or able to cause damage.'' Webster's 
Collegiate Dictionary (10th ed. 1993).

Increase in Civil Penalties

    The Commission seeks comments on proposed changes to its rules on 
civil penalties under FECA. The proposed rules are based on BCRA, which 
increases the civil penalties that may be negotiated by the Commission 
or imposed by a court for violations of the Act.
    The Act imposes civil penalties on anyone violating any portion of 
the Act or certain related portions of the Federal tax code. The Act's 
civil penalties, found at 2 U.S.C. 437g(a)(5), (6), and (12), are 
organized into two tiers of monetary penalties; one tier of penalties 
for violations of the Act, and a second tier of penalties for ``knowing 
and willful'' violations of the Act.
    BCRA amends sections 437g(a)(5)(B) and 437(g)(a)(6)(C) by 
separating out and increasing the penalties for a subset of knowing and 
willful violations, namely, contributions that are made in the name of 
another. See 2 U.S.C. 441f. Such contributions are often made through a 
conduit to circumvent the contribution limits. The amendment to 2 
U.S.C. 437g(a)(5)(B) increases the civil penalties for such violations 
to ``not less than 300 percent of the amount involved in the 
violation'' and ``not more than the greater of $50,000 or 1,000 percent 
of the amount involved in the violation.''
    Section 437g(a)(6)(C) of FECA, authorizing a court to impose civil 
penalties on a person who knowingly and willfully violates the Act, has 
been similarly amended by BCRA. Accordingly, the Commission is 
proposing to amend current 11 CFR 111.24 to implement these amendments 
to FECA.
    The proposed rule would divide current 11 CFR 111.24(a) into 
proposed paragraphs (a)(1), and (a)(2)(i) and (ii). Proposed paragraph 
(a)(1) would contain the unchanged language of the current regulation 
for civil penalties for violations of the Act or the relevant tax code 
provisions. Proposed paragraph (a)(2) would address ``knowing and 
willful'' violations and would be further divided into proposed 
paragraphs (a)(2)(i) and (ii). Proposed paragraph (a)(2)(i) would 
contain the unchanged language of the current regulation for civil 
penalties for knowing and willful violations of the Act or relevant tax 
code provisions. Proposed 11 CFR 111.24(a)(2)(ii) would contain 
proposed language implementing BCRA's amendments to FECA increasing 
civil penalties for knowing and willing violations involving 
contributions made in the name of another. The proposed language would 
explain that in the case of a knowing and willful violation of the 
prohibition on contributions in the name of another, the civil penalty 
would not be less than an amount that

[[Page 55353]]

is equal to 300 percent of the amount of the violation, and the civil 
penalty would not be more than $50,000 or an amount equal to 1,000 
percent of the amount of the violation, whichever is greater.

Personal Use

    In BCRA, Congress deleted 2 U.S.C. 439a in its entirety, and 
replaced it with a new section 439a. One of BCRA's principal sponsors 
explained:

    [BCRA] amends 2 U.S.C. section 439a to specify which candidate 
expenditures from campaign funds would be considered an unlawful 
conversion of a contribution or donation to personal use. The 
language continues to allow candidates to use excess campaign funds 
for transfers to a national, State or local committee of a political 
party. It is the intent of the authors that--as is the case under 
current law--such transfers be permitted without limitation. 
Furthermore, while the provision is intended to codify the FEC's 
current regulations on the use of campaign funds for personal 
expenses, we do not intend to codify any advisory opinion or other 
current interpretation of those regulations.

148 Cong. Rec. S2143 (daily ed. March 20, 2002) (statement of Sen. 
Feingold).

    The Commission notes that certain language from the pre-BCRA 
version of section 439a has not been included in the post-BCRA version 
of section 439a. First, the phrase ``in excess of any amount necessary 
to defray'' campaign expenses has been deleted from the statute. The 
Commission's personal use regulations are framed in terms of ``excess 
campaign funds.'' See 11 CFR 113.1(e) (``Excess campaign funds means 
amounts received by a candidate as contributions which he or she 
determines are in excess of any amount necessary to defray his or her 
campaign expenditures''); 11 CFR 113.2 (excess campaign funds and funds 
donated may be used to defray any ordinary and necessary expenses 
incurred in connection with the recipient's duties as a holder of 
Federal office). The Commission proposes that regulations 11 CFR 
113.1(e) and 11 CFR 113.2 remain unchanged because it does not appear 
that Congress intended to eliminate the discretion of candidates and 
Federal officeholders to use these excess campaign funds ``for ordinary 
and necessary expenses incurred in connection with duties of the 
individual as a holder of Federal office.'' 2 U.S.C. 439a(a)(2).\2\
---------------------------------------------------------------------------

