[Federal Register Volume 67, Number 240 (Friday, December 13, 2002)]
[Rules and Regulations]
[Pages 76962-76979]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-31521]



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Part VII





Federal Election Commission





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41 CFR Parts 100, 101, et al.



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

  Federal Register / Vol. 67, No. 240 / Friday, December 13, 2002 / 
Rules and Regulations  

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FEDERAL ELECTION COMMISSION

11 CFR Parts 100, 110, 111, and 113

[Notice 2002-25]


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

AGENCY: Federal Election Commission.

ACTION: Final rules and transmittal of regulations to Congress.

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SUMMARY: The Federal Election Commission is issuing final rules 
regarding disclaimers in political communications, fraudulent 
solicitations, civil penalties, personal use of campaign funds, and a 
technical amendment under the Federal Election Campaign Act of 1971, as 
amended (``FECA'' or ``the Act''). The final rules implement portions 
of the Bipartisan Campaign Reform Act of 2002 (``BCRA'') that govern 
new requirements for disclaimers accompanying radio, television, print, 
and other campaign communications, expand the FECA's fraudulent 
misrepresentation prohibition, increase the FECA's civil penalties for 
violating the prohibition on contributions made in the name of another, 
and codify the ``irrespective'' test regarding the personal use of 
campaign funds by candidates and Federal office holders.
    The Commission had planned to address BCRA-related rules for 
inaugural committees in this rulemaking; however, inaugural committees 
will now instead be addressed in a future rulemaking. Further 
information is provided in the supplementary information that follows.

EFFECTIVE DATES: January 13, 2003.

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

SUPPLEMENTARY INFORMATION: The Bipartisan Campaign Reform Act of 2002 
(``BCRA''), Pub. L. 107-155, 116 Stat. 81 (March 27, 2002), contains 
extensive and detailed amendments to the Federal Election Campaign Act 
of 1971 (``FECA'' or ``the Act''), as amended, 2 U.S.C. 431 et seq. 
This is one in a series of rulemakings the Commission is undertaking to 
implement the provisions of BCRA and to meet the rulemaking deadlines 
set out in BCRA.
    Section 402(c)(1) of BCRA establishes a general deadline of 270 
days for the Commission to promulgate regulations to carry out BCRA, 
which is December 22, 2002. The final rules do not apply with respect 
to runoff elections, recounts, or election contests resulting from the 
November 2002 general election. 2 U.S.C. 431 note.
    Because of the brief period before the statutory 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 29, 2002. 67 FR 55348 (Aug. 29, 2002). Thirteen 
written comments were received. The names of the commenters and their 
comments are available at http:www.fec.gov/register.htm under 
``Disclaimers, Fraudulent Solicitation, Civil Penalties, and Personal 
Use of Campaign Funds.'' A public hearing was not held.
    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 disclaimers, fraudulent solicitation, civil 
penalties, and personal use of campaign funds were transmitted to 
Congress on December 9, 2002.

Explanation and Justification

Introduction

    These final rules address changes to: disclaimer requirements for 
campaign communications (2 U.S.C. 441d); fraudulent misrepresentations 
for purposes of soliciting contributions or donations (2 U.S.C. 441h); 
civil penalties for a particular knowing and willful violation of FECA 
(2 U.S.C. 437g); permissible uses of campaign funds by candidates and 
officeholders (2 U.S.C. 439a); and a technical amendment to the 
definition of ``Act'' to include BCRA amendments to FECA.

11 CFR 100.18 Act (2 U.S.C. 431(19))

    Pre-BCRA, 11 CFR 100.18 defined ``Act'' to mean the Federal 
Election Campaign Act as amended by the 1974, 1976, and 1980 
amendments. The final rules amend this definition to include the 
amendments to FECA within the Bipartisan Campaign Reform Act.

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

    Under 2 U.S.C. 441d, certain communications must include 
disclaimers identifying who paid for and, where applicable, who 
authorized the communication. In BCRA, Congress added new specificity 
to these requirements, expanded the disclaimer requirement to reach 
disbursements to finance ``any communication'' made by political 
committees through any type of general public political advertising, 
and required that ``electioneering communications'' include 
disclaimers. See 2 U.S.C. 441d. Congress also enacted ``stand by your 
ad'' requirements for certain radio and television communications. 2 
U.S.C. 441d(d).
    The Commission is implementing these statutory changes by deleting 
pre-BCRA 11 CFR 110.11 in its entirety, and adopting a new section 
110.11 that is organized into a more easily understandable rule. As 
explained in detail below, revised section 110.11 incorporates many 
substantive provisions from the pre-BCRA version of the section.
11 CFR 110.11(a) Scope
    Paragraph (a) sets out the scope of the section by specifying which 
communications must carry disclaimers. Under 2 U.S.C. 441d(a), as 
amended by Congress through BCRA section 311, disclaimers are required 
whenever a person makes a disbursement for an electioneering 
communication, whenever a political committee makes a disbursement for 
the purpose of financing ``any communication through any broadcasting 
station, newspaper, magazine, outdoor advertising facility, mailing, or 
any other type of general public political advertising,'' or whenever 
any person makes a disbursement for the purpose of financing 
``communications expressly advocating the election or defeat of a 
clearly identified candidate, or solicits any contribution through any 
broadcasting station, newspaper, magazine, outdoor advertising 
facility, mailing, or any other type of general public political 
advertising.'' The descriptive list of ``through any broadcasting 
station, newspaper, magazine, outdoor advertising facility, mailing, or 
any other type of general public political advertising'' is similar to 
the language used by Congress in BCRA to describe a ``public 
communication,'' as defined in 2 U.S.C. 431(22). See also 11 CFR 100.26 
(67 FR 49111 (July 29, 2002)). The two descriptive lists differ in 
three respects. First, a ``public communication'' covers ``any 
broadcast, cable, or satellite transmission,'' whereas section 441d(a) 
refers only to communications through ``any broadcasting station.'' 
Second, a

[[Page 76963]]

``public communication'' includes a ``telephone bank to the general 
public,'' as defined in 2 U.S.C. 431(24), whereas telephone banks are 
not specifically mentioned in section 441d(a). Third, a ``public 
communication'' includes a ``mass mailing,'' which is defined as more 
than 500 pieces of substantially similar mail. 2 U.S.C. 431(22), (23). 
Section 441d(a) refers to a ``mailing,'' without any numerical minimum. 
Congress, through BCRA, removed the pre-BCRA reference to a ``direct 
mailing'' (emphasis added).
    The Commission noted in the NPRM that the 2 U.S.C. 441d(a) 
references to ``communication'' share a fundamental similarity with the 
definition of ``public communication'' (2 U.S.C. 431(22)) in that both 
contain the virtually identical and broadly inclusive phrase, ``or any 
other type [form] of general public political advertising,'' to 
describe what is encompassed by the respective definitions.\1\ Because 
of the inclusion of this virtually identical phrase, the Commission 
interprets each term listed in the definition of ``public 
communication'' or in 2 U.S.C. 441d(a) as a specific example of one 
form of ``general public political advertising.'' In other words, the 
universe of ``general public political advertising,'' as it has been 
functionally defined by Congress through both the definition of 
``public communication'' and in section 441d(a), encompasses all the 
terms explicitly included by Congress, in addition to other potential 
forms of general public political advertising not specifically listed.
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    \1\ Section 431(22) uses the word ``form,'' while section 
441d(a) uses the word ``type;'' the Commission discerns no 
substantive differences arising from the choice of synonyms.
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    The Commission sought comment on whether the description of 
``communication'' in 2 U.S.C. 441d(a) should be equated with the term 
``public communication,'' as defined in 2 U.S.C. 431(22). The 
Commission noted that one effect of using the consistent terminology of 
``public communication'' to describe the 2 U.S.C. 441d(a) 
communications would be that ``telephone banks to the general public'' 
would be subject to the disclaimer requirements. Another effect of 
using the consistent terminology of ``public communication'' would be 
to harmonize the meaning of ``mailing'' with ``mass mailing,'' and the 
coverage of ``any broadcasting station'' with ``any broadcast, cable, 
or satellite transmission.''
    The Commission received two comments on this issue. Both commenters 
argued that the terms ``public communication'' and ``communication,'' 
as used in the section 441d(a) context, should be treated as distinct 
terms with separate definitions. One commenter, advised against any 
interpretation that would have the effect of making the disclaimer 
requirements applicable to telephone banks. That commenter asserted 
that the existence of several state laws limiting or prohibiting taped 
phone messages are already sufficient to deter abuse in this area, and 
disclaimer requirements would only serve to chill speech.
    The Commission does not agree with this commenter that state laws 
regarding taped calls are sufficient to supplant the statutory 
disclaimer requirement, even in those few states that do have laws 
limiting taped calls. Requiring a caller to identify himself or herself 
serves important disclosure functions consistent with Congressional 
intent to broaden the reach of the previous laws regarding disclaimers 
and would likely complement state laws limiting the use of taped calls.
    The other commenter stated that treating the term ``communication'' 
in 2 U.S.C. 441d(a) the same as ``public communication'' would 
``conflate and confuse two separate concepts that Congress established 
to meet two distinct purposes.'' That commenter also asserted that the 
inclusion of other forms of ``general public political advertising'' 
does not indicate that the two terms share the same meaning. The 
commenter supported this assertion by citing to the Commission's 
previous explanation that ``general language following a listing of 
specific terms * * * does not evidence Congressional intent to include 
a separate and distinct term that is not listed * * *'' See Final Rules 
and Explanation and Justification, ``Prohibited and Excessive 
Contributions: Non-Federal Funds or Soft Money,'' 67 FR 49072 (July 29, 
2002).
    The Commission notes that its prior statement cited by the 
commenter was made in the context of a decision not to include Internet 
communications within the definition of ``public communication.'' 
Unlike the term ``telephone bank to the general public'' and the other 
terms listed in the BCRA definition of ``public communication,'' 
communications over the Internet were not specifically listed as one of 
the forms of ``general public political advertising.'' But while 
general language following a list of specific terms may not, by itself, 
provide sufficient evidence of Congressional intent, the Commission 
believes that such intent can be found where Congress has provided 
additional guidance as to the proper interpretation of that general 
language elsewhere in the same statute. In the Commission's judgment, 
the use of the phrase ``or any other type [form] of general public 
political advertising,'' which is used in BCRA only in the two 
locations specified above,\2\ should be interpreted in a virtually 
identical manner. Therefore, each form of communication specifically 
listed in the definition of ``public communication,'' as well as each 
form of communication listed with reference to a ``communication'' in 2 
U.S.C. 441d(a), must be a form of ``general public political 
advertising.'' To include the term ``telephone bank to the general 
public'' within the meaning of ``general public political advertising'' 
in one part of the statute but not the other would be to provide two 
different meanings to the term ``general public political 
advertising.'' Rather than conflating and confusing two separate 
concepts, the Commission, when appropriate, is establishing a 
consistent meaning from the repeated use of a single statutory phrase 
in order to promote simplicity and symmetry between the various 
statutory provisions and within the regulations.
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    \2\ See the definition of ``public communication'' in BCRA 
section 101 (2 U.S.C. 431(22)) and with reference to the scope of 
the disclaimer provisions in BCRA section 311 (2 U.S.C. 441d(a).)
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    This approach also incorporates Congressional intent, apparent in 2 
U.S.C. 441d(d), to regulate communications by radio and television, and 
the Commission's judgment that it would be unsupportable to require a 
disclaimer for a television communication that was broadcast, while not 
requiring a disclaimer for the same communication merely because it was 
carried on cable or satellite. It is also consistent with other uses 
(or proposed uses) of the term ``public communication'' in its 
regulations. The Commission has used the term ``public communication'' 
to clarify the definition of ``generic campaign activity,'' \3\ see 11 
CFR 100.25, and has proposed the use of ``public communication'' in a 
separate and ongoing rulemaking to describe communications that may be 
coordinated with a candidate, authorized committee, or political party 
committee. See proposed 11 CFR 109.21(c) and 109.37(a)(2), Notice of 
Proposed Rulemaking on Coordinated and Independent Expenditures, 67 FR

