[Federal Register Volume 67, Number 223 (Tuesday, November 19, 2002)]
[Rules and Regulations]
[Pages 69928-69950]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-28886]
[[Page 69927]]
-----------------------------------------------------------------------
Part IV
Federal Election Commission
-----------------------------------------------------------------------
11 CFR Parts 102 and 110
Contribution Limitations and Prohibitions; Final Rule
Federal Register / Vol. 67, No. 223 / Tuesday, November 19, 2002 /
Rules and Regulations
[[Page 69928]]
-----------------------------------------------------------------------
FEDERAL ELECTION COMMISSION
11 CFR Parts 102 and 110
[Notice 2002-22]
Contribution Limitations and Prohibitions
AGENCY: Federal Election Commission.
ACTION: Final rules and transmittal of regulations to Congress.
-----------------------------------------------------------------------
SUMMARY: The Federal Election Commission is issuing these final rules
to implement amendments made by the Bipartisan Campaign Reform Act of
2002 (``BCRA'') to the contribution limitations and prohibitions of the
Federal Election Campaign Act of 1971, as amended (``FECA'' or ``the
Act''). These rules increase the limits on contributions made by
individuals and political committees; index certain contribution limits
for inflation; prohibit contributions by minors to candidates,
authorized committees and committees of political parties and donations
by minors to committees of political parties; and prohibit
contributions, donations, expenditures, independent expenditures and
disbursements by foreign nationals. These rules also revise the
Commission's rules for designating contributions to particular
elections and attributing contributions to particular donors. Further
information is provided in the Supplementary Information that follows.
EFFECTIVE DATE: January 1, 2003.
FOR FURTHER INFORMATION CONTACT: Ms. Mai T. Dinh, Acting Assistant
General Counsel, Mr. J. Duane Pugh, Acting Special Assistant General
Counsel (redesignations and reattributions), or Attorneys Mr. Michael
G. Marinelli (contribution limitations), Ms. Dawn M. Odrowski
(contributions by minors) or Ms. Anne A. Weissenborn (foreign
nationals), 999 E Street, NW., Washington, DC 20463, (202) 694-1650 or
(800) 424-9530.
SUPPLEMENTARY INFORMATION: The Bipartisan Campaign Reform Act of 2002,
Public Law 107-155, 116 Stat. 81 (Mar. 27, 2002), contains extensive
and detailed amendments to the Federal Election Campaign Act of 1971,
as amended, 2 U.S.C. 431 et seq. This is one of a series of rulemakings
the Commission is undertaking to implement the provisions of BCRA.
Section 402(c)(1) of BCRA establishes a general deadline of 270
days for the Commission to promulgate regulations to carry out BCRA.
The President of the United States signed BCRA into law on March 27,
2002, so the 270-day deadline is December 22, 2002.
Because of the brief period before the deadline for promulgating
these rules, the Commission received and considered public comments
expeditiously. The Notice of Proposed Rulemaking (``NPRM'') on which
these final rules are based was published in the Federal Register on
August 22, 2002. 67 FR 54,366 (Aug. 22, 2002). The written comments
were due by September 13, 2002. The names of commenters and their
comments are available at http://www.fec.gov/register.htm under
``Contribution Limitations and Prohibitions.'' The NPRM stated that the
Commission would hold a hearing on the proposed rules if it received a
sufficient number of requests to testify. After reviewing the comments
received and in light of the relatively small number of requests to
testify, the Commission decided not to hold a public hearing on this
rulemaking. A notice canceling the proposed hearing was published on
the Commission's website on October 2, 2002 (http://www.fec.gov/press/20021002cancel.html) and in the Federal Register on October 7, 2002, 67
FR 62,410 (Oct. 7, 2002).
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 contribution limitations and prohibitions were
transmitted to Congress on November 8, 2002.
Introduction
The final rules address five major topics: (1) Increased limits on
contributions made by certain persons to candidates, by political party
committees to Senate candidates, and by individuals in a 2-year period;
(2) indexing of certain contributions limits for inflation; (3)
prohibition on contributions, donations, expenditures, independent
expenditures and disbursements by foreign nationals; (4) prohibition on
contributions by minors to candidates, authorized committees, and
committees of political parties and on donations by minors to
committees of political parties; and (5) designating contributions to
particular elections and attributing contributions to particular
contributors.
Four of the five topics involve implementing specific provisions of
BCRA. BCRA's amendments to 2 U.S.C. 441a(a) that increase contribution
limits for individuals and political committees are implemented by
amending 11 CFR 110.1, 110.2 and 110.5 and adding new Sec. 110.17 on
indexing the contributions limits for inflation. BCRA's amendments to 2
U.S.C. 441e to strengthen and expand the ban on campaign contributions
and donations by foreign nationals is implemented by removing and
reserving 11 CFR 110.4(a), the former regulation addressing foreign
nationals, and adding new Sec. 110.20. BCRA's ban on contributions by
minors to Federal candidates and contributions and donations by minors
to committees of political parties at 2 U.S.C. 441k is implemented by
removing 11 CFR 110.1(i)(2), the former regulation addressing
contributions by minors, and adding new Sec. 110.19.
In light of BCRA's focus on contribution limits, the Commission has
also decided to streamline its rules for redesignating contributions
for a particular election and reattributing contributions to particular
contributors. These changes are reflected in amendments to 11 CFR
110.1(b)(5) and 110.1(k)(3).
Explanation and Justification
11 CFR 102.9 Accounting for Contributions and Expenditures
Recordkeeping requirements play a crucial role in ensuring
compliance with FECA's and BCRA's contributions limitations, as noted
in the NPRM. 64 FR at 54,372. Accordingly, the Commission sought
comment on a variety of proposals to modify the recordkeeping
requirements in 11 CFR 102.9. Two commenters were opposed to any
change; one noted that electronic records should be sufficient,
provided they are in readable form. Another commenter supported the
Commission's proposal to require political committees to maintain
photocopies or electronic copies of contributors' checks. The
Commission has determined that requiring retention of photocopies or
electronic copies of contributors' checks will facilitate audits that
determine compliance with contribution limits. Therefore, 11 CFR
102.9(a) is amended to require political committee treasurers to
maintain either a full-size photocopy or a digital image of each check
or written instrument by which a contribution is made. If a political
committee elects to retain digital images, it must be prepared to
provide the Commission with the computer equipment and software needed
to retrieve and read the digital images at no cost to the Commission.
New 11 CFR 102.9(a)(4).
[[Page 69929]]
Additionally, the Commission is also amending the supporting
evidence requirements for redesignations and reattributions in
connection with other changes made to redesignations and
reattributions, as explained below in the discussion of 11 CFR
110.1(l).
Paragraph (e)(1) of 11 CFR 102.9 is amended to clarify that its
requirements apply to contributions designated in writing by the
contributor pursuant to 11 CFR 110.1(b)(2)(i), contributions treated as
such pursuant to 11 CFR 110.1(b)(2)(ii), contributions redesignated in
writing by the contributor pursuant to new 11 CFR 110.1(b)(5)(ii)(A),
or contributions designated by presumption pursuant to new 11 CFR
110.1(b)(5)(ii)(B). New paragraph (e)(2) makes the standard for
acceptable accounting methods explicit by stating that the committee's
records must demonstrate that, prior to the primary election, recorded
cash on hand was at all times equal to or in excess of the sum of
general election contributions received less the sum of general
election disbursements made. Additionally, a technical change is made
to recodify existing regulatory text as new paragraph (e)(3) in order
to clarify that the requirement for candidates not in the general
election to refund any contributions designated or treated as
contributions for the general election applies to all candidates and
authorized committees.
11 CFR 110.1 Contributions by Persons Other Than Multi-Candidate
Political Committees
1. 11 CFR 110.1(a) Scope
Section 110.1(a) sets out the scope of the regulations in 11 CFR
110.1. The final rules in this paragraph contain amended citations to
the provisions concerning minors and foreign nationals. This final rule
is substantially identical to the proposed rule, and the Commission did
not receive any comments concerning paragraph (a).
2. 11 CFR 110.1(b)(1) Increases in Limitations on Contributions to
Candidates
The Act limits the amount that individuals and certain other
persons may contribute to candidates and political committees,
including political party committees with respect to Federal elections.
2 U.S.C. 441a(a)(1). The pre-BCRA provisions of the Act permitted
persons to contribute up to $1,000 to Federal candidates per election
and up to $20,000 per calendar year to political committees established
and maintained by national political parties. For contributions made on
or after January 1, 2003, BCRA amends 2 U.S.C. 441a(a)(1)(A) to
increase the amount persons may contribute to Federal candidates to
$2,000 per election. Section 110.1(b)(1), which contains the
contribution limitation of 2 U.S.C. 441a(a)(1)(A), is therefore, being
amended to incorporate the new increased $2,000 contribution limit.
Paragraph (b)(1) in the final rules, with some minor revisions, is
substantially identical to proposed paragraph (b)(1) in the NPRM. The
Commission did not receive any comments on this provision.
FECA also permits certain persons to contribute up to $5,000 per
year to any other political committees. 2 U.S.C. 441a(a)(1)(C). This
contribution limit was left unchanged by BCRA. However, BCRA did revise
2 U.S.C. 441a(a)(1) by adding paragraph (D), which permits persons to
make up to $10,000 in contributions to a political committee
established and maintained by a State committee of a political party in
a calendar year. This statutory provision was implemented by the
addition of new paragraph (c)(5) to Sec. 110.1. See Prohibited and
Excessive Contributions: Non-Federal Funds or Soft Money Final Rules,
67 FR 49,063 (July 29, 2002).
BCRA mandates that the limit for contributions by individuals and
other persons under 2 U.S.C. 441a(a)(1)(A) be increased every odd-
numbered year by the percentage difference in the price index between
the current year and the base year of 2001. 2 U.S.C. 441a(c)(1)(B). The
mechanics of the indexing are set forth in 11 CFR 110.17, which is
discussed below. However, in order to alert the reader that the
contribution limits are adjusted every two years, Sec. 110.1(b)(1)(i)
contains a cross reference to section 110.17. Additionally, paragraph
(b)(1)(ii) sets forth the 2-year time period in which the increased
contribution limits are to be in effect. That 2-year period starts the
day after the previous general election and ends on the day of the next
regularly scheduled general election.
Because the contribution limits may change every two years,
depending upon the consumer price index, paragraph (b)(1)(iii) states
that the Commission will publish the new contribution limits in effect
in the Federal Register every odd-numbered year and maintain that
information on its website. One commenter supported this change.
3. 11 CFR 110.1(b)(3) Net Debts Outstanding
The NPRM raised the issue of the effect of the increase on
contribution limits due to the inflation adjustment on contributions
made after an election that are used to satisfy the net debts
outstanding of a candidate's authorized committees related to that
previous election. The NPRM sought comment on the following
hypothetical: If the contribution limit were to be increased from
$2,000 to $2,100, effective November 3, 2004, and contributor X makes a
$2,000 contribution to candidate Y in October of 2004, could
contributor X make a $100 contribution after November 3, 2004
designated for that general election, provided that candidate Y's
principal campaign committee still has net debts outstanding?
The Commission received several comments concerning this issue. All
the commenters who addressed this, including the Congressional sponsors
of BCRA, argued against permitting the increase in the contribution
limits to apply to contributions made to pay off net debts outstanding
from any election held prior to the increase in the contribution
limits. Instead, these commenters proposed that any increased
contribution limits should only apply to elections held after the date
on which the indexing triggers a higher contribution limit. Several of
these commenters noted the confusion that would ensue for both
contributor and recipient committees if multiple contribution limits
applied to the same election. The Commission agrees with this
reasoning. In addition, it finds no evidence that Congress intended
candidates in a deficit position after an election to have the benefit
of accepting larger contributions than candidates who have no debts
outstanding for that election. Consequently, the Commission is
persuaded that the increase in the contribution limits should not be
applied to previous elections. This interpretation will reduce the
occurrence of multiple changes to the contribution limits for
elections. The Commission also notes that the retroactive application
of 2 U.S.C. 441a(c)(1)(C) specifically begins on the date after the
previous general election, and can thus be construed to mean that the
increase in the contribution limits does not apply to any previous
election.
To make clear that the increase in contribution limits cannot be
used to retire net debts outstanding from previous elections, the
Commission is amending Sec. 110.1(b)(3)(iii). This regulation sets
forth the conditions under which candidates may accept contributions to
retire net debts outstanding after the date of a previous primary or
general election. The Commission is renumbering the two existing
conditions as paragraphs (b)(3)(iii)(A) and (B) and is adding the
[[Page 69930]]
additional requirement at paragraph (b)(3)(iii)(C) that contributions
received for net debts outstanding arising from previous elections do
not exceed the contribution limitations in effect on the date of such
election.
4. 11 CFR 110.1(b)(5)(ii) Redesignations
A. Introduction
In the NPRM, the Commission stated that BCRA's renewed focus on
contribution limits coincided with the Commission's consideration of
updating and streamlining its rules for designating contributions for a
particular election or attributing contributions to particular
contributors. See NPRM, 67 FR at 54,371. Under existing regulations,
all contributions are either designated in writing by the contributor,
11 CFR 110.1(b)(2)(i), or treated as contributions for the next
election after the contribution is made. 11 CFR 110.1(b)(2)(ii). This
is in order to ensure that no person contributes more than the
individual contribution limit to any candidate with respect to a
particular election. 2 U.S.C. 441a(a)(1)(A). Commission regulations
permit political committees in certain circumstances to obtain a
written redesignation signed by the contributor. 11 CFR
110.1(b)(5)(ii). The Commission presented proposed rules in the NPRM
that would permit the authorized committees of candidates to
redesignate contributions pursuant to a presumption in certain
circumstances. NPRM, 67 FR at 54,376. Additionally, the NPRM proposed
amending the rules pertaining to reattribution of contributions similar
to the rules on redesignation. This proposal is addressed in the
Explanation and Justification for 11 CFR 110.1(k)(3)(ii), discussed
below.
One commenter applauded the Commission's consideration of the
contribution redesignation regulations that it characterized as
``confusing and burdensome both for committees and contributors.'' In
contrast, several commenters noted that BCRA neither requires nor
anticipates a reexamination of the redesignation rules. BCRA's silence
on these issues led one commenter to the conclusion that these issues
would be more appropriately addressed in a separate rulemaking that
does not arise from BCRA, while another found the Commission's
reexamination well-timed, as an effort to simplify FECA compliance
generally, which will improve the ability of political committees to
comply with the new requirements of BCRA. In light of the new
contribution limits and other statutory changes in BCRA, the Commission
has concluded that this rulemaking provides an appropriate vehicle for
simplifying the rules governing redesignation.
B. 11 CFR 110.1(b)(5)(ii)(A) Existing Redesignation Rule
Because the Commission has decided to provide for an alternative
method for redesignation of contributions, 11 CFR 110.1(b)(5)(ii)
requires a technical amendment in order to incorporate the new
provision within this section. Thus, this rulemaking redesignates
former 110.1(b)(5)(ii)(A) and (B) as 110.1(b)(5)(ii)(A)(1) and (2),
respectively. This rulemaking does not amend the regulatory language of
these provisions.
C. 11 CFR 110.1(b)(5)(ii)(B) Redesignation of Certain Excessive Primary
Contributions
Current 11 CFR 110.1(b)(5) sets forth the procedure for the
redesignation of excessive contributions to candidates and authorized
committees from any person, except multicandidate committees and those
persons prohibited from making contributions. See 11 CFR 110.1(a). When
seeking a redesignation of an excessive contribution, a committee
treasurer must offer the contributor a refund and obtain a signed,
written redesignation from the contributor within 60 days of the
treasurer's receipt of the contribution. See 11 CFR 110.1(b)(5)(ii).
These requirements apply to excessive contributions that were
designated in writing by the contributor, 11 CFR 110.1(b)(5)(i)(A) and
(B), or that were not designated in writing by the contributor, 11 CFR
110.1(b)(5)(i)(C) and (D), in which case 11 CFR 110.1(b)(2)(ii) treats
the contributions as made for the next election for that Federal office
after the contributions are made.\1\ In addition to written
redesignations, the Commission is amending 11 CFR 110.1(b)(5) to permit
authorized committees to redesignate contributions that would otherwise
be excessive without obtaining a signed, written document under certain
circumstances, as discussed below.
---------------------------------------------------------------------------
\1\ These requirements apply whether the contributions are
excessive on their face or in aggregation with other contributions,
11 CFR 110.1(b)(5)(i)(A) and (C), or were designated for an election
and were made after the election, but cannot be accepted because the
contributions exceed net debts outstanding from the past election,
11 CFR 110.1(b)(5)(i)(B), or were received after an election but
undesignated, and the authorized committee has net debts outstanding
from the previous election. 11 CFR 110.1(b)(5)(i)(D).
---------------------------------------------------------------------------
As proposed in the NPRM, the Commission is amending these
regulations to include a mechanism to simplify redesignation procedures
for certain excessive primary contributions by using a presumption. See
NPRM, 67 FR at 54,371, new 11 CFR 110.1(b)(5)(ii)(B). This presumption
applies only when a contributor makes an excessive contribution to a
candidate's authorized committee before a primary election that is not
designated in writing for a particular election. In such circumstances,
a candidate's authorized committee may presume that the contributor
intended to contribute any excessive amount to that candidate's general
election, without obtaining written permission from the contributor to
treat the excess as a general election contribution. This presumption
should not be inferred, however, in instances where the contributor has
expressly designated a contribution in writing for a different
election.
