[Federal Register Volume 68, Number 230 (Monday, December 1, 2003)]
[Rules and Regulations]
[Pages 67013-67018]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 03-29752]



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  Federal Register / Vol. 68, No. 230 / Monday, December 1, 2003 / 
Rules and Regulations  

[[Page 67013]]



FEDERAL ELECTION COMMISSION

11 CFR Parts 100 and 102

[Notice 2003-22]


Leadership PACs

AGENCY: Federal Election Commission.

ACTION: Final rules and transmittal of regulations to Congress.

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SUMMARY: The Federal Election Commission is revising portions of its 
regulations to address the relationship between the authorized 
committee of a Federal candidate or officeholder and entities that are 
not authorized committees but are associated with the Federal candidate 
or officeholder. The final rules state that authorized committees and 
entities that are not authorized committees shall not be deemed to be 
affiliated. Thus, certain disbursements by those unaffiliated entities 
will be treated as in-kind contributions to the candidates. Further 
information is contained in the Supplementary Information that follows.

EFFECTIVE DATE: December 31, 2003.

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

SUPPLEMENTARY INFORMATION: The Commission is adopting final rules at 11 
CFR 100.5(g)(5) to address the relationship between authorized 
committees and unauthorized committees that are associated with a 
Federal candidate or officeholder, more commonly known as ``leadership 
PACs,'' as well as other entities that are not Federal political 
committees, but are established, financed, maintained, or controlled 
by, or acting on behalf of, a Federal candidate or officeholder 
(collectively ``leadership PACs''). Previously, the Commission has 
examined this relationship on a case-by-case basis to determine whether 
transactions between an authorized committee and a leadership PAC 
constituted in-kind contributions or resulted in affiliation under 11 
CFR 100.5(g). In promulgating rules of general applicability, the 
Commission is changing its case-by-case approach and is deciding to 
analyze these transactions as in-kind contributions exclusively and not 
to engage in an affiliation analysis in examining the relationship 
between an authorized committee and a leadership PAC. As such, under 
the new rules, an authorized committee and a leadership PAC will not be 
deemed to be affiliated. Additionally, the adoption of these rules 
requires a change in the Commission's regulations at 11 CFR 
102.2(b)(1)(i), which, in part, governs the disclosure of the names of 
all unauthorized committees affiliated with an authorized committee.
    The Commission published a Notice of Proposed Rulemaking on 
December 26, 2002, 67 FR 78753 (``NPRM''). Written comments were due by 
January 31, 2003. Comments were received from: the Campaign and Media 
Legal Center; the Center for Responsive Politics and Common Cause and 
Democracy 21 (joint comment); Cleta Mitchell, Esq.; Paul E. Sullivan, 
Esq.; Republicans Members of the U.S. House of Representatives Tom 
DeLay, Roy Blunt, Deborah Pryce, David Dreier, John Doolittle, Jack 
Kingston, Tom Reynolds, Bob Ney, Tom Davis, Phil English, Greg Walden, 
Buck McKeon, Hal Rogers, and Pete Sessions, and the American Liberty 
PAC, American Success PAC, Federal Victory Fund, Help America's Leaders 
PAC, Pacific Northwest Leadership Fund, People for Enterprise, Trade, 
and Economic Growth, Together for Our Majority PAC, and the 21st 
Century Fund (joint comment); the Rely on Your Beliefs Fund; and Lyn 
Utrecht, Esq., Eric Kleinfeld, Esq., Jim Lamb, Esq., and Pat Fiori, 
Esq. (joint comment). The comments are available at http://www.fec.gov/register.htm under ``Leadership PACs.'' The Commission held a public 
hearing on February 26, 2003, at which it heard testimony from seven 
witnesses: Donald McGahn, Esq.; Cleta Mitchell, Esq.; Paul E. Sullivan, 
Esq.; Lawrence M. Noble, Esq.; Paul Sanford, Esq.; Glen Shor, Esq.; and 
Donald Simon, Esq. Transcripts of the hearing are available at the 
website identified above. Please note that, for purposes of this 
document, ``comment'' and ``commenter'' apply to both written comments 
and oral testimony at the public hearing.
    Under the Administrative Procedures Act, 5 U.S.C. 553(d), and the 
Congressional Review of Agency Rulemaking Act, 5 U.S.C. 801(a)(1), 
agencies must submit final rules to the Speaker of the House of 
Representatives and the President of the Senate, and publish them in 
the Federal Register at least 30 calendar days before they take effect. 
The final rules that follow were transmitted to Congress on November 
24, 2003.