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60042, 60065 and 60068 (Sept. 24, 2002).
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    \3\ Congress defined ``generic campaign acitivity'' in BCRA as a 
``campaign activity'' that promotes a political party and does not 
promote a candidate or non-Federal candidate. Pub. L. 107-155, sec. 
101 (March 27, 2002) emphasis added).
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    In addition, by employing the term ``public communication'' in the 
section 110.11 disclaimer rules, the Commission avoids assigning 
different meanings to the term ``mailing'' in 2 U.S.C. 441d(a) and 
``mass mailing,'' the term used in the definition of ``public 
communication'' and defined by Congress in BCRA as more than 500 pieces 
of substantially similar mail. See 2 U.S.C. 431(23). In BCRA, Congress 
amended 2 U.S.C. 441d(a)(1) by removing the adjective ``direct'' from 
the pre-BCRA term ``direct mailing,'' thereby removing a term that had 
been defined differently than the BCRA definition of ``mass mailing.'' 
In the NPRM in this rulemaking, however, the Commission proposed a 
definition of the term ``mailing'' for purposes of the disclaimer 
requirements that would have treated ``mailing'' differently than the 
term ``mass mailing.'' The Commission has reconsidered this separate 
definition of ``mailing'' in light of its efforts to promote simplicity 
and symmetry within its regulations. Both ``mass mailing'' and 
``mailing'' are examples of ``general public political advertising,'' 
as set forth in the definition of ``public communication'' at 2 U.S.C. 
431(22) and at 2 U.S.C. 441d(a). Congress did not provide a separate 
definition of ``mailing.'' Therefore, in the Commission's judgment, the 
statutory term ``mailing'' used in 2 U.S.C. 441d(a) should not be given 
a separate meaning from ``mass mailing'' in the Commission's 
regulations. As a result, disclaimers would not be required for 
mailings unless the mailings are comprised of more than 500 pieces of 
substantially similar mail. See 2 U.S.C. 431(23).
    While the term ``public communication'' serves generally to 
describe the proper reach of the disclaimer rules, the Commission has 
decided that certain Internet-based communications also should be 
covered. The Commission has for years interpreted the statute to 
require disclaimers on electronic mail and Internet website 
communications. See, e.g., Advisory Opinions 1995-9 and 1999-37. In 
view of the widespread use of this technology in modern campaigning, 
and the relatively non-intrusive nature of disclaimer requirements, the 
Commission has concluded that the interests served by prompt public 
disclosure warrant application of the disclaimer provisions.
    Nonetheless, to avoid overreaching in this area, and to maintain 
some symmetry with the definition of ``public communication,'' the 
Commission is limiting the coverage of electronic mail to situations 
involving more than 500 substantially similar unsolicited 
communications. This approach would not require a disclaimer on 
electronic mail where the recipients have taken some affirmative step 
to be on a list used by the sender, such as responding positively to a 
request to be on such list. Moreover, regarding websites, the 
Commission is extending the disclaimer requirements only to political 
committee websites. This will assure, for example, that a website 
created and paid for by an individual will not have to include a 
disclaimer. At the same time, arguably, the most significant use of 
electronic mail and websites to conduct campaign activity will have to 
provide the public notice of who is responsible.
    In order to incorporate the foregoing Internet-based applications 
in the final disclaimer rules, 11 CFR 110.11(a) provides that for 
purposes of the section, the term ``public communication'' also covers 
more than 500 unsolicited electronic mail communications and websites 
of political committees. This is the Commission's only divergence from 
the 11 CFR 100.26 definition of ``public communication.''
    The Commission notes that it has initiated a separate rulemaking 
regarding several Internet-related issues. The disclaimer provisions 
may be revisited in that rulemaking.
    Paragraphs (a)(1) through (4) of the final rules in 11 CFR 110.11 
enumerate the particular types of such communications to which the 
disclaimer requirements apply. For the reasons described above and 
unless otherwise specified, the term ``communications'' is used in the 
preceding sentence and the remainder of the narrative below as a 
shorthand reference that encompasses both ``public communications'' and 
``electioneering communications.'' Throughout revised section 110.11, 
the word ``type'' is used, rather than ``form,'' as in the pre-BCRA 
version of the regulation. This change has no substantive effect and 
only serves to conform the regulation to the language of the statute. 
See 2 U.S.C. 441d; see also 11 CFR 100.27.
    In BCRA, Congress provided that ``any communication'' for which a 
political committee makes a disbursement must include a disclaimer, 
expanding the scope of the disclaimer requirement for political 
committees beyond communications constituting express advocacy and 
communications soliciting contributions. Compare pre- and post-BCRA 
versions of 2 U.S.C. 441d(a). Revised paragraph (a)(1) of section 
110.11 reads, ``[a]ll public communications for which a political 
committee makes a disbursement.''
    In contrast, revised paragraph (a)(2) of section 110.11 requires 
that ``[a]ll public communications by any person that expressly 
advocate the election or defeat of a clearly identified candidate'' 
must include a disclaimer. 2 U.S.C. 441d(a). The revised rule does not 
substantively change the disclaimer requirement for express advocacy 
communications from the pre-BCRA version of the regulation because BCRA 
does not alter the reach of the disclaimer requirements for persons 
that are not political committees, except with regard to electioneering 
communications (see below).
    Similarly, paragraph (a)(3) of section 110.11 requires ``[a]ll 
public communications by any person'' that solicit a contribution must 
include a disclaimer. 2 U.S.C. 441d(a). Here, too, the revised rule 
does not change the disclaimer requirement for solicitations from the 
pre-BCRA version of the rule because BCRA makes no changes in this 
regard.
    Congress amended 2 U.S.C. 441d(a) to require that ``electioneering 
communications'' include disclaimers. In paragraph (a)(4) of section 
110.11, the Commission requires that ``[a]ll electioneering 
communications by any person'' include a disclaimer. The term 
``electioneering communication'' is defined in 11 CFR 100.29(a). See 
Electioneering Communications Final Rules and Explanation and 
Justification 67 FR 65190 (Oct. 23, 2002).
    The Internal Revenue Service (``IRS'') commented generally on the 
scope of the Commission's proposed rules and found no direct conflict 
with the Internal Revenue Code or the regulations thereunder. The IRS 
noted that the Commission proposed at 11 CFR 110.11(a)(1)(iii) to 
require a disclaimer statement for all types of ``general public 
political advertising'' by any person soliciting contributions. The IRS 
also requested that for the benefit of tax-exempt organizations the 
Commission should restate certain requirements of section 6113 of the 
Internal Revenue Code (26 U.S.C. 6113). The IRS stated that section 
6113 provides that certain tax-exempt organizations that are not 
eligible to receive tax deductible charitable contributions, and whose 
gross annual receipts normally exceed $100,000, must disclose in an 
``express statement (in a conspicuous and easily recognizable format)'' 
that contributions to the organization are not deductible for Federal 
income tax purposes as charitable contributions. This provision

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applies to organizations that are not eligible to receive deductible 
charitable contributions and are described in section 501(c), section 
501(d), or section 527. The Internal Revenue Service issued Notice 88-
120 to provide safe harbors for meeting the requirements of section 
6113.

11 CFR 110.11(b) General Content Requirements

    Paragraph (b) of section 110.11 sets out the general content 
requirements for disclaimers, depending on who paid for the 
communication and, where applicable, who authorized the communication. 
Pre-BCRA paragraphs (a)(1)(i) and (ii) of section 110.11, which applied 
to communications authorized and paid for by a candidate and 
communications authorized by a candidate but paid for by another 
person, respectively, are redesignated as paragraphs (b)(1) and (2) in 
the revised regulation, respectively, without substantive revision.
    Paragraph (b)(3) of section 110.11 applies to a communication, 
including any solicitation, that is not paid for or authorized by a 
candidate. The provisions of pre-BCRA 11 CFR 110.11(a)(1)(iii) are 
replaced with paragraph (b)(3), with one substantive change. In BCRA, 
Congress provided that a covered communication not authorized by a 
candidate, his or her authorized committees or agents must have a 
disclaimer that includes the ``permanent street address, telephone 
number, or World Wide Web address'' of the person who paid for the 
communication. 2 U.S.C. 441d(a)(3). Similar language is being added in 
paragraph (b)(3).
    The Commission is not including pre-BCRA 11 CFR 110.11(a)(1)(iv) in 
revised section 110.11. This paragraph applied to ``solicitations 
directed to the general public on behalf of a political committee which 
is not an authorized committee of a candidate'' and required that these 
solicitations only state the name of the person who paid for the 
communication. In the NPRM the Commission proposed deleting paragraph 
(a)(1)(iv). Given that Congress amended 2 U.S.C. 441d(a) to extend the 
disclaimer requirements to apply ``whenever a political committee makes 
a disbursement for the purpose of financing any communication'' through 
any type of general public political advertisement, and given that 
Congress did not create a specific exception for authorization language 
in solicitations by unauthorized committees, the Commission is not 
retaining pre-BCRA 11 CFR 110.11(a)(1)(iv).

11 CFR 110.11(c) Disclaimer Specifications

A. Specifications for All Disclaimers
    In BCRA, Congress created a number of specific requirements for 
disclaimers to be included in communications covered by the statute. 
These statutory requirements vary, depending on whether the 
communication is printed or broadcast through radio or television, and 
on whether a candidate or another person pays for the communication. 2 
U.S.C. 441d(c), (d). Paragraph (c) combines the disclaimer requirements 
in pre-BCRA 11 CFR 110.11(a)(5) with the new requirements Congress 
added in BCRA.
    Paragraph (c)(1) sets forth a general, ``clear and conspicuous'' 
requirement applicable to all disclaimers, regardless of the medium in 
which the communication is transmitted. Paragraph (c)(1) is a slightly 
revised version of the ``clear and conspicuous'' requirement in pre-
BCRA 11 CFR 110.11(a)(5). The final sentence of paragraph (c)(1) 
provides that a disclaimer is not clear and conspicuous if it is 
difficult to read or hear, or if its placement is easily overlooked. 
This modifies the corresponding pre-BCRA provision, which was focused 
on print communications only, by generalizing it to apply to 
communications made through other media as well. This generalization is 
justified by BCRA's revision to section 441d, which broadened the scope 
of the statute. No commenters addressed this paragraph.
B. Specific Requirements for Printed Communications
    Several of the specific disclaimer requirements added by BCRA apply 
only to printed communications. 2 U.S.C. 441d(c)(1). Paragraph (c)(2) 
of section 110.11 implements the new statutory specifications, and also 
incorporates three of the print-specific provisions of pre-BCRA 11 CFR 
110.11.
    One commenter suggested that the pre-BCRA disclaimer regulations 
work well and should not be changed except where required under BCRA. 
For the most part, the Commission agrees, but with the recognition that 
Congress has in fact required a number of changes in the disclaimer 
provisions through BCRA. For example, the pre-BCRA requirement that a 
disclaimer be ``clear and conspicuous'' was limited to printed 
communications. In BCRA, Congress added a new requirement that the 
disclaimer in a printed communication be of ``sufficient type-size to 
be clearly readable by the recipient of the communication.'' 2 U.S.C. 
441d(c)(1). Given the specificity of the statutory requirements added 
by BCRA, new paragraph (c)(2)(i) restates the ``sufficient type size'' 
requirement verbatim, while new paragraphs (c)(2)(ii) and (c)(2)(iii) 
also precisely track 2 U.S.C. 441d(c)(2) and (3), respectively.
    The Commission sought comment on whether the term ``sufficient type 
size'' requires additional clarification or a ``safe harbor'' 
provision. Three commenters responded and each stated that the 
Commission should provide some additional guidance or ``safe harbor'' 
in the form of an ``objective'' standard for type size. One commenter 
advocated a type-size requirement related to the smallest font size of 
a communication, but a different commenter warned that such a 
requirement could be easily circumvented by reducing the type-size of 
one sentence, or even one word, in the communication. Two commenters 
also expressed concerns that a type-size requirement based on the size 
of the largest font size in the communication would be ``unworkable'' 
or ``overly complex.'' One commenter supported an approach that would 
set a fixed minimum type size.
    The Commission shares the concerns expressed by the commenters 
regarding formulas fixed to the smallest or largest type size in a 
communication's core message text. However, the Commission is also 
reluctant to set one fixed minimum type size for all communications 
because a type size that can be easily read in a newspaper might be 
completely unreadable when included on a billboard or other large, 
printed communication. Therefore, in 11 CFR 110.11(c)(2)(i), the 
Commission is creating a ``safe harbor'' provision that establishes a 
fixed, twelve-point type size as a sufficient size for disclaimer text 
in newspapers, magazines, flyers, signs and other printed 
communications that are no larger than the common poster size of 24 
inches by 36 inches. However, no specific safe harbor provision would 
apply to larger printed communications because the Commission concludes 
that the vast differences in the potential size and manner of display 
of larger printed communications would render fixed type-size examples 
ineffective and inappropriate. Whether a disclaimer on a larger printed 
communication is of sufficient type size to be clearly readable is 
therefore to be determined on a case-by-case basis, taking into account 
the vantage point from which the communication is intended to be seen 
or read as well as the actual size of the disclaimer text.