    \2\ In its 1995 Explanation and Justification of its rules 
concerning personal uses of campaign funds, the Commission stated 
that it ``reaffirm[ed] its long-standing opinion that candidates 
have wide discretion over the use of campaign funds.'' 60 Fed. 
Register 7867 (February 9, 1995).
---------------------------------------------------------------------------

    Also, the post-BCRA version of 2 U.S.C. 439a does not include the 
language ``any other lawful purpose'' in the statutory enumeration of 
permissible uses of excess campaign funds, as did the pre-BCRA version 
of the statute. 11 CFR 113.2(d) provides that ``excess campaign funds'' 
may be ``used for any other lawful purpose,'' in addition to specific 
uses permitted in paragraphs (a), (b), and (c) of that section. The 
Commission proposes that 11 CFR 113.2(d) remain intact, as it believes 
that Congress's continuing intent is to allow only lawful uses of 
campaign funds and donations. The Commission seeks comment on these 
proposals.
    The pre-BCRA version of 2 U.S.C. 439a contained a general 
prohibition against the personal use of campaign funds, but did not 
specify any particular impermissible uses. The Commission's pre-BCRA 
personal use regulations define certain uses of campaign funds or 
donations as per se prohibited personal uses. 11 CFR 113.1(g)(1)(i). In 
BCRA, Congress amended 2 U.S.C. 439a to include a non-exhaustive list 
of prohibited personal uses of campaign funds. 2 U.S.C. 439a(b). As one 
of BCRA's principal sponsors explained, new section 439a ``[c]odifies 
FEC regulations relating to the personal use of campaign funds by 
candidates. Contributions will be considered converted to personal use 
if they are used for an expense that would exist irrespective of the 
campaign or duties as an officeholder, including home mortgage or rent, 
clothing, vacation expenses, tuition payments, non-campaign-related 
automobile expenses, and a variety of other items.'' 148 Cong. Rec. 
S1993-1994 (daily ed. March 18, 2002) (statement of Sen. Feingold).
    The Commission notes that several of new 2 U.S.C. 439a's personal 
use provisions are summarized versions of pre-BCRA personal use 
regulations. For example, the statute now prohibits the use of campaign 
contributions and donations for ``a clothing purchase'' (2 U.S.C. 
439a(b)(2)(B)); whereas the corresponding regulation at 11 CFR 
113.1(g)(1)(i)(C) prohibits the personal use of ``[c]lothing, other 
than items of de minimis value that are used in the campaign, such as 
campaign ``T-shirts'' or caps with campaign slogans.'' Also, new 
section 439a does not incorporate the current 11 CFR 113.1(g)(1)(i) per 
se personal use rules in their entirety. Compare 2 U.S.C. 439a(b)(A) 
through (I) with 11 CFR 113.1(g)(1)(i). Nonetheless, the Commission 
interprets new subsection (b) of 2 U.S.C. 439a to provide an even 
firmer statutory foundation for the per se rules at 11 CFR 
113.1(g)(1)(i) than the pre-BCRA version of section 439a.
    The Commission proposes three changes to its per se rules. Pre-
BCRA, the Commission considered on a case-by-case basis whether excess 
campaign funds may be used to pay for vehicle expenses. 11 CFR 
113.1(g)(1)(ii)(D). New section 439a, however, includes ``a non-
campaign-related automobile expense'' in its list of prohibited uses of 
excess campaign funds. 2 U.S.C. 439a(b)(2)(C). Therefore, the 
Commission proposes to remove the ``vehicle expenses'' regulation from 
the ``case by case'' category of rules and add it to the ``per se 
prohibited'' category of rules. The new per se ``vehicle expenses'' 
rule would be proposed 11 CFR 113.1(g)(1)(i)(J).
    In addition, new section 439a includes ``a vacation or other non-
campaign-related trip'' in the list of prohibited uses of excess 
campaign funds. 2 U.S.C. 439a(b)(2)(E). The Commission accordingly 
proposes to include an implementing ``vacations and other non-campaign-
related trips'' provision as 11 CFR 113.1(g)(1)(i)(K). The Commission 
also proposes to modify current 11 CFR 113.1g(1)(ii)(C), which applies 
to ``travel expenses'' and is located in the ``case by case'' category 
of rules, to indicate that ``vacations and other non-campaign-related 
trips'' are per se prohibited.
    Proposed 11 CFR 113.1(g)(1)(i)(K) tracks the statutory language of 
new 2 U.S.C. 439a. However, candidates who are Federal officeholders 
may take trips that are not campaign-related, such as factfinding 
trips, which may nonetheless be part of their duties as Federal 
officeholders. The Commission seeks comment on whether Congress 
intended to ban completely the use of campaign funds for such trips. 
Compare 11 CFR 113.1(g)(5), which states in part that the use of 
campaign funds for ``political or officially connected expenses * * * 
[are] not personal use to the extent that the expense is * * * an 
ordinary and necessary expense incurred in connection with the duties 
of a holder of Federal office,'' with 2 U.S.C. 439a(b)(2)(E). 
Additionally, the Commission seeks comment on whether non-vacation, 
non-campaign-related travel should be evaluated on a case-by-case 
basis, under proposed 11 CFR 113.1(g)(1)(ii)(C).
    The Commission proposes one other change to the per se rules. 
Proposed 11 CFR 113.1(g)(1)(i)(I) would prohibit candidates from using 
campaign funds to pay themselves salaries or otherwise compensate 
themselves in any way for income lost as a result of campaigning for 
Federal office. Neither pre-BCRA