Explanation and Justification

11 CFR 100.5 Political Committee

I. Background

    The Federal Election Campaign Act of 1971, as amended (``FECA''), 2 
U.S.C. 431 et seq., defines ``authorized committee'' as ``the principal 
campaign committee or any other political committee authorized by a 
candidate under section 432(e)(1) of this title to receive 
contributions or make expenditures on behalf of such candidate.'' 2 
U.S.C. Sec.  431(6); see also 11 CFR 100.5(f)(1). ``Unauthorized 
committee'' is defined in the Commission's regulations as ``a political 
committee which has not been authorized in writing by a candidate to 
solicit or receive contributions or make expenditures on behalf of such 
candidate, or which has been disavowed pursuant to 11 CFR 
100.3(a)(3).'' 11 CFR 100.5(f)(2) (emphasis added). An unauthorized 
committee may accept contributions in greater amounts than those 
allowed to be accepted by an authorized committee, compare 2 U.S.C. 
441a(a)(1)(C) with 2 U.S.C. 441a(a)(1)(A), and, if it attains 
multicandidate committee status,\1\ may contribute greater amounts to 
Federal candidates than those allowed to be contributed by an 
authorized

[[Page 67014]]

committee. Compare 2 U.S.C. 441a(a)(2)(A) with 2 U.S.C. 441a(a)(1)(A).
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    \1\ A committee achieves multicandidate status when it has been 
registered under 2 U.S.C. 433 for not less than six months, has 
received contributions from more than 50 persons, and except for a 
State political party organization, has made contributions to five 
or more candidates for Federal office. 2 U.S.C. 441a(a)(4); 11 CFR 
100.5(c)(3).
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    The term ``leadership PAC'' lacks a formal definition. Generally, 
such 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.'' Notice of Proposed Rulemaking 
on Leadership PACs, 67 FR 78753, 78754 (Dec. 26, 2002) (citations 
omitted).
    Pursuant to 2 U.S.C. 441a(a)(5), ``all contributions made by 
political committees established or financed or maintained or 
controlled by any corporation, labor organization, or any other person, 
including any parent, subsidiary, branch, division, department, or 
local unit of such corporation, labor organization, or any other 
person, or by any group of such persons, shall be considered to have 
been made by a single political committee.''
    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 amount they can 
accept from any one contributor. 11 CFR 100.5(g), 110.3(a)(1), 
110.3(a)(3)(ii). Typically, under FECA and the Commission's 
regulations, the Commission has treated ``leadership PACs'' as 
unauthorized political committees, and usually has not found them to be 
affiliated with authorized committees sharing contribution limits of 
affiliated committees.
    In 1986 the Commission began a rulemaking to address affiliation in 
general, including leadership PACs. The Commission determined in 1989, 
however, to maintain its existing approach, noting that ``the 
Commission has concluded that this complex area is better addressed on 
a case-by-case basis.'' Affiliated Committees, Transfers, Prohibited 
Contributions, Annual Contribution Limitations and Earmarked 
Contributions; Final Rule, 54 FR 34098, 34101 (Aug. 17, 1989). The 
Commission embarked on this rulemaking in 2002, in part, to clarify its 
historic approach in examining the relationship and transactions 
between a candidate's authorized committee and a leadership PAC 
associated with that candidate. NPRM at 78755.

