[Federal Register Volume 67, Number 248 (Thursday, December 26, 2002)]
[Proposed Rules]
[Pages 78753-78760]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-32451]


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FEDERAL ELECTION COMMISSION

11 CFR Parts 100 and 110

[Notice 2002-28]


Leadership PACS

AGENCY: Federal Election Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Federal Election Commission is seeking comment on proposed 
rules to address leadership PACs, which are unauthorized committees 
that are associated with a Federal candidate or officeholder. Please 
note that the draft rules that follow do not represent a final decision 
by the Commission on the issues presented by this rulemaking. Further 
information is provided in the supplementary information that follows.

DATES: Comments must be received on or before January 31, 2003. If 
there are sufficient requests to testify, the Commission may hold a 
hearing on these proposed rules on February 26, 2003, at 9:30 a.m. 
Commenters wishing to testify at the hearing must so indicate in their 
written or electronic comments.

ADDRESSES: All comments should be addressed to Mr. J. Duane Pugh, Jr., 
Acting Special Assistant General Counsel, and must be submitted in 
either electronic or written form. Electronic mail comments should be 
sent to [email protected] and must include the full name, 
electronic mail address, and postal service address of the commenter. 
Electronic mail comments that do not contain the full name, electronic 
mail address, and the postal service address of the commenter will not 
be considered. If the electronic mail comments include an attachment, 
the attachment must be in the Adobe Acrobat (.pdf) or Microsoft Word 
(.doc) format. Faxed comments should be sent to (202) 219-3923, with 
printed copy follow-up to ensure legibility. Written comments and 
printed copies of faxed comments should be sent to Federal Election 
Commission, 999 E Street, NW., Washington, DC 20463. Commenters are 
strongly encouraged to submit comments electronically to ensure timely 
receipt and consideration. The Commission will make every effort to 
post public comments on its Web site within ten business days of the 
close of the comment period. The hearing will be held in the 
Commission's ninth floor meeting room, 999 E. St. NW., Washington, DC

FOR FURTHER INFORMATION CONTACT: Ms. Mai T. Dinh, Acting Assistant 
General Counsel, Mr. J. Duane Pugh, Jr., Acting Special Assistant 
General Counsel, or Mr. Anthony T. Buckley, Attorney, 999 E Street, 
NW., Washington, DC 20463, (202) 694-1650 or (800) 424-9530.

SUPPLEMENTARY INFORMATION: The Bipartisan Campaign Reform Act of 2002, 
Pub. L. 107-155, 116 Stat. 81 (March 27, 2002) (``BCRA''), contains 
extensive and detailed amendments to the Federal Election Campaign Act 
of 1971, as amended, 2 U.S.C. 431 et seq. This Notice of Proposed 
Rulemaking (NPRM) arises primarily from 2 U.S.C. 441i(e)(1), which 
prohibits Federal candidates and holders of Federal office, their 
agents, or any entity directly or indirectly established, financed, 
maintained, controlled by, or acting on behalf of, the candidate or 
officeholder, from soliciting, receiving, directing, transferring or 
spending funds that are not subject to the limitations, prohibitions, 
and reporting requirements of the Act in connection with Federal or 
non-Federal elections. In determining whether an entity is directly or 
indirectly established, financed, maintained, or controlled by a 
candidate or Federal officeholder, the

[[Page 78754]]

Commission has stated that it would look to the affiliation factors in 
11 CFR 100.5(g). See Explanation and Justification for Final Rules on 
Prohibited and Excessive Contributions: Non-Federal Funds or Soft 
Money, 67 FR 49063, 49084 (July 29, 2002). Thus, this rulemaking 
principally addresses when and under what circumstances so-called 
``leadership PACs'' are affiliated with the authorized committees of 
Federal candidates or officeholders under BCRA and the ramifications of 
any such affiliation.