[[Page 76966]]

    Paragraph (c)(2)(ii) of section 110.11 specifies that the 
disclaimer included in printed communications must be contained within 
a printed box set apart from the other contents of the communication. 2 
U.S.C. 441d(c)(2). Paragraph (c)(2)(iii) specifies that the text of the 
disclaimer must be printed with a reasonable degree of color contrast 
between the background and the printed statement. 2 U.S.C. 441d(c)(3). 
Both of these requirements apply regardless of the size of the printed 
material under paragraph (c)(2)(i).
    In the NPRM, the Commission sought comment on whether the statutory 
phrase ``reasonable degree of color contrast'' should be further 
defined, and specifically whether the color contrast for the disclaimer 
notice should be related to the color contrast of the core message 
text. One commenter drew a distinction between the statutory 
requirement of color contrast between the ``background and printed 
statement,'' 2 U.S.C. 441d(c)(3), and the Commission's suggestion in 
the narrative of the NPRM that a color contrast is required between the 
disclaimer text and the core message text. The Commission notes that 
color contrast between the disclaimer text and the core message text is 
not required by the statute, and is not required by the final rules. 
This should alleviate the commenter's concern that such an additional 
requirement might require three different colors (a background color, a 
core message text color, and a disclaimer text color), thereby 
effectively prohibiting simple black and white communications and 
possibly raising the cost for the communication. Therefore, paragraph 
(c)(2)(iii) addresses only the contrast between the text and background 
of a communication, and provides two ``safe harbor'' examples that, 
when followed, comply with the color-contrast requirement. First, 
paragraph (c)(2)(iii) specifies that the color contrast requirement is 
met if the disclaimer is printed in black text on a white background. 
Second, paragraph (c)(2)(iii) specifies that the color contrast 
requirement is met if the degree of contrast between the background 
color and the disclaimer text color is at least as great as the degree 
of contrast between the background color and the color of the largest 
text in the communication. Please note that these two examples do not 
constitute the only ways to satisfy the color contrast requirements, 
and that they are safe harbors, not mandatory requirements. This 
approach is intended to provide a clear, flexible safe harbor that will 
ensure that the disclaimer does not blend in with the background of the 
communication any more than a headline or other key part of the core 
message text, and thereby providing certainty to persons making 
communications needing disclaimers.
    Paragraphs (c)(2)(iv) and (v) incorporate pre-BCRA regulatory 
provisions specific to print communications. Paragraph (c)(2)(iv), to 
which the provisions of pre-BCRA paragraph (a)(5)(i) are redesignated 
without substantive revision, states that a disclaimer need not appear 
on the front or cover page of a communication, except for 
communications that only contain a front face, such as billboards. 
Paragraph (c)(2)(v), to which the provisions of pre-BCRA paragraph 
(a)(5)(ii) are redesignated without substantive change, states that a 
communication that would require a disclaimer if distributed 
separately, and that is included in a package of materials, must 
contain the required disclaimer.
C. Specific Requirements for Radio and Television Communications That 
Are Authorized by Candidates
    In BCRA, Congress added new requirements for disclaimers in radio 
and television communications paid for by candidates or persons 
authorized by candidates. 2 U.S.C. 441d(d)(1). Paragraph (c)(3) 
implements these specific statutory requirements as described below.
    Paragraph (c)(3)(i) tracks the new statutory language requiring 
that a communication that is paid for or authorized by a candidate or 
the candidate's authorized committee and transmitted through radio must 
include an audio statement spoken by the candidate himself or herself. 
2 U.S.C. 441d(d)(1)(A). The statement must identify the candidate, and 
state that the candidate has approved the communication. Id.
    Likewise, paragraphs (c)(3)(ii) tracks the new statutory language 
requiring that a communication that is paid for or authorized by a 
candidate or the candidate's authorized committee and transmitted 
through television have an oral disclaimer spoken by the candidate 
himself or herself. 2 U.S.C. 441d(d)(1)(B). The provision requires the 
candidate to identify himself or herself, and to state that he or she 
has approved the communication. In addition, Congress specified that 
the candidate must convey that message in one of two ways: through a 
full-screen view of the candidate making the statement or through a 
``clearly identifiable photographic or similar image of the candidate'' 
that appears during the candidate's voice-over statement. Paragraph 
(c)(3)(ii)(A) sets forth the first option, while paragraph 
(c)(3)(ii)(B) sets forth the second option and provides additional 
guidance regarding the meaning of ``clearly identifiable.'' The only 
commenter who specifically addressed this issue suggested that the 
picture of the candidate should only be considered ``clearly 
identifiable'' if it is displayed in a full-screen view. However, the 
Commission notes that although Congress specifically required a full-
screen view when the candidate is shown making the statement, Congress 
did not require a full-screen view for the still picture. The 
Commission views this as an intentional distinction that contemplated 
an alternative to the full-screen view. Therefore, the Commission is 
establishing a safe harbor provision whereby a still picture of the 
candidate shall be considered ``clearly identifiable'' if it occupies 
at least 80% of the vertical screen height. That size is, in the 
Commission's judgment, a meaningful alternative to the full-screen 
requirement, and complies with Congress's mandate that the picture be 
``clearly identifiable.''
    Congress also established a third disclaimer requirement for 
communications paid for or authorized by a candidate and transmitted 
through television. In addition to the oral statement described above, 
each television communication must contain a ``clearly readable'' 
written statement that appears at the end of the communication ``for a 
period of at least four seconds'' with a ``reasonable degree of color 
contrast'' between the background and the disclaimer statement. See 2 
U.S.C. 441d(d)(2)(B)(ii). These statutory requirements are implemented 
in new 11 CFR 110.11(c)(3)(iii).
    The pre-BCRA regulations provided that a written disclaimer 
appearing on the screen of a television communication ``shall be 
considered clear and conspicuous if [it] appear[s] in letters equal to 
or greater than four (4) percent of the vertical picture height for not 
less than four (4) seconds.'' Pre-BCRA 11 CFR 110.11(a)(5)(iii). Two 
commenters urged the Commission to retain the four-percent height 
provision as a ``safe harbor.'' However, the new Congressional color-
contrast requirement in 2 U.S.C. 441d(d)(2)(B)(ii) renders the pre-BCRA 
``safe harbor'' incomplete because the four-percent-for-four-seconds 
provision does not address color contrast.
    The Commission is therefore setting forth the statutory ``clearly 
readable''

[[Page 76967]]

requirement in paragraph 11 CFR 110.11(c)(3)(iii) and is employing the 
same four percent height provision and the four-second duration 
provision as two of the three specific criteria that will determine 
whether a statement is ``clearly readable.'' Rather than providing a 
``safe harbor,'' paragraphs 11 CFR 110.11(c)(3)(iii)(A), (B), and (C) 
provide, respectively, that the statement will not be considered 
``clearly readable'' unless it appears in letters equal to or greater 
than four percent of the vertical picture height, it appears for at 
least four seconds, and the statement contains a reasonable degree of 
color contrast with the background.
    Paragraph (c)(3)(iii)(B) sets forth the four-second duration 
requirement in accordance with the BCRA language. 2 U.S.C. 
441d(d)(1)(B).
    Paragraph 11 CFR 110.11(c)(3)(iii)(C) addresses the new color 
contrast requirement in BCRA, which is the third criterion used to 
determine whether a statement is clearly readable. Because the statute 
did not define ``reasonable degree of color contrast,'' the Commission 
requested comment on several different approaches. To continue the same 
``safe harbor'' approach of pre-BCRA paragraph (a)(5)(iii), the 
regulations would have to describe ``reasonable degree of color 
contrast'' in an objective manner. The same commenter who addressed the 
color contrast issue in the context of printed communications also 
suggested that the Commission avoid overly complicated or cost-
incurring definitions of ``reasonable degree of color contrast'' in the 
context of television communications. For the same reasons stated above 
with reference to the color contrast requirements for printed 
communications, the Commission is providing ``safe harbors'' for 
disclaimers that are printed in black text on a white background, as 
well as disclaimers that have at least the same degree of contrast with 
the background color as the degree of contrast between the background 
color and the color of the largest text used in the communication. 11 
CFR 110.11(c)(3)(iii)(C). Either of these disclaimer formats would 
satisfy the color-contrast requirement, which is the third criterion 
used to determine whether the statement is ``clearly readable.''
    The Commission received no comments on the two proposed examples of 
spoken disclaimers that, if used by a candidate, will satisfy the 
requirements of paragraphs (c)(3)(i), (ii) and (iii). These examples, 
located in paragraph (c)(3)(iv), are not mandatory and are not the only 
acceptable disclaimers. Paragraph (c)(3)(iv) is intended to provide a 
clear ``safe harbor'' for candidates, authorized committees, and others 
required to include disclaimers in communications.
D. Specific Requirements for Radio and Television Communications Paid 
for by Other Persons and Not Authorized by Candidates
    In BCRA, Congress set forth a scripted audio statement required for 
disclaimers in communications transmitted through radio or television 
and paid for by persons other than candidates or persons authorized by 
candidates. 2 U.S.C. 441d(d)(2). New paragraph (c)(4) tracks the 
statutory language by requiring the name of the political committee or 
other person responsible for the communication and any connected 
organization to be included in the communication. ``Connected 
organization'' is defined in 11 CFR 100.6. Paragraph (c)(4) also 
requires that communications transmitted through a telephone bank, as 
defined in 11 CFR 100.28, carry the same statement. See discussion 
regarding the inclusion of telephone banks within the term ``public 
communication,'' above, and the discussion of specific requirements for 
radio, telephone bank, and television communications authorized by 
candidates, above. The scripted statement is: ``XXX is responsible for 
the content of this advertising.'' 2 U.S.C. 441d(d)(2).
    Furthermore, in the case of a television transmission, Congress 
required that the statement be conveyed by a ``full-screen view of a 
representative of the political committee or other person making the 
statement,'' or in a ``voice-over'' by such representative. 2 U.S.C. 
441d(d)(2). The Commission sought comment on whether the regulation 
should specify who may represent the payor for this purpose. One 
commenter urged the Commission to require an officer of the 
organization to make the statement, rather than a volunteer or paid 
celebrity. In contrast, another commenter argued that any restriction 
on who could make the statement ``would far exceed the scope of BCRA,'' 
which allows a ``representative of the committee or other person'' to 
make the statement. See 2 U.S.C. 441d(d)(2) (emphasis added). The 
Commission agrees with the latter commenter that the statute does not 
appear to contemplate any additional restrictions on the choice of the 
person making the disclaimer statement. Furthermore, the Commission 
sees no reason to remove additional flexibility where the plain 
emphasis of the relevant statutory provision is the content and 
conspicuousness of the disclaimer, not the individual speaking those 
words. The Commission also notes that where Congress clearly intended 
that a specific person convey the disclaimer message for an authorized 
radio or television communication, it did so explicitly by providing 
that the candidate must make the statement. Compare 2 U.S.C. 441d(d)(1) 
with 2 U.S.C. 441d(d)(2). Thus, 11 CFR 110.11(c)(4)(ii) does not 
include any specific limitation regarding who must speak the required 
message. In addition, unlike the requirements for television 
communications authorized by candidates, the audio statement required 
for television communications that are not authorized by candidates can 
be accomplished through voice-over without any requirement of a 
photograph or similar representation of the speaker.
    Finally, as with authorized television communications, the 
disclaimer statement for a television communication that is not 
authorized by any candidate must also appear in writing at the end of 
the communication in a clearly readable manner with a reasonable degree 
of color contrast between the background and the printed statement for 
a period of at least four seconds. 2 U.S.C. 441d(d)(2). Paragraphs 11 
CFR 110.11(c)(4)(iii)(A), (B), and (C) are therefore identical to 11 
CFR 110.11(c)(3)(iii)(A), (B), and (C). See above explanation of 11 CFR 
110.11(c)(3)(iii).

11 CFR 110.11(d) Coordinated and Independent Expenditures by Political 
Party Committees

    Paragraph (d) of section 110.11 covers disclaimers for 
communications that constitute coordinated party expenditures and 
independent expenditures by national, state, district, and local 
political party committees. The relevant pre-BCRA provisions of 11 CFR 
110.11(a)(2) are being redesignated as paragraph (d)(1), with one minor 
grammatical change and without substantive change.
    Although the Commission did not propose any significant substantive 
changes for disclaimer requirements related to coordinated party 
expenditures, one commenter expressed concern that a communication paid 
for by a political party committee with funds subject to the 2 U.S.C. 
441a(d) coordinated expenditure limits would, solely by virtue of being 
a 2 U.S.C. 441a(d) coordinated expenditure, be considered to be 
``authorized'' communications subject to the requirements of 11 CFR 
110.11(c)(3).

[[Page 76968]]

The Commission does not intend such a result and believes that such an 
interpretation would be contrary to its longstanding policy of 
permitting political party committees to avail themselves of the 2 
U.S.C. 441a(d) limits, both before and after a party's primary, without 
any showing of candidate authorization or actual ``coordination'' with 
a candidate. See ``Party Expenditures vs. Contributions: 
Similarities,'' Campaign Guide for Political Party Committees at p.16 
(1996) (``It is up to the party committee to decide.'') Therefore, the 
Commission is adding new paragraph (d)(2) to 11 CFR 110.11 to make it 
clear that a communication paid for by a political party committee 
through a section 441a(d) expenditure will not be considered to be 
authorized by a candidate solely by virtue of using the funds subject 
to the section 441a(d) limits. 11 CFR 110.11(d)(3). Please note, 
however, that while this clarification recognizes a political party 
committee's freedom to characterize its payment as a ``coordinated 
expenditure'' even when no actual coordination occurred, the 
communication would be considered authorized by the candidate (and 
would therefore require an authorization statement to that effect) if 
the candidate approves the communication. The Commission is also making 
clear that communications made by a political party committee pursuant 
to 2 U.S.C. 441a(d) that are distributed prior to the date the party 
committee's candidate is nominated need not carry disclaimers 
indicating that the communication was authorized by any candidate, but 
only must indicate who paid for the communication. 11 CFR 
110.11(d)(1)(ii).
    Paragraph (d)(3) covers communications that constitute independent 
expenditures by political party committees. It states that the 
disclaimer provisions apply to such communications, and that a ``non-
authorization notice'' is required, as with any other independent 
expenditure communication. See pre-BCRA 11 CFR 109.3 and proposed 11 
CFR 109.10(e) (as proposed in a separate Notice of Proposed Rulemaking 
on Consolidated Reporting, 67 FR 64555 (October 21, 2002).)

11 CFR 110.11(e) Exempt Activities

    The Commission is redesignating the provisions of pre-BCRA 11 CFR 
110.11(a)(4), pertaining to communications that qualify as ``exempt 
activities,'' as paragraph (e) of section 110.11. In the NPRM, the 
Commission proposed to make only minor, non-substantive revisions. 67 
FR 55351. Although not so expressly stated in the NPRM, the Commission 
based this proposal on the tentative conclusion that Congress did not 
intend, in BCRA, to overturn the Commission's longstanding approach to 
disclaimers for exempt activities. The Commission received no comments 
on this proposal.
    The Commission has concluded that no substantive revisions are 
necessary. The Commission has, however, rewritten the paragraph to make 
it clear that public communications that constitute exempt activities 
are covered by the requirements of paragraphs (a), (b), (c)(1), and 
(c)(2) of section 110.11, but are not subject to the new ``stand by 
your ad'' requirements in paragraphs (c)(3) and (c)(4) of section 
110.11. This revision is not intended to change the rule substantively; 
rather, it is only intended to clarify the rule in light of the new 
provisions added by BCRA.