[[Page 55354]]

section 439a nor new section 439a directly address this issue, but the 
Commission believes that the proposed addition of candidate salaries to 
the list of impermissible personal uses is consistent with the non-
exhaustive list Congress included in amended section 439a(b)(2). The 
Commission notes that it failed to reach a four-vote majority on this 
issue when it considered the personal use rules in 1995 (60 FR 7867 
(February 9, 1995)), but it has since addressed this issue in Advisory 
Opinion 1999-1. Comments are sought as to whether this interpretation 
is appropriate.
    The Commission notes that Congress codified the regulatory 
``irrespective'' test. 2 U.S.C. 439a(b)(2); see 11 CFR 113.1(g). The 
Commission originally formulated this test, which states that 
``personal use'' means the use of excess campaign funds for any expense 
``that would exist irrespective of the candidate's campaign or duties 
as a Federal officeholder,'' because it could not anticipate and 
promulgate regulations covering all possible examples of prohibited 
personal use of excess campaign funds. Explanation and Justification 
for 11 CFR 113.1, 60 FR 7867 (February 9, 1995). Therefore, for uses 
not specifically identified as impermissible, the Commission stated 
that it would determine whether uses were for ``expenses that would 
exist irrespective of the candidate's campaign or duties as a Federal 
officeholder.'' Id. BCRA's description of the ``irrespective'' test is 
virtually identical to the Commission's description. Compare 2 U.S.C. 
439a(b) with 11 CFR 113.1(g). The Commission will, therefore, continue, 
post-BCRA, to apply the ``irrespective'' test as before.
    The Commission proposes a recordkeeping requirement for campaign 
funds used for expenses that may be partially personal in nature, 
including vehicle expenses, as set forth in proposed 11 CFR 
113.1(g)(1)(i)(J), and legal expenses, meal expenses, travel expenses, 
and charitable expenses, as listed in 11 CFR 113.1(g)(1)(ii) and 
(g)(2). See proposed 11 CFR 113.1(g)(8). This proposed regulation is 
based on the analysis in Advisory Opinion 2001-3, which advised that a 
member of Congress who proposed to pay for a vehicle with campaign 
funds and use it for a combination of campaign, official, and personal 
uses, should keep a log detailing each use of the car. In such cases of 
``mixed use,'' the proposed rule would require that a candidate or 
Federal officeholder keep a log or other record to document the dates 
and expenses related to personal use. The log or other record would 
have to be updated whenever an expense is incurred, either for campaign 
or officeholder uses or for personal uses. It would have to be 
maintained and preserved for three years and signed by the treasurer of 
the candidate's or Federal officeholder's committee.