II. Alternatives in the NPRM

    The NPRM set forth three different ways of addressing the question 
of affiliation between an authorized committee and a leadership PAC. 
The first two proposals (Alternatives A and B) would have established 
factors for finding affiliation, with all of the consequences of 
affiliation applying as a result. The third proposal (Alternative C) 
sought to codify the Commission's existing practice.
    Alternative A 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 were: (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 factor would have been 
satisfied even if the officeholder or candidate or agent authorized or 
approved only some and not all of the disbursements.
    Alternative B described two separate tests under which affiliation 
would have been found. Under proposed section 100.5(g)(5)(i)(A), 
affiliation would have existed if any one of the following factors were 
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, the 
authorized committee and the leadership PAC would have been considered 
affiliated because the candidate or officeholder exercised sufficient 
influence to conclude that the candidate or officeholder established, 
financed, maintained, or controlled the leadership PAC.
    If none of the above factors were present, affiliation could still 
be found under Alternative B of proposed section 100.5(g)(5)(i)(B) if 
any three of the following factors were 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.
    Alternative C would have largely continued the Commission's current 
treatment of leadership PACs by 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 not to influence the nomination or election of the candidate 
or officeholder involved. These activities are: (1) Only making 
disbursements to raise funds for party committees or to influence the 
nomination or election of persons other than the candidate or 
officeholder involved; (2) avoiding references to the candidacy or 
potential candidacy of the sponsoring candidate or officeholder in

[[Page 67015]]

any solicitations, communications or other materials of the 
unauthorized committee; (3) requiring that the candidate or 
officeholder make no reference to his or her candidacy or potential 
candidacy during his or her speeches or appearances on behalf of the 
leadership PAC; and (4) requiring that specified expenses would have to 
be reimbursed by a presidential campaign committee if the candidate or 
officeholder becomes a presidential candidate. If the leadership PAC 
did not conform its activities to these limitations, under Alternative 
C, it would be deemed to be an authorized committee.

III. Comments

1. Question of Affiliation

    One commenter thought that Alternative A was contrary to FECA and 
not mandated by the Bipartisan Campaign Reform Act of 2002, Pub. L. 
107-155, 116 Stat. 81(2002) (``BCRA''). Another commenter believed that 
this alternative would defeat the purpose of leadership PACs, and that 
it was sufficiently onerous that Federal officeholders could not and 
would not establish them. A third commenter agreed with this latter 
point, arguing that its terms went beyond what the authors of BCRA 
envisioned. One commenter disagreed with Alternative A's general 
structure, arguing that no one single factor is sufficient to prove 
affiliation absent express authorization by the candidate.
    Other commenters disapproved of Alternative A because it did not 
allow for sufficient opportunities to find affiliation. One commenter 
stated that the alternative contained only a per se list and thus 
ignored numerous factors that indicated a relationship existed between 
two committees. Another commenter argued that Alternative A was 
insufficiently comprehensive to encompass all relationships covered by 
the statutory term ``established, financed, maintained, or 
controlled.'' Similarly, one commenter supported many of the factors of 
Alternative A, but believed it did not include enough factors and was 
not sufficiently flexible.
    With respect to Alternative B, one commenter argued that it also 
was contrary to FECA and not mandated by BCRA. Another commenter felt 
that it essentially defeated the purpose of leadership PACs and was 
sufficiently onerous that the only conclusion to be drawn is that 
Federal officeholders could not and would not establish them. A third 
commenter agreed with this latter point, stating that Alternative B was 
a more burdensome version of Alternative A.
    The commenter who disagreed with the general structure of 
Alternative A concurred that most of the eight factors listed should be 
considered in determining affiliation, but thought setting a specific 
number to be met could present problems. Of the three commenters who 
thought Alternative A was not sufficiently comprehensive, all three 
supported the structure of Alternative B, but did not feel it included 
enough factors. Each of these commenters proposed variations on 
Alternative B that included additional factors. Two of these commenters 
added a third option for finding affiliation, based on a ``totality of 
the circumstances.'' The commenter who did not include such an option 
argued that the rule should only apply to political committees under 
FECA and political organizations organized under 26 U.S.C. 527.
    One commenter stated that Alternative C was a useful starting point 
for addressing the issue of the status of leadership PACs in the 
related candidate's own election. Another commenter thought that 
Alternative C provided a basis for a reasonable set of criteria 
defining and governing leadership PACs. This commenter suggested that 
certain amendments to Alternative C would be appropriate: (1) 
Specifically authorizing leadership PACs to contribute to State and 
local candidates and political parties within the limits and pursuant 
to State laws; (2) eliminating provisions that prohibit references to 
the related Federal candidate in solicitations or public appearances; 
and (3) requiring candidates and officeholders who become candidates 
for President and qualify for primary or general election financing to 
repay to the presidential campaign committee any expenses paid by the 
leadership PAC for travel, polling, staff, or other expenses made on 
behalf of the presidential campaign effort. Another commenter stated 
that Alternative C's proposed conditions are cumbersome and do not 
significantly improve the Commission's regulatory framework. This 
commenter suggested that the Commission should presume a leadership PAC 
is unaffiliated unless its activities are for the purpose of 
influencing the election of the connected Federal candidate.
    Another commenter argued that Alternative C continues a current 
system that fails to properly consider affiliation, and that the mere 
absence of a leadership PAC attempt to influence the specific 
officeholder's election should not be conclusive evidence that the 
committees are not affiliated. This commenter argued that such a 
standard ignores the ``established, financed, maintained, or controlled 
by'' test in FECA. Two other commenters disapproved of Alternative C 
because it maintains the status quo.