11 CFR 110.11(f) Exceptions

    Exceptions to the disclaimer requirements are set out in paragraph 
(f). The exceptions in pre-BCRA paragraphs (a)(6)(i), (ii), and (iii) 
are being redesignated as paragraphs (f)(1)(i), (ii), and (iii), 
respectively, with only grammatical, non-substantive revision.
    The Commission is incorporating the provisions of pre-BCRA 11 CFR 
110.11(a)(7), regarding certain communications by a separate segregated 
fund or its connected organization, in paragraph (f)(2), because this 
provision is essentially an exception. In addition, in paragraph 
(f)(2), the word ``form'' is being changed to ``type.'' This change has 
no substantive effect, and is being done only to conform to the 
language of the statute. See 2 U.S.C. 441d(a). In addition, the 
reference ``general public political advertising'' in pre-BCRA 11 CFR 
110.11(a)(7) is replaced with a reference to a ``public 
communication.'' 11 CFR 110.11(f)(2). No commenters addressed this 
provision.

11 CFR 110.11(g) Comparable Rate for Campaign Purposes

    Paragraph (g) of section 110.11 continues the pre-BCRA rule 
pertaining to comparable rates for print advertising. That is, the 
contents of pre-BCRA 11 CFR 110.11(b) are being redesignated as 
paragraph (g). Other than the addition of a heading for the paragraph, 
there are no revisions to the pre-BCRA rule. Paragraph (g) tracks 2 
U.S.C. 441d(b), as did its pre-BCRA predecessor. No commenters 
addressed this provision.

11 CFR 110.16 Prohibitions on Fraudulent Misrepresentations

    BCRA adds a subsection to the fraudulent misrepresentation statute 
at 2 U.S.C. 441h. The new provision, 2 U.S.C. 441h(b), prohibits a 
person from fraudulently misrepresenting that the person is speaking, 
writing or otherwise acting for, or on behalf of, a Federal candidate 
or political party, or an employee or agent of either, for the purpose 
of soliciting contributions or donations. It also prohibits persons 
from participating in, or conspiring to participate in, plans, schemes, 
or designs to make such fraudulent misrepresentations in soliciting 
contributions and donations. BCRA also non-substantively amends the 
existing fraudulent misrepresentation statute by redesignating it as 
subsection (a) of 2 U.S.C. 441h. The regulation implementing this 
provision, together with the pre-BCRA fraudulent misrepresentation 
regulation formerly found at 11 CFR 110.9(b),\4\ is combined in new 11 
CFR 110.16.
---------------------------------------------------------------------------

    \4\ Another BCRA rulemaking amended 11 CFR 110.9, formerly 
entitled ``Miscellaneous Provisions,'' to address only violations of 
the contribution limits and was re-titled accordingly. See Final 
Rules and Explanation and Justification for Contribution Limitations 
and Prohibitions, 67 FR 69928 (Nov. 19, 2002). Other provisions 
previously addressed in 11 CFR 110.9 include fraudulent 
misrepresentation, price index increase and voting age population. 
This rulemaking redesignates and amends the fraudulent 
misrepresentation provision. The ``Contribution Limitations and 
Prohibitions'' rulemaking redesignates and amends the price index 
increase provision. See id. A third BCRA rulemaking project entitled 
``Coordination and Independent Expenditures'' proposes to 
redesignate and amend the voting age population provision. See NPRM 
at 67 FR 60042, 60060 (Sept. 24, 2002).
---------------------------------------------------------------------------

    The pre-BCRA fraudulent misrepresentation provision, now codified 
at 2 U.S.C. 441h(a), is aimed at fraudulent misrepresentation of 
campaign authority. For additional background, see Legislative History 
of Federal Election Campaign Act Amendments of 1974 at 521. The statute 
prohibits a candidate, his or her employee or agent, or an organization 
under the candidate's control, from purporting to speak, write, or act 
for another candidate or political party on a matter that is damaging 
to the other candidate or party. Section 441h(a) encompasses, for 
example, a candidate who distributes letters containing statements 
damaging to an opponent and who fraudulently attributes them to the 
opponent. The Commission has determined that ``on a matter that is 
damaging'' includes actions or spoken or written communications that 
are intended to suppress votes for the candidate or party who has been

[[Page 76969]]

fraudulently misrepresented. A violation of section 441h(a) does not 
depend on whether the candidate or party who is fraudulently 
represented goes on to win an election. While the precise harm may be 
difficult to quantify, harm is presumed from the nature of the 
communication. Proof of financial damages is unnecessary.
    Because the language and purpose of the pre-BCRA misrepresentation 
statute encompasses only misrepresentations by a candidate or the 
candidate's employee or agent, the Commission has historically been 
unable to take action in enforcement matters where persons unassociated 
with a candidate or candidate's authorized committee have solicited 
funds by purporting to act on behalf of a specific candidate or 
political party. Candidates have complained that contributions that 
contributors believed were going to benefit the candidate were diverted 
to other purposes, harming both the candidate and contributor. 
Consequently, the Commission has frequently included in its annual 
legislative recommendations to Congress a recommendation that 2 U.S.C. 
441h be amended to specifically prohibit any person from fraudulently 
misrepresenting a candidate or political party in solicitations. See 
Federal Election Commission Annual Reports for 2000 at 39, for 1999 at 
47-48, for 1998 at 52, and 1997 at 47. BCRA's prohibition on fraudulent 
solicitations of contributions and donations implements those 
legislative recommendations. 2 U.S.C. 441h(b); see 148 Cong. Rec. S3122 
(daily ed. March 29, 2001) (statement of Sen. Nelson).
    The Commission received one comment on the proposed rules to 
implement BCRA's fraudulent solicitation provision and to redesignate 
the pre-BCRA fraudulent misrepresentation rule. The commenter expressed 
support for combining these two provisions in a new rule. The commenter 
agreed that an anti-fraud provision aimed at fraudulent fundraising and 
applicable to a broader range of persons was needed.
    The final rule at 11 CFR 110.16(a) remains unchanged from the 
proposed rule in the NPRM. Paragraph (a) amends the pre-BCRA fraudulent 
misrepresentation regulation, formerly found at 11 CFR 110.9(b), by 
adding the title, ``In general.'' This change follows BCRA, which added 
a similar heading to section (a) of 2 U.S.C. 441h. Technical amendments 
also make the wording of paragraph (a) gender-neutral. Finally, 
paragraph (a)(2) has been amended from the pre-BCRA rule to include the 
word ``scheme'' so that it tracks the statute.
    The final rule at 11 CFR 110.16(b) tracks the statutory language in 
BCRA. No changes are being made from the proposed rule. Paragraph 
(b)(1) prohibits a person from fraudulently misrepresenting that the 
person speaks, writes, or otherwise acts for or on behalf of a 
candidate, political party, or an employee or agent of either, in 
soliciting contributions or donations. As used in section 110.16(b)(1), 
``donation'' has the same meaning as in 11 CFR 300.2(e). See Final 
Rules for Prohibited and Excessive Contributions: Non-Federal Funds or 
Soft Money, 67 FR 49064, 49122 (July 29, 2002). Paragraph (b)(2) 
prohibits a person from willfully and knowingly participating in, or 
conspiring to participate in, any plan, scheme, or design to violate 
proposed paragraph (b)(1).
    The Commission notes that the fraudulent misrepresentations 
prohibited in both 11 CFR 441h(a) and (b) and 11 CFR 110.16(a) and (b) 
differ from common law fraud. Unlike common law fraudulent 
misrepresentation, section 441h gives rise to no tort action. Section 
441h is part of a Federal statute designed to address campaign finance 
abuses, not common law fraud. See generally Buckley v. Valeo, 424 U.S. 
1, 26-27 (1976).
    The Supreme Court has recognized that statutes that address schemes 
to defraud, such as sections 441h(a)(2) and (b)(2), do not require 
proof of the common law requirements of ``justifiable reliance'' and 
``damages.'' Neder v. United States, 527 U.S. 1, 24-25 (1999) (``The 
common law requirements of `justifiable reliance' and `damages,' for 
example, plainly have no place in federal fraud statutes * * *'' ``By 
prohibiting the `scheme to defraud' rather than the completed fraud, 
the elements of reliance and damage would clearly be inconsistent with 
the statutes Congress enacted''), citing United States v. Stewart, 872 
F.2d 957, 960 (10th Cir. 1989).
    Another indication that the fraudulent misrepresentations 
prohibited by section 441h differ from common law fraud is that section 
441h(a) states that the fraudulent misrepresentation must be ``on a 
matter which is damaging to [the misrepresented] candidate or political 
party.'' If the statute were to require proof of damage in common law 
fraudulent misrepresentation, then the phrase ``on a matter which is 
damaging'' is superfluous. Courts construe statutes so ``as to avoid 
rendering superfluous any parts thereof.'' Astoria Fed. Sav. & Loan 
Ass'n v. Solimino, 501 U.S. 104 (1991); see also Federal Election 
Commission v. Arlen Specter '96, 150 F. Supp.2d 797, 806 (2001), 
quoting Bennett v. Spear, 520 U.S. 154, 173 (1997).

11 CFR 111.24 Civil Penalties (2 U.S.C. 437g(a)(5), (6), (12), 28 
U.S.C. 2461 nt.).

    The Act imposes civil penalties on anyone violating any portion of 
FECA or the Presidential Election Campaign Fund Act (``Fund Act'') or 
the Presidential Primary Matching Payment Account Act (``Matching 
Payment Act''). The Act's civil penalties, found at 2 U.S.C. 
437g(a)(5), (6), and (12), are organized into two tiers of monetary 
penalties; one tier of penalties for violations of the Act, and a 
second tier of penalties for ``knowing and willful'' violations of the 
Act.
    BCRA amends sections 437g(a)(5)(B) and 437g(a)(6)(C) by separating 
out and increasing the penalties for a subset of knowing and willful 
violations, namely, contributions that are made in the name of another. 
See 2 U.S.C. 441f. Such contributions are often made through a conduit 
to circumvent the contribution limits. The amendment to 2 U.S.C. 
437g(a)(5)(B) increases the civil penalties for such violations to 
``not less than 300 percent of the amount involved in the violation'' 
and ``not more than the greater of $50,000 or 1,000 percent of the 
amount involved in the violation.''
    Section 437g(a)(6)(C) of FECA, authorizing a court to impose civil 
penalties on a person who knowingly and willfully violates the Act, has 
been similarly amended by BCRA. Accordingly, the Commission amends 11 
CFR 111.24 to implement these amendments to FECA.
    Specifically, the Commission is dividing 11 CFR 111.24(a) into 
paragraphs (a)(1), and (a)(2)(i) and (ii). Paragraph (a)(1) contains 
the unchanged language of the pre-BCRA regulation for civil penalties 
for violations of the Act or the Fund Act or Matching Payment Act. 
Paragraph (a)(2) addresses ``knowing and willful'' violations and is 
further divided into paragraphs (a)(2)(i) and (ii). Paragraph (a)(2)(i) 
contains the unchanged language of the pre-BCRA regulation for civil 
penalties for knowing and willful violations of FECA or the Fund Act or 
the Matching Payment Act. 11 CFR 111.24(a)(2)(ii) implements BCRA's 
amendments to FECA increasing civil penalties for knowing and willing 
violations involving contributions made in the name of another. In the 
case of a knowing and willful violation of the prohibition on 
contributions in the name of another, the civil penalty is not

[[Page 76970]]

less than an amount that is equal to 300 percent of the amount of the 
violation, and the civil penalty is not more than $50,000 or an amount 
equal to 1,000 percent of the amount of the violation, whichever is 
greater. The Commission received no comments on these amended rules, 
which are identical to the proposed rules, previously published.

