[Federal Register Volume 70, Number 21 (Wednesday, February 2, 2005)]
[Proposed Rules]
[Pages 5385-5387]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-1891]


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FEDERAL ELECTION COMMISSION

11 CFR Part 300

[Notice 2005-2]


De Minimis Exemption for Disbursement of Levin Funds by State, 
District, and Local Party Committees

AGENCY: Federal Election Commission.

ACTION: Notice of Proposed Rulemaking.

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SUMMARY: The Federal Election Commission requests comments on proposed 
revisions to the Commission's regulations that establish a de minimis 
exemption allowing State, district, and local committees of a political 
party to pay for certain Federal election activity aggregating $5,000 
or less in a calendar year entirely with Levin funds. In Shays v. FEC, 
the District Court held that the Commission's de minimis exemption was 
inconsistent with the statutory intent of the Bipartisan Campaign 
Reform Act and remanded the regulation to the Commission for further 
action consistent with the court's opinion. The Commission is appealing

[[Page 5386]]

this ruling to the D.C. Circuit. In the interim, the Commission is 
initiating this rulemaking. No final decision has been made by the 
Commission on the issues presented in this rulemaking. Further 
information is provided in the supplementary information that follows.

DATES: Comments must be received on or before March 4, 2005. If the 
Commission receives sufficient requests to testify, it may hold a 
hearing on these proposed rules. Commenters wishing to testify at the 
hearing must so indicate in their written or electronic comments.

ADDRESSES: All comments should be addressed to Mr. Brad C. Deutsch, 
Assistant General Counsel, and must be submitted in either electronic 
or written form. Commenters are strongly encouraged to submit comments 
electronically to ensure timely receipt and consideration. Electronic 
mail comments should be sent to [email protected] and may also be 
submitted through the Federal eRegulations Portal at http://www.regulations.gov. All electronic comments must include the full 
name, electronic mail address and postal service address of the 
commenter. Electronic mail comments that do not contain the full name, 
electronic mail address and postal service address of the commenter 
will not be considered. 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. Written comments and printed 
copies of faxed comments should be sent to the Federal Election 
Commission, 999 E Street, NW., Washington, DC 20463. The Commission 
will post public comments on its Web site. If the Commission decides a 
hearing is necessary, the hearing will be held in the Commission's 
ninth floor meeting room, 999 E Street NW., Washington, DC.

FOR FURTHER INFORMATION CONTACT:  Mr. Brad C. Deutsch, Assistant 
General Counsel, or Ms. Cheryl A.F. Hemsley, Attorney, 999 E Street 
NW., Washington, DC 20463, (202) 694-1650 or (800) 424-9530.