I. Background

    Generally speaking, leadership PACs are formed by individuals who 
are Federal officeholders and/or Federal candidates. The monies these 
committees receive are given to other Federal candidates to gain 
support when the officeholder seeks a leadership position in Congress, 
or are used to subsidize the officeholder's travel when campaigning for 
other Federal candidates. The monies may also be used to make 
contributions to party committees, including State party committees in 
key states, or donated to candidates for State and local office.
    FECA does not specifically define ``leadership PAC,'' but does 
define the terms ``political committee'' (2 U.S.C. 431(4)); ``principal 
campaign committee'' (2 U.S.C. 431(5)); and ``authorized committee'' (2 
U.S.C. 431(6)). Effective January 1, 2003, principal campaign 
committees and authorized committees may receive contributions of up to 
$2000 per election from individuals and other persons who are not 
multicandidate committees. See 2 U.S.C. 441a(a)(1)(A); 11 CFR 110.1(b). 
They may make contributions of up to $1,000 to other Federal candidates 
under 2 U.S.C. 432(e)(3). Unauthorized committees--that is, political 
committees whose purpose is to support more than one Federal 
candidate--may receive up to $5000 per year from individuals, other 
persons, and multicandidate committees, and once they qualify as 
multicandidate committees, may contribute up to $5000 per candidate per 
election. See 2 U.S.C. 441a(a)(1)(C) and 441a(a)(2)(A); 11 CFR 110.1(d) 
and 110.2. Nothing in the Commission's regulations prohibits an 
unauthorized committee that is not a party committee from establishing 
a non-Federal account that accepts funds that are not subject to the 
prohibitions, limitations and reporting requirements of the Act.
    In BCRA, Congress addressed organizations ``directly or indirectly 
established, financed, maintained, or controlled'' by other persons or 
organizations. The term appears in BCRA in the context of national 
party committees, (see 2 U.S.C. 441i(a)(2)), of State, district, and 
local political party committees (see, e.g., 2 U.S.C. 
441i(b)(2)(B)(iii)), and of Federal candidates and Federal 
officeholders (see, e.g., 441i(e)(1)). In addressing Federal candidates 
and officeholders, Congress added the phrase ``acting on behalf of.'' 
BCRA places limits on the amounts and types of funds that may be 
solicited, received, directed, transferred, or spent by Federal 
candidates and officeholders, their agents, and entities directly or 
indirectly established, financed, maintained, or controlled by, or 
acting on behalf of, any such candidate(s) or officeholder(s), in 
connection with either Federal or non-Federal elections, or both. See 2 
U.S.C. 441i(e)(1); see also 11 CFR 300.60, 300.61.
    The Commission first addressed ``leadership PACs'' in Advisory 
Opinion (``AO'') 1978-12. In this AO, the Commission concluded that a 
``political action committee'' formed in part by a Congressman was not 
considered an authorized committee of the Congressman as long as the 
Congressman did not authorize it in writing. As a result, contributors 
to the leadership PAC were not regarded as making contributions with 
respect to the Congressman's campaign. The Commission further noted 
that, ``[a]ssuming the [c]ommittee is not affiliated with [the 
Congressman's] principal campaign committee, * * * persons may 
contribute up to $5000 per calendar year to the Committee although 
contributions from individuals would be counted against their $25,000 
aggregate individual limit * * *.'' Several years after AO 1978-12 was 
issued, a complaint was filed with the Commission, alleging that the 
same committee and the same Congressman's principal campaign committee 
were affiliated, and that as a result of their affiliation they had 
made and received excessive contributions. The complainant cited 
several factors to conclude that the two committees were affiliated: 
(1) The unauthorized committee was identified with the officeholder; 
(2) some of the candidate's then-Congressional staffers received 
expense reimbursements for ``travel'' and ``consulting'' from both 
committees; (3) several persons performed services for both committees; 
and (4) parallel contributions to candidates were made by both 
committees on the same day. In that Matter Under Review (MUR 1870), the 
Commission found no reason to believe that violations stemming from an 
affiliated relationship had occurred.
    In subsequent MURs involving similar issues, the Commission relied 
on its prior conclusions in AO 1978-12 and MUR 1870 to find certain 
leadership PACs were not affiliated with certain authorized committees. 
For example, in MUR 2897 the Commission declined to pursue a complaint 
that a Federal officeholder's authorized committee was affiliated with 
a leadership PAC, resulting in excessive contributions being made and 
received. The complainant argued that affiliation between the 
authorized committee and a certain leadership PAC should result from 
several facts: (1) The officeholder's spouse was the leadership PAC's 
treasurer; (2) one of the leadership PAC's disclosure reports was faxed 
from the officeholder's Congressional office; and (3) both committees 
made disbursements to one particular consulting firm. In addition, the 
officeholder was listed as chairman of the leadership PAC on its 
stationery, and responded on behalf of the leadership PAC to the 
complaint. Similarly, in MUR 3740, the Commission declined to pursue a 
complaint alleging violations as a result of an affiliated 
relationship. In that matter, the leadership PAC's checks were signed 
by the Federal officeholder.
    In other AOs, the Commission has found two entities associated with 
an individual to be affiliated where the entities had a similar 
purpose. For example, in AO 1990-16, the Commission found that a 
committee organized under State law and devoted to supporting 
candidates for election to state and local office, that had previously 
been the campaign committee of the State's then-governor, was 
affiliated with a Federal political committee that had been organized 
by the governor and that had as its purpose supporting candidates for 
Federal office. Further, in AO 1991-12, the Commission found that the 
authorized committee of a Member of Congress was affiliated with 
another committee, when that other committee, which had originally been 
formed to test the waters for a Presidential run by the Member, changed 
its focus to support the Member's efforts to speak on national issues, 
and subsequently changed its focus again to support the Member's re-
election activities.
    In 1986, the Commission began a rulemaking to address affiliation 
in general, including leadership PACs. See Notice of Proposed 
Rulemaking; Contribution and Expenditure Limitations and Prohibitions, 
51 FR 27183 (July 30, 1986). After the hearing

[[Page 78755]]