11 CFR Part 113 Use of Campaign Accounts for Non-Campaign Purposes (2 
U.S.C. 439a)

Introduction
    In BCRA, Congress deleted 2 U.S.C. 439a in its entirety, and 
replaced it with an entirely new section. Subsection (a) of the amended 
section sets forth the following four categories of ``permitted uses'' 
of campaign funds: (1) Otherwise authorized expenditures in connection 
with a candidate's campaign for Federal office; (2) ordinary and 
necessary expenses incurred in connection with a Federal officeholder's 
duties; (3) contributions to certain tax-exempt organizations; and (4) 
transfers, without limitation, to national, state or local political 
party committees. 2 U.S.C. 439a(a)(1) through (4). Congress also 
included a list of non-exhaustive, per se prohibited personal uses of 
campaign funds, including home mortgage, rent or utility payments, 
clothing purchases, noncampaign-related automobile expenses, country 
club memberships, vacations or other noncampaign-related trips, 
household food items, tuition payments, noncampaign-related admissions 
to entertainment events, such as sporting events, concerts, and 
theatres, and health club dues. 2 U.S.C. 439a(b)(2)(A) through (I).
    Former 2 U.S.C. 439a was the statutory basis for the Commission's 
pre-BCRA ``personal use'' rules. It allowed candidates and Federal 
officeholders to use excess campaign funds to pay for ordinary and 
necessary expenses incurred in connection with their duties as Federal 
officeholders, certain contributions to tax-exempt organizations, and 
other lawful purposes, including transfers, without limitation, to 
national, state or local political party committees. The former section 
439a also generally prohibited candidates and Federal officeholders 
from converting their excess campaign funds to personal uses.
    Two pre-BCRA regulations implemented the statutory conversion-to-
personal-use prohibition. 11 CFR 113.1(g)(1)(i) set out a non-
exhaustive list of per se prohibited personal uses, and 11 CFR 
113.1(g)(1)(ii) described uses that the Commission evaluated on a case-
by-case basis. In addition, the latter regulation stated that uses that 
would exist ``irrespective'' of a candidate's campaign or a Federal 
officeholder's duties constitute personal use. Finally, another pre-
BCRA regulation, which described the permissible uses of excess 
campaign funds, included the ``any other lawful purpose'' language from 
former section 439a. 11 CFR 113.2(d).
    In the NPRM, the Commission proposed regulations that would 
implement amended section 439a. The Commission also requested comments 
on several issues. With regard to the personal use regulations, the 
Internal Revenue Service commented that it saw no direct conflict 
between the Commission's proposals and the Internal Revenue Code or the 
regulations thereunder. Other comments are addressed below.
Unchanged Provisions of 11 CFR 113.1(e) and 11 CFR 113.2
1. Per se Personal Uses
    The pre-BCRA version of 2 U.S.C. 439a contained a general 
prohibition against the personal use of campaign funds, but did not 
specify any particular impermissible uses. In contrast, the 
Commission's pre-BCRA personal use regulations specifically defined 
certain uses of campaign funds or donations as per se prohibited 
personal uses. 11 CFR 113.1(g)(1)(i).
    When Congress enacted BCRA, it amended 2 U.S.C. 439a(b) to include 
a non-exhaustive list of prohibited personal uses of campaign funds. As 
one of BCRA's principal sponsors explained, amended section 439a 
``[c]odifies FEC regulations relating to the personal use of campaign 
funds by candidates'' (emphasis added). 148 Cong. Rec. S1993-4 (daily 
ed. March 18, 2002) (statement of Sen. Feingold). However, the 
Commission noted in the NPRM that several of the personal use 
provisions in amended section 439a were not adopted verbatim, but were 
instead summaries of pre-BCRA personal use regulations. For example, 
the statute now prohibits the use of campaign contributions for ``a 
clothing purchase'' (2 U.S.C. 439a(b)(2)(B)); whereas the pre-BCRA 
corresponding regulation at 11 CFR 113.1(g)(1)(i)(C) prohibited the 
personal use of ``[c]lothing, other than items of de minimis value that 
are used in the campaign, such as campaign `T-shirts' or caps with 
campaign slogans.'' In addition, amended section 439a did not 
incorporate all of the pre-BCRA per se personal use rules in their 
entirety. Compare post-BCRA 2 U.S.C. 439a(b)(2)(A) through (I) with 
pre-BCRA 11 CFR 113.1(g)(1)(i). In the NPRM, the Commission stated that 
it interpreted new subsection (b) of 2 U.S.C. 439a to provide an even 
firmer statutory foundation for the per se rules at 11 CFR 
113.1(g)(1)(i) than did the pre-BCRA version of section 439a. No 
commenters opposed this interpretation, and two commenters supported 
it. Accordingly, aside from the exceptions noted below, the Commission 
is retaining its pre-BCRA per se personal use regulations.
2. Irrespective test
    As the Commission noted in the NPRM, pre-BCRA section 
113.1(g)(1)(ii) stated that a use that would exist ``irrespective'' of 
a candidate's campaign or a Federal officeholder's duties would 
constitute a prohibited personal use. In BCRA, Congress codified the 
``irrespective'' test as part of new section 439a(b)(2) (``For the 
purposes of paragraph (1), a contribution or donation shall be 
considered to be converted to personal use if the contribution or 
amount is used to fulfill any commitment, obligation, or expense of a 
person that would exist irrespective of the candidate's election 
campaign or individual's duties as a holder of Federal office * * *'') 
As the Commission explained in the NPRM, BCRA's ``irrespective'' test 
is virtually identical to the language in section 113.1(g)(1)(ii). The 
Commission proposed to continue to apply the ``irrespective'' test as 
it had done prior to BCRA. No comments were received specifically on 
this issue, although one commenter cited BCRA's ``irrespective'' 
language in the context of the commenter's analysis of the 
``noncampaign-related trip'' language in proposed 11 CFR 
113.1(g)(i)(K). (Noncampaign-related trips are discussed below.) 
Therefore, in the final rule, the Commission is not revising the 
``irrespective'' test.
Amended Provisions of 11 CFR 113.1
1. 11 CFR 113.1(b) and (e)--Excess Campaign Funds
    In BCRA, Congress deleted the phrase ``in excess of any amount 
necessary to defray'' campaign expenses from section 439a. Former 
section 113.1(e) defined ``excess campaign funds'' to mean ``amounts 
received by a candidate as contributions which he or she determines are 
in excess of any amount necessary to defray his or her campaign 
expenditures.'' In the NPRM, the Commission proposed not to change 
section 113.1(e), but raised the issue of whether Congress intended to 
eliminate the discretion of candidates and Federal

[[Page 76971]]

officeholders to use these excess campaign funds ``for ordinary and 
necessary expenses incurred in connection with duties of the individual 
as a holder of Federal office.'' 2 U.S.C. 439a(a)(2). No commenters 
opposed the Commission's proposal to leave section 113.1(e) unchanged, 
and one commenter supported leaving the ``excess campaign funds'' 
phrase intact.
    To ensure that 11 CFR part 113 is consistent with the plain 
language of BCRA, the Commission has decided that the term ``excess 
campaign funds'' should be dropped. Accordingly, the title of part 113, 
(formerly ``Excess Campaign Funds and Funds Donated to Support Federal 
Officeholder Activities'') now reads ``Campaign Funds and Funds Donated 
to Support Federal Officeholder Activities.'' In addition, the 
references to the term ``excess campaign funds'' throughout part 113 
are being deleted.
    The Commission is also deleting 11 CFR 113.1(e), which previously 
defined ``excess campaign funds'' as ``amounts received by a candidate 
as contributions which he or she determines are in excess of any amount 
necessary to defray his or her campaign expenditures.''
    The Commission is also making the following conforming amendments. 
In paragraphs (e)(1)(i), (e)(5), and (f), the term ``campaign funds'' 
is being substituted for ``excess campaign funds.'' Lastly, the 
Commission is also changing ``excess campaign funds'' to ``campaign 
funds'' in paragraph (b), which defines ``office accounts.''
2. 11 CRF 113.1(g)(1)(i)(B)--Funeral Expenses
    Notwithstanding a principal sponsor's statement that the BCRA 
codifies the Commission's personal use regulations, amended section 
439a failed to include two per se examples of personal use contained in 
11 CFR 113.1(g). One of these, funeral, cremation or burial expenses, 
is being retained with significant exceptions. These would include such 
expenses for a candidate, employee or volunteer of authorized 
committees whose death arises out of, or in the course of, campaign 
activity. While there is no legislative history pertaining to this 
particular category of personal uses, it is at least a permissible 
construction of the BCRA to conclude that Congress deliberately 
excluded funeral expenses from its list of excluded uses of campaign 
funds. Norman J. Singer, Statutes and Statutory Construction Sec.  
47.23 (6th ed. 2000) (``When `include' is utilized, it is generally 
improper to conclude that entities not specifically enumerated are 
excluded. * * * It has also been assumed that when the legislature 
expresses things through a list, the court assumes that what is not 
listed is excluded.'').
    In any event, limiting the use of campaign funds for funeral 
expenses resulting from a death that arises out of, or in the course 
of, campaign activity meets the Commission's ``irrespective'' test now 
codified in 2 U.S.C. 439a(b)(2). The phrase, ``arises out of, or in the 
course of,'' is a term of art employed in workers'' compensation 
statutes and insurance contracts and would cover, for instance, deaths 
resulting from injuries suffered during campaign activity.
    In addition, with respect to funeral expenses for authorized 
committee staff and volunteers who die in the course of campaign 
activity, public policy considerations counsel the permission of the 
payment of such expenses from campaign funds as campaign volunteers and 
staff, unlike officeholders and their staff, generally do not receive 
any fringe benefits that would cover the cost of funeral expenses.
3. 11 CFR 113.1(g)(1)(i)(I)--Using Contributions To Pay Salaries to 
Candidates
    In the NPRM, the Commission proposed adding a new rule, 11 CFR 
113.1(g)(1)(i)(I), which would prohibit candidates from using campaign 
funds to pay themselves salaries or otherwise compensate themselves for 
income lost as a result of campaigning for Federal office. In AO 1999-
1, the Commission banned the use of campaign funds to pay candidate 
salaries, in part because candidates would otherwise be able to spend 
campaign funds received as salaries for prohibited personal uses such 
as food, clothing, utilities, mortgages and other prohibited uses. 
Also, although the Commission noted that one of BCRA's principal 
sponsors stated that BCRA was intended to codify the Commission's 
current regulations but not its advisory opinions (148 Cong. Rec. S2143 
(daily ed. March 20, 2002) (statement of Sen. Feingold)), the 
Commission preliminarily concluded that this proposed addition to its 
regulations would be consistent with the non-exhaustive list of 
prohibited personal uses in amended 2 U.S.C. 439a(b)(2).
    The Commission sought comment as to whether or not principal 
campaign committees should be able to pay a candidate's salary out of 
campaign funds. Three commenters opposed the NPRM's proposal to 
prohibit the payment of candidate salaries and no commenter supported 
the proposal. One commenter argued that the definition of personal use 
does not encompass a payment to, as distinguished from an obligation 
of, a candidate. The same commenter also argued that because many 
candidates must forego salary in order to conduct the business of the 
campaign, a candidate who is dependent on an income is put at a severe 
disadvantage compared to an incumbent who is free to campaign at all 
times without any reduction in compensation or to an affluent 
challenger, who can afford to campaign without receiving any 
compensation.
    The commenter also noted that AO 1999-1, which cites AOs 1996-34, 
1995-42, and 1995-20, stated that the Commission has permitted the use 
of campaign funds to enable candidates and immediate family members to 
attend campaign events. Finally, the commenter concluded that 
candidates without significant resources might not be able to forego 
salary payments in order to run for Federal office, and recommended 
that the Commission promulgate a regulation permitting candidates to be 
paid salaries from campaign funds, with restrictions sufficient to 
prevent abuse.
    A second commenter, citing the above-mentioned statement by one of 
BCRA's principal sponsors that the new law was not intended to codify 
the Commission's advisory opinions, asserted that the Commission lacked 
the authority to characterize salary payments to candidates from 
campaign funds as a per se prohibited personal use. This commenter also 
argued that, were it not for their campaign responsibilities, 
candidates would not have to leave their jobs and give up their 
salaries. Thus, the commenter concluded, this situation fulfills BCRA's 
``irrespective'' test. The commenter also maintained that paying 
salaries to candidates so that they can buy personal items and services 
is akin to corporate employees making political contributions from 
their salaries. The commenter drew the analogy that, because corporate 
contributions are illegal but contributions from corporate employees 
are not, candidates should be able to draw salaries from campaign funds 
and should be allowed to purchase personal goods and services. Noting 
that would-be candidates of modest means might not be able to run for 
Federal office without salaries, the commenter urged the Commission not 
to change existing rules on this subject, but rather to either 
reconsider AO 1999-1 or let Congress decide the issue.
    Finally, a third commenter, who joined in the comments of the 
previous two commenters, maintained that the

[[Page 76972]]