The Commission agrees with the commenter who noted the
reasonableness of a presumption that a contributor of a large
contribution to a primary election campaign would also support the
general election campaign of the same candidate. That commenter
reasoned that the primary and general elections occur in the same year
and are two stages of one process to elect a candidate to a particular
office. However, the Commission disagrees with another commenter who
argued that written redesignations most often serve as barriers to
contributor intent, which in the commenter's view is generally to
support the candidate to the maximum extent possible. The Commission
retains its rules on written redesignations in all other situations
described in 11 CFR 110.1(b)(5)(i)(A) through (D). Only in the specific
circumstance presented in new 11 CFR 110.1(b)(5)(ii)(B) will the
presumption suffice to replace a written redesignation.
Thus, the Commission is revising Sec. 110.1(b)(5)(ii)(B) to permit
an authorized committee to redesignate excessive contributions to the
general election if the following conditions are satisfied. First, the
contribution must be made before the primary election. Second, the
contribution must not have been designated in writing for another
election. Third, the contribution would be excessive if treated as a
contribution made for the primary election, and fourth, the
redesignation does not cause the contributor to exceed any other
contribution limit. These conditions are set forth in paragraphs
(b)(5)(ii)(B)(1) through (4), respectively. The committee must be
permitted to accept general election contributions in order to
designate contributions by presumption. Therefore, if a presidential
candidate's
[[Page 69931]]
authorized committee accepts public funding in the general election,
the presumption is available to any such committees only to the extent
they are permitted to accept contributions to a general election legal
and accounting compliance fund. The final rule also requires that the
authorized committee notify the contributor of the redesignation. This
requirement is discussed in further detail below.
D. 11 CFR 110.1(b)(5)(ii)(B)(5) and (6) Notice to Contributors
With respect to the redesignation of certain primary contributions,
the NPRM included two alternatives, Alternatives 1-A and 1-B. See
proposed 11 CFR 110.1(b)(5)(ii)(B), NPRM, 67 FR at 54,371 and 54,376.
The alternatives differed in whether an authorized committee employing
the presumption to redesignate a contribution would be required to
notify the contributor that such action is being taken. Alternative 1-A
would not have required any notification to the contributor, while
Alternative 1-B would have required notification through the addition
of paragraphs (b)(5)(ii)(B)(5) and (6). See NPRM, 67 FR at 54,371 and
54,376.
Alternative 1-A was designed to minimize the administrative burden
on authorized committees when a contributor's intent could be
reasonably inferred. See id. at 54,371. Some commenters preferred this
approach. One viewed it as a better balance between the Commission's
need to ensure that committees follow procedures and the committees'
need for flexibility. Greater flexibility for the committees was the
basis for another commenter's support. Another found Alternative 1-A to
be consistent with contributor intent and with BCRA's change in the
individual aggregate contribution limit from an annual to an election
cycle basis. See 2 U.S.C. 441a(a)(3). The Commission notes, however,
that BCRA changes the individual aggregate contribution limit to a bi-
annual basis that only approximates the election cycle for the U.S.
House of Representatives. More importantly, Congress did not change the
per candidate contribution limits from a per-election to an election-
cycle basis.
Alternative 1-B in the Commission's proposal would have required
that the authorized committee inform the contributor that a portion of
the contribution is being redesignated to the general election, and
that the contributor may request a refund instead. As with Alternative
1-A, no confirmation from the contributor would have been required.
This alternative attracted the support of several commenters, as
well. One commenter found that the presumption combined with notice to
the contributor reasonably approximates contributor intent, with notice
ensuring that any other contributor intent can be honored. Similarly,
another argued Alternative 1-B strikes the appropriate balance between
the administrative burden imposed on authorized committees and the need
to honor contributor intent, noting that some primary election
contributors might plan to support a different candidate in the general
election. Another commenter supported the notice required under
Alternative 1-B because it would provide an opportunity for the
contributor to ``opt-out'' and receive a refund, instead of permitting
the redesignation, and because it is more likely to prevent the
contributor from inadvertently making an excessive contribution to the
general election.
The Commission has determined that notifying contributors is
necessary when authorized committees redesignate excessive
contributions that were initially considered primary contributions by
operation of 11 CFR 110.1(b)(2)(ii) to be general election
contributions. The Commission has therefore adopted Alternative 1-B as
proposed in the NPRM, with clarification to the notice procedure as
described below. See NPRM, 67 FR at 54,371 and 54,376. The Commission
believes that, in the precise circumstances discussed, it is reasonable
to infer that the contributor of an otherwise excessive primary
contribution would likely not object to redesignating a portion of that
contribution to the general election campaign. The contributor's check
establishes the contributor's intent to contribute the funds to the
candidate's authorized committee. The contribution limits in FECA
prohibit the excessive contributions at issue, so the presumption
permits the authorized committee to honor the contributor's intent in a
manner that avoids a violation of law by both the recipient committee
and the contributor.
The notice and refund procedure serves to confirm the presumption
that a contributor of an excessive, undesignated contribution to the
primary election would consent to a redesignation of the excessive
portion of the contribution to the general election. The authorized
committee may assume acquiescence on the part of the contributor if the
contributor does not respond to the notification. However, if the
contributor does not want the contribution to be redesignated, the
notice provides a mechanism by which the contributor may object to the
redesignation and request a refund or a reattribution under 11 CFR
110.1(k)(3)(ii). Additionally, the Commission notes that the trigger
for a committee's use of the presumption--an undesignated excessive
contribution--suggests the contributor may benefit from information
about the contribution limits in FECA. Contributors need to know if a
contribution was redesignated or reattributed so that they can avoid an
inadvertent excessive contribution. Any authorized committee that seeks
to retain a contribution that would otherwise constitute a violation of
law can fairly be required to notify the contributor of the means by
which it has remedied the violation of law. Thus, new paragraph
(b)(5)(ii)(B)(5) requires the treasurer to notify the contributor of
the redesignation and provide an opportunity to the contributor to
request a refund. In such a notice, the committee may, if it wishes,
also seek a written reattribution under 11 CFR 110.1(k)(3)(ii)(A);
however, authorized committees are not required to include this
information in the notice pursuant to 11 CFR 110.1(b)(5)(ii)(B)(5).
Authorized committees may notify contributors by paper mail, email,
fax, or any other written method. The authorized committee must do so
within sixty days of the treasurer's receipt of the contribution. See
new 11 CFR 110.1(b)(5)(ii)(B)(6). The notice must be written in order
to avoid opportunities for fraud, so the option to communicate orally
has been deleted from paragraph (b)(5)(ii)(B)(6). The sixty-day
requirement protects contributor intent by providing notice on a
reasonably contemporaneous basis.
E. 11 CFR 110.1(b)(5)(ii)(C) Redesignation of Certain Excessive General
Election Contributions
The Commission sought comment on whether to permit backward-looking
presumptions, so that excessive general election contributions received
after a primary election could be designated by an authorized committee
to pay off primary debt. See NPRM, 67 FR at 54,371. Three commenters
favored a backward-looking presumption in certain circumstances. One
supported the presumption in the situation described, provided that the
authorized committee has net debts outstanding for the primary
election. Another supported the presumption, provided that it is
limited to elections in the same election cycle. A third supported the
presumption, provided that the contributor receives notice. Finally,
one commenter argued against such a
[[Page 69932]]
backward-looking presumption because it would require more complex
considerations by the contributors. However, the Commission notes that
the burden of calculating net debts outstanding for the primary
election falls on the authorized committees, not on the contributors.
The Commission has determined that the backward-looking
presumption, in limited circumstances, should apply subject to the same
conditions as the redesignation presumption in 11 CFR
110.1(b)(5)(ii)(B). The Commission notes that current 11 CFR
110.1(b)(3)(iv) permits a candidate in the general election to pay
primary election debts and obligations with general election
contributions. Thus, if a contributor designates in writing that a non-
excessive contribution should be considered for the general election,
the recipient committee may nonetheless use those funds to pay primary
debts, pursuant to 11 CFR 110.1(b)(3)(iv). In this situation, it would
be incongruous if a recipient committee had less flexibility with
contributions that are not designated in writing than it would have
with those that are designated in writing.
Consequently, the Commission has incorporated such a presumption in
new 11 CFR 110.1(b)(5)(ii)(C). The presumption can be applied to an
excessive contribution that is made after the primary election date,
but before the general election and that was not designated in writing
by the contributor. 11 CFR 110.1(b)(5)(ii)(C)(1) and (2). The committee
must have more net debts outstanding as calculated under 11 CFR
110.1(b)(3)(ii) from the primary than the excessive portion of the
contribution. 11 CFR 110.1(b)(5)(ii)(C)(5). The conditions in 11 CFR
110.1(b)(5)(ii)(C)(3), (4), (6), and (7) are similar or identical to
the conditions set forth in 11 CFR 110.1(b)(5)(ii)(B)(3), (4), (5), and
(6), respectively. It is important to note, however, that if a
contributor makes an excessive contribution and designates the
contribution in a signed writing for the general election, then the
authorized committee would be required to obtain a signed writing from
the contributor to redesignate any portion of the contribution to the
primary. See new 11 CFR 110.1(b)(5)(ii)(C)(2).
5. 11 CFR 110.1(c) Contributions to Political Party Committees
The pre-BCRA provisions of the Act permitted persons to contribute
up to $20,000 per calendar year to the political committees established
and maintained by the national political parties. BCRA amends 2 U.S.C.
441a(a)(1)(B) to increase the amount that may be contributed by
individuals and certain other persons to political committees
established and maintained by national political parties to $25,000 per
calendar year. Consequently, the Commission is amending 11 CFR
110.1(c)(1) to increase the amount that may be contributed by those
covered by 2 U.S.C. 441a(a)(1)(B) to committees established and
maintained by national political parties to $25,000 per year. No
comments were received on this change. Paragraph (c)(2) of this section
provides that these committees consist of the national committees, and
the House and Senate campaign committees.
The Commission is adding new paragraphs (c)(1)(i), (ii) and (iii)
to Sec. 110.1. These paragraphs parallel new paragraphs (b)(1)(i),
(ii) and (iii) discussed above. Paragraph (c)(1)(i) provides for
application of the indexing provisions at 11 CFR 110.17 to the
contribution limitation for contributions to national party committees.
New paragraph (c)(1)(ii) establishes the two-year period in which the
indexing is applied. New paragraph (c)(1)(iii) provides for the
periodic publication by the Commission of the increased contribution
limits. When proposed in the NPRM, the new paragraphs (c)(1)(i) and
(c)(1)(iii) received no comments. These paragraphs are left
substantially unchanged from the NPRM in the final rules. The comments
relating to paragraph (c)(1)(ii) regarding the timing of the increase
in the contribution limit due to the application of the indexing
provisions are addressed below in the Explanation and Justification for
new Sec. 110.17.
6. 11 CFR 110.1(i) Contributions by Spouses
As explained below in the Explanation and Justification for new 11
CFR 110.19, 2 U.S.C. 441k prohibits contributions made by minors to
Federal candidates and contributions and donations to committees of
political parties, but it does not prohibit contributions or donations
to other types of political committees such as corporate and labor
organization separate segregated funds and non-connected political
committees (often referred to as ``PACs'').
The proposed rules would have amended the pre-BCRA provision
governing contributions by minors at former 11 CFR 110.1(i)(2) to
reflect this point. The Commission has decided instead to move the pre-
BCRA minors provision to new 11 CFR 110.19 so that all of the
provisions regarding minors are addressed in one section of the
regulations. Therefore, the final rules move the minors provision at
former 11 CFR 110.1(i)(2) to new 11 CFR 110.19(d). As a result of this
move, Sec. 110.1(i) addresses only contributions by spouses, a
provision that is unchanged. Therefore the final rules amend the title
of paragraph (i) to ``Contributions by Spouses'' to reflect the
remaining focus of this paragraph.
7. 11 CFR 110.1(k)(3)(ii) Reattribution
A. Introduction
In connection with the proposed amendments to the redesignation
rules, the NPRM also included a similar proposal to amend the
reattribution rules. Current 11 CFR 110.1(k)(3) sets forth the
procedures for the reattribution of excessive contributions to other
joint contributors. Contributions from more than one person must
include each contributor's signature, and each such contributor is
attributed an equal share of the contribution unless other instructions
are provided. 11 CFR 110.1(k)(1) and (2). A committee may ask a
contributor who made an excessive contribution if a joint contribution
was intended. 11 CFR 110.1(k)(3)(i). In order to reattribute a
contribution in such a situation, a committee treasurer must offer the
contributor a refund and must obtain within sixty days of the
contribution a written reattribution signed by each of the
contributors. 11 CFR 110.1(k)(3)(ii). (Unlike redesignation, which is
limited to authorized committees because of the relationship of the
contribution to particular elections pursuant to 2 U.S.C.
441a(a)(1)(A), the reattribution procedure is available to all
political committees, any of which could receive joint contributions.)
The commenters who supported the Commission's proposal to amend the
redesignation rules also supported the proposal to amend the
reattribution rules for the same reasons. Likewise, commenters who did
not favor the Commission's proposal regarding redesignation also did
not support amending the reattribution rules at this time.
B. The Proposal and Comments
The Commission proposed a presumption related to reattribution in
the NPRM. When funds are contributed by a check or other written
instrument with two or more names imprinted on the check, but with only
one signature, the entire contribution is attributed to the individual
whose signature appears on the check. See 11 CFR 104.8(c) and
110.1(k)(1). Alternatives 2-A and 2-B in proposed 11 CFR
110.1(k)(3)(ii)(B) in the NPRM both included a presumption that with
respect to such contributions that are excessive, a committee would
[[Page 69933]]
be permitted to presume that the contribution should be attributed
equally among those whose names appeared on the check or other
instrument. See NPRM, 67 FR at 54,371 and 54,377. Like the
redesignation alternatives, Alternative 2-B would have required the
recipient committee to notify the contributors, while Alternative 2-A
would not have required any notice. See id.
Three commenters opposed both Alternatives 2-A and 2-B. The three
agreed that inferring a non-signer's intent to contribute in the
absence of any indication from that individual is extremely unreliable
and carries a greater risk of error than the redesignation presumption.
One commenter observed that the non-signer might not support the same
candidates and political committees that the signer supports. Even if
he or she does support the same candidates, if the non-signer is
unaware of the contribution, he or she may inadvertently make an
excessive contribution to the same committee. Another of the three
found Alternative 2-B unacceptable because the burden of ``opting-
out,'' that is, choosing to request a refund instead of permitting the
reattribution, would be on the contributor, whereas the commenter
believed the burden should be on the recipient committee. A fourth
commenter agreed with the presumption, arguing that contributors do not
generally believe more than one signature would be required because
usually only one person signs a particular check. This commenter also
argued that any indication of intent to make a joint contribution
should suffice, citing examples of accompanying correspondence, a donor
card, or a notation on a check. Under such circumstances, this
commenter would not require notification. In the absence of any
indication of such an intent, this commenter supports the approach of
Alternative 2-B, which would require the recipient committee to notify
the contributors of the reattribution.
C. 11 CFR 110.1(k)(3)(ii)(A) Existing Reattribution Rule
Because the Commission has decided to provide for an alternative
method for reattribution of contributions, 11 CFR 110.1(k)(3)(ii)
requires a technical amendment in order to incorporate the new
provision within this section. Thus, this rulemaking redesignates
former Sec. 110.1(k)(3)(ii)(A) and (B) as Sec. 110.1(k)(3)(ii)(A)(1)
and (2), respectively. This rulemaking does not amend the regulatory
language of these provisions.
D. 11 CFR 110.1(k)(3)(ii)(B) Presumption of a Reattribution
The Commission has concluded that the changes required by BCRA
provide an appropriate occasion to promulgate regulations that will
provide authorized committees with additional means of reattributing
certain contributions. Thus, it has adopted Alternative 2-B with two
modifications. Under paragraph (k)(3)(ii)(B)(1), if an excessive
contribution is made with a written instrument with more than one
individual's name imprinted upon it, but only one signature, the
permissible portion of the contribution will be attributed to the
signer, and the committee may reattribute any excessive portion of the
contribution to any other individual whose name is imprinted on the
written instrument. Thus, the final rule differs from the proposed rule
in that the proposed rule would have divided excessive contributions
equally among the names listed on the check. The final rule takes a
different approach in order to attribute the maximum permissible amount
to the signer because that contributor's intent is clear. Only
excessive funds would be reattributed pursuant to the presumption to
another contributor whose name appears preprinted on the check, and
only to the extent that this reattribution would not cause that other
individual to exceed his or her contribution limit.
The Commission has determined that notice to the contributors is
essential to make any presumption in this situation reasonable. The
political committee employing this presumption is required to notify
all contributors and offer the signer contributor a refund under
paragraph (k)(3)(ii)(B)(2).
As noted in the NPRM, the Commission and political committees have
devoted significant resources to ensure compliance with the
reattribution requirements. The Commission agrees with the commenter
who noted that joint contributors often indicate their intention to
jointly contribute in some fashion other than by both signing one
personal check. However, the Commission also agrees that a presumption
based only on an individual's name appearing on a check is not reliable
standing alone. Consequently, the Commission is adopting the
requirement that political committees notify all of the joint
contributors to whom any portion of the contribution is reattributed.