during this rulemaking, the Office of General Counsel drafted final 
rules that addressed ``affiliation between a candidate's authorized 
committees and other political committees closely associated with that 
candidate.'' FEC Agenda Document 88-1, Draft Revisions to the 
Affiliation and Earmarking Regulations (11 CFR 110.3-110.6) (Dec. 23, 
1987), at 3. This document indicated that under the proposed revisions 
to the Commission rules, ``[p]roposed Sec.  110.3(a)(4)(i) would 
provide that a candidate's authorized committees are affiliated with 
any other unauthorized committees established, financed, maintained or 
controlled by the same person or group of persons, including the 
candidate.'' Id. at 4.
    After receiving public comments and holding a hearing, however, the 
Commission maintained its existing policy: committees formed or used by 
a candidate or officeholder to further his or her campaign are 
affiliated; those formed or used for other purposes are not. The 
Commission explained: ``Although the Commission considered including in 
the revised regulations language that would focus specifically on 
affiliation between authorized committees and candidate PACs or 
leadership committees, the Commission has decided instead to continue 
to rely on the factors set out at 11 CFR 110.3(a)(3)(ii). After 
evaluating the comments and testimony on this issue, as well as the 
situations presented in the previous advisory opinions and compliance 
matters, the Commission has concluded that this complex area is better 
addressed on a case-by-case basis. Thus, in an appropriate case, the 
Commission will examine the relationship between the authorized and 
unauthorized committees to determine whether they are commonly 
established, financed, maintained or controlled.'' Affiliated 
Committees, Transfers, Prohibited Contributions, Annual Contribution 
Limitations and Earmarked Contributions; Final Rule, 54 FR 34101 (Aug. 
17, 1989) (emphasis added).
    Most recently, in the Explanation and Justification for the new 
Soft Money regulations, the Commission noted that new 11 CFR 300.61 and 
300.62 permit ``Federal candidates and officeholders to solicit, 
receive, direct, transfer, spend, or disburse funds in connection with 
Federal and non-Federal elections only from sources permitted under the 
Act and only when the combined amounts solicited and received from any 
particular person or entity do not exceed the amounts permitted under 
the Act's contribution limits and are not from prohibited sources. In 
other words, a Leadership PAC that comes within the definition of 11 
CFR 300.2(c) can raise up to a total of $5,000 from any particular 
person or entity, regardless of whether the funds are contributed to 
the PAC's Federal account, donated to its non-Federal account, or 
allocated between the two.'' Explanation and Justification for Final 
Rules on Prohibited and Excessive Contributions: Non-Federal Funds or 
Soft Money, 67 FR 49063, 49107 (July 29, 2002). The Commission also 
concluded, in promulgating 11 CFR 300.2(c), that ``the affiliation 
factors laid out in 11 CFR 100.5(g) properly define `directly or 
indirectly established, financed, maintained, or controlled' for 
purposes of BCRA.'' Id. at 49,084. Thus, the Commission has already 
acknowledged that BCRA's limitations on the sources and amounts of 
funds that Federal candidates and officeholders can raise applies to 
leadership PACs. ``Although candidate PACs and leadership PACs are not 
specifically mentioned, the legislative history indicates that 2 U.S.C. 
441i(e)(1) is intended to prohibit Federal officeholders and candidates 
from soliciting any funds for these committees that do not comply with 
FECA's source and amount limitations.'' Id. at 49,107.
    The Commission now seeks comment on whether it needs to clarify its 
approach and whether BCRA's inclusion of the phrases ``directly or 
indirectly'' and ``acting on behalf of'' in 2 U.S.C. 441i(e)(1) 
requires the Commission to consider, or permits the Commission to 
disregard, the authorized or unauthorized status of political 
committees in determining whether they are affiliated. See 2 U.S.C. 
432(e)(1) (candidate shall designate in writing a principal campaign 
committee and may designate additional authorized committees); 2 U.S.C. 
432(e)(3) (no political committee that supports more than one candidate 
may be an authorized committee); 2 U.S.C. 441a(a)(5) (FECA affiliation 
provisions). The Commission seeks comment as to whether its current 
approach regarding leadership PACs, including the limitations imposed 
by BCRA already implemented by the Commission in other regulations, 
adequately addresses the real or perceived potential for abuse 
regarding them, and whether BCRA requires or permits the Commission to 
change the way it has proceeded in this area. Specifically, the 
Commission seeks comment on whether there are circumstances in which an 
unauthorized committee should be considered affiliated per se with a 
candidate's authorized committee. If so, should those committees share 
a contribution limit, as to both contributions received and made, and 
should that contribution limit be that of an authorized committee or an 
unauthorized committee?
    Alternatively, the Commission seeks comment on whether there should 
be a rebuttable presumption that such committees are affiliated under 
such circumstances, and, if so, what factors could be used to rebut the 
presumption. The Commission also seeks comment on what criteria should 
be used in determining affiliation between leadership PACs and 
authorized committees; the affiliation criteria listed at 11 CFR 
100.5(g)(4) and 110.3(a), or some other or additional criteria. The 
Commission also seeks comment as to how it should treat organizations 
that do not participate in election campaigns but work closely with 
authorized committees, federal officeholders or candidates. See 
Advisory Opinion 1977-54 (approving candidate involvement in state-wide 
petition drive absent express advocacy or solicitation for 
officeholder's campaign by unauthorized committee sponsoring petition 
drive).

II. Proposed Rules

1. Definition of ``Leadership PAC''

    Although the proposed rules do not include a definition of 
leadership PAC, the Commission seeks comment on whether a definition of 
``leadership PAC'' is appropriate. If so, the Commission welcomes 
suggestions on appropriate definitions. Additionally, the Commission 
seeks comment on whether the definition should be an independent 
definition, or should be tied to affiliation.

2. Affiliation

    The proposed rules include three alternative amendments to current 
11 CFR 100.5(g) that would specifically address affiliation of 
leadership PACs. Alternatives A and B focus on the relationships 
between the committees involved and the candidate or officeholder with 
whom the committees are closely associated. If the factors establishing 
a certain close association are met, then a candidate's authorized 
committees and unauthorized committees (such as leadership PACs) would 
be affiliated, and would then have to conform themselves to the 
strictures of affiliated committees.
    Alternative C focuses on the actions of the committees involved to 
determine whether an unauthorized committee is in fact an authorized 
committee of the Federal candidate or officeholder with whom it is 
associated. To the extent the