SUPPLEMENTARY INFORMATION:  The Bipartisan Campaign Reform Act of 2002 
(``BCRA''), Pub. L. 107-155, 116 Stat. 81 (March 27, 2002), contained 
extensive and detailed amendments to the Federal Election Campaign Act 
of 1971, as amended (the ``Act''), 2 U.S.C. 431 et seq. As amended by 
BCRA, subsection 441i(b)(1) of the Act, 2 U.S.C. 441i(b)(1), provides 
that State, district, and local political party committees must 
generally use Federal funds \1\ to pay for Federal election activity 
(``FEA'').\2\ However, subsection 441i(b)(2) provides an exception for 
certain activities covered by Types 1 and 2 FEA, for which State, 
district, and local political party committees may allocate 
disbursements between Federal funds and Levin funds in accordance with 
allocation ratios as determined by the Commission.\3\ 2 U.S.C. 
441i(b)(2); see also 11 CFR 300.2(i), 300.32, and 300.33.
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    \1\ ``Federal funds'' are funds that comply with the 
limitations, prohibitions, and reporting requirements of the Act. 
See 11 CFR 300.2(g).
    \2\ The four types of FEA are: Type 1--Voter registration 
activity during the period that begins on the date that is 120 days 
before a regularly scheduled Federal election is held and ends on 
the date of the election; Type 2--Voter identification, get-out-the-
vote activity, or generic campaign activity conducted in connection 
with an election in which a candidate for Federal office appears on 
the ballot; Type 3--A public communication that refers to a clearly 
identified candidate for Federal office; and Type 4--Services 
provided during any month by an employee of a State, district, or 
local committee of a political party who spends more than 25 percent 
of his or her compensated time during that month on activities in 
connection with a Federal election. See 2 U.S.C. 431(20) and 11 CFR 
100.24.
    \3\ Levin funds are a type of non-Federal funds raised only by 
State, district, and local political party committees. Levin funds 
are limited to donations of $10,000 per source per calendar year and 
are generally solicitable from sources otherwise prohibited by the 
Act (except from foreign nationals). Donations of Levin Funds, 
however, must be lawful under the laws of the State in which a 
committee is organized. See 2 U.S.C. 441i(b)(2)(B); see also 11 CFR 
300.31 and 300.32(c). Types 1 and 2 FEA listed in note 2, above, are 
allocable between Federal and Levin funds, so long as the activities 
do not refer to a clearly identified Federal candidate (``allocable 
Type 1&2 FEA''). See 2 U.S.C. 441i(b)(2)(B)(i) and 11 CFR 300.32.
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    On July 29, 2002, the Commission promulgated regulations at 11 CFR 
Part 300 implementing BCRA's provisions concerning disbursements by 
State, district, and local party committees for FEA. See Final Rules 
and Explanation and Justification for Regulations on Prohibited and 
Excessive Contributions; Non-Federal Funds or Soft Money, 67 FR 49064 
(July 29, 2002) (``Soft Money E&J''). The regulations at 11 CFR 
300.32(c)(4) require any State, district, or local committee of a 
political party that disburses more than $5,000 on allocable Type 1&2 
FEA in a calendar year either to pay for such allocable FEA entirely 
with Federal funds or to allocate disbursements between Federal funds 
and Levin funds. The Commission also created a de minimis exemption for 
any State, district, or local party committee whose disbursements for 
allocable Type 1&2 FEA aggregate $5,000 or less in a calendar year (the 
``$5,000 Exemption''), permitting such committees to pay for these 
types of FEA entirely with Levin funds.
    In the Soft Money E&J, the Commission stated three reasons for 
promulgating the $5,000 Exemption at 11 CFR 300.32(c)(4). First, the 
Commission noted that although BCRA requires State, district, and local 
political party committees to report all receipts and disbursements for 
FEA, the statute provides an exception for committees whose FEA 
receipts and disbursements aggregate less than $5,000 in a calendar 
year. See 2 U.S.C. 434(e)(2)(A). The Commission reasoned that the 
reporting exception suggests that Congress did not take a rigid 
approach to low levels of FEA. Second, the Commission explained that it 
was particularly sensitive to the grassroots nature of allocable Type 
1&2 FEA, stating that there is a far weaker nexus between Federal 
candidates and this category of FEA than the other types of FEA for 
which use of Levin funds is prohibited. Finally, the Commission noted 
that $5,000 is only half of what any single donor may donate to each 
and every State, district, and local political party committee under 
BCRA, so there is no danger that allowing a committee to use entirely 
Levin funds for allocable Type 1&2 FEA aggregating $5,000 or less in a 
calendar year would lead to circumvention of the $10,000 Levin fund 
donation limit in BCRA. See Soft Money E&J at 49097.
    In Shays v. FEC, 337 F.Supp.2d 28, 114-117 (D.D.C. 2004), appeal 
filed, No. 04-5352 (D.C. Cir. Sept. 28, 2004) (``Shays''), the district 
court held that the $5,000 Exemption in 11 CFR 300.32(c)(4) was 
inconsistent with Congress's clear intent, as expressed in BCRA, to 
allow State, district, and local party committees to pay for allocable 
Type 1&2 FEA either solely with Federal funds or with funds allocated 
between Federal and Levin funds.\4\ The court concluded that the $5,000 
Exemption was not permissible, finding that ``Congress clearly 
expressed its intent in BCRA's statutory language that all [FEA] 
pursued by state, local and district political party committees is to 
be paid for using federal funds, except for certain circumstances where 
such committees may use an `allocated' ratio

[[Page 5387]]