Commission's proposal exceeds both Congress's mandate in BCRA and 
congressional intent. The commenter also stated that the proposal would 
exacerbate what the commenter characterized as ``enhanced advantages 
conferred upon the wealthy, including incumbent federal office 
holders,'' by BCRA. The commenter concluded that, unlike officeholders, 
persons of average means need a salary in order to pay expenses while 
running for office.
    The Commission agrees with the commenters that the payment of a 
salary to a candidate is not a prohibited personal use as defined under 
Commission regulations since, but for the candidacy, the candidate 
would be paid a salary in exchange for services rendered to an 
employer. The Commission's personal use regulations issued on February 
9, 1995 adopted the ``irrespective test'' in determining whether 
expenses would be deemed personal use. In the Explanation and 
Justification, the Commission explained that ``if campaign funds are 
used for a financial obligation that is caused by campaign activity or 
the activities of an officeholder, that use is not personal use.'' 
Explanation and Justification, Final Rules on Expenditures; Reports by 
Political Committees; Personal Use of Campaign Funds, 60 FR 7862, at 
7863-7864 (Feb. 9, 1995). A salary paid to a candidate would be in 
return for the candidate's services provided to the campaign and the 
necessity of that salary would not exist irrespective of the candidacy. 
As the Commission has previously stated, under the Act and Commission 
regulations, a candidate and the candidate's campaign committee have 
wide discretion in making expenditures to influence the candidate's 
election, but may not convert excess campaign funds to personal use. 2 
U.S.C. 431(9) and 439a, AOs 1992-4, 1991-2, 1988-13, 1987-2, 1987-1, 
1984-42, 1984-8, 1980-138 and 1980-49. Therefore, the Commission will 
permit a candidate's principal campaign committee to pay a salary to 
the candidate, thus superseding AO 1999-1.
    Advisory Opinions 2001-10, 2001-03, 2000-40, 2000-37, and 2000-12 
state the Commission will permit the use of campaign funds for salary 
payments to a member of the candidate's family provided that that the 
family member is providing bona fide services to the campaign and the 
salary does not exceed fair market value for the services provided. 
Unlike the payment of salaries to members of a candidate's family, 
however, there need not be any showing that a candidate is providing 
bona fide services to the campaign; the fact that the candidate's work 
is valuable to his or her campaign shall be presumed.
    Note that a candidate's salary does not, however, constitute a 
qualified campaign expense as that term is defined in 11 CFR 9002.11 
and 9032.9.
    The payment of salaries to candidates from campaign funds is 
subject to certain conditions in the final rules. First, the 
candidate's salary must be paid from his or her principal campaign 
committee only, as defined in 11 CFR 100.5(e)(1). This condition 
precludes the possibility of multiple salaries, and generally adds 
clarifying specificity.
    Second, the salary payment to the candidate must not exceed the 
minimum annual salary for the Federal office sought. Thus, if a 
candidate seeks a seat held by a member of the House of Representatives 
or the Senate who holds a leadership position, and is thus paid more 
than the minimum salary payable to a member of the House of 
Representatives or the Senate, respectively, the candidate's salary 
payment shall nonetheless not exceed the lowest salary for the Federal 
office that he or she seeks. Any salary payment to a candidate from 
campaign funds in excess of the salary paid to a Federal officeholder--
U.S. House, U.S. Senate, or the Presidency--shall be considered 
personal use. See definition of ``Individual holding Federal office,'' 
11 CFR 300.2(o). See also 11 CFR 113.1(c) and 11 CFR 100.4. Further, 
any earned income that the candidate receives from salaries or wages 
from any other source will count towards the limit of the minimum 
annual salary for the Federal office sought. This condition will 
prevent candidates from paying themselves a salary from campaign funds 
on top of other earned income that they receive from other sources, 
such as from private-sector employment, to the extent that such 
combined payments exceed the minimum annual salary for the Federal 
office that the candidate is seeking. This ceiling on permissible 
candidate salaries from campaign funds is intended to prevent possible 
abuse in terms of candidates paying themselves exorbitant salaries, and 
will likewise ensure that a challenger may be paid out of campaign 
funds no more than the officeholder whom he or she is running against 
is paid by the government for his or her government service. 
Additionally, no candidate may receive a salary from campaign funds in 
excess of what he or she received as earned income in the year prior to 
becoming a candidate. This additional safeguard will help ensure that 
campaign salaries are not used to enrich candidates, but instead used 
to compensate candidates for lost income that is forgone due to 
becoming a candidate.
    Third, the final rule requires candidates who avail themselves of 
this salary provision to provide income tax records from the relevant 
years and other evidence of earned income upon the request of the 
Commission.
    Fourth, payments made under this paragraph must be computed on a 
pro-rata basis. This is intended to prevent a candidate's principal 
campaign committee from paying the candidate the entire minimum annual 
salary for the Federal office sought by the candidate, unless he or she 
is a candidate, as defined by 11 CFR 100.3(a), for at least one year. 
Any tax payments required by the Internal Revenue Service, or state 
and/or local governments, are the responsibility of the candidate.
    Fifth, an incumbent Federal officeholder, as defined in 11 CFR 
100.5(f)(1), must not receive salary payments as a candidate from 
campaign funds. Otherwise, of course, such an incumbent officeholder 
would be receiving two salaries, one from his or her campaign and one 
for his or her official duties.
    Sixth, under the final rules at 11 CFR 113.1(g)(1)(i)(I), the first 
payment of a salary from campaign funds to a candidate must be made no 
earlier than the filing deadline for access to the primary election 
ballot for Federal candidates, as determined by State law, or in those 
states that do not conduct primaries, on January 1 of each even-
numbered year. See 11 CFR 100.24(a)(1)(i). If the candidate wins the 
primary election, the principal campaign committee may continue to pay 
him or her a salary from campaign funds through the date of the general 
election, up to and including the date of any general runoff. Id. If 
the candidate loses the primary, withdraws from the race, or otherwise 
ceases to be a candidate, no salary payments may be paid beyond that 
date. In odd-numbered years in which a special election for a Federal 
office occurs, the principal campaign committee of a candidate may pay 
him or her a salary from campaign funds starting on the date the 
special election is set and ending on the day of the special election. 
See 11 CFR 100.24(a)(1)(ii).
    In making this decision, the Commission is satisfied that, because 
all candidate and family members' salaries will be fully disclosed to 
the public, those who contribute to the campaign and who support the 
candidate will be able to voice their approval, or

[[Page 76973]]

disapproval, of this use of campaign funds.
4. 11 CFR 113.1(g)(1)(i)(J) and 11 CFR 113.1(g)(1)(ii)(C)--Noncampaign-
Related Trips
    One issue on which the Commission requested comment is raised by 2 
U.S.C. 439a(b)(2)(E), which specifically included a ``vacation or other 
noncampaign-related trip'' (emphasis added) as a per se statutorily 
prohibited personal use. The NPRM accordingly proposed to add ``[a] 
vacation or other noncampaign-related trip'' to the regulatory list of 
per se personal uses in proposed 11 CFR 113.1(g)(1)(i)(K). The 
Commission also proposed to modify the pre-BCRA case-by-case rules at 
11 CFR 113.1(g)(1)(ii)(C), which applies to ``travel expenses'' to 
reflect the changes made by BCRA. Seven sets of commenters, including 
the principal sponsors of BCRA, addressed the Commission's proposal.
    The principal sponsors of BCRA stated that Congress had 
intentionally left intact the statutory provision that states that 
campaign funds may be used ``for ordinary and necessary expenses 
incurred in connection with duties of the individual as a holder of 
Federal office.'' \5\ Compare pre-BCRA 2 U.S.C. 439a with new 2 U.S.C. 
439a(a)(2); see also 11 CFR 113.1(g)(5). The principal sponsors 
explained that Congress did not intend to modify current law or 
practice governing the use of campaign funds for travel expenses in 
connection with officeholders' duties. Consequently, they requested 
that the Commission modify the following regulations: proposed 11 CFR 
113.1(g)(1)(i)(J); proposed 113.1(g)(1)(i)(K); proposed 11 CFR 
113.1(g)(ii)(C); and 11 CFR 113.1(g)(5).
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    \5\ For a detailed explanation of how the Commission's personal 
use rules interact with the rules of the House of Representatives 
and the Senate, see the Commission's 1995 Explanation and 
Justification of its rules concerning personal use of campaign funds 
at 60 FR 7870-7871 (Feb. 9, 1995).
---------------------------------------------------------------------------

    Another group of commenters also observed that new section 
439a(a)(2) states that campaign funds may be used ``for ordinary and 
necessary expenses incurred in connection with duties of the individual 
as a holder of Federal office.'' This language, these commenters 
stated, expresses Congress's intent to allow Senators to use campaign 
funds for their official expenses, including fact-finding trips. These 
commenters also pointed out that fact-finding trips, which members 
would not take but for their official duties, would not occur 
``irrespective'' of their official duties. Therefore, these trips 
constitute part of members' official duties and do not constitute a 
prohibited personal use of campaign funds.
    Finally, two commenters acknowledged that 2 U.S.C. 439a(b)(2) 
includes a vacation or noncampaign-related trip in the list of 
prohibited uses. Nonetheless, they asserted that, if the Commission 
were to issue regulations to ban the use of campaign funds for 
noncampaign-related travel, it would be ignoring Congress's clear 
authorization in amended 2 U.S.C. 439a(a)(2) to allow the use of 
campaign funds for expenses incurred in connection with an individual's 
duties as a Federal officeholder, and the ``irrespective'' test, which, 
as stated above, is now part of amended 2 U.S.C. 439a(b)(2). They urged 
the Commission to construe the statute as a whole.
    Other commenters also argued that the Commission should not 
prohibit the use of campaign funds to pay for all noncampaign-related 
travel, including fact-finding trips. As did the previous commenters, 
these commenters noted that BCRA permits the use of campaign funds 
``for ordinary and necessary expenses incurred in connection with 
duties of the individual as a holder of Federal office.'' Therefore, 
the commenters urged the Commission not to adopt regulations defining 
``noncampaign-related'' travel as a per se prohibited personal use, but 
rather to evaluate travel on a case-by-case basis under 11 CFR 
113.1(g)(1)(ii)(C), as has been the Commission's rule.
    Another commenter asserted that the Commission has historically 
treated the use of campaign funds for campaign-related travel and for 
officeholder travel as permissible. This commenter argued that the 
language of amended 2 U.S.C. 439a(a) has explicitly made this practice 
permissible by listing both campaign expenditures and officeholder-
related expenses as acceptable uses of campaign funds. If, according to 
the commenter, Congress intended to change its longstanding practice, 
it would have done so explicitly, in its list of per se prohibited 
personal uses. This commenter concluded that Congress's failure to 
specifically exclude officeholder-related travel from the per se list 
of prohibited personal uses in amended 2 U.S.C. 439a(b)(2) was 
inadvertent, and recommended that the Commission exclude both 
officeholder-related travel and campaign-related travel from proposed 
11 CFR 113.1(g)(1)(i)(K).
    A commenter stated that there is no need to change the Commission's 
current personal use regulations because Congress did not intend either 
to limit or ban an officeholder's ability to use campaign funds for 
officeholder travel, even if the travel is not campaign-related, such 
as fact-finding trips. A different commenter maintained that campaign 
funds should not be used for fact-finding trips. Instead, the commenter 
recommended that campaign funds not be used for anything other than 
campaign costs, such as advertising and campaign literature, with the 
exception of charitable contributions.\6\
---------------------------------------------------------------------------

    \6\ According to the commenter, charitable contributions made 
with campaign funds should be allowed as long as the candidates 
themselves do not receive tax deductions for the charitable 
contributions. The Commission notes that contributions to certain 
charities are permitted by 2 U.S.C. 439a(a)(3) and 11 CFR 
113.1(g)(2). Whether those contributions are tax-deductible falls 
within the jurisdiction of the Internal Revenue Service.
---------------------------------------------------------------------------

    Based on Congressional guidance and the reasoning expressed in 
other comments concerning this matter, the Commission is not adding the 
``noncampaign-related trip'' language to the list of per se personal 
uses in the final rules in 11 CFR 113.1(g)(1)(i)(J). Thus, this 
paragraph provides only that the use of campaign funds for a vacation 
is a per se personal use. (This proposed provision was designated as 
paragraph (g)(1)(i)(K) in the proposed rules.) The Commission is 
persuaded that amended section 439a(a), which provides that campaign 
funds may be used ``for ordinary and necessary expenses incurred in 
connection with duties of the individual as a holder of Federal 
office,'' encompasses certain noncampaign-related travel, 
notwithstanding the language of 2 U.S.C. 439a(b)(2)(E). Accordingly, 
aside from vacations, which are enumerated as a per se personal use in 
the final rules in 11 CFR 113.1(g)(1)(i)(J), the Commission will 
continue to evaluate travel expenses on a case-by-case basis under 
existing 11 CFR 113.1(g)(1)(ii)(C).
5. 11 CFR 113.1(g)(1)(ii)(D)--Noncampaign-Related Automobile Expenses
    BCRA amended 2 U.S.C. 439a by including ``a noncampaign-related 
automobile expense'' in the list of per se prohibited uses of campaign 
funds. Given that statutory provision, the Commission proposed to 
delete vehicle expenses from the case-by-case rules set out in 11 CFR 
113.1(g)(1)(ii).
    Two sets of commenters addressed this proposal. BCRA's principal 
sponsors stated that the Commission's proposed regulation could be 
read, incorrectly, to completely prohibit the use of campaign funds for 
any vehicle expenses (other than for de minimis amounts), including 
campaign-related expenses. The other commenters argued

[[Page 76974]]