Technical Amendment to the Definition of ``Act''

    Current 11 CFR 100.18 defines ``Act'' to mean the Federal Election 
Campaign Act as amended by the 1974, 1976, and 1980 amendments. The 
proposed rules would amend this definition to include the amendments to 
FECA within the Bipartisan Campaign Reform Act.

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 of this certification 
is that national, State, and local party committees of the two major 
political parties to which the proposed fraudulent solicitation, 
disclaimers, and civil penalties rules would apply are not small 
entities under 5 U.S.C. 601. In addition, the rules for personal use 
would only affect individuals, not entities, and the rules for the 
prohibition on fraudulent solicitation do not carry an economic impact. 
Furthermore, the small entities to which the rules would apply would 
not be unduly burdened by the proposed new requirements for disclaimers 
since the proposed requirements only add specificity to the current 
disclaimer requirements. The proposed increase in civil penalties would 
not unduly burden small entities since a small entity would pay a civil 
penalty only if the entity engaged in a specific knowing and willful 
violation of the Act.

List of Subjects

11 CFR Part 100

    Elections

11 CFR Part 110

    Campaign funds, and political committees and parties.

11 CFR Part 111

    Campaign funds, and political committee and parties.

11 CFR Part 113

    Campaign funds, and political candidates.
    For the reasons set out in the preamble, the Commission proposes to 
amend chapter I of title 11 of the Code of Federal Regulations as 
follows:

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

    1. The authority citation for part 100 would be revised to read as 
follows:

    Authority: 2 U.S.C. 431, 434, 438(a)(8).

    2. Section 100.18 would be revised to read as follows:


Sec. 100.18  Act (2 U.S.C. 431(19)).

    Act means the Federal Election Campaign Act of 1971 (Pub. L. 92-
225), as amended in 1974 (Pub. L. 93-443), 1976 (Pub. L. 94-283), 1980 
(Pub. L. 96-187), and 2002 (Bipartisan Campaign Reform Act of 2002, 
Pub. L. 107-155).

PART 110--CONTRIBUTION AND EXPENDITURE LIMITATIONS AND PROHIBITIONS

    3. The authority citation for part 110 would be revised to 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, and 441k.

    4. Section 110.11 would be revised to read as follows:


Sec. 110.11  Communications; advertising; disclaimers (2 U.S.C 441d).

    (a) Applicability and definitions.
    (1) Applicability. This section applies only to communications 
through any broadcast, cable, or satellite transmission, newspaper, 
magazine, outdoor advertising facility, mailing or any other type of 
general public political advertising. The following types of such 
communications must include disclaimers, as specified in this section:
    (i) All such communications for which a political committee makes a 
disbursement.
    (ii) All such communications by any person that expressly advocate 
the election or defeat of a clearly identified candidate.
    (iii) All such communications by any person that solicits any 
contribution.
    (iv) All electioneering communications by any person.
    (2) Definitions.
    (i) Electioneering communication has the same meaning as set forth 
at 11 CFR 100.29.
    (ii) As used in this section only, mailing means more than one 
hundred substantially similar pieces of mail.
    (b) General content requirements. A disclaimer required by 
paragraph (a) of this section must contain the following information:
    (1) If the communication, including any solicitation, is paid for 
and authorized by a candidate, an authorized committee of a candidate, 
or its agent, the disclaimer must clearly