2. Impact of BCRA

    The Commission also sought comment as to how BCRA impacted a 
potential rule governing leadership PACs. Five commenters took issue 
with a suggestion in the NPRM that BCRA might require a finding of 
affiliation between an authorized committee and a leadership PAC. One 
commenter noted that one of BCRA's sponsors, Senator John McCain, had 
stated that, under BCRA's terms, ``[a] Federal officeholder or 
candidate is prohibited from soliciting contributions for a Leadership 
PAC that do not comply with Federal hard money source and amount 
limitations. Thus, the Federal officeholder or candidate could solicit 
up to $5,000 per year from an individual or PAC for the Federal account 
of the Leadership PAC and an additional $5,000 from an individual or 
PAC for the non-Federal account of the Leadership PAC.'' 148 Cong. Rec. 
S2140 (Mar. 20, 2002). Thus, this commenter argued that BCRA does not 
contemplate the automatic affiliation of leadership PACs with 
authorized committees.
    This same commenter noted that a number of leaders of the House of 
Representatives, all of whom voted in favor of BCRA, have leadership 
PACs. One commenter argued that BCRA does not require or even suggest 
that the Commission change its approach with respect to leadership PACs 
and the proper focus is on whether the activities at issue are ``for 
the purpose of influencing the election of the individual who is 
connected with the PAC.'' In contrast, other commenters argued for an 
interpretation that BCRA prohibits Federal candidates and officeholders 
from maintaining soft money leadership PACs.
    The Commission determined in the Soft Money rulemaking that BCRA 
does not allow a Federal candidate or officeholder to raise up to 
$5,000 separately for the Federal and non-Federal accounts of 
leadership PACs directly or indirectly established, financed, 
maintained, or controlled by that Federal candidate or officeholder. 
Rather, for their leadership PACs, they are limited to raising a total 
of $5,000 from any one source, per election cycle. See Final Rules on 
Prohibited and Excessive Contributions: Non-Federal Funds or Soft 
Money, 67 FR 49064, 49107 (July 29, 2002) (``Although

[[Page 67016]]

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.'') Therefore Federal candidates will not violate BCRA 
merely by establishing and raising money for their leadership PACs 
within the amount limitations and source prohibitions of FECA and BCRA.