that the Commission should not interpret BCRA to prohibit the use of 
campaign funds for all noncampaign-related vehicle expenses. Instead, 
these commenters urged the Commission to continue to permit, on a case-
by-case basis, vehicle expenses paid for with campaign funds that are 
used for Federal officeholder purposes.
    The Commission agrees with these reasons to continue to assess 
vehicle expenses on a case-by-case basis under 11 CFR 
113.1(g)(1)(ii)(D). The text of proposed 11 CFR 113.1(g)(1)(i)(J) was 
identical to that of pre-BCRA 11 CFR 113.1(g)(1)(ii)(D). The Commission 
further notes that one of BCRA's principal sponsors explained that the 
`` * * * personal use * * * provision is intended to codify the FEC's 
current regulations on the use of campaign funds for personal expenses 
* * *'' (emphasis added). 148 Cong. Rec. S2143 (daily ed. March 20, 
2002) (statement of Sen. Feingold).
    The Commission acknowledges the BCRA's sponsors' observation that 
the beginning of paragraph (g)(1)(ii)(D) could be read to prohibit 
campaign and officeholder-related uses of vehicles funded by campaign 
contributions. (''Vehicle expenses, unless they are a de minimis 
amount.'') 11 CFR 113.1(g)(1)(ii)(D)). The Commission notes, however, 
that this provision must be read together with the next sentence (``If 
a committee uses campaign funds to pay expenses associated with a 
vehicle that is used for both personal activities beyond a de minimis 
amount and campaign or officeholder related activities, the portion of 
the vehicle expenses associated with the personal activities is 
personal use, unless the person(s) using the vehicle for personal 
activities reimburse(s) the campaign account within thirty days for the 
expenses associated with the personal activities.'').
6. 11 CFR 113.1(g)(5) and 11 CFR 113.1(g)(6)--Technical Changes
    The Commission is making non-substantive changes to two cross-
references in 11 CFR 113.1(g)(5) to the definition of ``expenditure,'' 
and to one cross-reference in 11 CFR 113.1(g)(6) to the definition of 
``contribution.'' These citation changes conform to the reorganized 
regulations on ``contributions'' and ``expenditures.'' 67 FR 50582 
(Aug. 5, 2002).
7. 11 CFR 113.1(g)(7) Members of Candidate Family
    The Commission is revising the provision in this regulation that 
includes as a member of the candidate's family a person who shares a 
residence with the candidate. This change was not addressed in the 
NPRM, but is being included to clarify the intent of the regulation and 
to eliminate any potential conflict with the Defense of Marriage Act, 1 
U.S.C. Sec.  7. While the personal use prohibition applies to ``any 
person,'' the regulations apply special scrutiny to members of a 
candidate's family as potential conduits for evasion of the personal 
use prohibition. At the same time, the regulations recognize that a 
joint account shared with one or more family members may be used to pay 
a candidate's personal living expenses without the role of the family 
members in such payments being treated as a contribution. 11 CFR 
113.1(g)(6)(ii).
    The revised regulation recognizes that any payments to a person 
sharing a residence with a candidate could serve as a means of 
supporting the candidate's personal living expenses and thus bans gifts 
from the campaign to family members or persons residing with the 
candidate, 11 CFR 113.1(g)(4), subjects salary payments by the campaign 
to such persons to certain conditions, 11 CFR 113.1(g)(1)(H), and 
limits payments for real or personal property owned by family members 
and used for campaign purposes. 11 CFR 113.1(g)(1)(E)(2). Use of 
campaign funds for mortgage, rent or utility payments for the residence 
of a candidate or of a member of the candidate's family is also 
prohibited, 11 CFR 113.1(g)(1)(E)(1), but would not operate any 
differently in the case of a family member who resides with the 
candidate. Similarly, anyone actually residing with a candidate could 
pay a share of living expenses without having those payments be deemed 
contributions to the candidate's campaign. Finally, personal funds of 
candidates would include the candidate's share of any joint accounts 
held by the candidate and a person residing with the candidate. 11 CFR 
113.1(g)(6)(ii).
    The revised regulation includes any person residing with the 
candidate within the definition of ``Members of the candidate's 
family.'' The provision formerly included ``a person who has a 
committed relationship with the candidate, such as sharing a residence 
and having mutual responsibility for each other's personal welfare or 
living expenses.'' The ``committed relationship'' condition could have 
been read as an approximation of marriage, especially as the 1995 
Explanation and Justification for this provision, 60 FR 7872 (Feb. 29, 
1995), stated that persons in this committed relationship category 
``will be treated as the equivalent of the candidate's spouse.'' This 
rendering of the statute appears to be prohibited by the Defense of 
Marriage Act, 1 U.S.C. Sec.  7, which provides that ``[i]n determining 
the meaning of any Act of Congress, or of any ruling, regulation, of 
interpretation of the various administrative bureaus and agencies of 
the United States, the word 'marriage' means only a legal union between 
one man and one woman as husband and wife, and the word 'spouse' refers 
only to a person of the opposite sex who is a husband or a wife.''
    In addition, the Commission was concerned that a committed 
relationship does not represent a generally recognized legal test (for 
instance, most states do not recognize non-marital relationships 
contemplated by the ``committed relationship'' provision) and thus 
would be difficult for the Commission to ascertain and enforce if 
called upon to do so. The question of residence or domicile on the 
other hand is a factual matter that does not call upon the Commission 
to inquire into or make judgments about the nature of the relationship 
between a candidate and persons residing with the candidate.
8. 11 CFR 113.1(g)(8)--Recordkeeping Requirement
    In the NPRM, the Commission proposed new 11 CFR 113.1(g)(8), a 
recordkeeping requirement for campaign funds used for expenses that may 
be partly personal in nature. Such expenses may include vehicle, legal, 
meal, and travel expenses. See 11 CFR 113.1(g)(1)(ii)(A) through (D) 
and 11 CFR 113.2. As stated in the NPRM, the proposed regulation is 
based on the analysis in AO 2001-3, which advised that a member of 
Congress who proposed to pay for a vehicle with campaign funds and use 
it for a combination of campaign, official, and personal uses, should 
keep a log detailing each use of the car. Keeping such logs will help 
the Commission to determine to what extent ``case-by-case'' expenses 
are personal in nature. No commenters addressed this provision. The 
Commission adopts this provision as 11 CFR 113.1(g)(8), with one 
modification to clarify that the log will also serve to distinguish 
personal uses from uses related to a Federal office holder's duties.
Amended Provisions of 11 CFR 113.2
    Given the amendments BCRA made to 2 U.S.C. 439a described above 
regarding the deletion of the phrase ``excess campaign funds'' and the 
amendments being made to 11 CFR 113.1, the Commission is revising 
section 113.2 in several respects. First, the title and the 
introductory portion of this section are

[[Page 76975]]

being changed to more clearly convey that this section sets forth the 
permissible non-campaign uses of funds in a campaign account, rather 
than uses of what were previously called ``excess campaign funds.''
    In the NPRM, the Commission noted that former 2 U.S.C. 439a 
included the phrase ``for any other lawful purpose'' in addition to 
enumerating permissible uses of excess campaign funds. BCRA amended 
section 439a by deleting ``any other lawful purpose'' from the list of 
permitted uses. Nonetheless, in the NPRM, the Commission proposed 
retaining that term in pre-BCRA 11 CFR 113.2(d). One commenter 
disagreed with the Commission's proposed rule and recommended that the 
``any other lawful purpose'' language be deleted from the regulation. 
This commenter noted that pre-BCRA 11 CFR 113.2(d), which closely 
tracks the wording of section 439a, provides for four broad permissible 
uses of campaign funds: (1) Ordinary and necessary expenses incurred in 
connection with the duties of a holder of Federal office; (2) 
contributions to an organization described in 26 U.S.C. 170(c); (3) 
transfers to a national, state or local party committee; and (4) any 
other lawful purpose, except that such funds may not be converted to 
personal use, other than to defray officeholder expenses or repay loans 
made by the candidate for campaign purposes. Pointing out that BCRA 
deletes ``any other lawful purpose'' as an expressly permissible use of 
campaign funds, the commenter argued that BCRA reduces the categories 
of permissible uses of campaign funds from four to three. Thus, the 
commenter concluded that the ``any other lawful purpose'' language in 
11 CFR 113.2(d) should be deleted and that the regulation should be 
revised accordingly.
    The Commission concludes that the commenter's reasoning is correct, 
and therefore is removing and reserving paragraph (d) of former section 
113.2, which referred to ``any other lawful purpose.'' With this 
revision, it is now clear that in addition to defraying expenses in 
connection with a campaign for federal office, campaign funds may be 
used only for the enumerated non-campaign purposes identified in 
paragraphs (a), (b), and (c) of section 113.2, and that this listing of 
permissible non-campaign purposes is exhaustive.
    The Commission notes that, pursuant to 2 U.S.C. 432(e)(3)(B), 
authorized committees also may make contributions of $1,000 or less to 
authorized committees of other candidates. This provision was not 
amended by BCRA which otherwise generally increased contribution limits 
to $2,000 per person. Authorized committees may make contributions to 
organizations other than those described in section 170(c) of the 
Internal Revenue Code of 1986 and other authorized committees (subject 
to the $1,000 limit) unless those contributions are in connection with 
the campaign for Federal office of the authorizing candidate. In 
furtherance of a Federal candidate's election, that Federal candidate 
may contribute to state and local candidates pursuant to this section.
    A provision addressing the repayment of candidate loans has been 
deleted from section 113.2 as part of the removal of paragraph (d). The 
Commission will, if necessary, address this issue in the upcoming 
``Millionaires' Amendment'' rulemaking. See 2 U.S.C. 441a(j).
    Although the Commission is not amending section 113.2(e)(1), which 
refers to ``excess funds,'' it is changing section 113.2(e)(1)(i), 
which refers to ``any excess campaign or donated funds.'' These rules 
permit qualified Members of Congress who served in the 102d Congress or 
an earlier Congress to convert to personal use the unobligated balance 
of their excess funds as of Nov. 30, 1989. Paragraph (e)(1) addresses 
``excess funds,'' rather than ``excess campaign funds,'' and sets forth 
detailed instructions to determine this amount. Revised paragraph 
(e)(1)(i) now refers simply to ``campaign funds.''
    In light of Congress deleting the phrase ``in excess of any amount 
to defray'' campaign expenses from section 439a, and the Commission's 
revision herein to 11 CFR 113.1 and 113.2, officeholders may spend 
campaign funds to defray campaign expenses and expenses incurred in 
connection with the recipient's duties as a holder of federal office, 
and that such expenses may be paid in any order, at their discretion.

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

    The Commission certifies that the attached final rules will not 
have a significant economic impact on a substantial number of small 
entities. The basis of this certification is that national, State, and 
local party committees of the two major political parties to which the 
fraudulent solicitation, disclaimers, and civil penalties rules apply 
are not small entities under 5 U.S.C. 601. In addition, the rules for 
personal use only affect individuals, not entities, and the rules for 
the prohibition on fraudulent solicitation do not carry an economic 
impact. Furthermore, the requirements of the disclaimer rules as 
applied to small entities are no more than what is necessary to comply 
with the new statute enacted by Congress, and in any event, such 
entities will not incur significant additional costs in complying with 
these requirements. The increase in civil penalties do not unduly 
burden small entities since a small entity would pay a civil penalty 
only if the entity engaged in a specific knowing and willful violation 
of the Act.

List of Subjects

11 CFR Part 100

    Elections.

11 CFR Part 110

    Campaign funds, and political committees and parties.

11 CFR Part 111

    Campaign funds, and political committee and parties.

11 CFR Part 113

    Campaign funds, and political candidates.


    For the reasons set out in the preamble, subchapter A of chapter I 
of title 11 of the Code of Federal Regulations is amended as follows:

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

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

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


    2. Section 100.18 is revised to read as follows:


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

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

PART 110--CONTRIBUTION AND EXPENDITURE LIMITATIONS AND PROHIBITIONS

    3. The authority citation for part 110 continues to read as 
follows:

    Authority: 2 U.S.C. 431(8), 431(9), 432(c)(2), 437d(a)(8), 
438(a)(8), 441a, 441b, 441d, 441e, 441f, 441g, 441h, and 441k.


    4. Section 110.11 is revised to read as follows:


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

    (a) Scope. This section applies only to public communications, 
defined for this

[[Page 76976]]

section to include the communications at 11 CFR 100.26 plus unsolicited 
electronic mail of more than 500 substantially similar communications 
and Internet websites of political committees available to the general 
public, and electioneering communications as defined in 11 CFR 100.29. 
The following types of such communications must include disclaimers, as 
specified in this section:
    (1) All public communications for which a political committee makes 
a disbursement.
    (2) All public communications by any person that expressly advocate 
the election or defeat of a clearly identified candidate.
    (3) All public communications by any person that solicit any 
contribution.
    (4) All electioneering communications by any person.
    (b) General content requirements. A disclaimer required by 
paragraph (a) of this section must contain the following information:
    (1) If the communication, including any solicitation, is paid for 
and authorized by a candidate, an authorized committee of a candidate, 
or an agent of either of the foregoing, the disclaimer must clearly 
state that the communication has been paid for by the authorized 
political committee;
    (2) If the communication, including any solicitation, is authorized 
by a candidate, an authorized committee of a candidate, or an agent of 
either of the foregoing, but is paid for by any other person, the 
disclaimer must clearly state that the communication is paid for by 
such other person and is authorized by such candidate, authorized 
committee, or agent; or
    (3) If the communication, including any solicitation, is not 
authorized by a candidate, authorized committee of a candidate, or an 
agent of either of the foregoing, the disclaimer must clearly state the 
full name and permanent street address, telephone number, or World Wide 
Web address of the person who paid for the communication, and that the 
communication is not authorized by any candidate or candidate's 
committee.
    (c) Disclaimer specifications.
    (1) Specifications for all disclaimers. A disclaimer required by 
paragraph (a) of this section must be presented in a clear and 
conspicuous manner, to give the reader, observer, or listener adequate 
notice of the identity of the person or political committee that paid 
for and, where required, that authorized the communication. A 
disclaimer is not clear and conspicuous if it is difficult to read or 
hear, or if the placement is easily overlooked.
    (2) Specific requirements for printed communications. In addition 
to the general requirement of paragraphs (b) and (c)(1) of this 
section, a disclaimer required by paragraph (a) of this section that 
appears on any printed public communication must comply with all of the 
following:
    (i) The disclaimer must be of sufficient type size to be clearly 
readable by the recipient of the communication. A disclaimer in twelve 
(12)-point type size satisfies the size requirement of this paragraph 
(c)(2)(i) when it is used for signs, posters, flyers, newspapers, 
magazines, or other printed material that measure no more than twenty-
four (24) inches by thirty-six (36) inches.
    (ii) The disclaimer must be contained in a printed box set apart 
from the other contents of the communication.
    (iii) The disclaimer must be printed with a reasonable degree of 
color contrast between the background and the printed statement. A 
disclaimer satisfies the color contrast requirement of this paragraph 
(c)(2)(iii) if it is printed in black text on a white background or if 
the degree of color contrast between the background and the text of the 
disclaimer is no less than the color contrast between the background 
and the largest text used in the communication.
    (iv) The disclaimer need not appear on the front or cover page of 
the communication as long as it appears within the communication, 
except on communications, such as billboards, that contain only a front 
face.
    (v) A communication that would require a disclaimer if distributed 
separately, that is included in a package of materials, must contain 
the required disclaimer.
    (3) Specific requirements for radio and television communications 
authorized by candidates. In addition to the general requirements of 
paragraphs (b) and (c)(1) of this section, a communication that is 
authorized or paid for by a candidate or the authorized committee of a 
candidate (see paragraph (b)(1) or (b)(2) of this section) that is 
transmitted through radio or television, or through any broadcast, 
cable, or satellite transmission, must comply with the following:
    (i) A communication transmitted through radio must include an audio 
statement by the candidate that identifies the candidate and states 
that he or she has approved the communication; or
    (ii) A communication transmitted through television or through any 
broadcast, cable, or satellite transmission, must include a statement 
that identifies the candidate and states that he or she has approved 
the communication. The candidate shall convey the statement either:
    (A) Through an unobscured, full-screen view of himself or herself 
making the statement, or
    (B) Through a voice-over by himself or herself, accompanied by a 
clearly identifiable photographic or similar image of the candidate. A 
photographic or similar image of the candidate shall be considered 
clearly identified if it is at least eighty (80) percent of the 
vertical screen height.
    (iii) A communication transmitted through television or through any 
broadcast, cable, or satellite transmission, must also include a 
similar statement that must appear in clearly readable writing at the 
end of the television communication. To be clearly readable, this 
statement must meet all of the following three requirements:
    (A) The statement must appear in letters equal to or greater than 
four (4) percent of the vertical picture height;
    (B) The statement must be visible for a period of at least four (4) 
seconds; and
    (C) The statement must appear with a reasonable degree of color 
contrast between the background and the text of the statement. A 
statement satisfies the color contrast requirement of this paragraph 
(c)(3)(iii)(C) if it is printed in black text on a white background or 
if the degree of color contrast between the background and the text of 
the statement is no less than the color contrast between the background 
and the largest type size used in the communication.
    (iv) The following are examples of acceptable statements that 
satisfy the spoken statement requirements of paragraph (c)(3) of this 
section with respect to a radio, television, or other broadcast, cable, 
or satellite communication, but they are not the only allowable 
statements:
    (A) ``I am [insert name of candidate], a candidate for [insert 
Federal office sought], and I approved this advertisement.''
    (B) ``My name is [insert name of candidate]. I am running for 
[insert Federal office sought], and I approved this message.''
    (4) Specific requirements for radio and television communications 
paid for by other persons and not authorized by a candidate. In 
addition to the general requirements of paragraphs (b) and (c)(1) of 
this section, a communication not authorized by a candidate or a 
candidate's authorized committee that is transmitted through radio or 
television or through any broadcast, cable, or