The committee may make the notice in any written form and must do so
within sixty days of the treasurer's receipt of the contribution. See
new 11 CFR 110.1(k)(3)(ii)(B)(3). The sixty-day requirement protects
contributor intent by providing notice on a reasonably contemporaneous
basis. Like the redesignation notice provision, section
110.1(k)(3)(ii)(B)(3) has been clarified to permit notice by any
written method, including email. Authorized committees may, if they
choose, provide contributors with a single notice as to any permissible
redesignation and any permissible reattribution.
E. Other Proposals Relating to Redesignation and Reattribution for
Which No Changes to the Rule Are Being Made
(1) 11 CFR 110.2 Multicandidate Contributions
Current 11 CFR 110.2(b)(5) sets forth the procedure for
redesignation of excessive contributions made by multicandidate
committees. In the NPRM, the Commission asked commenters to address
whether excessive contributions from multicandidate committees should
be subject to any form of redesignation by presumption. Only one
commenter supported any such application, while two opposed it. These
two argued that a signed writing should be required from multicandidate
committees because these committees are likely to be sufficiently
familiar with the existing Commission requirements so that the higher
standard of specificity required from them is not burdensome. The
Commission agrees that the redesignation presumption is inappropriate
for multicandidate committees, so no change has been made to 11 CFR
110.2.
(2) Expanding the Redesignation Presumption Beyond the Election Cycle
The Commission also asked in the NPRM if presumptions that would
permit authorized committees to redesignate contributions beyond the
current election cycle to either earlier or subsequent cycles were
appropriate. See NPRM, 67 FR at 54,371. Only one commenter supported
any presumption that reaches beyond a current cycle; that commenter
argued that redesignations to elections in future cycles were
acceptable if the contributors were notified. The other commenters
argued that any presumptions should be limited to the current cycle.
One said inferring donative intent would be difficult as the extent to
which a contributor supports a candidate can vary significantly from
one election cycle to another. Another noted that this might be so
because candidates' positions on issues can change, and
[[Page 69934]]
candidates are likely to face different opponents in previous or
subsequent cycles. Another noted that recordkeeping would be
complicated for the committees (which may change from one election to
the next), the contributors, and the Commission if such a presumption
were adopted. The Commission agrees with many of these comments and has
decided to limit the redesignation and reattribution presumptions to
within one election cycle.
(3) Separate Accounts for Redesignated Contributions
The Commission asked in the NPRM if it should revise 11 CFR 102.9
to require that an authorized committee maintain a separate account for
general election contributions accepted before the primary election
occurs. See NPRM, 67 FR at 54,371-72. Three commenters addressed this
proposal. Two commenters who opposed the requirement stated that
separate accounts are unnecessary. One argued that the public record
consists of all of a candidate committee's accounts combined, even if
the funds are in fact in separate accounts. Consequently, they argued
that the public record, which specifies to which election contributions
are designated, would not be augmented by a committee's maintenance of
separate accounts. Should an authorized committee be subject to a
Commission audit, this commenter argued that the Audit Division is
capable of calculating whether a committee spent general election funds
on the primary election campaign. Another commenter noted that separate
accounts do not ``specifically aid in compliance'' and that separate
accounts are not required by BCRA. One commenter supported the
requirement, arguing that the Commission has a valid concern regarding
the use of general election funds in a primary election campaign, which
could permit the contributor and the committee to effectively double
the contribution limit with respect to the primary election. This
commenter also argued that separate accounts are a modest burden for
committees and may be preferable to maintaining separate books and
records.
Although the Commission believes maintaining a separate account is
the best way for an authorized committee to show its compliance with
the prohibition on spending general election contributions in
connection with a primary election, the Commission is reluctant to
require that authorized committees maintain separate accounts when
other means of accounting, which may be better suited to an
organization, will suffice to prevent the use of general election
contributions in connection with a primary election. Consequently, the
Commission declines to amend 11 CFR 102.9 in this regard.
(4) Eliminating the Signature Requirements
The Commission sought comment on whether it should eliminate the
signature requirement for all redesignations and reattributions under
11 CFR 110.1 and 110.2, and instead permit authorization from the
contributor by email or through oral communications with the
contributor when the recipient committee creates and maintains a
contemporaneous signed record of the conversation. See NPRM, 67 FR at
54,371.
All of the commenters who addressed this issue thought an email
should suffice, instead of a writing signed by the contributor. Some
commenters were opposed to permitting committees to memorialize
conversations to serve as documentation of redesignations or
reattributions, as discussed above in connection with 11 CFR 110.1(l).
In adopting the new means of redesignation and reattribution in 11
CFR 110.1(b)(5)(ii)(B), 110.1(b)(5)(ii)(C), and 110.1(k)(3)(ii)(B), the
Commission has concluded that no contributor response is required for
the reattributions and redesignations pursuant to the new presumptions,
so no contributor signature is required. However, the designation and
attribution regulations require contributor signatures in other
instances. See, e.g., 11 CFR 110.1(b)(4)(ii), new
110.1(b)(5)(ii)(A)(2), 110.1(k)(1), and new 110.1(k)(3)(ii)(A)(2). In
these situations, the regulations require a response from the
contributor, and thus require the response to be in writing and signed
by the contributor in order to prevent fraud and to clearly indicate
who is contributing. Cf. 11 CFR 104.8(c) (requiring contributions to be
reported as made by the last person signing the instrument). While
email may be an appropriate vehicle for contacting contributors such as
new 11 CFR 110.1(b)(5)(ii)(B)(6) and (C)(7) or for contributor
responses in some instances, it may raise complicating issues that have
not been addressed in this rulemaking. For example, with respect to
reattributions, how could a committee determine whether both
contributors have consented to the reattribution? The Commission has
concluded that permitting email to replace a contributor's signature
should be undertaken in connection with a rulemaking that considers all
of the instances in Commission regulations in which this issue is
present, rather than making that change in some instances, but not
others, and in the absence of a full consideration of issues similar to
the one raised above. Therefore, the Commission has concluded that
existing rules should not be amended in this rulemaking to eliminate
the signature requirements across the board or to permit email messages
to take the place of signed written redesignations or reattributions
under revised 11 CFR 110.1(b)(5)(ii)(A)(2) or 11 CFR
110.1(k)(3)(ii)(A)(2). Consequently, no further changes to the
regulations are being made in this rulemaking.
8. 11 CFR 110.1(l)(4) and (5) Supporting Evidence
As noted in the NPRM, the adoption of the notification approach
requires 11 CFR 110.1(l)(4) to be amended to specify the supporting
evidence required to be retained under such an approach. See NPRM, 67
FR at 54,371. A full-size copy of the check or written instrument, any
signed writings from the contributors that accompanied the
contribution, and the political committee's notices required for
redesignations under 11 CFR 110.1(b)(5)(ii)(B) or (C) or reattributions
under 11 CFR 110.1(k)(3)(ii)(B) are included among the supporting
evidence that must be retained for the redesignation or reattribution
to be effective. See new 11 CFR 110.1(l)(4)(ii). Paragraph (l)(5) has
also been revised to state that if a political committee fails to
retain the notices, then the presumptions for the redesignations or the
reattributions will not be effective.
Some commenters supported the proposal that would have permitted
committees to orally notify contributors and write a memorandum
regarding the conversation to document it. Others opposed this aspect
of the proposal as an inherently unreliable process that would provide
too great an opportunity for fraud and abuse. The Commission agrees
with the latter comments, so the final rules with regard to the
redesignation and reattribution presumptions require the notice to be
in writing, including by email. See new 11 CFR 110.1(b)(5)(ii)(B)(6);
110.1(b)(5)(ii)(C)(7); and 110.1(k)(3)(ii)(B)(3).
One technical correction is included in 11 CFR 110.1(l)(5) as well.
The citation to paragraph (l)(2) in the first sentence should be to
paragraph (l)(1) instead.
[[Page 69935]]
11 CFR 110.2 Contributions by Multicandidate Political Committees
Section 110.2 sets forth the dollar limits on contributions made by
multicandidate committees, as generally established by 2 U.S.C.
441a(a)(2). BCRA substantially amended the contribution limit for
certain types of multicandidate committees specified in 2 U.S.C.
441a(h), which is addressed in Sec. 110.2. As a result, the Commission
is amending the regulations to reflect the new limits set forth in more
detail below.
Under pre-BCRA 2 U.S.C. 441a(h), the Republican and Democratic
Senatorial campaign committees or the national committee of a political
party or any combination of such committees were permitted to
contribute up to $17,500 to a candidate for election or nomination for
election to the U.S. Senate during the year of the election. BCRA
amends this section of the Act to increase the amount that may be
contributed by these committees to Senatorial candidates to $35,000 on
or after January 1, 2003. Consequently, 11 CFR 110.2(e), which contains
this contribution limit, is being amended to increase the limit to
$35,000.
New paragraph (e)(1) sets forth the amended contribution limit. The
Commission did not receive any comment on its proposal to amend
paragraph (e)(1). New paragraph (e)(2) parallels the provisions in
Sec. 110.1(c)(1)(i), (ii) and (iii) and 110.1(b)(1)(i), (ii) and
(iii). New paragraph (e)(2) provides for the application of the
indexing provisions at 11 CFR 110.17 to this contribution limitation
and establishes the two-year period in which the increased contribution
limits are in effect. New paragraph (e)(2) also provides for the
periodic publication by the Commission of the increased contribution
limit. When first proposed in the NPRM, this paragraph received one
comment supporting the intention to publish information regarding the
adjusted contribution limit. The comments relating to paragraph (e)(2)
that concern the timing of the increase in the contribution limit due
to the application of the indexing provisions are addressed in the
Explanation and Justification for new Sec. 110.17, below.
11 CFR 110.4 Contributions in the Name of Another; Cash Contributions
Previously, 11 CFR 110.4(a) set forth regulations implementing the
prohibitions on contributions and expenditures by foreign nationals
codified at 2 U.S.C. 441e. In light of the amendments to 2 U.S.C. 441e
contained in BCRA, Sec. 110.4(a) is being removed and reserved, and
new 11 CFR 110.20 is being created to implement BCRA's prohibition on
contributions, donations, expenditures, independent expenditures, and
disbursements by foreign nationals.
In addition, the section heading has been changed to cover the two
topics addressed in this section: (1) Contributions made in the name of
another and (2) cash contributions.
11 CFR 110.5 Aggregate Bi-Annual Contribution Limitations for
Individuals
Aside from the limits on the dollar amounts that individuals may
contribute to candidates and political committees, 2 U.S.C. 441a(a)(3)
also contains aggregate limits on the amount that individuals may give
within a specified period of time. These contribution limits are set
forth in the Commission's regulations at 11 CFR 110.5. However, as with
Sec. Sec. 110.1 and 110.2 discussed above, BCRA substantially amended
the FECA by restructuring the aggregate contribution limits. As a
result, the Commission is amending the regulations in Sec. 110.5 to
reflect the new contribution limits in BCRA.
1. 11 CFR 110.5(a) Scope
Section 110.5(a) sets forth the scope of the regulations in 11 CFR
110.5. The final rules in this paragraph contain amended citations to
the provisions concerning minors and foreign nationals. This final rule
is identical to the proposed rule, on which the Commission received no
comments.
2. 11 CFR 110.5(b) Bi-Annual Limitations
BCRA amends the provisions in FECA that establish the total amount
of contributions that may be made by individuals within the prescribed
time periods. Under former 2 U.S.C. 441a(a)(3), individuals were
permitted to make no more than $25,000 in aggregate contributions per
calendar year. This section was revised by BCRA to establish new bi-
annual aggregate limits that permit individuals to make up to $95,000
in contributions, including up to $37,500 in contributions to
candidates and their authorized committees, and up to $57,500 in
contributions to any other political committees. 2 U.S.C. 441a(a)(3)(A)
and (B). The $57,500 aggregate contribution limit contains a further
restriction in that no more than $37,500 of this amount may be given to
political committees that are not the political committees of national
political parties. 2 U.S.C. 441a(a)(3)(B).
Current 11 CFR 110.5(b) is being amended to incorporate the
increased bi-annual aggregate contribution limits, which are effective
on January 1, 2003. New paragraph (b)(1)(i) contains the new bi-annual
aggregate limit for contributions to candidates and their authorized
committees. New paragraph (b)(1)(ii) contains the new bi-annual
aggregate limit for contributions to other political committees. The
Commission received no comments on the changes to paragraphs (b)(1)(i)
and (ii) of this section.
Sections 441a(i)(1)(C) and 441a-1(a)(1)(B) of FECA contain an
exception to the bi-annual contribution limits for individuals. Under
these new provisions of BCRA, the individual contribution limits to
candidates for the U.S. House of Representatives and U.S. Senate are
increased during certain limited time periods if the candidate is
opposing another candidate who makes expenditures from his or her
personal funds above a certain threshold. Contributions made under
these increased dollar limits do not apply to the individual
contributor's bi-annual aggregate limits. 2 U.S.C. 441a(i)(1)(C) and
441a-1(a)(1)(B). Accordingly, new Sec. 110.5(b)(2) reflects this
exception, which will be addressed in greater detail in a separate
rulemaking concerning the so-called ``millionaires'' amendment.'' One
commenter, while agreeing generally with proposed paragraph
(b)(1)(iii), suggested that the language in the draft rule was not
direct enough in making this point. The Commission agrees and thus, new
paragraph (b)(2) states more precisely the circumstances under which
the individual bi-annual limits on contributions do not apply to
contributions coming under 2 U.S.C. 441a(i)(1)(C) or 441a-1(a)(1)(B).
Section 110.5(b)(3) provides for the increase, if necessary, in the
bi-annual aggregate contribution limits by the percent difference in
the price index, as described in 11 CFR 110.17. The issues relating to
the relationship of the statutory time frame for aggregating
contributions and the inflation adjustment time frame are discussed
below regarding 11 CFR 110.17(b). New paragraph (b)(4) states the
Commission's intention to publish information regarding the adjusted
contribution limits in the Federal Register and on the Commission's Web
site. One commenter supported publishing the adjusted contribution
limits. New paragraphs (b)(3) and (b)(4) contain provisions parallel to
that found 11 CFR 110.1(b) and (c) and 110.2(e). These paragraphs of
the final rules contain minor wording revisions but are nearly
identical to the
[[Page 69936]]
proposed versions, on which the Commission received no comments.
11 CFR 110.9 Violations of Limitations
The final rules at 11 CFR 110.9, formerly entitled, ``Miscellaneous
provisions,'' are being amended to address only violations of the
contribution and expenditure limitations. Other provisions in 11 CFR
110.9 addressing fraudulent misrepresentations, the price index
increase, and the voting age population are being or will be amended
and moved in this rulemaking and other BCRA rulemaking projects.\2\ The
title of section 110.9 is also being changed to ``Violations of
limitations'' to reflect these changes. Finally, the final rules add
the word ``knowingly'' in two places pertaining to the acceptance of
contributions in violation of the limitations and prohibitions set
forth in 11 CFR part 110. This revision mirrors the knowledge
requirement in 2 U.S.C. 441a(f) and 441f. No comments were received on
this revision or the reorganization of these provisions.
---------------------------------------------------------------------------
\2\ The BCRA rulemaking project entitled ``Other Provisions''
will address the fraudulent misrepresentation provisions. See Notice
of Proposed Rulemaking (``NPRM'') at 67 FR 55,348, 55,356 (Aug. 29,
2002). The BCRA rulemaking project entitled ``Coordination and
Independent Expenditures'' will address the voting age population
provisions. See NPRM at 67 FR 60,042, 60,060 ( Sept. 24, 2002).
---------------------------------------------------------------------------
The prohibition on contributions by minors is contained in 2 U.S.C.
441k and not in 2 U.S.C. 441a of the Act. Therefore, the Commission
notes that in instances where a candidate, an authorized committee, or
a committee of a political party knowingly accepts a contribution from
a minor, it would be in violation of Sec. 110.9 only if the
contribution is made in the name of another, but not if the
contribution was made with the minor's own funds. See 2 U.S.C.
441a(f)(''no candidate or political committee shall knowingly accept
any contribution * * * in violation of the provisions of this
section'').
11 CFR 110.17 Price Index Increase
Pre-BCRA 2 U.S.C. 441a(c) mandated yearly indexing to inflation of
the expenditure limitations established by 2 U.S.C. 441a(b) (the limits
on expenditures by candidates for nomination and election to the office
of President of the United States who accept public funding) and 2
U.S.C. 441a(d) (the limits on expenditures by national party
committees, State party committees, or their subordinate committees in
connection with the general election campaign of candidates for Federal
office). BCRA amends 2 U.S.C. 441a(c) to extend the inflation indexing
to: (1) The limitations on contributions made by persons under 2 U.S.C.
441a(a)(1)(A) (contributions to candidates) and 441a(a)(1)(B)
(contributions to national party committees); (2) the bi-annual
aggregate contribution limits applicable to individuals now found at 2
U.S.C. 441a(a)(3); and (3) the limitation on contributions made to U.S.
Senate candidates by certain political party committees at 2 U.S.C.
441a(h). 2 U.S.C. 441a(c)(1)(B). Under the statute, the adjustments for
inflation for 2 U.S.C. 441a(a)(1)(A), 441a(a)(1)(B), 441a(a)(3) and
441a(h) are to be made only in odd-numbered years and such increases
are to be in effect for the 2-year period beginning on the first day
following the date of the general election in the preceding year and
ending on the date of the next regularly scheduled general election. 2
U.S.C. 441a(c)(1)(C).
Former 11 CFR 110.9(c), which described the expenditure limits
subject to inflation indexing, did not include any of the new inflation
indexing discussed above. In order to address the price indexing for
the new contributions and expenditures limitations in a comprehensive
manner, the Commission is adding new Sec. 110.17 to track the changes
to 2 U.S.C. 441a(c).