3. Other Concerns

    Two commenters, a leadership PAC and a joint comment from 
leadership PACs and Members of the House of Representatives, stated 
that their support of challengers helped those candidates who are often 
at a fundraising disadvantage when compared to incumbents.\2\ One 
commenter argued that leadership PAC support for open seat candidates 
is sometimes critical to the viability of these candidates. Another 
commenter urged that the rule should be clear to ``encourage and 
validate'' the important role of these committees. This same commenter 
argued that leadership PACs should be encouraged as an avenue for 
Federal officeholders to support local and State parties and candidates 
in a manner that is disclosed to the Commission. This commenter also 
noted the importance of leadership PACs in their role of replacing the 
loss of non-Federal funds due to BCRA.
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    \2\ One commenter cited the Commission recent approval of 
campaign payment of candidate's salaries under certain circumstances 
as recognition of the importance of challengers receiving adequate 
funds.
---------------------------------------------------------------------------

    In response to the commenters arguing that BCRA precludes the 
result of the final rule issued today, the Commission concludes that 
BCRA's structure and wording answer these concerns. BCRA contemplates 
Federal candidate control of unauthorized committees. Otherwise, there 
would be no need to apply ``hard money'' limits. 2 U.S.C. 441i(e)(1). 
Thus, BCRA cannot be read generally to prohibit leadership PACs or to 
require that they be affiliated with a candidate's authorized 
committee. To the contrary, had Congress believed it was mandating a 
per se rule of affiliation between the two types of committees, BCRA 
would have gone further to require that contributions to those 
committees be aggregated with contributions to the candidate's 
authorized committee. BCRA requires no such aggregation.

IV. Final Rule

    In previous advisory opinions and compliance matters, the 
Commission has examined leadership PACs whose activities were 
significantly intertwined with the activities of a Federal candidate's 
authorized committee. In such circumstances, the Commission had two 
competing, but equally valid, theories it could pursue. The Commission 
could consider whether the leadership PAC's actions made it affiliated 
with the authorized committee, or the Commission could consider the 
committees unaffiliated and determine whether the leadership PAC made 
in-kind contributions to the authorized committee. The Commission has 
declined in several instances to find that a leadership PAC was 
affiliated with a candidate's authorized committee, even where it was 
apparent that the committees were controlled by the same person. See 
affiliation factors at 11 CFR 100.5(g). Instead, the Commission 
exercised its discretion to determine that a leadership PAC made in-
kind contributions to the related Federal candidate's campaign. 
Nonetheless, the Commission maintained its discretion to pursue either 
of the two competing approaches. In making these findings, the 
Commission typically found that committees formed by a candidate to 
further his or her campaign were affiliated; those formed for other 
purposes were not.
    New Sec.  100.5(g)(5) clarifies the relationship between an 
authorized committee and a leadership PAC by removing the possibility 
that a candidate's authorized committee can be affiliated with an 