of federal and Levin funds.'' Shays at 116-17.
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    \4\ ``Under the Chevron analysis, a court first asks ``whether 
Congress has directly spoken to the precise question at issue. If 
the intent of Congress is clear, that is the end of the matter; for 
the court, as well as the agency, must give effect to the 
unambiguously expressed intent of Congress.'''' Shays at 51 (quoting 
Chevron, U.S.A., Inc. v. Natural Res. Def. Council, 467 U.S. 837, 
842-43 (1984)).
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    The court stated that for a regulatory de minimis exemption to 
stand, an agency has the burden of demonstrating that following the 
precise language of the statute would lead to ``absurd or futile 
results,'' or that the failure to create a de minimis exemption would 
be ``contrary to the primary legislative goal.'' Shays at 117 (quoting 
Environmental Defense Fund v. EPA, 82 F.3d 451, 466 (D.C. Cir. 1996) 
quoting, in turn, State of Ohio v. EPA, 997 F.2d 1520, 1535 (D.C. Cir. 
1993)). The court addressed each of the Commission's reasons for 
adopting the $5,000 Exemption and found that the Commission had not met 
the burden of demonstrating that following the precise statutory 
language would lead to absurd or futile results and had not shown that 
the $5,000 Exemption comported with BCRA's purposes.\5\ Shays at 117. 
The court then remanded the regulations to the Commission for further 
action consistent with its opinion. Shays at 130.
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    \5\ The Commission has filed an appeal with the U.S. Court of 
Appeals for the D.C. Circuit of certain aspects of the Shays 
decision, including the court's conclusion that the $5,000 Exemption 
is inconsistent with the statutory intent of 2 U.S.C 441i(b). The 
appeal is currently pending. In the event the Commission prevails on 
appeal, the Commission may terminate this rulemaking proceeding 
prior to adoption of final rules.
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I. Proposed 11 CFR 300.32(c)(4)--Conditions and Restrictions on 
Spending Levin Funds

    Because the court found the $5,000 Exemption to be inconsistent 
with the statutory intent of 2 U.S.C 441i(b) and that the standards for 
upholding a de minimis exemption had not been met, the Commission 
proposes to delete the $5,000 Exemption from 11 CFR 300.32(c)(4). 
Paragraph (c)(4) of the proposed rule would require State, local, and 
district political party committees to pay for all allocable FEA either 
entirely with Federal funds or with an allocation of Federal and Levin 
funds pursuant to 11 CFR 300.33. The Commission solicits comments on 
the proposed regulation. The Commission also invites comments on 
whether following the precise language of BCRA would lead to ``absurd 
or futile results,'' absent promulgation of a de minimis exemption for 
disbursement of Levin funds by State, district, and local political 
party committees.

II. Alternative Proposal for 11 CFR 300.32(c)(4)

    Although not reflected in the attached proposed rules, the 
Commission also seeks comments on whether 11 CFR 300.32(c)(4) should be 
revised to apply only to State, district, and local party committees 
with combined receipts and disbursements for FEA (whether allocable or 
not) that together aggregate to less than $5,000 in a calendar year. 
See 2 U.S.C. 434(e)(2)(A). If a de minimis exemption allowing for the 
exclusive use of Levin funds for allocable Type 1&2 FEA were to apply 
only to State, district, and local party committees with FEA receipts 
and disbursements aggregating less than $5,000 in a calendar year, the 
exemption would then apply only to those committees that are already 
statutorily exempt from having to report FEA under the exception 
contained in 2 U.S.C. 434(e)(2)(A). The Commission invites comment on 
whether adoption of this alternative proposal would comport with the 
statutory intent of 2 U.S.C 441i(b).

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

    The Commission certifies that the attached proposed rules, if 
promulgated, would not have a significant economic impact on a 
substantial number of small entities. The basis for this certification 
is that the State, district, and local party committees of the two 
major political parties are not small entities under 5 U.S.C. 601 
because they are not small businesses, small organizations, or small 
governmental jurisdictions. To the extent that other political party 
committees may fall within the definition of ``small entities,'' their 
number is not substantial.

List of Subjects in 11 CFR Part 300

    Campaign funds, Nonprofit organizations, Political candidates, 
Political committees and parties, Reporting and recordkeeping 
requirements.
    For the reasons set out in the preamble, the Federal Election 
Commission proposes to amend subchapter C of chapter I of title 11 of 
the Code of Federal Regulations as follows:

PART 300--NON-FEDERAL FUNDS

    1. The authority citation for part 300 would continue to read as 
follows:

    Authority: 2 U.S.C. 434(e), 438(a)(8), 441a(a), 441i, 453.

    2. Section 300.32 would be amended by revising paragraph (c)(4) to 
read as follows:


Sec.  300.32  Expenditures and disbursements

* * * * *
    (c) * * *
    (4) The disbursements for allocable Federal election activity may 
be paid for entirely with Federal funds or may be allocated between 
Federal funds and Levin funds according to 11 CFR 300.33.
* * * * *

    Dated: January 27, 2005.
Scott E. Thomas,
Chairman, Federal Election Commission.
[FR Doc. 05-1891 Filed 2-1-05; 8:45 am]
BILLING CODE 6715-01-P