1. 11 CFR 110.17(a) Price Index Increases for Party Committee
Expenditure and Presidential Candidate Expenditure Limitations
New Sec. 110.17(a) replaces and restates, with some minor
rewording, former section 110.9(c) regarding the price index increases
that apply to the political party committee and Presidential candidate
spending limits established by 11 CFR 110.7 and 110.8. However,
paragraph (a) contains one important change from former section 11 CFR
110.9(c). Section 110.9(c) had incorrectly stated that the expenditure
limitations established by Sec. Sec. 110.7 and 110.8 would be
increased by the annual percent difference of the price index, as
certified to the Commission by the Secretary of Labor. Section 441a(c)
of the Act does not use an annual percent difference of the price index
to calculate the increases. Instead, it requires the use of the percent
difference between the price index for the 12 months preceding the
beginning of the calendar year in which the change is made and the base
period. For the party committee expenditures limitations and the
Presidential candidate expenditures limitations, the base period is
calendar year 1974, with each change remaining in effect for a calendar
year. Consequently, paragraph (a) of new 11 CFR 110.17 correctly states
the standard to be applied and deletes the term ``annual'' from the
regulation. The Commission received no comment on this change.
2. 11 CFR 110.17(b) Price Index Increases for Contributions by Persons,
by Political Party Committees to Senatorial Candidates, and the Bi-
Annual Aggregate Contribution Limitation for Individuals
As noted above, BCRA increased the number of contribution
limitations now subject to price index increases. 2 U.S.C.
441a(c)(1)(B). New 11 CFR 110.17(b) tracks BCRA by providing that the
following contribution limits will be indexed to inflation: 11 CFR
110.1(b)(1) (limits for persons contributing to candidates and
authorized political committees); 11 CFR 110.1(c)(1) (limits for
contributions made to national party committees); 11 CFR 110.2(e)
(limits for contributions made by party committees to Senatorial
candidates); and 11 CFR 110.5 (bi-annual aggregate contribution limits
for individuals). New Sec. 110.17(b)(1) specifies that these
contribution limitations will be increased during odd-numbered years
and that the increased limit would be in effect for a two-year period.
The NPRM raised the issue of the interaction between the statutory
provision that indexes certain contribution limits, 2 U.S.C.
441a(c)(1)(C), and the various contribution limits themselves.
Particular focus was centered on the retroactive effective date in the
indexing provision as it relates to the two calendar year-based
aggregate contribution limit of 2 U.S.C. 441a(a)(3).
In the NPRM, the Commission proposed at 11 CFR 110.5(b)(3) to
interpret the statute in a way that required donors to aggregate
contributions using the two-year period referenced in the effective
date language of the indexing provision, rather than the 'January 1 of
odd year through December 31 of even year' time frame of Section
441a(a)(3).
Several commenters, including the Congressional sponsors of BCRA,
urged that the Commission not adopt the proposed approach and instead
apply the calendar year approach set forth in the statutory provision
setting out the contribution limit itself. The commenters noted that
the inflation adjustment language was confusing and its effective date
language stems largely from an intention to assure that the revised
`per election' limit on giving to candidates was revised after each
general election. They urged, in essence, that the Commission simplify
[[Page 69937]]
application of the inflation adjustment provision so that for affected
limits based on calendar year aggregations, the effective date would
only affect the next upcoming calendar year-based period. This would
mean that the inflation adjustments on the limit on contributing to
national parties (2 U.S.C. 441a(a)(1)(B)), the limit on national party
contributions to Senate candidates (2 U.S.C. 441a(h)), and the two-year
limit on aggregate contributions (2 U.S.C. 441a(a)(3)) would only
affect the next calendar-year based period, not the calendar year-based
period when the effective date period technically begins under section
441a(c)(1)(B).
The Commission has decided to adopt the approach suggested by the
commenters. It would be somewhat confusing if the calendar year-based
contribution limits were to be increased in the midst of the calendar
year period involved. Accordingly, the Commission is adopting final
rules that delete the language at proposed 11 CFR 110.5(b)(3), and is
modifying the language at proposed 11 CFR 110.1(c)(1)(ii), 110.2(e)(2),
and 110.5(b)(2) and 110.17(b)(1) to clarify that for the calendar year-
based limits, the indexing changes will only affect the calendar year-
based periods that follow. Please note that the indexing changes for
the `per election' limit at 11 CFR 110.1(b)(1) will still take effect,
pursuant to 11 CFR 110.1(b)(1)(ii), on the day after the general
election and will only affect elections held after that general
election. See discussion above regarding 11 CFR 110.1(b)(3) and Net
Debts Outstanding.
New paragraph (b)(2) of 11 CFR 110.17 establishes that 2001 is the
base year for the calculation of the price index difference. No
comments were received regarding this paragraph. One commenter noted
that while the contribution limits may be increased due to indexing to
inflation, the exact amount of the increase may not be precisely known
or formally published until after January of the odd-numbered year. The
commenter urged that the Commission establish a ``safe harbor'' to deal
with these circumstances. This commenter suggested allowing political
committees to receive contributions in excess of previous contributions
limits while granting a period of time after the publication of the new
limits to refund ``de minimis excessive contributions'' without
triggering enforcement consequences.
The Commission believes that the creation and implementation of
this approach would be problematic. Determining or defining what
amounts should be treated as de minimis poses difficulties. In the
discussion regarding net debts outstanding and increased contribution
limits, the Commission noted the confusion that would exist if multiple
contribution limits attached to the same election. Similarly, allowing
political committees to determine what amounts to accept in
anticipating the indexing adjustments would also create confusion and,
in effect, multiple contribution limits. The operation of a safe harbor
would, therefore, be administratively challenging and could also
undermine the contribution limits. Also, during times when inflation is
low, it is possible that there would be no increase in certain limits
due to the operation of the rounding provisions. See the Explanation
and Justification for new 11 CFR 110.17(c) below. For these reasons,
the Commission has determined that the acceptance of ``de minimis''
excessive contributions is not appropriate and is not included in the
final rules.
3. 11 CFR 110.17(c) Rounding of Price Index Increases
A further change in 2 U.S.C. 441a(c) is the introduction of a
rounding provision for all the amounts that are increased by the
indexing to inflation in 2 U.S.C. 441a (including the Presidential
expenditure limits at 2 U.S.C. 441a(b) and coordinated party spending
limits at 2 U.S.C. 441a(d)). If the inflation--adjusted amount is not a
multiple of $100, it is rounded to the nearest multiple of $100. 2
U.S.C. 441a(c)(1)(B)(iii). New section 110.17(c) implements the new
rounding provision found at 2 U.S.C. 441a(c)(B)(iii). This final rule,
which is identical to the proposed rule, did not draw any comments.
4. 11 CFR 110.17(d) Definition of Price Index
New Sec. 110.17(d) tracks 2 U.S.C. 441a(c)(2)(A) by specifically
defining the ``price index'' as the average over a calendar year of the
Consumer Price Index (all items--United States city average) published
by the Bureau of Labor Statistics. The Department of Labor computes the
CPI using two population groups: All Urban Consumers (CPI-U) and
Clerical Workers (CPI-W). The CPI-U represents approximately 87% of the
total United States population while the CPI-W, a subset of the CPI-U,
represents 32% of the total United States population.\3\ While neither
the FECA nor BCRA specifies which population group is to be used, the
Commission has historically used the more inclusive CPI-U since that
appears to be the best method to calculate changes in the affected
limitations. The Commission received one comment supporting the use of
the CPI-U and no comments supporting the use of the CPI-W. Therefore,
for the reasons identified above, the Commission will continue to use
the CPI-U when calculating the percent change in the Consumer Price
Index.
---------------------------------------------------------------------------
\3\ The CPI published by the Department of Labor may be found at
http://www.bls.gov/cpi/home.htm.
---------------------------------------------------------------------------
5. 11 CFR 110.17(e) Publication of Price Index Increases
New Sec. 110.17(e) in the final rules states that the Commission
will announce the amount of the adjusted expenditure and contribution
limitations in the Federal Register and on the Commission's Web site.
The Commission received one comment supporting this provision and none
opposing it.
6. Application of the First Increase Due to Percent Changes in the
Price Index
The increased contribution limits of 2 U.S.C. 441a(a)(1)(A) and
(B), 441a(a)(3), and 441a(h) apply to contributions made on or after
January 1, 2003. However, under the interpretation outlined above, 2
U.S.C. 441a(c)(1)(C) requires that these same contribution limits be
increased through indexing for inflation in odd-numbered years with the
increase in effect starting with the day following the last general
election in the previous year. This could imply that the initial
contribution limits authorized by BCRA to take legal effect on January
1, 2003 should also be increased by the difference in the price index.
Several comments, including one from the Congressional sponsors of
BCRA, disagreed with this interpretation and instead urged that the
first increase in the limits should occur in 2005 and take effect in
November 3, 2004, which is the day after the general election.
One comment noted that it was legally impossible for the indexing
provision to be given their full effect in 2003. According to the
commenter, the new contribution limits are effective on or after
January 1, 2003. For the indexing provisions to be given a full effect
in 2003, any increase in the contribution limit would be retroactively
applied, making the effective date November 6, 2002, rather than the
statutorily mandated effective date of January 2, 2003. Even though the
legislative history is otherwise silent on this point, this legal
impossibility strongly implies that these provisions were intended to
be applied first in 2005. After considering these
[[Page 69938]]
comments, the Commission agrees that the indexing provisions should be
first applied in 2005.
11 CFR 110.19 Contributions and Donations by Minors
1. Introduction
BCRA prohibits individuals who are 17 years old and younger
(minors) from making contributions to Federal candidates and
contributions and donations to committees of political parties. See 2
U.S.C. 441k. Senator McCain, a primary sponsor of BCRA, stated during
the Senate debate on the legislation that the prohibition on
contributions by minors ``restores the integrity of the individual
contribution limits by preventing parents from funneling contributions
through their children, many of whom are simply too young to make such
contributions knowingly.'' 148 Cong. Rec. S2145-2146 (daily ed. March
20, 2002).
The final rules at new 11 CFR 110.19 implement BCRA's prohibitions
on contributions and donations by minors at 2 U.S.C. 441k. Because 2
U.S.C. 441k expressly prohibits only contributions by minors to
candidates and contributions and donations by minors to committees of
political parties, contributions by minors to other types of political
committees, such as separate segregated funds and non-connected
political committees, will continue to be governed by the provisions of
the pre-BCRA regulations. These regulations are being moved from former
11 CFR 110.1(i)(2) to 11 CFR 110.19(d).
2. 11 CFR 110.19(a) Contributions to Candidates
Paragraph (a) of 11 CFR 110.19 prohibits contributions by minors to
Federal candidates. The paragraph specifies that the prohibition on
contributions by minors to Federal candidates includes contributions to
a candidate's principal campaign committee, to any other authorized
committee of that candidate, and to any entity directly or indirectly
established, financed, maintained or controlled by one or more Federal
candidates.
The Commission sought comment on whether prohibiting contributions
by minors to entities directly or indirectly established, financed,
maintained or controlled by one or more Federal candidates is within
the scope of 2 U.S.C. 441k. The only commenter to address this issue
supported prohibiting minors' contributions to such entities, opining
that the prohibition would further BCRA's purpose of ensuring that
contribution limits are not evaded by a parent funneling money through
a child. The Commission agrees.
The Commission also sought comment in the NPRM as to whether the
regulations should make clear that the relevant time for determining
whether a minor has made a prohibited contribution or donation is the
age of the minor at the time he or she makes a contribution. No
comments were received on this issue. The final rules do not include a
separate provision addressing this point because reference in the rules
to 11 CFR 110.1(b)(6), which addresses when a contribution is made,
provides sufficient clarification.
3. 11 CFR 110.19(b) Contributions and Donations to Committees of
Political Parties
New 11 CFR 110.19(b) implements BCRA's prohibition on contributions
and donations by minors to ``a committee of a political party.'' The
proposed rules at 11 CFR 110.19(b) interpreted this provision as a
prohibition on contributions and donations to national, State,
district, and local party committees. In light of BCRA's language
prohibiting donations as well as contributions to political party
committees, the Commission proposed to interpret 2 U.S.C. 441k to
prohibit minors from making any donations whatsoever to State,
district, and local party committees, including to their non-Federal
accounts. In the alternative, the Commission sought comment on whether
a narrower construction of BCRA's prohibition on donations to State,
district, and local party committees was warranted. Specifically, the
Commission sought comment on prohibiting donations by minors to the
extent such amounts are used to conduct activities affecting Federal
elections but to permit these donations if used for exclusively non-
Federal purposes to the extent permitted by State law.
Two commenters addressed this issue. One commenter stated that
BCRA's prohibition should not extend to minors' contributions to State,
district, and local party committees because the purpose of the
provision is to prevent parents from evading federal contribution
limits by funneling contributions to their children. The commenter
argued that aside from limits on Levin funds, which can be used to
finance certain ``Federal election activities'' by State, district, and
local parties, BCRA does not limit funds given to State, district, and
local parties. The same commenter also rejected the narrower
construction described in the NPRM that would prohibit minors'
donations to State, district, and local party committees only to the
extent that they were to finance activities affecting Federal
elections. The commenter argued that concerns that minors'
contributions might be used as Levin funds should be addressed in a
rulemaking addressing those funds.
A second commenter stated that though contributions by minors to
State, district, and local party committees do not risk circumvention
of federal contribution limits ``since there are no such limits,'' the
statutory language at 2 U.S.C. 441k does not limit the prohibition on
contributions or donations by minors to federal accounts of State,
district, and local party committees. Other commenters, including the
Congressional sponsors of BCRA, did not directly address the issue of
minors' donations to political party committees but noted that minors
may continue to make donations directly to State and local candidates
to the extent permitted under State law.
The final rule at 11 CFR 110.19(b)(1) follows the proposed rule by
prohibiting contributions and donations by minors to national, State,
district, and local committees of a political party. Further, the
Commission believes that interpreting the prohibition on donations to
encompass both non-Federal accounts and Federal accounts of political
party committees is appropriate. Interpreting the phrase ``committee of
a political party'' to encompass only national party committees would
render the prohibition on ``donations'' meaningless because national
party committees must no longer accept non-Federal funds under 2 U.S.C.
441i. Similarly, the prohibition on ``donations'' would have no meaning
if the minor's prohibition encompassed only Federal accounts of party
committees since funds accepted by Federal accounts, used for the
purpose of influencing Federal elections, are considered to be
``contributions'' not ``donations.'' Thus, BCRA preempts State law to
the extent that State law permits minors to make donations to State,
district, and local party committees.
Prohibiting donations by minors to all committees of State,
district, and local parties also has a Federal purpose because
donations of non-Federal funds to State parties could otherwise be
used, in part, to finance Federal election activities, as defined at 2
U.S.C. 431(20). See also, 11 CFR 100.24(a) and (b) in Final Rules for
Prohibited and Excessive Contributions: Non-Federal Funds or Soft
Money, 67 FR 49,064, 49,110-49,111 (July 29, 2002). These activities,
including voter registration and get-out-the vote activities conducted
within a
[[Page 69939]]
specific time frame, are required under BCRA to be funded either wholly
with Federal funds or with a combination of Federal funds and another
category of funds regulated by BCRA known as ``Levin funds.'' See 67 FR
at 49,098 and 49,125-49,126 (11 CFR 300.32(c) and 300.33(a) and
accompanying Explanation and Justification). Although Levin funds may
be raised from sources permitted under State law, BCRA limits the
amount of such funds to $10,000 per donor. Thus, to the extent that
donations to State, district, and local party committees may be used
for such activities, BCRA limits those donations. Prohibiting minors
from making donations serves to prevent parents from circumventing
those donation limits through minor children, just as the prohibition
on contributions by minors serves to prevent evasion of the
contribution limits.
The Commission has decided not to include in the final rules the
alternative suggested in the NPRM that would permit minors to make
donations to non-Federal accounts of State, district, and local party
committees if the recipient committee can show by establishing separate
accounts or through a reasonable accounting method that the donation is
used for exclusively non-Federal purposes. As discussed above, the
statutory language is broad and does not distinguish between Federal
and non-Federal accounts of party committees. Additionally, this
approach would require State, district, and local party committees to
track yet another type of donation or establish another account in
addition to those it already tracks or maintains, thereby resulting in
an additional administrative burden to those groups. See, e.g., 67 FR
at 49,093 (Explanation and Justification for 11 CFR 300.30).
Accordingly, as interpreted by the final rules, BCRA preempts State
law to the extent that State law permits individuals under 18 years of
age to donate funds to State, district, and local party committees.
This preemption may have little practical effect in some states. As
pointed out in the NPRM, many states treat contributions by minors as
contributions by their parent(s) or guardian(s). See for example, Kan.
Stat. Ann. 25-4153(c) and Okla. Stat. t. 74, 257:10-1-2(a)(1) and
(h)(2).
Paragraph (b)(2) of the final rules is unchanged from the proposed
rules. It prohibits contributions and donations by minors to entities
directly or indirectly established, financed, maintained or controlled
by a committee of a national, State, district or local political party.
No comments were received on this provision.
As discussed above in the Explanation and Justification for
paragraph (b)(1), the Commission interprets the prohibition on
contributions and donations by minors to committees of political
parties to include accounts of party committees and entities
established, financed, maintained or controlled by these party
committees, including their Federal and non-Federal accounts.
