[Federal Register Volume 70, Number 36 (Thursday, February 24, 2005)]
[Proposed Rules]
[Pages 9013-9016]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 05-3471]


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FEDERAL ELECTION COMMISSION

11 CFR Part 300

[Notice 2005-6]


Candidate Solicitation at State, District, and Local Party 
Fundraising Events

AGENCY: Federal Election Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Federal Election Commission seeks comments on proposed 
changes to its rule regarding appearances by Federal officeholders and 
candidates at State, district, and local party fundraising events under 
the Federal Election Campaign Act of 1971, as amended (``FECA'' or the 
``Act''). The current regulation contains an exemption permitting 
Federal officeholders and candidates to speak at State, district, and 
local party fundraising events ``without restriction or regulation.'' 
This regulation was challenged in Shays v. FEC. The U.S. District Court 
for the District of

[[Page 9014]]

Columbia held that this regulation implementing the Bipartisan Campaign 
Reform Act of 2002 was based on a permissible construction of the 
statute. However, the district court also held that the Commission had 
not provided adequate explanation of its decision to permit Federal 
candidates and officeholders to speak ``without restriction or 
regulation,'' and therefore had not satisfied the reasoned analysis 
requirement of the Administrative Procedure Act. The district court 
remanded the regulation to the Commission for further action consistent 
with the court's opinion. Accordingly, in order to comply with the 
court's decision, the Commission now revisits the exemption for 
candidate and Federal officeholder speech at State, district, and local 
party fundraising events. The Commission has made no final decision 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 28, 2005. If the 
Commission receives sufficient requests to testify, it may hold a 
hearing on this proposed rule. Commenters wishing to testify at the 
hearing must so indicate in their written or electronic comments.

ADDRESSES: All comments should be addressed to Ms. Mai T. Dinh, 
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 
www.regulations.gov. All electronic comments must include the full 
name, electronic mail address, and postal service address of the 
commenter. Electronic 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 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 
that 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: Ms. Mai T. Dinh, Assistant General 
Counsel, Mr. J. Duane Pugh Jr., Senior Attorney, or Ms. Margaret G. 
Perl, 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''), Public Law 107-155, 116 Stat. 81 (2002), places limits on 
the amounts and types of funds that can be raised by Federal 
officeholders and candidates for both Federal and State elections. See 
2 U.S.C. 441i(e). These restrictions also apply to their agents, and 
entities directly or indirectly established, financed, maintained, or 
controlled by, or acting on behalf of, any such candidate(s) or Federal 
officeholder(s) (``covered persons''). Covered persons may not 
``solicit, receive, direct, transfer or spend'' non-Federal funds in 
connection with an election for Federal, State, or local office except 
under limited circumstances. See 2 U.S.C. 441i(e); 11 CFR part 300, 
subpart D.
    Section 441i(e)(3) states that ``notwithstanding'' the prohibition 
on raising non-Federal funds, including Levin funds, in connection with 
a Federal or non-Federal election in section 441i(b)(2)(C) and (e)(1), 
``a candidate or an individual holding Federal office may attend, 
speak, or be a featured guest at a fundraising event for a State, 
district, or local committee of a political party.'' Id. During the 
rulemaking implementing this provision, the Commission initially sought 
comment on a rule proposing that, while such individuals could attend, 
speak, or be a featured guest at a party fundraising event, they could 
not say anything that could be construed as soliciting or otherwise 
seeking non-Federal funds, including Levin funds. See Notice of 
Proposed Rulemaking on Prohibited and Excessive Contributions; Non-
Federal Funds or Soft Money, 67 FR 35654, 35672 (May 20, 2002). In the 
alternative, the NPRM sought comment on whether the fundraising event 
provision was a total exemption from the general solicitation ban, 
whereby Federal officeholders and candidates and their agents may 
attend and speak freely at such events without restriction or 
regulation. Id.
    The Commission considered a range of comments on the scope of the 
fundraising provision. Ultimately, the Commission decided to construe 
the statutory provision broadly, permitting Federal officeholders and 
candidates to attend, speak, and appear as a featured guest at State, 
district, and local fundraising events ``without restriction or 
regulation.'' See Final Rules on Prohibited and Excessive 
Contributions; Non-Federal Funds or Soft Money, 67 FR 49064, 49108 
(July 29, 2002); 11 CFR 300.64(b).
    In Shays v. FEC, 337 F. Supp.2d 28 (D.D.C. 2004), the district 
court held that the Commission's explanation and justification for the 
fundraising provision in 11 CFR 300.64(b) did not satisfy the reasoned 
analysis requirement of the Administrative Procedure Act (``APA'') in 
two respects.\1\ First, the district court held that the Commission's 
construction of BCRA as permitting Federal officeholders and candidates 
to speak at State, district, and local party fundraising events 
``without restriction or regulation'' is not compelled by the language 
of the statute. Id. at 92-93. The court concluded that the BCRA 
provision ``is ambiguous in that it can be read in more than one way.'' 
Id. at 89. Specifically, the court concluded that the statute ``can be 
read to either be a carve-out for unabashed solicitation by federal 
candidates and officeholders at state, district or local committee 
fundraising events, or to simply make clear that merely attending, 
speaking or being the featured guest at such an event is not to be 
construed as constituting solicitation per se.'' Id. Second, the 
district court stated ``the FEC has not explained how examining speech 
at fundraising events implicates constitutional concerns that are not 
present when examining comments made at other venues.'' Id. at 93. The 
court remanded the regulation to the Commission for further action 
consistent with its opinion. Id. at 130.
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    \1\ Although the court held that the fundraising exemption 
regulation failed to satisfy the APA, it found the regulation did 
not necessarily run contrary to Congress's intent in creating the 
fundraising exemption and was based on a permissible construction of 
the statute. Id. at 90, 92 (finding the regulation survived Chevron 
review). Moreover, the court stated that it ``cannot find on the 
current record that the Commission's regulation on its face `unduly 
compromises the Act's purposes' by `creat[ing] the potential for 
gross abuse.' '' Id. at 91 (quoting Orloski v. FEC, 795 F.2d 156, 
164, 165 (DC Cir. 1986)). See also Shays, 337 F. Supp.2d at 92 
(``the court cannot find that the Commission has unduly compromised 
FECA's purposes'').
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    To comply with the district court's order, the Commission is 
issuing this notice of proposed rulemaking to provide proposed 
revisions to the explanation and justification for the final rules it 
adopted concerning the provision allowing Federal officeholders and 
candidates to speak without restriction or regulation at fundraising 
events for State, district, and local party committees. See 11 CFR 
300.64. As an alternative to providing a new