entity that is not an authorized committee, even if the candidate 
established, financed, maintained, or controlled that entity.
    In promulgating this final rule, the Commission has considered the 
25-year history of Commission enforcement and policy precedent (see, 
e.g., Advisory Opinions 1978-12, 1984-46, 2003-12; MURs 1870, 2897 and 
3740) and the comments received in response to the NPRM. Alternatives A 
and B, with per se affiliation factors, would have been too rigid and 
overbroad. They would have created a basis for affiliation in 
situations where interaction between an authorized committee and a 
leadership PAC would not merit such designations if those interactions 
were undertaken by committees where neither committee was authorized in 
writing by the candidate. Although Alternative C reflects the 
Commission's historic approach to leadership PACs, it suggests that the 
Commission would examine them on a case-by-case basis. While the 
Commission has discretion to pursue either an affiliation or in-kind 
contributions analysis under FECA on a case-by-case basis when 
considering the circumstances surrounding leadership PACs, the 
Commission has decided, as a matter of policy, to adopt the in-kind 
contribution analysis as a rule of general applicability as they 
pertain to leadership PACs. See Michigan v. EPA, 268 F.3d 1075, 1087 
(D.C. Cir. 2001) (discussing agency's discretion to choose rulemaking 
or case-by-case adjudicative procedure, citing SEC v. Chenery, 332 U.S. 
174, 203 (1947) and Vermont Yankee Nuclear Power Corp. v. Natural 
Resources Defense Council, Inc., 435 U.S. 519, 543 (1978)).
    This decision does not affect affiliation between an authorized 
committee and any joint fundraising committee under 2 U.S.C. 
432(e)(3)(ii) and 11 CFR 102.13(c)(1). Nor does it affect the ability 
of a national committee of a political party to be designated as the 
principal campaign committee of that party's presidential candidate 
under 2 U.S.C. 432(e)(3)(i) and 11 CFR 102.13(c)(2). Nor does this rule 
allow a leadership PAC to provide support to the Federal candidate or 
officeholder with whom it is associated in amounts different than those 
available to other similar political committees. Rather, a leadership 
PAC's provision of funds, goods, or services to any authorized 
committee will be treated as a contribution as defined in 2 U.S.C. 
431(8), and thus limited to the amount at either 2 U.S.C. 441a(a)(1)(A) 
or 441a(a)(2)(A) per election, depending on whether the leadership PAC 
has attained multicandidate committee status, unless the activity falls 
within an exception to the definition of ``contribution'' or 
``expenditure,'' or is a fair market value exchange of goods or 
services for the usual and normal charge. See also 2 U.S.C. 431(8).
    The Commission considered the issue of whether its treatment of 
leadership PACs comports with the purpose of the affiliation rule: the 
protection of contribution limitations. In adopting new Sec.  
100.5(g)(5), the Commission is applying the affiliation rule separately 
to distinct types of political committees to enforce different 
contribution limits. Typically, committees that become affiliated 
already operate under similar limitations on the amounts of 
contributions that they can make and accept. The fact of affiliation 
simply means that they now share one common limitation. One of the 
complications in affiliating authorized committees with leadership PACs 
is that these types of committees are subject to different