Consequently, new paragraph (b)(3) of the final rules makes clear that
the prohibition on contributions and donations by minors encompasses
donations to any account of a committee or entity described in
paragraphs (b)(1) and (b)(2) of this section.
4. Contributions and Donations by Minors for Certain Runoffs, Recounts
and Election Contests
BCRA provides that its prohibition on contributions and donations
by minors to candidates and political parties does not apply with
respect to runoff elections, recounts or election contests resulting
from elections held prior to November 6, 2002. See 2 U.S.C. 431 note.
Proposed 11 CFR 110.1(i)(3) addressed this provision. No commentes were
received on it. The final rules do not address 2 U.S.C. 431 note
because the Commission has concluded that regulatory provisions for it
are unnecessary.
5. 11 CFR 110.19(c) Contributions to Political Committees That Are Not
Authorized Committees or Committees of Political Parties
Because 2 U.S.C. 441k specifically prohibits contributions by
minors to candidates and political party committees and not to other
types of unauthorized committees, proposed 11 CFR 110.19(c)
contemplated that minors could continue to make unearmarked
contributions to unauthorized political committees except political
party committees, in accordance with the requirements of 11 CFR
110.1(i)(2), the prior rules governing contributions by minors. The
Commission sought comment in the NPRM as to whether 2 U.S.C. 441k could
be interpreted to also prohibit contributions by minors to other
political committees such as separate segregated funds and non-
connected political committees. None of the commenters addressed this
issue.
The final rules adhere to the plain language of 2 U.S.C. 441k in
permitting minors to continue to make contributions to these other
political committees under the existing rules. Thus, the final rules at
11 CFR 110.19(c)(1) through (c)(3) restate the regulations governing
contributions by minors, which are being moved from 11 CFR 110.1(i)(2)
and amended to reflect that they now govern unearmarked contributions
by minors to unauthorized political committees other than political
party committees. Paragraph (c) provides that an individual under 18
years of age may make contributions in accordance with the contribution
limits set out at 11 CFR 110.1 and 110.5, if all of the following
conditions are satisfied: (1) The minor voluntarily and knowingly makes
the decision to contribute; (2) the funds, goods or services
contributed are owned or controlled exclusively by the minor; (3) the
contribution is not made from the proceeds of a gift given to the minor
to make a contribution or is not in any way controlled by an individual
other than the minor; and (4) the contribution is not earmarked or
otherwise directed to one or more Federal candidates or political
committees or organizations described in Sec. Sec. 110.19(a) and (b).
The reorganization of the final rule clarifies that the types of
committees to which a minor may continue to contribute are political
committees not described in Sec. Sec. 110.19(a) and (b), provided that
the contribution is not earmarked to a candidate, committee or
organization described in Sec. Sec. 110.19(a) and (b). The final rules
also clarify that non-earmarked contributions to these other political
committees will continue to be governed by the existing regulations
governing contributions by minors. No comments were received on this
provision.
6. 11 CFR 110.19(d) Volunteer Services
Paragraph (d) of the final rules makes clear that minors are not
prohibited from volunteering their services to Federal candidates,
political party committees or other political committees, in accordance
with legislative intent. See 148 Cong. Rec. S2146 (daily ed. March 20,
2002) (statement of Senator McCain). The final rule is identical to
proposed 11 CFR 110.19(d). The Commission received one comment
addressing volunteer services. The commenter agreed that under 2 U.S.C.
441k minors could continue to participate in any type of political
campaign by volunteering.
7. 11 CFR 110.19(e) Definition of Directly or Indirectly Establish,
Maintain, Finance, or Control
The final rule at 11 CFR 110.19(e) is similar to the language of
the proposed rule in 11 CFR 110.19(e). It refers the reader to 11 CFR
300.2(c) for the definition of ``directly or indirectly establish,
maintain, finance, or control.'' For the definition, see Final Rules
for
[[Page 69940]]
Excessive and Prohibited Contributions: Non-Federal Funds or Soft
Money, 67 FR at 49,121. The Commission believes that it is preferable
to use the same definition of a term throughout the BCRA regulations to
promote consistency and avoid confusion where, as here, doing so would
not undermine the purpose of the statute. One commenter expressed
support for using the same definition of the term throughout the BCRA
regulations, although the same commenter noted that it had disagreed
with the definition of ``directly or indirectly establish, maintain,
finance, or control'' contained in 11 CFR 300.2(c) in its comments on
the NPRM on Prohibited and Excessive Contributions: Non-Federal Funds
or Soft Money.
8. Proposed Exemption for Emancipated Minors
The Commission also sought comment in the NPRM as to whether minors
who are emancipated under State law should be exempt from the
prohibition. Under many State laws, a petition for a judicial
declaration or order of emancipation requires consideration as to
whether a minor manages his or her own financial affairs or is
financially self-supporting. Emancipation also has the effect, in most
cases, of conferring upon a minor the rights and responsibilities of an
adult, and relieving a child of parental control, thereby diminishing
the possibility that a parent would funnel contributions or donations
through an emancipated minor child.
Five commenters addressed this issue. Four commenters, including
the congressional sponsors of BCRA, expressed support for such an
exemption. These commenters agreed that the risk of parental evasion of
the contribution limits through an emancipated minor was either not
present or diminished. The fifth commenter agreed that the risk of
parental circumvention of contribution limits was less of a concern in
the case of an emancipated minor. However, this commenter argued that
the statutory language clearly prohibited contributions by minors based
solely on age.
The Commission has decided not to include an exemption for
emancipated minors in the final rules given the plain language of 2
U.S.C. 441k, which prohibits certain contributions and donations by
minors on the basis of age alone and not on a minor's legal or
financial independence from a parent.
11 CFR 110.20 Prohibition on Contributions, Donations, Expenditures,
Independent Expenditures and Disbursements by Foreign Nationals
As indicated by the title of section 303 of BCRA, ``Strengthening
Foreign Money Ban,'' Congress amended 2 U.S.C. 441e to further
delineate and expand the ban on contributions, donations, and other
things of value by foreign nationals. BCRA expressly applies the ban to
contributions and donations solicited, accepted, received, or made
directly or indirectly in connection with State and local, as well as
Federal office. 2 U.S.C. 441e(a)(1)(A) and (a)(2). Furthermore, the
prohibition applies to: (1) Contributions and donations to committees
of political parties; (2) donations to Presidential inaugural
committees; (3) donations to party committee building funds; (4)
disbursements for electioneering communications; (5) expenditures; and
(6) independent expenditures. 2 U.S.C. 441e(a)(1)(B) and (C); 36 U.S.C.
510. Consequently, the Commission is amending 11 CFR part 110 to
implement the revised statutory provision. The final rules remove and
reserve 11 CFR 110.4(a), the former regulation that addressed foreign
nationals. New Sec. 110.20 implements BCRA's prohibition on
contributions, donations, expenditures, independent expenditures, and
disbursements by foreign nationals. This new section also implements
the provision in 2 U.S.C. 441e(a)(2) that prohibits persons from
knowingly soliciting, accepting, or receiving contributions and
donations from foreign nationals, and adds prohibitions against the
knowing provision of substantial assistance with foreign national
contributions or donations, including, but not limited to, serving as a
conduit or intermediary. ``Foreign national'' and ``knowingly'' are
defined for purposes of this section.
1. 11 CFR 110.20(a)(1) and (2) Definitions of ``Disbursement'' and
``Donation''
New Sec. 110.20(a) defines for purposes of this section several
words or phrases that are either not defined in other sections of the
Act or that are defined elsewhere so as to cover only Federal
elections. Two of these, namely ``disbursement'' and ``donation'' were
not defined in the proposed rules; however, comments were sought as to
whether the final rules should include definitions of these terms.
Although the Commission did not receive any comments regarding a
definition of ``disbursement,'' it believes additional guidance to be
necessary in light of the use of ``disbursement'' in BCRA in the
context of the foreign national prohibition, and its corresponding and
repeated use in new Sec. 110.20. Thus, the final rule at 11 CFR
110.20(a)(1) incorporate the definition of this term in new 11 CFR
300.2(d). One commenter urged the Commission to import the definition
of ``donation'' in 11 CFR 300.2(e) into Sec. 110.20(a). For the same
reason that the Commission considers it necessary to provide guidance
as to ``disbursement'' in Sec. 110.20, it agrees that Sec. 110.20(a)
should also include a definition of ``donation.'' Consequently,
paragraph (a)(2) incorporates the definition of ``donation'' at 11 CFR
300.2(e) into Sec. 110.20.
2. 11 CFR 110.20(a)(3) Definition of ``Foreign National''
Section 110.20(a)(3), which defines ``foreign national,'' generally
follows the definition at former 11 CFR 110.4(a)(4). Section
110.20(a)(3)(i) incorporates ``foreign principal'' as defined in 22
U.S.C. 611(b) within the definition of ``foreign national.'' Paragraph
(a)(3)(ii) includes non-citizens but excludes permanent residents of
the United States as defined in 8 U.S.C. 1101(a)(20). Paragraph
(a)(3)(iii) narrows the definition of ``foreign national'' by excluding
both citizens of the United States and, in keeping with BCRA, United
States nationals pursuant to 8 U.S.C. 1101(a)(22).\4\ The final rule is
the same as the language in proposed 11 CFR 110.20(i). No comments
addressing this definition were received.
---------------------------------------------------------------------------
\4\ ``National of the United States'' is defined as ``(A) a
citizen of the United States, or (B) a person who, though not a
citizen of the United States, owes permanent allegiance to the
United States.'' 8 U.S.C. 1101(a)(22). The addition of (B) covers
residents of American Samoa.
---------------------------------------------------------------------------
3. 11 CFR 110.20(a)(4) and (a)(5) Definition of ``Knowingly''
Both the former and the current foreign national prohibitions in 2
U.S.C. 441e are silent as to what degree of knowledge, if any, a person
soliciting, accepting, or receiving a contribution or donation must
have regarding the foreign national status of the contributor or donor
to establish a violation of the statute. In contrast, some other
prohibitions in FECA and BCRA expressly provide that knowledge is an
element of the violation.\5\
---------------------------------------------------------------------------
\5\ 5 E.g., 2 U.S.C. 441a(f) ``No candidate or political
committee shall knowingly accept any contribution * * * in violation
of the provisions of this section * * *.'' (Emphasis added).
---------------------------------------------------------------------------
The Commission in recent years has addressed the issue of required
knowledge in a number of enforcement matters arising under former 2
U.S.C.
[[Page 69941]]
441e(a). See, for example, Matter Under Review (``MUR'') 4530, et al.
In this and related matters, the Commission confronted questions of
whether the statute or the First Amendment requires a person to have
knowledge of a contributor or donor's foreign national status in order
to be in violation of the foreign-national prohibition, and, if so,
what degree of knowledge is required.
The Commission considered, for example, whether actual knowledge at
the time of a solicitation or receipt is a prerequisite for a
violation, or whether the person has a duty of inquiry when
circumstances would raise the suspicions of an objective observer.
Another alternative with regard to the level of knowledge required
would be to assume, given the silence in both FECA and BCRA on this
question, that Congress intended this to be a strict liability statute.
The fact that Congress has used ``knowingly'' in other provisions of
FECA and BCRA, but did not include this standard with regard to the
solicitation, acceptance, or receipt of foreign national contributions
and donations, could be construed as intent not to require knowledge in
this regard.
The U.S. Supreme Court has found that `` `the meaning of the
statute must, in the first instance, be sought in the language in which
the act is framed, and if that is plain, * * * the sole function of the
courts is to enforce it according to its terms'.'' Sutherland Statutory
Construction 40:01, quoting Caminetti v. U.S., 242 U.S. 470, 485
(1917). However, one exception to this ``plain meaning rule'' is that
the rule should not be applied when an injustice would result.
Sutherland Statutory Construction 47:25. Based upon its prior
enforcement experience with political committees, and, in particular,
with the frequent involvement of volunteers in the solicitation and
receipt of contributions and donations, the Commission has determined
that a knowledge requirement may produce a less harsh result than a
strict liability standard.
The final rules at 11 CFR 110.20(a)(4), like the proposed rules,
contain three standards of knowledge, any one of which would satisfy
the knowledge requirements: (1) Actual knowledge; (2) reason to know;
and (3) the equivalent of willful blindness. Additionally, both the
proposed rules and the final rules in paragraph (a) contain a list of
facts that would lead a reasonable person to conclude that, or inquire
as to whether, a contribution or donation was made by a foreign
national.
The NPRM sought comments as to whether the additions of a knowledge
requirement and of specific standards of knowledge were appropriate and
whether there were other potential facts that should be added to those
proposed as circumstances that should trigger an inquiry. Further,
comments were requested as to whether the regulation should expressly
require that recipient candidates, political committees and other
organizations actively seek information as to the citizenship of
contributors and donors whenever one of the factors listed is at issue.
Several of the commenters opposed a strict liability standard, but
supported the inclusion of explicit knowledge requirements in the
rules. However, some commenters opposed as too high the standard in
proposed paragraph (g)(4)(ii) that would find knowledge when a person
was aware of facts that would lead a reasonable person to conclude that
there is ``a substantial probability'' the source of certain funds is a
foreign national; one of these commenters suggested that a
``preponderance of the evidence'' or ``more likely than not''standard
would be more appropriate. Divergent views were expressed as to the
inclusion of a duty to inquire about the nationality of a donor, with
one commenter urging reliance upon current 11 CFR 103.3 rather than
upon the addition of an affirmative duty to inquire,\6\ and another
arguing that a ``reasonable inquiry'' should include asking
``directly'' whether or not a donor is a foreign national.
---------------------------------------------------------------------------
\6\ The Commission's regulations at 11 CFR 103.3(b) require that
political committee treasurers examine all contributions received
for evidence of illegality. If a contribution presenting genuine
questions as to legality is deposited, the treasurer has an
affirmative duty to investigate the contribution and use best
efforts to determine the legality of the contribution. 11 CFR
103.3(b)(1). If, despite such due diligence, the treasurer is unable
to determine the legality of the contribution within 30 days of
receipt, the treasurer is required to refund the contribution to the
contributor. Id.
---------------------------------------------------------------------------
As is also discussed below with regard to new section 110.20(g) and
(h), the final rules make knowledge an element of any violation of 2
U.S.C. 441e arising from the solicitation, acceptance, or receipt of
foreign national contributions and donations, or that results from the
substantial provision of assistance in the solicitation, making,
acceptance, or receipt of such contributions and donations. The final
rules at 11 CFR 110.20(a)(4) provide a definition of ``knowingly,''
whereby satisfaction of any one of three standards will establish
knowledge for purposes of 11 CFR 110.20(g) and (h). Section
110.20(a)(5) contains a list of facts that would lead a reasonable
person to conclude, or inquire as to whether, a contribution or
donation was made by a foreign national, as discussed below.
In the final rules, the first standard of knowledge at paragraph
(a)(4)(i) is that of actual knowledge of the source of funds solicited,
accepted, or received. The second standard at paragraph (a)(4)(ii)
requires awareness on the part of the person soliciting, accepting, or
receiving a contribution or donation of certain facts that would lead a
reasonable person to conclude that there is a substantial probability
that the contribution or donation comes from a foreign source.
Substantial probability means that there is a considerable likelihood
that the donor is a foreign national. See Black's Law Dictionary, Fifth
Edition, 1979, and the Random House Dictionary of the English Language,
1987. This is, in effect, a ``reason to know'' standard under which a
person should have acted as though a fact existed until it could be
proven otherwise. See Restatement (Second) of Agency, sec. 9, cmt. d
(1958).
The third standard of knowledge at paragraph (a)(4)(iii) is
satisfied when the person soliciting, accepting, or receiving a
contribution or donation is, or becomes aware of, facts that would lead
a reasonable person to inquire as to whether the source of the funds
solicited, accepted, or received is a foreign national. This third
standard is in effect willful blindness, which is applicable to
situations in which a known fact should have prompted a reasonable
inquiry, but did not.
Each of the three paragraphs focus on the source of the funds at
issue. The source of funds may or may not be the putative contributor
or donor who provides a check or other negotiable instrument to a
candidate or committee; rather, the source would be the person or
persons who originated the contribution or donation, even if it passed
through the hands or accounts of a U.S. citizen or permanent resident.
Paragraph (a)(5) sets forth categories of facts that are intended
to be illustrative of the types of information that should lead a
recipient to question the origin of a contribution or donation under
paragraphs (a)(4)(ii) or (iii). These consist of: (i) The use of a
foreign passport or passport number; (ii) the provision of a foreign
address; (iii) the use of a check or other written instrument drawn on
a foreign bank or a wire transfer from a foreign bank; or (iv)
contributors or donors who reside abroad. Failure to conduct a
reasonable inquiry in the face of any of these facts constitutes
evidence of a knowing violation of the Act.
[[Page 69942]]
4. 11 CFR 110.20(a)(6) Definition of ``Solicit''
The NPRM sought comments as to whether the Commission should
incorporate into the regulations at 11 CFR 110.20 the definition of
``solicit'' at 11 CFR 300.2(m), whether it should leave the term
undefined, or whether it should give the term a more expansive or a
narrower reading in this context. The term ``to solicit'' is defined in
11 CFR 300.2(m) 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.'' Prohibited and Excessive
Contributions: Non-Federal Funds or Soft Money; Final Rule, 67 FR
49,064-49,122 (July 29, 2002).