[[Page 76977]]

satellite transmission, must comply with the following:
    (i) A communication transmitted through radio or television or 
through any broadcast, cable, or satellite transmission, must include 
the following audio statement, ``XXX is responsible for the content of 
this advertising,'' spoken clearly, with the blank to be filled in with 
the name of the political committee or other person paying for the 
communication, and the name of the connected organization, if any, of 
the payor unless the name of the connected organization is already 
provided in the ``XXX is responsible'' statement; and
    (ii) A communication transmitted through television, or through any 
broadcast, cable, or satellite transmission, must include the audio 
statement required by paragraph (c)(4)(i) of this section. That 
statement must be conveyed by an unobscured full-screen view of a 
representative of the political committee or other person making the 
statement, or by a representative of such political committee or other 
person in voice-over.
    (iii) A communication transmitted through television or through any 
broadcast, cable, or satellite transmission, must also include a 
similar statement that must appear in clearly readable writing at the 
end of the communication. To be clearly readable, the statement must 
meet all of the following three requirements:
    (A) The statement must appear in letters equal to or greater than 
four (4) percent of the vertical picture height;
    (B) The statement must be visible for a period of at least four (4) 
seconds; and
    (C) The statement must appear with a reasonable degree of color 
contrast between the background and the disclaimer statement. A 
disclaimer satisfies the color contrast requirement of this paragraph 
(c)(4)(iii)(C) if it is printed in black text on a white background or 
if the degree of color contrast between the background and the text of 
the disclaimer is no less than the color contrast between the 
background and the largest type size used in the communication.
    (d) Coordinated party expenditures and independent expenditures by 
political party committees.
    (1)(i) For a communication paid for by a political party committee 
pursuant to 2 U.S.C. 441a(d), the disclaimer required by paragraph (a) 
of this section must identify the political party committee that makes 
the expenditure as the person who paid for the communication, 
regardless of whether the political party committee was acting in its 
own capacity or as the designated agent of another political party 
committee.
    (ii) A communication made by a political party committee pursuant 
to 2 U.S.C. 441a(d) and distributed prior to the date the party's 
candidate is nominated shall satisfy the requirements of this section 
if it clearly states who paid for the communication.
    (2) For purposes of this section, a communication paid for by a 
political party committee, other than a communication covered by 
paragraph (d)(1)(ii) of this section, that is being treated as a 
coordinated expenditure under 2 U.S.C. 441a(d) and that was made with 
the approval of a candidate, a candidate's authorized committee, or the 
agent of either shall identify the political party that paid for the 
communication and shall state that the communication is authorized by 
the candidate or candidate's authorized committee.
    (3) For a communication paid for by a political party committee 
that constitutes an independent expenditure under 11 CFR 100.16, the 
disclaimer required by this section must identify the political party 
committee that paid for the communication, and must state that the 
communication is not authorized by any candidate or candidate's 
authorized committee.
    (e) Exempt activities. A public communication authorized by a 
candidate, authorized committee, or political party committee, that 
qualifies as an exempt activity under 11 CFR 100.140, 100.147, 100.148, 
or 100.149, must comply with the disclaimer requirements of paragraphs 
(a), (b), (c)(1), and (c)(2) of this section, unless excepted under 
paragraph (f)(1) of this section, but the disclaimer does not need to 
state whether the communication is authorized by a candidate, or any 
authorized committee or agent of any candidate.
    (f) Exceptions. (1) The requirements of paragraphs (a) through (e) 
of this section do not apply to the following:
    (i) Bumper stickers, pins, buttons, pens, and similar small items 
upon which the disclaimer cannot be conveniently printed;
    (ii) Skywriting, water towers, wearing apparel, or other means of 
displaying an advertisement of such a nature that the inclusion of a 
disclaimer would be impracticable; or
    (iii) Checks, receipts, and similar items of minimal value that are 
used for purely administrative purposes and do not contain a political 
message.
    (2) For purposes of this section, whenever a separate segregated 
fund or its connected organization solicits contributions to the fund 
from those persons it may solicit under the applicable provisions of 11 
CFR part 114, or makes a communication to those persons, such 
communication shall not be considered a type of public communication 
and need not contain the disclaimer required by paragraphs (a) through 
(c) of this section.
    (g) Comparable rate for campaign purposes.
    (1) No person who sells space in a newspaper or magazine to a 
candidate, an authorized committee of a candidate, or an agent of the 
candidate, for use in connection with the candidate's campaign for 
nomination or for election, shall charge an amount for the space which 
exceeds the comparable rate for the space for non-campaign purposes.
    (2) For purposed of this section, comparable rate means the rate 
charged to a national or general rate advertiser, and shall include 
discount privileges usually and normally available to a national or 
general rate advertiser.

    5. Section 110.16 is added to read as follows:


Sec.  110.16  Prohibitions on fraudulent misrepresentations.

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

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

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

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


    7. In Sec.  111.24, paragraph (a) is revised as follows:

[[Page 76978]]

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

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

PART 113--USE OF CAMPAIGN ACCOUNTS FOR NON-CAMPAIGN PURPOSES (2 
U.S.C. 439a)

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

    Authority: 2 U.S.C. 432(h), 438(a)(8), 439a, and 441a.


    9. In Sec.  113.1, paragraphs (b) and (g) are revised to read as 
follows, and paragraph (e) is removed and reserved:


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

* * * * *
    (b) Office account. Office account means an account established for 
the purposes of supporting the activities of a Federal or State 
officeholder which contains campaign funds and funds donated, but does 
not include an account used exclusively for funds appropriated by 
Congress, a State legislature, or another similar public appropriating 
body, or an account of the officeholder which contains only the 
personal funds of the officeholder.
* * * * *
    (e) [Removed and reserved]
* * * * *
    (g) Personal use. Personal use means any use of funds in a campaign 
account of a present or former candidate to fulfill a commitment, 
obligation or expense of any person that would exist irrespective of 
the candidate's campaign or duties as a Federal officeholder.
    (1)(i) Personal use includes but is not limited to the use of funds 
in a campaign account for any item listed in paragraphs (g)(1)(i)(A) 
through (J) of this section:
    (A) Household food items or supplies.
    (B) Funeral, cremation or burial expenses except those incurred for 
a candidate (as defined in 11 CFR 100.3) or an employee or volunteer of 
an authorized committee whose death arises out of, or in the course of, 
campaign activity.
    (C) Clothing, other than items of de minimis value that are used in 
the campaign, such as campaign ``T-shirts'' or caps with campaign 
slogans.
    (D) Tuition payments, other than those associated with training 
campaign staff.
    (E) Mortgage, rent or utility payments--
    (1) For any part of any personal residence of the candidate or a 
member of the candidate's family; or
    (2) For real or personal property that is owned by the candidate or 
a member of the candidate's family and used for campaign purposes, to 
the extent the payments exceed the fair market value of the property 
usage.
    (F) Admission to a sporting event, concert, theater or other form 
of entertainment, unless part of a specific campaign or officeholder 
activity.
    (G) Dues, fees or gratuities at a country club, health club, 
recreational facility or other nonpolitical organization, unless they 
are part of the costs of a specific fundraising event that takes place 
on the organization's premises.
    (H) Salary payments to a member of the candidate's family, unless 
the family member is providing bona fide services to the campaign. If a 
family member provides bona fide services to the campaign, any salary 
payment in excess of the fair market value of the services provided is 
personal use.
    (I) Salary payments by a candidate's principal campaign to a 
candidate in excess of the lesser of: the minimum salary paid to a 
Federal officeholder holding the Federal office that the candidate 
seeks; or the earned income that the candidate received during the year 
prior to becoming a candidate. Any earned income that a candidate 
receives from salaries or wages from any other source shall count 
against the foregoing limit of the minimum salary paid to a Federal 
officeholder holding the Federal office that the candidate seeks. The 
candidate must provide income tax records from the relevant years and 
other evidence of earned income upon the request of the Commission. 
Salary shall not be paid to a candidate before the filing deadline for 
access to the primary election ballot for the Federal office that the 
candidate seeks, as determined by State law, or in those states that do 
not conduct primaries, on January 1 of each even-numbered year. See 11 
CFR 100.24(a)(1)(i). If the candidate wins the primary election, his or 
her principal campaign committee may pay him or her a salary from 
campaign funds through the date of the general election, up to and 
including the date of any general election runoff. If the candidate 
loses the primary, withdraws from the race, or otherwise ceases to be a 
candidate, no salary payments may be paid beyond the date he or she is 
no longer a candidate. In odd-numbered years in which a special 
election for a Federal office occurs, the principal campaign committee 
of a candidate for that office may pay him or her a salary from 
campaign funds starting on the date the special election is set and 
ending on the day of the special election. See 11 CFR 100.24(a)(1)(ii). 
During the time period in which a principal campaign committee may pay 
a salary to a candidate under this paragraph, such payment must be 
computed on a pro-rata basis. A Federal officeholder, as defined in 11 
CFR 100.5(f)(1), must not receive salary payments as a candidate from 
campaign funds.
    (J) A vacation.
    (ii) The Commission will determine, on a case-by-case basis, 
whether other uses of funds in a campaign account fulfill a commitment, 
obligation or expense that would exist irrespective of the candidate's 
campaign or duties as a Federal officeholder, and therefore are 
personal use. Examples of such other uses include:
    (A) Legal expenses;
    (B) Meal expenses;
    (C) Travel expenses, including subsistence expenses incurred during 
travel. If a committee uses campaign funds to pay expenses associated 
with travel that involves both personal activities and campaign or 
officeholder-related activities, the incremental expenses that result 
from the personal activities are personal use, unless the person(s) 
benefiting from this use reimburse(s) the campaign account within 
thirty days for the amount of the incremental expenses, and
    (D) Vehicle expenses, unless they are a de minimis amount. If a 
committee uses campaign funds to pay expenses associated with a vehicle 
that is used for both personal activities beyond a de minimis amount 
and campaign or

[[Page 76979]]

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

    10. In Sec.  113.2, the section heading, the introductory language, 
and paragraphs (e)(1)(i), (e)(5), and (f) are revised to read as 
follows, and paragraph (d) is removed and reserved:


Sec.  113.2  Permissible non-campaign uses of funds (2 U.S.C. 439a).

    In addition to defraying expenses in connection with a campaign for 
federal office, funds in a campaign account or an account described in 
11 CFR 113.3:
* * * * *
    (d) [Removed and reserved]
    (e) * * *
    (1) * * *
    (i) Cash assets the Member may convert any excess campaign or 
donated funds in an amount up to the Member's authorized committee(s)' 
cash on hand, determined under 11 CFR 104.3(a)(1), as of November 30, 
1989, less the committee(s)' total outstanding debts as of that date.
* * * * *
    (5) 103d Congress or later Congress: A qualified Member who serves 
in the 103d Congress or a later Congress may not convert to personal 
use any campaign or donated funds, as of the first day of such service.
    (f) Nothing in this section modifies or supersedes other Federal 
statutory restrictions or relevant State laws that may apply to the use 
of campaign or donated funds by candidates or Federal officeholders.

    Dated: December 10, 2002.
David M. Mason,
Chairman, Federal Election Commission.
[FR Doc. 02-31521 Filed 12-12-02; 8:45 am]
BILLING CODE 6715-01-P