[[Page 55355]]

state that the communication has been paid for by the authorized 
political committee;
    (2) If the communication, including any solicitation, is authorized 
by a candidate, an authorized committee of a candidate, or its agent, 
but paid for by any other person, the disclaimer must clearly state 
that the communication is paid for by such other person and is 
authorized by such candidate, authorized committee, or agent; or
    (3) If the communication, including any solicitation, is not 
authorized by a candidate, authorized committee of a candidate or its 
agents, the disclaimer must clearly state the full name and permanent 
street address, telephone number, or World Wide Web address of the 
person who paid for the communication, and that the communication is 
not authorized by any candidate or candidate's committee.
    (c) Disclaimer specifications.
    (1) Specifications for all disclaimers. A disclaimer required by 
paragraph (a) of this section must be presented in a clear and 
conspicuous manner, to give the reader, observer, or listener adequate 
notice of the identity of the person or political committee that paid 
for and, where required, that authorized the communication. A 
disclaimer is not clear and conspicuous if it is difficult to read or 
hear, or if the placement is easily overlooked.
    (2) Specific requirements for printed communications. In addition 
to the general requirement of paragraph (c)(1) of this section, a 
disclaimer required by paragraph (a) of this section that appears on 
any printed communication must comply with all of the following:
    (i) The disclaimer must be of sufficient type size to be clearly 
readable by the recipient of the communication.
    (ii) The disclaimer must be contained in a printed box set apart 
from the other contents of the communication.
    (iii) The disclaimer must be printed with a reasonable degree of 
color contrast between the background and the printed statement.
    (iv) The disclaimer need not appear on the front or cover page of 
the communication as long as it appears within the communication, 
except on communications, such as billboards, that contain only a front 
face.
    (v) A communication that would require a disclaimer if distributed 
separately, that is included in a package of materials, must contain 
the required disclaimer.
    (3) Specific requirements for radio and television communications 
authorized by candidates. In addition to the general requirements of 
paragraph (c)(1) of this section, a communication that is authorized or 
paid for by a candidate (see paragraph (b)(1)(i) or (b)(1)(ii) of this 
section) that is transmitted through radio or television must comply 
with the following:
    (i) A communication transmitted through radio must include an audio 
statement by the candidate that identifies the candidate and states 
that he or she has approved the communication; or
    (ii) A communication transmitted through television must include a 
statement that identifies the candidate and states that he or she has 
approved the communication. The statement shall be conveyed by an 
unobscured, full-screen view of the candidate making the statement, or 
the candidate in a voice-over, accompanied by a clearly identifiable 
photographic or similar image of the candidate. The statement shall 
also appear in writing at the end of the communication in a clearly 
readable manner with a reasonable degree of color contrast between the 
background and the disclaimer statement, for a period of at least four 
(4) seconds.
    (iii) The following are examples of acceptable disclaimers for a 
communication covered by paragraph (c)(3) of this section, but they are 
not the only allowable disclaimers.
    (A) ``I am [insert name of candidate], a candidate for [insert 
Federal office sought], and I authorized this advertisement.''
    (B) ``My name is [insert name of candidate]. I am running for 
[insert Federal office sought], and I authorized this message.''
    (4) Specific requirements for radio and television communications 
paid for by other persons and not authorized by a candidate. In 
addition to the general requirements of paragraph (c)(1) of this 
section, a communication not authorized by a candidate (see paragraphs 
(b)(1)(iii) or (b)(2) of this section) that is transmitted through 
radio or television must comply with the following:
    (i) A communication transmitted through radio or television must 
include the following audio statement, ``XXX is responsible for the 
content of this advertising,'' spoken clearly, with the blank to be 
filled in with the name of the political committee or other person 
paying for the communication, and the name of the connected 
organization, if any, of the payor; and
    (ii) A communication transmitted through television must include 
the audio statement required by paragraph (c)(4)(i) of this section. 
The statement must be conveyed by an unobscured full-screen view of a 
representative of the political committee or other person making the 
statement, or by a representative of such political committee or other 
person in voice-over. The disclaimer statement must appear in writing 
at the end of the communication in a clearly readable manner with a 
reasonable degree of color contrast between the background and the 
printed statement, for a period of at least four (4) seconds.
    (d) Coordinated party expenditures and independent expenditures by 
political party committees.
    (1) (i) For a communication paid for by a political party committee 
pursuant to 2 U.S.C. 441a(d), the disclaimer required by paragraph (a) 
of this section must identify the political party committee that makes 
the expenditure as the person who paid for the communication, 
regardless of whether the political party committee was acting in its 
own capacity or as the designated agent of another political party 
committee.
    (ii) A communication made by a political party committee pursuant 
to 2 U.S.C. 441a(d) prior to the date the party's candidate is 
nominated shall satisfy the requirements of this section if it clearly 
states who paid for the communication.
    (2) For a communication paid for by a political party committee 
that constitutes an independent expenditure under 11 CFR 100.16, the 
disclaimer required by this section must identify the political party 
committee that paid for the communication, and must state that the 
communication is not authorized by any candidate or candidate's 
committee.
    (e) Exempt activities. For purposes of paragraph (a) of this 
section only, the term communication includes a communication by a 
candidate or party committee that qualifies as an exempt activity under 
11 CFR 100.140, 100.147, 100.148, or 100.149. Such communications, 
unless excepted under paragraph (f)(1) of this section, must clearly 
state who paid for the communication, but do not have to include an 
authorization statement.
    (f) Exceptions.
    (1) The requirements of paragraphs (a) through (e) of this section 
do not apply to the following:
    (i) Bumper stickers, pins, buttons, pens, and similar small items 
upon which the disclaimer cannot be conveniently printed; or
    (ii) Skywriting, water towers, wearing apparel, or other means of 
displaying an advertisement of such a nature that the inclusion of a 
disclaimer would be impracticable; or