Two of the comments received strongly urged the Commission not to
incorporate the definition of ``solicit'' at 11 CFR 300.2(m), deeming
it too narrow. One such commenter characterized the definition as
``radically underinclusive'' and inferred that it would allow ``a broad
range of solicitations to escape [regulation,]'' and, if adopted in
part 110, would allow candidates and officials to ``suggest or request
that foreign nationals make contributions to their campaigns.'' In
promulgating 11 CFR 300.2(m), however, the Commission was advised of
the need for clear definitions to avoid ambiguity, vagueness and
confusion as to what activities or conversations would constitute
solicitations. 67 FR at 49,086-49,087 (July 29, 2002). By using the
term ``ask,'' the Commission defined ``solicit'' to require some
affirmative verbalization or writing, thereby providing members of
Congress, candidates and committees with an understandable standard. It
is the impressionistic or subjective aspects of the term ``suggest''
and ``request'' that the Commission rejected in the Title I rulemaking.
The Commission also notes that while the terms ``suggest'' or
``request'' recommended by one commenter encompass a wide array of
activity, it is not clear that they would cover more direct
verbalizations or writings captured by terms such as ``demand,''
``instruct,'' or ``tell,'' which the Commission believes are captured
by the term ``ask.''
The Commission is aware that the decision to define ``solicit'' as
``ask'' rather than as ``request, suggest or recommend'' (proposed by
the Commission staff) was controversial. The Commission notes that
``request'' and ``ask'' are essentially synonymous. (See American
Heritage College Dictionary, 34d Edition: ``request'' is defined as
``1. To express a desire for; ask for. 2. To ``ask'' (a person) to do
something;'' ``ask'' is defined as ``* * * 4. To make a request of or
for.'') The Commission was unwilling to use the far more expansive term
``suggest,'' for concern that such a vague term could subject persons
to investigation and prosecution based on highly subjective judgments
about whether a particular remark or action constituted a
``suggestion.'' The definition of ``solicit'' is intended to include
``a palpable communication intended to, and reasonably understood to,
convey a request for some action * * *'' The Democratic National
Committee, the Democratic Senatorial Campaign Committee, and the
Democratic Congressional Campaign Committee, Comments on Coordinated
and Independent Expenditures, 3 (Oct. 11, 2002).
In addition, the basic canons of statutory construction argue
strongly against using the phrase ``request or suggestion'' to define
``solicit.'' BCRA, and FECA prior to passage of BCRA, use the term
``request or suggestion'' in the definition of ``independent
expenditure'' (See BCRA section 211, 2 U.S.C. 431(17)) and in the
reciprocal definition of ``coordination'' (See BCRA section 213, 2
U.S.C. 441a(a)(7)(B)). ``We find the contrasting language to be
particularly telling. Where Congress includes particular language in
one section of a statute but omits it in another * * * it is generally
presumed that Congress acts intentionally and purposely in the
disparate inclusion or exclusion.'' (FEC v. NRA Political Victory Fund,
513 U.S. 88, 95 (1994) quoting Keene Corp. v. United States, 508 U.S.
200, 208 (1993) (internal quotations and citation omitted).
The Commission believes that the need to craft clear and
understandable definitions marking the boundary between permissible and
impermissible solicitations by candidates, parties, or their agents in
the realm of non-Federal funds, applies equally to the realm of foreign
national funds. A single definition has the added benefit of reducing
confusion among those who solicit campaign funds often, and from a
variety of individuals. Accordingly, the term ``solicit'' in the final
rules at 11 CFR part 110.20 has the same meaning as in 11 CFR 300.2(m).
5. 11 CFR 110.20(a)(7) Safe Harbor for Knowledge Standard
The Commission in the NPRM also sought comment on whether it should
create safe harbors within which political committees would be deemed
to have satisfied their duty to investigate contributions or donations
in order to confirm that they do not come from foreign sources. One
commenter requested that the Commission expressly create such a safe
harbor if ``reasonable efforts'' have been made to follow guidelines in
the regulations.
Whether a person has the requisite knowledge under 11 CFR
110.20(a)(4) and whether a contributor or donor is a foreign national
are often fact-intensive determinations. Given the wide range of
factual situations that could arise, and the likelihood that some
foreign donors or contributors will take steps to conceal the illegal
nature of their actions, it is not possible in all circumstances to
craft appropriate safe harbors to safeguard recipient committees who do
not and cannot know of the illegality while at the same time holding
accountable those who do or should know.
However, the Commission is adopting one narrowly tailored safe
harbor. Under 11 CFR 103.3(b)(1), with respect to contributions that
present ``enuine questions'' that they may come from a foreign source,
political committee treasurers have an affirmative duty to investigate
the contributions and use best efforts to determine the legality of the
contribution. If, despite such due diligence, the treasurer is unable
to determine the legality of the contribution within 30 days, the
treasurer is required to refund the contribution to the contributor.
Id. During the last several years, many political committees and other
organizations, out of an abundance of caution, have adopted a policy of
requesting and keeping on file copies of U.S. passport papers from all
their contributors who reside outside the United States, or who list a
foreign address, or who make a contribution through a foreign bank. The
Commission believes such prudent practices are appropriate and satisfy
a political committee's affirmative duty to investigate such
questionable contributions. Accordingly, the Commission is creating a
safe harbor at 11 CFR 110.20(a)(7) whereby any person shall be deemed
to have conducted a reasonable inquiry under 11 CFR 110.20(a)(4)(iii)
if he or she seeks and obtains copies of current and valid U.S.
passport papers for U.S. citizens who are contributors or donors who
(i) use a foreign passport or passport number for identification
purposes, (ii) provide a foreign address, (iii) make a contribution or
donation by means of a check or other written instrument drawn on a
foreign bank or by a wire transfer from a foreign bank, or (iv) reside
abroad. See 11 CFR 110.20(a)(5)(i) through (iv). Under those
circumstances, the political committee shall also be deemed to have
satisfied its
[[Page 69943]]
affirmative duty to investigate such contributions under 11 CFR
103.3(b)(1).
Current 11 CFR 103.3(b)(2) provides the steps necessary for a
treasurer who discovers that an illegal contribution has been deposited
to fully remedy the situation; this provision applies ``to
contributions from foreign nationals * * * when there is no evidence of
illegality on the face of the contributions themselves.'' Explanation
and Justification, 52 FR 760, 768-69 (Jan. 9, 1987). In light of 11 CFR
103.3(b)(2), the Commission has concluded that no additional safe
harbor is necessary in this area.
6. 11 CFR 110.20(b) ``Indirectly''
BCRA amends 2 U.S.C. 441e by banning foreign national contributions
and donations, or express or implied promises to make such
contributions or donations, that are made ``directly or indirectly.''
Previously, 2 U.S.C. 441e(a) banned foreign national contributions made
directly ``or through any other person.'' The legislative history of
BCRA does not reveal whether Congress intended ``indirectly'' to have a
broader meaning than ``through any other person,'' the language used in
pre-BCRA 2 U.S.C. 441e(a).
The Commission solicited comments in the NPRM as to whether
``indirectly'' should be construed to have a broader meaning than
``through any other person'' and if so, whether the rules should
explicitly reflect this interpretation by defining ``indirectly.''
Several of the commenters urged the Commission not to interpret
``indirectly'' as having a broader meaning, arguing that there is
nothing in the legislative history to support such a reading, and that
to do so would involve speculation as to Congressional intent.
The NPRM further solicited comments as to whether ``indirectly''
should be interpreted to cover U.S. subsidiaries of foreign
corporations that make non-Federal donations with corporate funds or
that have a separate segregated fund that makes Federal contributions.
Specifically, the Commission sought comment on whether BCRA's new
statutory language prohibits a foreign-controlled U.S. corporation,
including a U.S. subsidiary of a foreign corporation, from making
corporate donations, or from making Federal contributions from a
separate segregated fund, or both.
Numerous comments were received addressing the involvement in
elections of U.S. subsidiaries of foreign corporations, all of which
strongly urged the Commission not to extend the prohibition on foreign
national involvement to the activities of foreign-owned U.S.
subsidiaries. The comment submitted by the BCRA sponsors stated that
Congress in this legislation did not address ``contributions by
foreign-owned U.S. corporations, including U.S. subsidiaries of foreign
corporations.'' A number of the other commenters cited the absence, in
BCRA and in its legislative history, of express Congressional intent to
reach either donations by such corporate entities in state elections,
where permitted by state law, or the involvement of their separate
segregated funds in Federal elections. They stressed the significance
of such silence given the series of Commission advisory opinions over
more than two decades that have affirmed the participation of such
subsidiaries in elections in the United States, either directly in
states where state law permits, or through separate segregated funds
with regard to Federal elections, so long as there is no involvement of
foreign nationals in decisions regarding such participation and so long
as foreign nationals are not solicited for the funds to be used. See
Advisory Opinions 2000-17, 1999-28, 1995-15, 1992-16, 1992-07, 1990-08,
1989-29, 1982-34, 1981-36, 1980-100, and 1978-21. Several commenters
asserted further that the impetus for Congress to amend 2 U.S.C. 441e
in 2002 was the involvement of individual foreign nationals in the
financing of the 1996 presidential election campaign, not the
activities of foreign-owned U.S. subsidiaries.
A number of commenters argued that the use of ``indirectly'' in
BCRA with regard to foreign national contributions and donations
represented only a codification of the Commission's earlier use of this
word in advisory opinions and regulations to prohibit the direct or
indirect involvement of individual foreign nationals in decisions
concerning either corporate donations at the State or local level or
Federal contributions made by separate segregated funds. See Advisory
Opinions 2000-17, 1995-15, 1992-16, 1990-08, and 1989-29, and 11 CFR
110.4(a)(3). A joint comment stressed that Congress had earlier
addressed and rejected a ban on U.S. subsidiary participation, the
House of Representatives in 1998 and the Senate earlier in 1992, and
that this legislative history showed that the use of ``indirectly'' in
BCRA addresses only foreign national involvement in corporate decision-
making.\7\ These comments, plus one received from two members of the
U.S. Senate, argued that, because Congress was thus very familiar with
the U.S. subsidiary issue, any Congressional intent to prohibit such
activity in the context of BCRA would have been addressed in debate and
made explicit in the legislation.
---------------------------------------------------------------------------
\7\ These legislative references are to the histories of the
Congressional Campaign Spending Limit and Election Reform Act of
1992, which was vetoed by the President, and of the Bipartisan
Campaign Reform Act, H.R. 2183, when it was considered by the House
of Representatives in 1998. In 1992, Senator Bentsen offered an
amendment to prohibit federal contributions by the separate
segregated funds of U.S. subsidiaries when such a subsidiary is more
than 50% owned or controlled by a foreign corporation. The amendment
would have changed the definition of ``foreign national'' to include
50% owned or controlled subsidiaries, and would also have applied
the foreign national prohibition to the separate segregated funds of
such subsidiaries.
In response, Senator Breaux offered a substitute amendment that
would have codified (1) the right of U.S. subsidiary employees to
participate in elections through separate segregated funds and (2)
the prohibition in the Commission's regulations against the
participation of foreign nationals, ``directly or indirectly,'' in
decision-making regarding contributions or expenditures made in
connection with elections at all levels and in the administration of
a political committee. The Senate voted to substitute the Breaux
amendment. The commenters stressed the use of ``indirectly'' in the
Breaux amendment and argued that its use in BCRA was for the same
purpose; i.e., the codification of the regulation prohibiting the
participation of foreign nationals in decision-making.
In 1998, the House voted with no opposition for an amendment
introduced by Representative Gillmor and Representative Tanner to
assure the right of a U.S. subsidiary of a foreign owned or
controlled corporation to maintain a separate segregated fund
(``SSF''). An amendment proposed by Representative Kaptur to
prohibit Federal contributions or expenditures by such SSFs was
later modified to address only reporting by U.S. subsidiaries.
---------------------------------------------------------------------------
Several commenters questioned the constitutionality of prohibiting
U.S. employees of foreign-owned subsidiaries from participation in U.S.
elections. They argued that such a ban would discriminate against these
employees on the basis of their employers' parent companies. One
commenter noted that, by definition, U.S. subsidiaries are U.S.
companies. Another asserted that a ban on U.S. subsidiary election-
related activity would be counter to the globalization of financial
activity; yet another argued that it would be counter to NAFTA and
other treaties. One commenter noted possible negative effects upon U.S.
trade associations if certain of their member corporations could not
form separate segregated funds.
The Commission agrees with those who have argued that
``indirectly'' should not be deemed to cover U.S. subsidiaries of
foreign corporations. This agreement is based upon the lack of evidence
of Congressional intent to broaden the prohibition on foreign national
involvement in U.S. elections to cover such entities, and upon the
[[Page 69944]]
substantial policy reasons set forth in the long line of Commission
advisory opinions that have permitted U.S. subsidiaries to administer
separate segregated funds and to make corporate donations for State and
local elections where they are allowed to do so by state law.
The Commission has determined that the activities of U.S.
subsidiaries of foreign corporations are governed by new Sec.
110.20(i), which prohibits involvement of foreign nationals in the
decision-making of separate segregated funds, and of corporations that
plan to make donations in connection with State and local elections
where they are permitted to do so. (See further discussion below.)
Thus, the final rules do not define ``indirectly'' or contain
additional rules pertaining to U.S. subsidiaries of foreign
corporations.
7. 11 CFR 110.20(b) Addition of ``Donation'' in the Foreign National
Ban
In BCRA, Congress added the ``donation'' of funds by foreign
nationals to the existing ban on contributions by foreign nationals. In
1999, 2000, and 2001 the Commission included in its legislative
recommendations to Congress a proposal that 2 U.S.C. 441e be amended to
clarify that the statutory prohibition on foreign national
contributions extends to State and local elections. The Commission
noted, inter alia, that this could be accomplished by changing
``contribution'' to ``donation.''
Congress chose to retain ``contribution'' and to add ``donation''
in BCRA as a prohibited activity. Congress also revised 2 U.S.C. 441e
to delete references to ``elections'' and ``candidates'' for ``any
political office,'' and substituted the broader phrase ``Federal,
State, or local election.'' 2 U.S.C. 441e(a)(1)(A). Through this two-
fold approach, Congress left no doubt as to its intention to prohibit
foreign national support of candidates and their committees and
political organizations and foreign national activities in connection
with all Federal, State, and local elections.
The legislative history indicates that the revision to 2 U.S.C.
441e ``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, including any electioneering
communications. This clarifies that the ban on contributions [by]
foreign nationals applies to soft money donations.'' Statement of Sen.
Feingold, 148 Cong. Rec. S1991-1997 (daily ed. Mar. 18, 2002). The NPRM
proposed a definition of ``election,'' based to some extent on the
definition in 11 CFR 100.2, which drew no comments. This proposed
definition is not included in the final rules. Instead, the wording of
new 11 CFR 110.20 tracks the statutory language in BCRA.
As discussed above, the definition of ``donation'' in 11 CFR
300.2(e) applies to paragraph 110.20(b). Under this provision, both
contributions and donations by foreign nationals are prohibited.
8. 11 CFR 110.20(c) Contributions and Donations to Committees and
Organizations of Political Parties
BCRA expressly extends the prohibition on foreign national
contributions and donations to those made to committees of political
parties. 2 U.S.C. 441e(a)(1)(B). The particular committees covered
include the national party committees; the national congressional
campaign committees; and all State, district, local, and subordinate
committees, including the non-Federal accounts of State, district, and
local party committees.
In light of BCRA's addition of ``donation'' to the statutory
language, the proposed rules further extended the foreign national
prohibition to organizations of political parties, whether or not they
are political committees under the Act and 11 CFR 100.5. Because many
party organization activities affect Federal, State, and local
elections, this extension to all party organizations reinforces the
prohibition at 2 U.S.C. 441e(a)(1)(A) on foreign national contributions
and donations in connection with elections at all levels. Two
commenters on the proposed rules agreed with this interpretation, and
no commenters objected. Because of the interaction between 2 U.S.C.
441e(a)(1)(A) and (B), the final rule at 11 CFR 110.20(c) adopts this
extension to all political party organizations.
9. 11 CFR 110.20(d) Contributions and Donations to Building Funds
BCRA prohibits foreign nationals from making any contribution or
donation to national party committees, including donations for the
purchase or construction of an office building. See 2 U.S.C. 441e. In
addition, new 11 CFR 300.35(a) explicitly provides that the
prohibitions in BCRA against contributions and donations by foreign
nationals do not permit party committees to spend funds contributed or
donated by foreign nationals for the purchase or construction of State
or local party committee office buildings. Final Rule and Explanation
and Justification, 67 FR 49,101, 49,127 (July 29, 2002). The
Explanation and Justification for 11 CFR 300.35 indicates that this
prohibition on foreign national funding also extends to in-kind
contributions or donations.
Consistent with new 11 CFR 300.35(a), new 11 CFR 110.20(d)
explicitly states that foreign nationals are prohibited from making
contributions or donations directly or indirectly to committees or
organizations of a political party for the construction or purchase of
any office building. This final rule is identical to the language in
proposed Sec. 110.20(f). The only two commenters who addressed this
topic agreed with this addition to the regulations.