[[Page 67017]]

amount limitations for making and receiving contributions. Requiring 
them to abide by a single contribution limit means choosing a 
limitation that is not intended for one of those committees.\3\ 
Consequently, it is logical to view an authorized committee and a 
leadership PAC as separate committees, and transactions between them 
that benefit the authorized committee as contributions and not as a 
basis to find them affiliated.
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    \3\ Indeed, the NPRM sought comment on which of the two separate 
contribution limitations applicable to authorized and unauthorized 
committees should obtain in the event the Commission determined such 
committees would be affiliated. The one commenter who addressed this 
question believed that the FECA allowed the Commission no discretion 
in this matter, and that the lower contribution limits applicable to 
the authorized committee would have to be applied to the leadership 
PAC.
---------------------------------------------------------------------------

    Further, the consequences of new 11 CFR 100.5(g)(5) with respect to 
leadership PAC contribution limits are no different after the 
promulgation of this rule than before. Leadership PACs operating as 
unauthorized political 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. 
432(e)(3), 441a(a)(1)(C) and 441a(a)(2)(A); 11 CFR 110.1(d) and 
110.2(b). Although such leadership PACs are not exposed to the 
consequences of affiliation with authorized committees, leadership PACs 
may still be deemed affiliated with other unauthorized committees. See 
11 CFR 100.5(g)(2), (3), and (4); see also Advisory Opinion 1990-16 
(where 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). Thus, the rule in new 11 CFR 
100.5(g)(5) provides no new avenue for circumventing the separate 
contribution limitations applicable to authorized and unauthorized 
committees.
    The Commission concludes that since its first examination of 
leadership PACs, these committees cannot be assumed to be acting as 
authorized committees. Rather, these PACs are worthy of the same 
treatment as other unauthorized committees that operate without 
presumptions as to their status. To the extent that leadership PACs are 
used to pay for costs that could and should otherwise be paid for by a 
candidate's authorized committee, such payments are in-kind 
contributions, subject to the Act's contribution limits and reporting 
requirements.
    The Commission also concludes that in instances when leadership PAC 
activity results in an in-kind contribution to a candidate, Commission 
regulations adequately regulate such activity. 11 CFR 100.52(a) and 
(d), 109.20, 109.21, 109.23, 109.37; see MUR 5376 (Campaign America/
Quayle); Report of the Audit Division on Bauer for President 2000, 
Inc., FEC Agenda Doc. No. 02-37, dated May 8, 2002 (considered in the 
Open Sessions on May 16, 2002 and May 23, 2002) (recommendations with 
respect to Campaign for Working Families PAC); MUR 3367 (Committee for 
America/Haig). These regulations, which define ``contribution'' and 
which address coordinated activities, will serve to ensure that 
leadership PACs are not used improperly to support the ``associated'' 
candidate's campaign.
    The final rule at 11 CFR 100.5(g)(5) properly places the 
enforcement focus on the activity at issue. To support the proposition 
that rules governing in-kind contributions properly capture this 
activity, the Commission need look no further than its recently-issued 
final rule ``to treat certain expenses incurred by multicandidate 
committees as in-kind contributions benefiting publicly funded 
Presidential candidates.'' Final Rules on Public Financing of 
Presidential Candidates and Nominating Conventions, 68 FR 47386, 47407 
(Aug. 8, 2003); 11 CFR 9034.10; 11 CFR 110.2(l). Although that rule was 
aimed at a somewhat different range of activity, the explanation and 
justification stated, ``For other situations not addressed [in the new 
regulations governing pre-candidacy activity with a nexus to a 
Presidential campaign], including when expenditures are paid for by 
multicandidate committees after candidacy, the general provisions 
describing in-kind contributions at 11 CFR 100.52(a) and (d), 109.20, 
109.21, 109.23, and 109.37 would apply.'' Final Rules on Public 
Financing of Presidential Candidates and Nominating Conventions, 68 FR 
at 47407. The Commission intends symmetry between its regulations with 
respect to leadership PACs and its new rules applicable to certain pre-
candidacy activity benefiting Presidential candidates by multicandidate 
committees.
    The Commission also noted that the final rules in the Public 
Financing of Presidential Candidates and Nominating Conventions, 68 FR 
at 47408, ``in no way address situations where the Commission 
determines that the multicandidate political committee and the 
candidate's principal campaign committee are affiliated under 11 CFR 
100.5(g)(4).'' With the new rule, the Commission has decided to examine 
these situations with a contribution analysis, instead of an 
affiliation analysis.
    By its terms, new 11 CFR 100.5(g)(5) also applies to entities that 
are not political committees. Recently, the Commission examined the 
situation of a State ballot initiative committee that had been 
established by a Federal candidate and officeholder, but was not a 
registered Federal committee. AO 2003-12. The Commission found that the 
relationship between the ballot initiative committee and the Federal 
candidate and officeholder was sufficiently similar to the relationship 
between a traditional leadership PAC and its connected Federal 
candidate to warrant treating the Federal candidate and officeholder 
and the ballot initiative committee in the same manner as the 
Commission had historically treated leadership PACs for affiliation 
purposes. Therefore, under new 11 CFR 100.5(g)(5), the Commission would 
not examine the transactions between the Federal candidate and 
officeholder and the ballot initiative committee to determine whether 
the ballot initiative committee is affiliated with the Federal 
candidate and officeholder's authorized committee. Rather, the 
Commission would analyze the facts to determine whether the ballot 
initiative committee made an in-kind contribution to the Federal 
candidate and officeholder. Furthermore, the Commission will continue 
to use the affiliation factors in 11 CFR 300.2(c) to determine whether 
the Federal candidate and officeholder or his agent directly or 
indirectly established or finance or maintained or controlled the 
ballot initiative committee for purposes of the restrictions on the 
solicitation, receipt, transfer or disbursement of non-Federal funds in 
2 U.S.C. 441i(e).