[[Page 55356]]

    (iii) Checks, receipts, and similar items of minimal value which 
are used for purely administrative purposes and do not contain a 
political message.
    (2) Whenever a separate segregated fund or its connected 
organization solicits contributions to the fund from those persons it 
may solicit under the applicable provisions of 11 CFR part 114, or 
makes a communication to those persons, such communication shall not be 
considered a type of general public political advertising and need not 
contain the disclaimer set forth in paragraphs (a) through (c) of this 
section.
    (g) Comparable rate for campaign purposes.
    (1) No person who sells space in a newspaper or magazine to a 
candidate, an authorized committee of a candidate, or an agent of the 
candidate, for use in connection with the candidate's campaign for 
nomination or for election, shall charge an amount for the space which 
exceeds the comparable rate for the space for non-campaign purposes.
    (2) For purposes of this section, comparable rate means the rate 
charged to a national or general rate advertiser, and shall include 
discount privileges usually and normally available to a national or 
general rate advertiser.
    5. Section 110.16 would be added to read as follows:


Sec. 110.16  Prohibitions on Fraudulent Misrepresentations.

    (a) In General. No person who is a candidate for Federal office or 
an employee or agent of such a candidate shall--
    (1) Fraudulently misrepresent the person or any committee or 
organization under the person's control as speaking or writing or 
otherwise acting for or on behalf of any other candidate or political 
party or employee or agent thereof in a matter which is damaging to 
such other candidate or political party or employee or agent thereof; 
or
    (2) Willfully and knowingly participate in or conspire to 
participate in any plan, scheme, or design to violate paragraph (a)(1) 
of this section.
    (b) Fraudulent Solicitation of Funds. No person shall--
    (1) Fraudulently misrepresent the person as speaking, writing, or 
otherwise acting for or on behalf of any candidate or political party 
or employee or agent thereof for the purpose of soliciting 
contributions or donations; or
    (2) Willfully and knowingly participate in or conspire to 
participate in any plan, scheme, or design to violate paragraph (b)(1) 
of this section.

PART 111--COMPLIANCE PROCEDURE (2 U.S.C. 437g, 437d(a)

    6. The authority citation for part 111 would continue to read as 
follows:

    Authority: 2 U.S.C. 437g, 437d(a), and 438(a)(8); 28 U.S.C. 2461 
nt.

    7. In Sec. 111.24, paragraph (a) would be revised to read as 
follows:


Sec. 111.24  Civil penalties (2 U.S.C. 437g(a)(5), (6), (12), 28 U.S.C. 
2461 nt.).