10. 11 CFR 110.20(e) and (f) Expenditures, Independent Expenditures,
and Disbursements
BCRA prohibits a foreign national from making ``an expenditure,
independent expenditure, or disbursement for an electioneering
communication.'' 2 U.S.C. 441e(a)(1)(C). The Commission in the NPRM
interpreted the prohibitions against an ``expenditure'' or an
``independent expenditure'' by a foreign national as being general in
scope, and the phrase ``for an electioneering communication'' at 2
U.S.C. 441e(a)(1)(C) as modifying only ``disbursement.'' This
interpretation is based upon the fact that BCRA expressly exempts from
the definition of ``electioneering communication'' ``a communication
which constitutes an expenditure or an independent expenditure under
this Act * * *.'' 2 U.S.C. 434(f)(3)(B)(ii).\8\ This exemption
apparently left ``disbursement'' as the sole transaction category
applicable to electioneering communications. Several commenters agreed
with this interpretation. The final rule at Sec. 110.20(e)
specifically prohibits disbursements for electioneering communications
by foreign nationals.
---------------------------------------------------------------------------
\8\ BCRA defines ``electioneering communication'' as a
``broadcast, cable, or satellite communication'' that ``refers to a
clearly identified candidate for Federal office,'' that is made
within particular time frames, and that is targeted to the relevant
electorate if it refers to a candidate other than those for the
office of President or Vice-President. 2 U.S.C. 434(f)(3)(A)(i)(I).
For a more extensive discussion of electioneering communications,
see the Final Rules on ``Electioneering Communications,'' 67 FR
65190 (Oct. 23, 2002).
---------------------------------------------------------------------------
Section 431(9)(A)(1) of FECA defines ``expenditure'' as ``any
purchase, payment, * * * or anything of value made for the purpose of
influencing any election for Federal office,'' and 2 U.S.C. 431(17)
defines ``independent expenditure'' as ``an expenditure by a person
expressly advocating the election or defeat of a clearly defined
candidate which is made without cooperation or
[[Page 69945]]
consultation with any candidate * * *.'' Thus, the terms
``expenditure'' and ``independent expenditure'' apply only to amounts
spent with respect to Federal elections. In contrast, ``disbursement,''
a term used in both FECA and BCRA but not defined in the statutes, is
defined in 11 CFR 300.2 as ``any purchase or payment made by any person
that is subject to the Act.'' As discussed above, this definition of
``disbursement'' covers payments beyond those that constitute
``expenditures,'' and ``independent expenditures,'' such as those made
in connection with non-Federal elections.
BCRA does not contain an express prohibition against foreign
national disbursements for activities other than electioneering
communications. This omission left in question the status of
disbursements by foreign nationals in connection with State and local
elections that are by definition not ``expenditures'' or ``independent
expenditures'' because they are not made in connection with Federal
elections. The Commission's treatment of a similar issue in the past
has, however, provided guidance on this question.
Previously, 2 U.S.C. 441e contained no express prohibition against
expenditures by foreign nationals. Nevertheless, the Commission revised
11 CFR 110.4(a) in 1989 to state that foreign nationals were prohibited
from making expenditures as well as contributions. The Explanation and
Justification for that amendment stated: ``The FECA generally prohibits
expenditures when it prohibits contributions by a specific category
[of] persons, thereby ensuring that the persons cannot accomplish
indirectly what they are prohibited from doing directly.'' 54 FR 4858
(Nov. 24, 1989). The Explanation and Justification continued: ``Nothing
in section 441e's legislative history suggests that Congress intended
to deviate from the FECA's general pattern of treating contributions
and expenditures in parallel fashion.'' Id.
As discussed above, BCRA added ``donations'' to the activities
prohibited to foreign nationals, this being one way in which the reach
of the statute is extended to State and local elections to which the
term ``contributions'' does not apply. As was the case earlier with the
FECA, there is nothing in BCRA that would indicate an intent on the
part of Congress to treat disbursements for State or local elections
any differently than it now treats expenditures for Federal elections,
or any intent to not consider donations and disbursements to be
parallel concepts. The addition of ``disbursements'' also serves to
strengthen even more the ban on foreign money.
The proposed rule treated ``donations'' and ``disbursements'' in
the same fashion as ``contributions'' and ``expenditures'' have been
addressed in the past, by prohibiting at proposed paragraph (d) all
disbursements for elections by foreign nationals, not just the
disbursements made for electioneering communications that were
explicitly prohibited at proposed 11 CFR 110.20(e). Three commenters
affirmed the Commission's approach. No commenters were opposed.
Consequently, while the final rule at Sec. 110.20(e) prohibits any
disbursement for an electioneering communication by foreign nationals,
the final rule at paragraph (f) prohibits all expenditures, independent
expenditures, and disbursements by foreign nationals in connection with
Federal, State and local elections for the reasons stated above.
11. 11 CFR 110.20(g) Solicitation, Acceptance or Receipt of
Contributions and Donations From Foreign Nationals
BCRA prohibits any person from soliciting, accepting, or receiving
from a foreign national a contribution or donation made in connection
with a Federal, State, or local election, or made to a party committee.
2 U.S.C. 441e(a)(2). Proposed Sec. 110.20(g)(1) sought to prohibit the
knowing solicitation, acceptance or receipt of contributions or
donations from foreign nationals. As noted above, the final rule at
Sec. 110.20(g) contains the same prohibition. The Commission's
additions of a knowledge requirement and of knowledge standards with
regard to the solicitation, acceptance or receipt of foreign national
contributions and donations are discussed above in connection with 11
CFR 110.20(a)(4) and (5).
12. 11 CFR 110.20(h) Assisting Foreign National Contributions or
Donations
The foreign national prohibition at 2 U.S.C. 441e as amended by
BCRA also raised issues concerning the liability of persons who
knowingly assist foreign nationals in making contributions or
donations. The proposed rules included a prohibition on the assisting
of foreign national contributions and donations. Section 441e of the
Act does not explicitly address those who assist others to violate its
prohibition on foreign national contributions, donations, expenditures,
independent expenditures, and disbursements. Recently, however, the
Commission has addressed in the enforcement context a number of
situations in which there arose questions about the liability of
individuals who had provided substantial assistance to a foreign
national or to a recipient committee with regard to a foreign national
contribution or donation. These individuals had functioned as conduits
or intermediaries for the funds involved. See MUR 4530, et al. The
Commission concluded in these enforcement matters that, because the
wording of 2 U.S.C. 441e at the time prohibited foreign nationals from
making contributions directly or through any other person, and because
the statute also prohibited persons from soliciting, accepting or
receiving such contributions from a foreign national, the activities of
conduits and intermediaries of foreign national funds were prohibited
when the funds involved had been passed on for the purpose of making
contributions. It is also worth noting that, in some instances, the
foreign national making a prohibited contribution can easily evade U.S.
jurisdiction, while a U.S. citizen serving as a conduit or rendering
substantial assistance can be more easily reached.
The Commission has now concluded that, in light of Congressional
intent in BCRA to strengthen the foreign money ban, nothing in amended
2 U.S.C. 441e should be construed to alter the Commission's pre-BCRA
determinations in this respect. Additionally, the Commission has broad
rulemaking authority in 2 U.S.C. 437d(a)(8) to make rules that are
``necessary to carry out the provisions of the Act.'' See also BCRA,
Public Law 107-155, sec. 402(c). It has determined that a rule that
prohibits persons from knowingly providing substantial assistance to
foreign nationals to circumvent the FECA is necessary to effectuate one
of the key purposes of BCRA, that is, to prevent foreign national funds
from influencing elections. One commenter expressed agreement with
extending the prohibition to those who assist foreign national
contributions and donations.
For purposes of paragraphs (h)(1) and (2), ``substantial
assistance'' means active involvement in the solicitation, making,
receipt or acceptance of a foreign national contribution or donation
with an intent to facilitate successful completion of the transaction.
See, e.g., IIT, An International Investment Trust v. Cornfield, 619
F.2d 909, 922, 925-926, (2nd Cir. 1980), citing, inter alia, Rolf v.
Blyth, Eastman Dillon & Co., Inc., 570 F.2d 38, 47-48 (2nd Cir.), cert.
denied, 438 U.S. 1030 (1978); and U.S. v. Peoni,
[[Page 69946]]
100 F.2d 401 (2nd Cir. 1938).\9\ ``Substantial assistance'' does not
include strictly ministerial activity undertaken pursuant to the
instructions of an employer, manager or supervisor.
---------------------------------------------------------------------------
\9\ As stated in IIT, Judge Learned Hand observed in Peoni, a
criminal case involving possession of counterfeit money, that for
centuries courts had required that an accessory to an activity be a
person who must ``in some sort associate himself with the venture,
that he participate in it as something that he wishes to bring
about, that he seek by his action to make it succeed. All the words
used [by courts] * * * carry an implication of purposive attitude
towards it.'' 100 F.2d at 402.
---------------------------------------------------------------------------
The final rule at paragraph (h)(1) combines proposed paragraphs
(h)(3) and (4) by prohibiting any person from knowingly providing
substantial assistance in the solicitation, making, receipt, or
acceptance of a contribution or donation from a foreign national. This
provision covers, but is not limited to, those persons who act as
conduits or intermediaries for foreign national contributions or
donations and who thus would also violate the statutory prohibition
against receiving contributions or donations from a foreign national.
The final rule at paragraph (h)(2) extends the prohibition on knowingly
providing substantial assistance to assisting foreign nationals in the
making of expenditures, independent expenditures and disbursements in
connection with Federal or non-Federal elections.
The three standards of knowledge set forth at Sec. 110.20(a)(4)
are applicable to anyone who provides the kinds of assistance
prohibited by paragraph (h).
13. 11 CFR 110.20(i) Prohibition on Participation by Foreign Nationals
in Decisions Related to Election Activities
Section 110.20(i) retains the prohibition at former 11 CFR
110.4(a)(3) on participation by foreign nationals in decisions made by
any person, including entities such as corporations, labor
organizations or political committees, that are related to Federal and
non-Federal elections. The only changes involve the addition of
``political organization'' to the listing of decision-making entities
and of ``donations'' and ``disbursements'' to the list of transactions
about which decisions are made; all of these additions are needed to
address fully the prohibition on the funding of State and local
elections. Foreign nationals are prohibited from taking part in
decisions about contributions and donations to any Federal, State, or
local candidates or to, or by, any political committees or political
organizations, and in decisions about expenditures and disbursements
made in support of, or in opposition to, such candidates, political
committees or political organizations. Foreign nationals also are
prohibited from involvement in the management of a political committee,
including a separate segregated fund, a non-connected committee or the
non-Federal accounts of these committees.
Numerous comments received regarding the proposed rules supported
this provision as the appropriate way to prevent foreign nationals from
engaging in election-related activities, particularly in the context of
U.S. subsidiaries of foreign-owned corporations. No commenter opposed
the proposed regulation.
14. Donations to Presidential Inaugural Committees
In the NPRM the Commission proposed to include a BCRA-related rule
prohibiting knowing acceptance by Presidential inaugural committees of
donations from foreign nationals. Proposed 11 CFR 110.20(c), 67 FR at
54,379. The Commission had stated in the NPRM entitled ``Disclaimers,
Fraudulent Solicitations, Civil Penalties, and Personal Use of Campaign
Funds,'' that it would address rules pertaining to inaugural committees
in a future rulemaking. 67 FR 55, 348 (Aug. 29, 2002). The Commission
has determined that the rules concerning inaugural committees should be
addressed in a comprehensive manner. Therefore, donations by foreign
nationals to Presidential inaugural committees will also be part of
this future rulemaking and are not included in these final rules.
Certification of No Effect Pursuant to 5 U.S.C. 605(b) (Regulatory
Flexibility Act)
The Commission certifies that the attached final rules do not have
a significant economic impact on a substantial number of small
entities. The entities affected by these rules are political
committees, minors, foreign nationals and U.S. nationals. The basis of
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 because they are not small businesses, small
organizations, or small governmental jurisdictions.
Minors and many foreign nationals are individuals, and therefore,
not small entities. Furthermore, the final rules, which are based on
statutory language, clarify and describe in further detail the already
existing ban on contributions by foreign nationals. Additionally, to
the extent that there may be foreign nationals that may fall within the
definition of ``small entities,'' their numbers are not substantial,
particularly the number that would make a donation, expenditure,
independent expenditure, or disbursement in connection with a Federal,
State, or local election.
In addition, to the extent that the rules apply to any small
entities, they are not unduly burdened by the increased contribution
limitations, which give such small entities more latitude in the amount
they contribute. Furthermore, the new rules for redesignating
contributions for a particular election and reattributing contributions
to particular donors provide political committees with flexibility and
additional means to ensure compliance with FECA and BCRA, thereby
reducing any economic costs they may have incurred under the previous
rules.
List of Subjects
11 CFR Part 102
Political committees and parties, Reporting and recordkeeping
requirements.
11 CFR Part 110
Campaign funds, Political committees and parties.
For the reasons set out in the preamble, Subchapter A of Chapter I
of title 11 of the Code of Federal Regulations is amended as follows:
PART 102--REGISTRATION, ORGANIZATION, AND RECORDKEEPING BY
POLITICAL COMMITEES (2 U.S.C. 433)
1. 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.
2. Section 102.9 is amended by adding paragraph (a)(4) and revising
paragraph (e) to read as follows:
Sec. 102.9 Accounting for contributions and expenditures (2 U.S.C.
432(c)).
* * * * *
(a) * * *
(4) In addition to the account to be kept under paragraph (a)(1) of
this section, for contributions in excess of $50, the treasurer of a
political committee or an agent authorized by the treasurer shall
maintain:
(i) A full-size photocopy of each check or written instrument; or
(ii) A digital image of each check or written instrument. The
political committee or other person shall provide the computer
equipment and software needed to retrieve and read the digital images,
if necessary, at no cost to the Commission.
* * * * *
[[Page 69947]]
(e)(1) If the candidate, or his or her authorized committee(s),
receives contributions that are designated for use in connection with
the general election pursuant to 11 CFR 110.1(b) prior to the date of
the primary election, such candidate or such committee(s) shall use an
acceptable accounting method to distinguish between contributions
received for the primary election and contributions received for the
general election. Acceptable accounting methods include, but are not
limited to:
(i) The designation of separate accounts for each election, caucus
or convention; or
(ii) The establishment of separate books and records for each
election.
(2) Regardless of the method used under paragraph (e)(1) of this
section, an authorized committee's records must demonstrate that, prior
to the primary election, recorded cash on hand was at all times equal
to or in excess of the sum of general election contributions received
less the sum of general election disbursements made.
(3) If a candidate is not a candidate in the general election, any
contributions made for the general election shall be refunded to the
contributors, redesignated in accordance with 11 CFR 110.1(b)(5) or
110.2(b)(5), or reattributed in accordance with 11 CFR 110.1(k)(3), as
appropriate.
* * * * *
PART 110--CONTRIBUTION AND EXPENDITURE LIMITATIONS AND PROHBITIONS
3. The authority citation for part 110 is revised to read as
follows:
Authority: 2 U.S.C. 431(8), 431(9), 432(c)(2), 437d, 438(a)(8),
441a, 441b, 441d, 441e, 441f, 441g, 441h and 441k.
4. Section 110.1 is amended by revising paragraphs (a), (b)(1),
(b)(3)(iii), (b)(5)(ii), (c)(1), (i), (k)(3)(ii), (l)(4), and (l)(5) to
read as follows:
Sec. 110.1 Contributions by persons other than multicandidate
political committees (2 U.S.C. 441a(a)(1)).
(a) Scope. This section applies to all contributions made by any
person as defined in 11 CFR 100.10, except multicandidate political
committees as defined in 11 CFR 100.5(e)(3) or entities and individuals
prohibited from making contributions under 11 CFR 110.19 and 110.20 and
11 CFR parts 114 and 115.
(b) * * *
(1) No person shall make contributions to any candidate, his or her
authorized political committees or agents with respect to any election
for Federal office that, in the aggregate, exceed $2,000.
(i) The contribution limitation in the introductory text of
paragraph (b)(1) of this section shall be increased by the percent
difference in the price index in accordance with 11 CFR 110.17.
(ii) The increased contribution limitation shall be in effect for
the 2-year period beginning on the first day following the date of the
last general election in the year preceding the year in which the
contribution limitation is increased and ending on the date of the next
general election. For example, an increase in the contribution
limitation made in January 2005 is effective from November 3, 2004 to
November 7, 2006.
(iii) In every odd numbered year, the Commission will publish in
the Federal Register the amount of the contribution limitation in
effect and place such information on the Commission's Web site.
* * * * *
(3) * * *
(iii) The amount of the net debts outstanding shall be adjusted as
additional funds are received and expenditures are made. The candidate
and his or her authorized political committee(s) may accept
contributions made after the date of the election if:
(A) Such contributions are designated in writing by the contributor
for that election;
(B) Such contributions do not exceed the adjusted amount of net
debts outstanding on the date the contribution is received; and
(C) Such contributions do not exceed the contribution limitations
in effect on the date of such election.
* * * * *
(5) * * *
(ii) (A) A contribution shall be considered to be redesignated for
another election if--
(1) The treasurer of the recipient authorized political committee
requests that the contributor provide a written redesignation of the
contribution and informs the contributor that the contributor may
request the refund of the contribution as an alternative to providing a
written redesignation; and
(2) Within sixty days from the date of the treasurer's receipt of
the contribution, the contributor provides the treasurer with a written
redesignation of the contribution for another election, which is signed
by the contributor.