[[Page 78756]]

activities of an unauthorized committee mirror or supplement the 
activities of an authorized committee, i.e. to the extent the 
unauthorized committee undertakes certain activities to assist in the 
election efforts of the candidate with whom it is associated, the 
committee would be considered an authorized committee of the candidate. 
Thus, Alternative C frames the issue in terms of whether a leadership 
PAC is an authorized committee of the candidate or officeholder rather 
than whether it is affiliated with that person's authorized committee.
    The Commission currently has set out, at 11 CFR 100.5(g)(4), 
factors to be considered in determining whether certain committees are 
affiliated. It would be the Commission's intention, under Alternatives 
A and B, that any proposed rules that it adopts at 11 CFR 100.5(g)(5) 
would be solely applicable to committees associated with candidates, 
and that the factors at 11 CFR 100.5(g)(4) would not apply. The 
Commission seeks comment on whether such an approach is appropriate.
    The Commission seeks comment on which alternative, if any, is 
preferable and on the additional issues described below.
A. Alternative A
    Alternative A would set out individual factors in proposed section 
100.5(g)(5)(i), the presence of any one of which would result in 
affiliation. The factors are: (1) The candidate or officeholder, or 
their agent has signature authority on the unauthorized committee's 
checks; (2) funds contributed or disbursed by the unauthorized 
committee are authorized or approved by the candidate or officeholder 
or their agent; (3) the candidate or officeholder is clearly identified 
as described in 11 CFR 100.17 on either the stationery or letterhead of 
the unauthorized committee; (4) the candidate, officeholder or his 
campaign staff, office staff, or immediate family members, or any other 
agent, has the authority to approve, alter or veto the unauthorized 
committee's solicitations, contributions, donations, disbursements or 
contracts to make disbursements; and (5) the unauthorized committee 
pays for travel by the candidate, his campaign staff or office staff in 
excess of $10,000 per calendar year. The second criterion applies 
whether or not all disbursements are authorized or approved by the 
officeholder or candidate or agent or whether only some disbursements 
are so authorized or approved. The Commission also seeks comment on an 
individual factor not presented in the proposed rules where an 
unauthorized committee's communications and promotional materials 
frequently or predominantly identify the candidate or individual 
holding Federal office, as described in 11 CFR 100.17. Should such a 
focus by an unauthorized committee on a single candidate have any 
bearing on its affiliation with the candidate's authorized committee?
    Alternative A would also include a transition period provision in 
proposed section 100.5(g)(5)(ii) to allow unauthorized committees that 
would otherwise be affiliated to come into compliance with the 
Commission's new regulations by severing their connection to the 
candidate or officeholder, by disgorging any funds that would make them 
affiliated, or by taking any other necessary actions by the proposed 
date. Section 100.5(g)(5)(iii) would also allow entities to seek an 
advisory opinion from the Commission regarding their status.
B. Alternative B
    Alternative B would provide two separate tests under which 
affiliation would be found. Under proposed section 100.5(g)(5)(i)(A), 
affiliation would exist if any one of the following factors are 
present: (1) The candidate or officeholder has signature authority on 
the entity's checks; (2) the candidate or officeholder must authorize 
or approve disbursements over a certain minimum amount; (3) the 
candidate or officeholder signs solicitation letters and other 
correspondence on behalf of the entity; (4) the candidate or 
officeholder has the authority to approve, alter or veto the entity's 
solicitations; (5) the candidate or officeholder has the authority to 
approve, alter, or veto the entity's contributions, donations, or 
disbursements; or (6) the candidate or officeholder has the authority 
to approve the entity's contracts. Under this alternative, any one of 
these factors would indicate that the candidate or officeholder has 
substantial influence and control over the entity, and that the entity 
should be considered to be established, financed, maintained, or 
controlled by, or acting on behalf of, the candidate or officeholder.
    If none of the above factors are present, affiliation could still 
be found under proposed section 100.5(g)(5)(i)(B) if any three of the 
following factors are present: (1) The campaign staff or immediate 
family members of the candidate or officeholder have the authority to 
approve, alter or veto the entity's solicitations; (2) the campaign 
staff or immediate family members of the candidate or officeholder have 
the authority to approve, alter, or veto the entity's contributions, 
donations, or disbursements; (3) the campaign staff or immediate family 
members of the candidate or officeholder have the authority to approve 
the entity's contracts; (4) the entity and the candidate or 
officeholder's authorized committees share, exchange, or sell 
contributor lists, voter lists, or other mailing lists directly to one 
another, or indirectly through the candidate or officeholder to one 
another; (5) the entity pays for the candidate or officeholder's travel 
anywhere except to or from the candidate or officeholder's home State 
or district; (6) the entity and the candidate or officeholder's 
authorized committees share office space, staff, a post office box, or 
equipment; (7) the candidate or officeholder's authorized committee(s) 
and the entity share common vendors; and (8) the name or nickname of 
the candidate or the officeholder, or other unambiguous reference to 
the candidate or officeholder appears on either the entity's stationery 
or letterhead. Under this approach, these factors, each taken 
individually, do not provide sufficient evidence of the candidate or 
officeholder's control and influence over the entity for that entity to 
be considered to be established, financed, maintained, or controlled 
by, or acting on behalf of, the candidate or officeholder. However, the 
existence of three or more of these factors would meet that standard.
    The Commission seeks comment on whether any specific factors in 
section 100.5(g)(4) that are not repeated in some form in the proposed 
alternatives below, should be repeated in any new leadership PAC 
affiliation rule, such as current paragraph (g)(4)(ii)(B) (authority or 
ability to participate in the governance of the organization); current 
paragraph (g)(4)(ii)(C) (authority or ability to hire or fire officers 
or decisionmakers); current paragraph (g)(4)(ii)(E) (current common or 
overlapping officers or employees); current paragraph (g)(4)(ii)(F) 
(officers or employees who previously worked for the other committee); 
current paragraph (g)(4)(ii)(G) (provision of funds in a significant 
amount from one committee to the other); current paragraph 
(g)(4)(ii)(H) (one committee causing or arranging for the other 
committee to receive funds in a significant amount); and especially 
current paragraph (g)(4)(ii)(J) (whether the committees have similar 
patterns of contributions or contributors).
    With respect to the per se factor regarding approval or 
authorization of disbursements (proposed paragraph

[[Page 78757]]