    (a) Except as provided in 11 CFR part 111, subpart B and in 
paragraph (b) of this section, a civil penalty negotiated by the 
Commission or imposed by a court for a violation of the Act or chapters 
95 or 96 of title 26 (26 U.S.C.) shall be as follows:
    (1) Except as provided in paragraph (a)(2) of this section, in the 
case of a violation of the Act or chapters 95 or 96 of title 26 (26 
U.S.C), the civil penalty shall not exceed the greater of $5,500 or an 
amount equal to any contribution or expenditure involved in the 
violation.
    (2) Knowing and willful violations.
    (i) In the case of a knowing and willful violation of the Act or 
chapters 95 or 96 of title 26 (26 U.S.C.), the civil penalty shall not 
exceed the greater of $11,000 or an amount equal to 200% of any 
contribution or expenditure involved in the violation.
    (ii) Notwithstanding paragraph (a)(2)(i) of this section, in the 
case of a knowing and willful violation of 2 U.S.C. 441f, the civil 
penalty shall not be less than 300% of the amount of any contribution 
involved in the violation and shall not exceed the greater of $50,000 
or 1,000% of the amount of any contribution involved in the violation.
* * * * *

PART 113--EXCESS CAMPAIGN FUNDS AND FUNDS DONATED TO SUPPORT 
FEDERAL OFFICE HOLDERS ACTIVITIES (2 U.S.C. 439a)

    8. The authority citation for part 113 would continue to read as 
follows:

    Authority: 2 U.S.C. 439a.

    9. In section 113.1, paragraph (g) would be revised to read as 
follows:


Sec. 113.1  Definitions (2 U.S.C. 439a).

    When used in this part--
* * * * *
    (g) Personal use. Personal use means any use of funds in a campaign 
account of a present or former candidate to fulfill a commitment, 
obligation or expense of any person that would exist irrespective of 
the candidate's campaign or duties as a Federal officeholder.
    (1) (i) Personal use includes but is not limited to the use of 
funds in a campaign account for:
    (A) Household food items or supplies;
    (B) Funeral, cremation or burial expenses;
    (C) Clothing, other than items of de minimis value that are used in 
the campaign, such as campaign ``T-shirts'' or caps with campaign 
slogans;
    (D) Tuition payments, other than those associated with training 
campaign staff;
    (E) Mortgage, rent or utility payments--
    (1) For any part of any personal residence of the candidate or a 
member of the candidate's family; or
    (2) For real or personal property that is owned by the candidate or 
a member of the candidate's family and used for campaign purposes, to 
the extent the payments exceed the fair market value of the property 
usage;
    (F) Admission to a sporting event, concert, theater or other form 
of entertainment, unless part of a specific campaign or officeholder 
activity;
    (G) Dues, fees or gratuities at a country club, health club, 
recreational facility or other nonpolitical organization, unless they 
are part of the costs of a specific fundraising event that takes place 
on the organization's premises;
    (H) Salary payments to a member of the candidate's family, unless 
the family member is providing bona fide services to the campaign. If a 
family member provides bona fide services to the campaign, any salary 
payment in excess of the fair market value of the services provided is 
personal use;
    (I) Salary payments to a candidate or any other compensation for 
income lost as a result of the campaign for federal office;
    (J) Vehicle expenses, unless they are a de minimis amount. If a 
committee uses campaign funds to pay expenses associated with a vehicle 
that is used for both personal activities beyond a de minimis amount 
and campaign or officeholder related activities, the portion of the 
vehicle expenses associated with the personal activities is personal 
use, unless the person(s) using the vehicle for personal activities 
reimburse(s) the campaign account within thirty days for the expenses 
associated with the personal activities; and
    (K) A vacation or other non-campaign-related trip.
    (ii) The Commission will determine, on a case by case basis, 
whether other uses of funds in a campaign account fulfill a commitment, 
obligation or expense that would exist irrespective of the candidate's 
campaign or duties as a Federal officeholder, and therefore are