(B) Notwithstanding paragraph (b)(5)(ii)(A) of this section or any
other provision of this section, the treasurer of the recipient
authorized political committee may treat all or part of the amount of
the contribution that exceeds the contribution limits in paragraph
(b)(1) of this section as made with respect to the general election,
provided that:
(1) The contribution was made before the primary election;
(2) The contribution was not designated for a particular election;
(3) The contribution would exceed the limitation on contributions
set forth in paragraph (b)(1) of this section if it were treated as a
contribution made for the primary election;
(4) Such redesignation would not cause the contributor to exceed
any of the limitations on contributions set forth in paragraph (b)(1)
of this section;
(5) The treasurer of the recipient authorized political committee
notifies the contributor of the amount of the contribution that was
redesignated and that the contributor may request a refund of the
contribution; and
(6) Within sixty days from the date of the treasurer's receipt of
the contribution, the treasurer shall provide notification required in
paragraph (b)(5)(ii)(B)(5) of this section to the contributor by any
written method including electronic mail.
(C) Notwithstanding paragraph (b)(5)(ii)(A) of this section or any
other provision of this section, the treasurer of the recipient
authorized political committee may treat all or part of the amount of
the contribution that exceeds the contribution limits in paragraph
(b)(1) of this section as made with respect to the primary election,
provided that:
(1) The contribution was made after the primary election but before
the general election;
(2) The contribution was not designated for a particular election;
(3) The contribution would exceed the limitation on contributions
set forth in paragraph (b)(1) of this section if it were treated as a
contribution made for the general election;
(4) Such redesignation would not cause the contributor to exceed
any of the limitations on contributions set forth in paragraph (b)(1)
of this section;
(5) The contribution does not exceed the committee's net debts
outstanding for the primary election;
(6) The treasurer of the recipient authorized political committee
notifies the contributor of how the contribution was redesignated and
that the contributor may request a refund of the contribution; and
(7) Within sixty days from the date of the treasurer's receipt of
the contribution, the treasurer shall provide notification required in
paragraph (b)(5)(ii)(C)(6) of this section to the
[[Page 69948]]
contributor by any written method, including electronic mail.
* * * * *
(c) * * *
(1) No person shall make contributions to the political committees
established and maintained by a national political party in any
calendar year that in the aggregate exceed $25,000.
(i) The contribution limitation in paragraph (c)(1) of this section
shall be increased by the percent difference in the price index in
accordance with 11 CFR 110.17.
(ii) The increased contribution limitation shall be in effect for
the two calendar years starting on January 1 of the year in which the
contribution limitation is increased.
(iii) In every odd-numbered year, the Commission will publish in
the Federal Register the amount of the contribution limitation in
effect and place such information on the Commission's Web site.
* * * * *
(i) Contributions by spouses. The limitations on contributions of
this section shall apply separately to contributions made by each
spouse even if only one spouse has income.
* * * * *
(k) * * *
(3) * * *
(ii) (A) A contribution shall be considered to be reattributed to
another contributor if--
(1) The treasurer of the recipient authorized political committee
asks the contributor whether the contribution is intended to be a joint
contribution by more than one person, and informs the contributor that
he or she may request the return of the excessive portion of the
contribution if it is not intended to be a joint contribution; and
(2) Within sixty days from the date of the treasurer's receipt of
the contribution, the contributor provides the treasurer with a written
reattribution of the contribution, which is signed by each contributor,
and which indicates the amount to be attributed to each contributor if
equal attribution is not intended.
(B)(1) Notwithstanding paragraph (k)(3)(ii)(A) of this section or
any other provision of this section, any excessive portion of a
contribution described in paragraph (k)(3)(i) of this section that was
made by a written instrument that is imprinted with the names of more
than one individual may be attributed among the individuals listed
unless a different instruction is on the instrument or in a separate
writing signed by the contributor(s), provided that such attribution
would not cause any contributor to exceed any of the limitations on
contributions set forth in paragraph (b)(1) of this section.
(2) The treasurer of the recipient authorized political committee
shall notify each contributor of how the contribution was attributed
and that the contributor may request the refund of the excessive
portion of the contribution if it is not intended to be a joint
contribution.
(3) Within sixty days from the date of the treasurer's receipt of
the contribution, the treasurer shall provide such notification to each
contributor by any written method, including electronic mail.
(l) * * *
(4)(i) If a political committee chooses to rely on a postmark as
evidence of the date on which a contribution was made, the treasurer
shall retain the envelope or a copy of the envelope containing the
postmark and other identifying information; and
(ii) If a political committee chooses to rely on the redesignation
presumption in 11 CFR 110.1(b)(5)(ii)(B) or (C) or the reattribution
presumption in 11 CFR 110.1(k)(3)(ii)(B), the treasurer shall retain a
full-size photocopy of the check or written instrument, of any signed
writings that accompanied the contribution, and of the notices sent to
the contributors as required by 11 CFR 110.1(b)(5)(ii)(B) and
(k)(3)(ii)(B).
(5) If a political committee does not retain the written records
concerning designation required under 11 CFR 110.1(l)(1), the
contribution shall not be considered designated in writing for a
particular election, and the provisions of 11 CFR 110.1(b)(2)(ii) or 11
CFR 110.2(b)(2)(ii) shall apply. If a political committee does not
retain the written records concerning redesignation or reattribution
required under 11 CFR 110.1(l)(2), (3), (4)(ii) or (6), including the
contributor notices, the redesignation or reattribution shall not be
effective, and the original designation or attribution shall control.
* * * * *
5. Section 110.2 is amended by revising paragraph (e) to read as
follows:
Sec. 110.2 Contributions by multicandidate political committees (2
U.S.C. 441a(a)(2)).
* * * * *
(e) Contributions by political party committees to Senatorial
candidates.
(1) Notwithstanding any other provision of the Act, or of these
regulations, the Republican and Democratic Senatorial campaign
committees, or the national committee of a political party, may make
contributions of not more than a combined total of $35,000 to a
candidate for nomination or election to the Senate during the calendar
year of the election for which he or she is a candidate. Any
contribution made by such committee to a Senatorial candidate under
this paragraph in a year other than the calendar year in which the
election is held shall be considered to be made during the calendar
year in which the election is held.
(2) The contribution limitation in paragraph (e)(1) of this section
shall be increased by the percent difference in the price index in
accordance with 11 CFR 110.17. The increased contribution limitation
shall be in effect for the two calendar years starting on January 1 of
the year in which the contribution limitation is increased. In every
odd-numbered year, the Commission will publish in the Federal Register
the amount of the contribution limitation in effect and place such
information on the Commission's Web site.
* * * * *
6. Section 110.4 is amended by revising the section heading and by
removing and reserving paragraph (a) to read as follows.
Sec. 110.4 Contributions in the name of another; cash contributions
(2 U.S.C. 441f, 441g, 432(c)(2)).
(a) [Removed and reserved].
* * * * *
7. Section 110.5 is amended by revising the section heading and
paragraphs (a), (b), (d) and (e) to read as follows:
Sec. 110.5 Aggregate bi-annual contribution limitation for
individuals (2 U.S.C. 441a(a)(3)).
(a) Scope. This section applies to all contributions made by any
individual, except individuals prohibited from making contributions
under 11 CFR 110.19 and 110.20 and 11 CFR part 115.
(b) Bi-annual limitations.
(1) In the two-year period beginning on January 1 of an odd-
numbered year and ending on December 31 of the next even-numbered year,
no individual shall make contributions aggregating more than $95,000,
including no more than:
(i) $37,500 in the case of contributions to candidates and the
authorized committees of candidates; and
(ii) $57,500 in the case of any other contributions, of which not
more than $37,500 may be attributable to contributions to political
committees that are not political committees of any national political
parties.
(2) Contributions to candidates made under the increased
contribution limitations under 11 CFR part 400,
[[Page 69949]]
during periods in which such candidates may accept such contributions,
are not subject to the contribution limitations of paragraph (b)(1) of
this section.
(3) The contribution limitations in paragraph (b)(1) of this
section shall be increased by the percent difference in the price index
in accordance with 11 CFR 110.17. The increased contribution
limitations shall be in effect for the two calendar years starting on
January 1 of the year in which the contribution limitations are
increased.
(4) In every odd-numbered year, the Commission will publish in the
Federal Register the amount of the contribution limitations in effect
and place such information on the Commission's Web site.
* * * * *
(d) Independent expenditures. The bi-annual limitation on
contributions in this section applies to contributions made to persons,
including political committees, making independent expenditures under
11 CFR part 109.
(e) Contributions to delegates and delegate committees. The bi-
annual limitation on contributions in this section applies to
contributions to delegate and delegate committees under 11 CFR 110.14.
8. Section 110.9 is revised to read as follows:
Sec. 110.9 Violation of limitations.
No candidate or political committee shall knowingly accept any
contribution or make any expenditure in violation of the provisions of
11 CFR part 110. No officer or employee of a political committee shall
knowingly accept a contribution made for the benefit or use of a
candidate, or make any expenditure on behalf of a candidate, in
violation of any limitation imposed on contributions and expenditures
under this part 110.
Sec. Sec. 110.15 and 110.16 [Reserved]
9. Sections 110.15 and 110.16 are added and reserved.
10. Section 110.17 is added to read as follows:
Sec. 110.17 Price index increase.
(a) Price index increases for party committee expenditure
limitations and Presidential candidate expenditure limitations. The
limitations on expenditures established by 11 CFR 110.7 and 110.8 shall
be increased by the percent difference between the price index, as
certified to the Commission by the Secretary of Labor, for the 12
months preceding the beginning of the calendar year and the price index
for the base period.
(1) Each expenditure limitation so increased shall be the
expenditure limitation in effect for that calendar year.
(2) For purposes of this paragraph (a), the term base period means
calendar year 1974.
(b) Price index increases for contributions by persons, by
political party committees to Senatorial candidates, and the bi-annual
aggregate contribution limitation for individuals. The limitations on
contributions established by 11 CFR 110.1(b) and (c), 110.2(e), and
110.5, shall be increased only in odd-numbered years by the percent
difference between the price index, as certified to the Commission by
the Secretary of Labor, for the 12 months preceding the beginning of
the calendar year and the price index for the base period.
(1) The increased contribution limitations shall be in effect as
provided in 11 CFR 110.1(b)(1)(ii), 110.1(c)(1)(ii), 110.2(e)(2) and
110.5(b)(3).
(2) For purposes of this paragraph (b) the term base period means
calendar year 2001.
(c) Rounding of price index increases. If any amount after the
increases under paragraph (a) or (b) of this section is not a multiple
of $100, such amount shall be rounded to the nearest multiple of $100.
(d) Definition of price index. For purposes of this section, the
term price index means the average over a calendar year of the Consumer
Price Index (all items--United States city average) published monthly
by the Bureau of Labor Statistics.
(e) Publication of price index increases. In every odd-numbered
year, the Commission will publish in the Federal Register the amount of
the expenditure and contribution limitations in effect and place such
information on the Commission's Web site.
Sec. 110.18 [Reserved]
11. Section 110.18 is added and reserved.
12. Section 110.19 is added to read as follows:
Sec. 110.19 Contributions and donations by minors.
(a) Contributions to candidates. An individual who is 17 years old
or younger shall not make a contribution to a candidate for Federal
office, including a contribution to any of the following:
(1) A principal campaign committee designated pursuant to 11 CFR
101.1(a);
(2) Any other political committee authorized by a candidate under
11 CFR 101.1(b) and 102.13 to receive contributions or make
expenditures on behalf of such candidate; or
(3) Any entity directly or indirectly established, financed,
maintained or controlled by one or more Federal candidates.
(b) Contributions and donations to committees of political parties.
An individual who is 17 years old or younger shall not make a
contribution or donation to:
(1) A national, State, district, or local committee of a political
party, including a national congressional campaign committee;
(2) Any entity directly or indirectly established, financed,
maintained or controlled by a national, State, district, or local
committee of a political party, including a national congressional
campaign committee; or
(3) Any account of a committee or entity described in paragraphs
(b)(1) and (b)(2) of this section.
(c) Contributions to political committees that are not authorized
committees or committees of political parties. An individual who is 17
years old or younger may make contributions to a political committee
not described in paragraph (a) or (b) of this section that in the
aggregate do not exceed the limitations on contributions of 11 CFR
110.1 and 110.5, if--
(1) The decision to contribute is made knowingly and voluntarily by
that individual;
(2) The funds, goods, or services contributed are owned or
controlled exclusively by that individual, such as income earned by
that individual, the proceeds of a trust for which that individual is
the beneficiary, or a savings account opened and maintained exclusively
in that individual's name;
(3) The contribution is not made from the proceeds of a gift, the
purpose of which was to provide funds to be contributed, or is not in
any other way controlled by another individual; and
(4) The contribution is not earmarked or otherwise directed to one
or more Federal candidates, authorized committees, political party
committees, or other organizations covered by paragraph (a) or (b) of
this section. See 11 CFR 110.6.
(d) Volunteer Services. Nothing in this section shall prohibit an
individual who is 17 years old or younger from providing volunteer
services to any Federal candidate or political committee.
(e) Definition of directly or indirectly establish, maintain,
finance, or control. Directly or indirectly establish, maintain,
finance, or control has the same meaning as in 11 CFR 300.2(c).
[[Page 69950]]
13. Section 110.20 is added to read as follows:
Sec. 110.20 Prohibition on contributions, donations, expenditures,
independent expenditure, and disbursements by foreign nationals. (2
U.S.C. 441e).
(a) Definitions. For purposes of this section, the following
definitions apply:
(1) Disbursement has the same meaning as in 11 CFR 300.2(d).
(2) Donation has the same meaning as in 11 CFR 300.2(e).
(3) Foreign national means--
(i) A foreign principal, as defined in 22 U.S.C. 611(b); or
(ii) An individual who is not a citizen of the United States and
who is not lawfully admitted for permanent residence, as defined in 8
U.S.C. 1101(a)(20); however,
(iii) Foreign national shall not include any individual who is a
citizen of the United States, or who is a national of the United States
as defined in 8 U.S.C. 1101(a)(22).
(4) Knowingly means that a person must:
(i) Have actual knowledge that the source of the funds solicited,
accepted or received is a foreign national;
(ii) Be aware of facts that would lead a reasonable person to
conclude that there is a substantial probability that the source of the
funds solicited, accepted or received is a foreign national; or
(iii) Be aware of facts that would lead a reasonable person to
inquire whether the source of the funds solicited, accepted or received
is a foreign national, but the person failed to conduct a reasonable
inquiry.
(5) For purposes of paragraph (a)(4) of this section, pertinent
facts include, but are not limited to:
(i) The contributor or donor uses a foreign passport or passport
number for identification purposes;
(ii) The contributor or donor provides a foreign address;
(iii) The contributor or donor makes a contribution or donation by
means of a check or other written instrument drawn on a foreign bank or
by a wire transfer from a foreign bank; or
(iv) The contributor or donor resides abroad.
(6) Solicit has the same meaning as in 11 CFR 300.2(m).
(7) Safe Harbor. For purposes of paragraph (a)(4)(iii) of this
section, a person shall be deemed to have conducted a reasonable
inquiry if he or she seeks and obtains copies of current and valid U.S.
passport papers for U.S. citizens who are contributors or donors
described in paragraphs (a)(5)(i) through (iv) of this section. No
person may rely on this safe harbor if he or she has actual knowledge
that the source of the funds solicited, accepted, or received is a
foreign national.
(b) Contributions and donations by foreign nationals in connection
with elections. A foreign national shall not, directly or indirectly,
make a contribution or a donation of money or other thing of value, or
expressly or impliedly promise to make a contribution or a donation, in
connection with any Federal, State, or local election.
(c) Contributions and donations by foreign nationals to political
committees and organizations of political parties. A foreign national
shall not, directly or indirectly, make a contribution or donation to:
(1) A political committee of a political party, including a
national party committee, a national congressional campaign committee,
or a State, district, or local party committee, including a non-Federal
account of a State, district, or local party committee, or
(2) An organization of a political party whether or not the
organization is a political committee under 11 CFR 100.5.
(d) Contributions and donations by foreign nationals for office
buildings. A foreign national shall not, directly or indirectly, make a
contribution or donation to a committee of a political party for the
purchase or construction of an office building. See 11 CFR 300.10 and
300.35.
(e) Disbursements by foreign nationals for electioneering
communications. A foreign national shall not, directly or indirectly,
make any disbursement for an electioneering communication as defined in
11 CFR 100.29.
(f) Expenditures, independent expenditures, or disbursements by
foreign nationals in connection with elections. A foreign national
shall not, directly or indirectly, make any expenditure, independent
expenditure, or disbursement in connection with any Federal, State, or
local election.
(g) Solicitation, acceptance, or receipt of contributions and
donations from foreign nationals. No person shall knowingly solicit,
accept, or receive from a foreign national any contribution or donation
prohibited by paragraphs (b) through (d) of this section.
(h) Providing substantial assistance.
(1) No person shall knowingly provide substantial assistance in the
solicitation, making, acceptance, or receipt of a contribution or
donation prohibited by paragraphs (b) through (d), and (g) of this
section.
(2) No person shall knowingly provide substantial assistance in the
making of an expenditure, independent expenditure, or disbursement
prohibited by paragraphs (e) and (f) of this section.
(i) Participation by foreign nationals in decisions involving
election-related activities. A foreign national shall not direct,
dictate, control, or directly or indirectly participate in the
decision-making process of any person, such as a corporation, labor
organization, political committee, or political organization with
regard to such person's Federal or non-Federal election-related
activities, such as decisions concerning the making of contributions,
donations, expenditures, or disbursements in connection with elections
for any Federal, State, or local office or decisions concerning the
administration of a political committee.
Dated: November 8, 2002.
David M. Mason,
Chairman, Federal Election Commission.
[FR Doc. 02-28886 Filed 11-18-02; 8:45 am]
BILLING CODE 6715-01-U