110.5(g)(5)(i)(A)(2)), the Commission seeks comment as to whether the 
minimum amount to be approved should be stated in the rule and, if so, 
what that amount should be. Should the Commission look to other 
factors, such as the entity's established policy, to determine the 
amount on a case-by-case basis?
    Unlike Alternative A, Alternative B does not include a transition 
period provision. Rather, if the Commission decides to adopt 
Alternative B as its final rule, proposed section 100.5(g)(5) would be 
effective thirty days after the final rules are published in the 
Federal Register. Thus, the Commission would examine the relationship 
between an authorized committee with a leadership PAC from that day 
forward in applying the affiliation factors in proposed section 
100.5(g)(5).
    Alternative B is similar to Alternative A in another respect. 
Proposed section 100.5(g)(5)(ii) would allow, but not require, 
committees to seek an advisory opinion to determine whether affiliation 
exists. See proposed section 100.5(g)(5)(iii) in Alternative A.
C. Alternative C
    As noted above, Alternative C would largely continue the 
Commission's current treatment of leadership PACs by not treating a 
leadership PAC as affiliated with a candidate or officeholder's 
authorized committees unless the leadership PAC undertook activities 
that would indicate its primary purpose is to influence the nomination 
or election of the candidate or officeholder involved. This approach is 
similar to the approach contemplated by the earlier 1986-1987 
rulemaking but the final rules did not include provisions directly 
addressing leadership PACs. See Affiliated Committees, Transfers, 
Prohibited Contributions, Annual Contribution Limitations and Earmarked 
Contributions; Final Rule, 54 FR 34101 (Aug. 17, 1989).
    At one point during this earlier rulemaking process, the Commission 
considered a staff draft providing that an unauthorized committee 
established, financed, maintained or controlled by a candidate would 
not be deemed affiliated with the candidate's authorized committee if 
it could demonstrate that: ``(A) A substantial proportion of the 
unauthorized committee's disbursements are contributions to or 
expenditures on behalf of other federal candidates; (B) The 
unauthorized committee has not solicited contributions for the 
candidate's campaign for Federal office and has not solicited funds 
that would become contributions under 11 CFR 101.3 once the individual 
becomes a candidate; and (C) The unauthorized committee has not made 
expenditures for communications, or engaged in other activities, for 
the purpose of influencing the candidate's or future candidate's 
nomination or election to Federal office.'' FEC Agenda Document 88-1, 
pp. 3, 4 and pp. 5, 6 of draft regulation. In 1989, however, the 
Commission decided not to adopt specific final rules concerning this 
issue. See above for discussion of the Commission's statement about 
leadership PACs in the Explanation to the Affiliated Committees, 
Transfers, Prohibited Contributions, Annual Contribution Limitations 
and Earmarked Contributions Final Rule.
    At this point, under Alternative C, 11 CFR 100.5(g) would be 
revised to add new paragraph (g)(5) indicating that an unauthorized 
committee established, financed, maintained or controlled by, or acting 
on behalf of, a candidate or officeholder, would be deemed an 
authorized committee, unless it could meet four conditions. Any 
committee that could not meet all four conditions would be 
automatically subject to the contribution limits of 2 U.S.C. 
441a(a)(1)(A) and (2)(A).
    Paragraph (g)(5)(i) would require the committee to only make 
outlays to raise funds for party committees or to influence the 
nomination or election of persons other than the candidate or 
officeholder involved.
    Paragraph (g)(5)(ii) would require that any solicitations, 
communications or other materials of the unauthorized committee would 
have to avoid references to the candidacy or potential candidacy of the 
sponsoring candidate or officeholder.
    At paragraph (g)(5)(iii) the Commission would require that at 
speeches or appearances by the candidate or officeholder no reference 
be made to such person's candidacy or potential candidacy. The only 
exception would be a brief reference made in response to a question 
where there was no pre-planning or control by the candidate or 
officeholder.
    Finally, to address the problems encountered by the Commission in 
dealing with leadership PACs defraying expenses that appear to be in 
preparation for a possible presidential run, paragraph (g)(5)(iv) would 
require that specified expenses would have to be reimbursed by a 
presidential campaign committee if the candidate or officeholder does 
become a presidential candidate. This requirement would apply to 
expenses to assist persons seeking to become delegates in the 
presidential caucus or convention process and expenses to set up 
staffed operations in states that hold primaries or caucuses in the 
first three months of a presidential election year. The reimbursement 
to the unauthorized committee would have to be made by the 60th day 
after the expense involved, or by the 60th day after the person becomes 
a presidential candidate, if later.
    Because similar regulatory language regarding affiliation appears 
at section 110.3 of the regulations, identical text would be placed 
there at new paragraph 110.3(a)(4).
    With respect to Alternative C, the Commission seeks comment on any 
aspect of the proposed rule that should be considered before its 
adoption. The Commission particularly would like comment on the policy 
ramifications of permitting candidates or officeholders to establish, 
finance, maintain, or control separate committees that do not have to 
share the same contribution limits that would apply to an authorized 
committee of such candidate or officeholder. Further, the Commission 
would like comment on the actual practices of leadership PACs. Are they 
undertaking activities that the Commission should consider in drawing 
lines between those that should be treated as authorized committees and 
those that should not?
    Unlike the BCRA provisions at 2 U.S.C. 441i(e) that only deal with 
entities sponsored by Federal officeholders, the proposed rule in 
Alternative C would cover leadership PACs created by any officeholder. 
Is this a proper approach? Is there a need for further explanation of 
how this would apply?
    This proposed rule uses terms of art contained in the current law, 
such as ``authorized committee'' (defined at 2 U.S.C. 431(6) and 11 CFR 
100.5(f)(1)) and ``unauthorized committee'' (defined at 11 CFR 
100.5(f)(2)). Since these terms themselves use the term of art 
``political committee,'' is there a problem with using them? Is there a 
need to address in this rulemaking what is meant by the latter term? 
Note that at one point the Commission had a pending rulemaking 
regarding the definition of ``political committee,'' but it has been 
held in abeyance pending completion of other projects. Should the 
Commission use even broader terms in the area of leadership PACs to try 
to address ``entities,'' as used in BCRA's language at 2 U.S.C. 
441i(e)?
    Finally, Alternative C would include a conforming amendment to 11 
CFR 110.3(a) to address the issue of contribution limits of leadership 
PACs