[[Page 55357]]

personal use. Examples of such other uses include:
    (A) Legal expenses;
    (B) Meal expenses; and
    (C) Travel expenses, except for a vacation or other non-campaign-
related trip under paragraph (g)(1)(i)(K) of this section, including 
subsistence expenses incurred during travel. If a committee uses 
campaign funds to pay expenses associated with travel that involves 
both personal activities and campaign or officeholder related 
activities, the incremental expenses that result from the personal 
activities are personal use, unless the person(s) benefiting from this 
use reimburse(s) the campaign account within thirty days for the amount 
of the incremental expenses.
    (2) Charitable donations. Donations of campaign funds or assets to 
an organization described in section 170(c) of Title 26 of the United 
States Code are not personal use, unless the candidate receives 
compensation from the organization before the organization has expended 
the entire amount donated for purposes unrelated to his or her personal 
benefit.
    (3) Transfers of campaign assets. The transfer of a campaign 
committee asset is not personal use so long as the transfer is for fair 
market value. Any depreciation that takes place before the transfer 
must be allocated between the committee and the purchaser based on the 
useful life of the asset.
    (4) Gifts. Gifts of nominal value and donations of a nominal amount 
made on a special occasion such as a holiday, graduation, marriage, 
retirement, or death are not personal use, unless made to a member of 
the candidate's family.
    (5) Political or officially connected expenses. The use of campaign 
funds for an expense that would be a political expense under the rules 
of the United States House of Representatives or an officially 
connected expense under the rules of the United States Senate is not 
personal use to the extent that the expense is an expenditure under 
subpart D of part 100 or an ordinary and necessary expense incurred in 
connection with the duties of a holder of Federal office. Any use of 
funds that would be personal use under 11 CFR 113.1(g)(1) will not be 
considered an expenditure under subpart D of part 100 or an ordinary 
and necessary expense incurred in connection with the duties of a 
holder of Federal office.
    (6) Third party payments. Notwithstanding that the use of funds for 
a particular expense would be a personal use under this section, 
payment of that expense by any person other than the candidate or the 
campaign committee shall be a contribution under subpart B of part 100 
to the candidate unless the payment would have been made irrespective 
of the candidacy. Examples of payments considered to be irrespective of 
the candidacy include, but are not limited to, situations where--
    (i) The payment is a donation to a legal expense trust fund 
established in accordance with the rules of the United States Senate or 
the United States House of Representatives;
    (ii) The payment is made from funds that are the candidate's 
personal funds as defined in 11 CFR 110.10(b), including an account 
jointly held by the candidate and a member of the candidate's family;
    (iii) Payments for that expense were made by the person making the 
payment before the candidate became a candidate. Payments that are 
compensation shall be considered contributions unless--
    (A) The compensation results from bona fide employment that is 
genuinely independent of the candidacy;
    (B) The compensation is exclusively in consideration of services 
provided by the employee as part of this employment; and
    (C) The compensation does not exceed the amount of compensation 
which would be paid to any other similarly qualified person for the 
same work over the same period of time.
    (7) Members of the candidate's family. For the purposes of 
paragraph (g) of this section, the candidate's family includes:
    (i) The spouse of the candidate;
    (ii) Any child, step-child, parent, grandparent, sibling, half-
sibling or step-sibling of the candidate or the candidate's spouse;
    (iii) The spouse of any child, step-child, parent, grandparent, 
sibling, half-sibling or step-sibling of the candidate; and
    (iv) A person who has a committed relationship with the candidate, 
such as sharing a household and having mutual responsibility for each 
other's personal welfare or living expenses.
    (8) For those uses of campaign funds described in proposed 
paragraphs (g)(1)(i) and (g)(1)(ii) of this section that involve both 
personal use and campaign use, a contemporaneous log or other record 
must be kept to document the dates and expenses related to the personal 
use of the campaign funds. The log must be updated whenever campaign 
funds are used for personal expenses, as described in paragraph (g)(1) 
of this section, rather than for campaign expenses. The log or other 
record must also be maintained and preserved for 3 years after the 
report disclosing the disbursement is filed, pursuant to 11 CFR 102.9 
and 104.14(b).

    Dated: August 22, 2002.
Karl J. Sandstrom,
Vice-Chairman, Federal Election Commission.
[FR Doc. 02-21893 Filed 8-28-02; 8:45 am]
BILLING CODE 6715-01-P