V. Effect on Previous Advisory Opinions

    As the Commission noted earlier, these new rules merely codify the 
discretion the Commission has exercised when the question of 
affiliation between an authorized committee and an unauthorized 
committee has come before it in the past. Thus, the final rules 
supersede

[[Page 67018]]

Advisory Opinions 1978-12, 1984-46, 1987-12, 1990-7, 1991-12, and 1993-
22, only to the extent these advisory opinions suggest that an 
authorized committee can be affiliated with an unauthorized committee.

11 CFR 102.2 Statement of Organization: Forms and Committee 
Identification Number

    The Commission's previous reporting regulations at 11 CFR 
102.2(b)(1)(i) provided, in part, for the eventuality of an authorized 
committee being affiliated with an unauthorized committee, and mandated 
that a principal campaign committee disclose on its statement of 
organization the names and addresses of all unauthorized committees 
with which it is affiliated. Because the new rule in 11 CFR 100.5(g)(5) 
eliminates the possibility of a principal campaign committee, i.e. an 
authorized committee, being affiliated with an unauthorized committee, 
the provisions of Sec.  102.2(b)(1)(i) addressing such a possibility 
are no longer valid. Accordingly, the Commission is revising Sec.  
102.2(b)(1)(i) to eliminate these provisions. Pursuant to the revised 
Sec.  102.2(b)(1)(i), a principal campaign committee will still be 
required to disclose the names and addresses of all other authorized 
committees that have been authorized by its candidate. While this 
revision was not addressed in the NPRM, it is a logical and technical 
change necessitated by the new 11 CFR 100.5(g)(5).

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

    The Commission certifies that the final rules do not have a 
significant economic impact on a substantial number of small entities. 
The basis of this certification is that these rules only codify current 
Commission practice with respect to whether certain entities 
established, financed, maintained, controlled by, or acting on behalf 
of, Federal candidates, are affiliated with authorized committees of 
Federal candidates. Accordingly, 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 and limits on contributions. 
This does not impose a significant economic burden because entities 
affected are already required to comply with the Act's requirements in 
these areas.

List of Subjects

11 CFR Part 100

    Elections.

11 CFR Part 102

    Registration, organization, and recordkeeping by political 
committees.

0
For the reasons set out in the preamble, the Federal Election 
Commission amends subchapter A of Chapter I of Title 11 of the Code of 
Federal Regulations as follows:

PART 100--SCOPE AND DEFINITIONS

0
1. The authority citation for part 100 continues to read as follows:


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

0
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) * * *
    (5) Notwithstanding paragraphs (g)(2) through (g)(4) of this 
section, no authorized committee shall be deemed affiliated with any 
entity that is not an authorized committee.

PART 102--REGISTRATION, ORGANIZATION, AND RECORDKEEPING BY 
POLITICAL COMMITTEES

0
3. The authority citation for part 102 continues to read as follows:

    Authority: 2 U.S.C. 432, 433, 434(a)(11), 438(a)(8), 441d.


0
4. In Sec.  102.2, paragraph (b)(1)(i) is revised to read as follows:


Sec.  102.2  Statement of organization: Forms and committee 
identification number (2 U.S.C. 433(b), (c)).

* * * * *
    (b) * * *
    (1) * * *
    (i) A principal campaign committee is required to disclose the 
names and addresses of all other authorized committees that have been 
authorized by its candidate. Authorized committees need only disclose 
the name of their principal campaign committee.
* * * * *

    Dated: November 24, 2003.
Bradley A. Smith,
Vice Chairman, Federal Election Commission.
[FR Doc. 03-29752 Filed 11-28-03; 8:45 am]
BILLING CODE 6715-01-P