[[Page 78758]]

that are deemed to be authorized committees. Under Alternative C, such 
committees would be subject to the provisions of current 11 CFR 
110.3(a)(1)(i) by operation of proposed section 110.3(a)(4) with the 
factors listed in proposed section 100.5(g)(5) of Alternative C.
D. Additional Issues
    In addition to the alternative amendments to 11 CFR 100.5(g), the 
Commission seeks comment on the following issues. First, should the 
factors in Alternatives A and B establish a rebuttable presumption of 
affiliation rather than per se affiliation? If so, how should the 
presumption be rebutted? Secondly, does the Commission's position in 
the Soft Money Explanation and Justification, as reiterated in the 
Contribution Prohibitions and Limitations Explanation and 
Justification, have any bearing on its analysis concerning affiliation 
between leadership PACs and authorized committees? Assuming that the 
Commission wishes to address leadership PACs in some fashion, would it 
be less confusing if the Commission were to create a new section solely 
addressing issues regarding leadership PACs, rather then amending the 
affiliation rules? Do the proposed factors at 11 CFR 100.5(g)(5) in 
Alternatives A and B cover all of the necessary activities that should 
be considered in an affiliation analysis? If not, what else needs to be 
addressed? Alternative A references actions by an ``agent'' acting on 
behalf of a candidate or officeholder to be sufficient for affiliation 
to be found. The Commission seeks comment as to whether this is 
appropriate. If so, should the Commission rely on the definition of 
agent at 11 CFR 300.2(b), or some other definition, or should it create 
a new definition for this purpose? The Commission welcomes comments on 
any of the questions listed above.

3. Ramifications of Finding Affiliation

A. Federal Funds (``Hard Money'')
    Under the Commission's regulations, committees that are affiliated, 
that is, committees that are established, financed, maintained, or 
controlled by the same corporation, labor organization, person or group 
of persons, et al., share a single limitation on the dollar amount they 
may receive from any one contributor. See 11 CFR 100.5(g)(3). Political 
committees of all types may participate in joint fundraising efforts, 
however, which are not intended to be affected by these proposed rules. 
See 2 U.S.C. 432(e)(3)(A)(i) and 441a(a)(5)(A); 11 CFR 102.17 and 
9034.8. Under FECA and the Commission's regulations, the Commission has 
treated leadership PACs as unauthorized political committees, and thus 
it has not treated them as affiliated with authorized committees, with 
the result that the unauthorized committee would not share a 
contribution limit with the authorized committees. See 11 CFR 100.5(g), 
110.3(a)(1), 110.3(a)(3)(ii). The Commission seeks comment on what 
limit should apply to leadership PACs and authorized committees that 
are deemed to be affiliated under Alternatives A and B. Should these 
committees be required to share a contribution limit just as other 
affiliated committees, and if so, what should the shared contribution 
limitation be between an authorized committee and an affiliated 
leadership PAC? Should that contribution limit be that of an authorized 
committee or an unauthorized committee? Can the Commission permit 
authorized and unauthorized committees to operate within separately 
applicable contribution limits notwithstanding common control by the 
same candidate? If so, should it? Does the fact of affiliation mean 
that minors are barred from making contributions to leadership PACs? 
See 2 U.S.C. 441k (which, inter alia, prohibits individuals who are 17 
years old and younger from making contributions to candidates). The 
Commission also seeks comment on whether the contribution limits 
promulgated at 11 CFR 300.62 would need to be harmonized with the 
proposed rules, if adopted.
    The above discussion addresses contributions received by the 
leadership PAC. Another question the Commission seeks comment on is 
whether the leadership PAC and the authorized committee share a common 
limit as to contributions made to other candidates. If so, does this 
limit have to be the limit at 2 U.S.C. 432(e)?
    As noted above, Alternative C would address this issue by finding 
certain committees to be authorized committees subject to the 
limitations appropriate to authorized committees.
B. Non-Federal Funds (``Soft Money'')
    The final rules promulgated pursuant to BCRA already prohibit 
Federal candidates and officeholders, their agents, and entities 
directly or indirectly established, financed, maintained, or controlled 
by, or acting on behalf of them, from accepting funds in connection 
with any election, Federal or non-Federal, if such funds do not comply 
with the limits, prohibitions, and, with respect to funds in connection 
with any Federal election only, the reporting requirements, of FECA. 
See 2 U.S.C. 441i(e)(1)(A) and (B); see also 11 CFR 300.61 and 300.62. 
Thus, leadership PACs that support Federal and non-Federal candidates 
would be similarly banned from soliciting, receiving, directing, 
transferring, or spending funds that do not comply with FECA (i.e., 
non-Federal funds). Would such a restriction also exist for an 
organization created to support efforts to discuss national issues, 
where the organization provides no direct support to Federal candidates 
or political committees, makes no independent expenditures, and does 
not engage in what would be Federal election activity if done by a 
party committee? If so, what would be the legal basis for such a 
restriction?
C. Transfers
    If affiliation is found under Alternative A or B, then pursuant to 
2 U.S.C. 441a(a)(5)(C) and 11 CFR 110.3(c)(1) the affiliated leadership 
PAC would be able to make unlimited transfers to a candidate or 
officeholder's authorized committees, consistent with the limitations 
of the Act. See also 11 CFR 102.6. The proposed rules do not include 
any amendments that would change these rules. Is it appropriate for the 
Commission to continue this policy on transfers?
D. Reporting
    Under 11 CFR 104.3(f), affiliated entities are required to 
consolidate their disclosure reports. Accordingly, should the 
leadership PAC be required to consolidate disclosure reports with the 
principal campaign committee of the candidate with whom they are 
affiliated? Or should reporting be handled in a different manner and, 
if so, how?

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

    These proposed rules if promulgated would not have a significant 
economic impact on a substantial number of small entities. The basis of 
this certification is that these rules only limit the sources and 
amounts of contributions that certain political committees can accept, 
and that these rules do not impose any additional costs on the 
contributors or the committees. Further, the primary purpose of the 
proposed revisions is to clarify the Commission's rules regarding 
affiliation; directly or indirectly establish, finance, maintain or 
control; and limits on contributions. This does not impose a 
significant economic burden because entities affected are

[[Page 78759]]

already required to comply with the Act's requirements in these areas.

List of Subjects

11 CFR Part 100

    Elections.

11 CFR Part 110

    Campaign funds, Political committees and parties.

    For the reasons set out in the preamble, the Federal Election 
Commission is proposing to amend subchapter A, of chapter 1 of title 11 
of the Code of Federal Regulations as follows:

PART 100--SCOPE AND DEFINITIONS

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

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

    2. In Sec.  100.5, paragraph (g)(5) is added to read as follows:


Sec.  100.5  Political Committee (2 U.S.C. 431(4), (5), (6)).

* * * * *
    (g) * * *

Alternative A

    (5) Notwithstanding paragraph (g)(4) of this section, the 
Commission may examine the relationship between an entity associated 
with an individual holding Federal office or a candidate for Federal 
office and the authorized committees of that candidate or individual 
holding Federal office in accordance with the provisions of this 
paragraph (g)(5).
    (i) An unauthorized committee(s) shall be deemed to be directly or 
indirectly established, financed, maintained, or controlled by a 
candidate or individual holding Federal office if any of the following 
are applicable:
    (A) The candidate or individual holding Federal office, or an agent 
of either, has signature authority on the unauthorized committee's 
checks;
    (B) Funds contributed or disbursed by the unauthorized committee 
are authorized or approved by the candidate or individual holding 
Federal office, or an agent of either;
    (C) The candidate or individual holding Federal office is clearly 
identified as described in 11 CFR 100.17 on either the stationery or 
letterhead of the unauthorized committee;
    (D) The candidate, individual holding Federal office or his 
campaign staff, office staff, or immediate family members, or any other 
agent of either, has the authority to approve, alter or veto the 
unauthorized committee's solicitations, contributions, donations, 
disbursements or contracts to make disbursements; or
    (E) The unauthorized committee pays for travel by the candidate, 
his campaign staff or office staff, or any other agent of the 
candidate, in excess of $10,000 per calendar year.
    (ii) Transition period. On or after [90 days after publication of 
the final rule in the Federal Register], an unauthorized committee 
shall not be deemed to be affiliated with an authorized committee 
unless, based on actions taken by those committees solely after [90 
days after publication of the final rule in the Federal Register], they 
satisfy the requirements of paragraph (g)(5)(i). If an entity receives 
funds from another entity prior to [90 days after publication of the 
final rule in the Federal Register], and the recipient entity disposes 
of the funds prior to date [90 days after publication of the final rule 
in the Federal Register], the receipt of such funds prior to [90 days 
after publication of the final rule in the Federal Register], shall 
have no bearing on determining whether the recipient entity is financed 
by the contributing entity within the meaning of this section. Actions 
taken by a Federal candidate or individual holding Federal office, or 
an agent of either, before [90 days after publication of the final rule 
in the Federal Register], shall have no bearing on whether affiliation 
exists.
    (iii) Determinations by the Commission.
    (A) An entity may request an advisory opinion of the Commission to 
determine whether it is affiliated with the authorized committees of 
any Federal candidate or individual holding Federal office. The request 
for such an advisory opinion must meet the requirements of 11 CFR part 
112 and must demonstrate that the entity is not directly or indirectly 
financed, maintained or controlled by the sponsor.
    (B) Nothing in this section shall require entities that are 
unaffiliated as of [the effective date of these rules] to obtain an 
advisory opinion to confirm that they are not affiliated.

Alternative B

    (5) Notwithstanding paragraph (g)(4) of this section, the 
Commission may examine the relationship between an entity associated 
with an individual holding Federal office or a candidate for Federal 
office and the authorized committees of that candidate or individual 
holding Federal office in accordance with the provisions of this 
paragraph (g)(5).
    (i) An entity associated with an individual holding Federal office 
or a candidate for Federal office is affiliated with the authorized 
committees of that candidate or individual holding Federal office if 
the conditions set forth in either paragraph (g)(5)(i)(A) or 
(g)(5)(i)(B) of this section are satisfied.
    (A) Any one of the following statements is true:
    (1) The candidate or individual holding Federal office, or an agent 
of the candidate or individual holding Federal office, has signature 
authority on the entity's checks;
    (2) The candidate or individual holding Federal office, or an agent 
of the candidate or individual holding Federal office, must approve or 
authorize disbursements over a certain minimum amount;
    (3) The candidate or the individual holding Federal office signs 
solicitation letters or other correspondence on behalf of the entity;
    (4) The candidate or individual holding Federal office has the 
authority to approve, alter or veto the entity's solicitations;
    (5) The candidate or individual holding Federal office has the 
authority to approve, alter or veto the entity's contributions, 
donations, or disbursements; or
    (6) The candidate or individual holding Federal office has the 
authority to approve the entity's contracts;
    (B) Any three of the following statements are true:
    (1) The campaign staff or immediate family members of the candidate 
or individual holding Federal office, or any other agent of the 
candidate or individual holding Federal office, has the authority to 
approve, alter or veto the entity's solicitations;
    (2) The campaign staff or immediate family members of the candidate 
or individual holding Federal office, or any other agent of the 
candidate or individual holding Federal office, has the authority to 
approve, alter or veto the entity's contributions, donations, or 
disbursements;
    (3) The campaign staff or immediate family members of the candidate 
or individual holding Federal office, or any other agent of the 
candidate or individual holding Federal office, has the authority to 
approve the entity's contracts;
    (4) The entity and the authorized committees of the candidate or of 
the individual holding Federal office, share, exchange or sell 
contributor lists, voter lists, or other mailing lists directly to or 
with each other, or indirectly through the candidate or individual 
holding Federal office to or with each other;
    (5) The entity pays for the travel of the candidate or of the 
individual holding

[[Page 78760]]

Federal office anywhere except to or from the State or district of the 
candidate or individual holding Federal office;
    (6) The entity and the authorized committees of the candidate or of 
the individual holding Federal office's share office space, staff, a 
post office box, or equipment;
    (7) The entity and the authorized committees of the candidate or of 
the individual holding Federal office share common vendors; or
    (8) The name or nickname of the candidate or of the individual 
holding Federal office, or other unambiguous reference to the candidate 
or individual holding Federal office, appears on either the entity's 
stationery or letterhead;
    (ii) Determinations by the Commission.
    (A) An entity may request an advisory opinion of the Commission to 
determine whether it is affiliated with the authorized committees of 
any Federal candidate or individual holding Federal office. The request 
for such an advisory opinion must meet the requirements of 11 CFR part 
112 and must demonstrate that the entity is not directly or indirectly 
established, financed, maintained, controlled by, or acting on behalf 
of, the sponsor.
    (B) Nothing in this section shall require entities that are 
unaffiliated to obtain an advisory opinion to confirm that they are not 
affiliated.

Alternative C

    (5) An unauthorized committee established, financed, maintained, or 
controlled by, or acting on behalf of, a candidate or individual 
holding Federal office will be deemed to be an authorized committee of 
such candidate or individual holding Federal office unless it can 
demonstrate:
    (i) It only has made contributions, expenditures, donations, or 
other disbursements for the direct purpose of funding party committees 
or influencing the nomination or election of persons other than the 
candidate or individual holding Federal office;
    (ii) It has not made reference to the candidacy or potential 
candidacy of the candidate or individual holding Federal office in 
solicitations, communications, or other materials;
    (iii) In any speeches or public appearances by the candidate or 
individual holding Federal office which have been financed by the 
unauthorized committee, no reference is made to the candidacy or 
potential candidacy of the candidate or individual holding Federal 
office, unless such reference is brief, not planned or controlled by 
the candidate or individual holding Federal office, and in response to 
a question from an attendee; and
    (iv) If such candidate or individual holding Federal office becomes 
a presidential candidate, any disbursements the unauthorized committee 
has made for the purpose of paying expenses of particular persons 
seeking to become caucus or convention delegates in the presidential 
nomination process or for the purpose of establishing staffed 
operations in states holding presidential primaries or caucuses in the 
first three months of the presidential election year are reimbursed by 
the presidential authorized committee of the candidate or individual 
holding Federal office within 60 days of being made, or within 60 days 
of such person becoming a candidate, if later.

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, 441k.

    4. In Sec.  110.3, paragraph (a)(4) is added to read as follows:


Sec.  110.3  Contribution limitations for affiliated committees and 
political party committees; Transfers (2 U.S.C. 441a(a)(5), 
441a(a)(4)).

    (a) * * *
    (4) For purposes of paragraph (a)(1)(i) of this section, an 
unauthorized committee established, financed, maintained, or controlled 
by, or acting on behalf of, a candidate or individual holding Federal 
office will be deemed to be an authorized committee of such candidate 
or individual holding Federal office unless it can demonstrate:
    (i) It only has made contributions, expenditures, donations, 
electioneering communications, or other disbursements for the direct 
purpose of funding party committees or influencing the nomination or 
election of persons other than the candidate or individual holding 
Federal office;
    (ii) It has not made reference to the candidacy or potential 
candidacy of the candidate or individual holding Federal office in 
solicitations, communications, or other materials;
    (iii) In any speeches or public appearances by the candidate or 
individual holding Federal office which have been financed by the 
unauthorized committee, no reference is made to the candidacy or 
potential candidacy of the candidate or individual holding Federal 
office, unless such reference is brief, not planned or controlled by 
the candidate or individual holding Federal office, and in response to 
a question from an attendee; and
    (iv) If such candidate or individual holding Federal office becomes 
a presidential candidate, any disbursements the unauthorized committee 
has made for the purpose of paying expenses of particular persons 
seeking to become caucus or convention delegates in the presidential 
nomination process or for the purpose of establishing staffed 
operations in states holding presidential primaries or caucuses in the 
first three months of the presidential election year are reimbursed by 
the presidential authorized committee of the candidate or individual 
holding Federal office within 60 days of being made, or within 60 days 
of such person becoming a candidate, if later.
* * * * *

    Dated: December 19, 2002.
David M. Mason,
Chairman, Federal Election Commission.
[FR Doc. 02-32451 Filed 12-24-02; 8:45 am]
BILLING CODE 6715-01-P