[[Page 9015]]

explanation for the current rule, this NPRM also includes a proposed 
rule that would replace current section 300.64 with a rule barring 
candidates and Federal officeholders from soliciting or directing non-
Federal funds when attending or speaking at party fundraising events. 
Both approaches are explained below.

Proposed Revisions to the Explanation and Justification for Current 11 
CFR 300.64

    The Commission seeks comment on the following proposed three 
paragraphs to be included in a revised explanation and justification 
for current 11 CFR 300.64:
    ``In promulgating current 11 CFR 300.64(b), the Commission 
construed 2 U.S.C. 441i(e)(3) to exempt Federal officeholders and 
candidates from the general solicitation ban, so that they may attend 
and speak without restriction or regulation at party fundraising 
events. The district court recognized that section 441i(e)(3) was 
ambiguous and upheld the Commission's interpretation of this section as 
a permissible reading under Chevron step one. See 337 F. Supp.2d at 89-
90. The district court also upheld the current section 300.64(b) under 
Chevron step two review because the regulation did not unduly 
compromise FECA. Id. at 92.
    ``Section 300.64 effectuates the balance Congress struck between 
the appearance of corruption engendered by soliciting sizable amounts 
of soft money and the legitimate and appropriate role Federal 
officeholders and candidates play in raising funds for their political 
parties. Just as Congress expressly permitted these individuals to 
raise non-Federal funds when they themselves run for non-Federal office 
(see 2 U.S.C. 441i(e)(2)), and to solicit limited amounts of non-
Federal funds for certain 501(c) organizations (see 2 U.S.C. 
441i(e)(4)), Congress also enacted 2 U.S.C. 441i(e)(3) to provide a 
mechanism whereby Federal officeholders and candidates could continue 
to play a role at State, district and local party committee fundraising 
events at which non-Federal funds are raised. The limited nature of 
this statutory exemption embodied in 11 CFR 300.64 is evident in that 
it does not permit Federal officeholders and candidates to solicit non-
Federal funds for State, district or local party committees in pre-
event publicity or through other mechanisms. Nor does it extend to 
fundraising on behalf of national party committees.
    ``In implementing this statutory scheme, the Commission is mindful 
that evaluating speech in the context of a party fundraising event 
raises First Amendment concerns where it is difficult to discern what 
specific words would be merely `speaking' at such an event without 
crossing the line into soliciting or directing non-Federal funds. See 
11 CFR 300.2(m) (definition of `to solicit') and 300.2(n) (definition 
of `to direct'). As the U.S. Supreme Court has observed, `solicitation 
is characteristically entwined with informative and perhaps persuasive 
speech seeking support for particular causes or for particular views.' 
Schaumberg v. Citizens for a Better Env't, 444 U.S. 620, 632 (1980). A 
regulation that permitted speaking at a party event, the central 
purpose of which is fundraising, but prohibited soliciting would 
require candidates to tease out words of general support for the 
political party and its causes from words of solicitation for non-
Federal funds for that political party. A complete exemption in section 
300.64(b) that allows Federal officeholders and candidates, in these 
limited circumstances, to speak and attend without restriction or 
regulation, including solicitation of non-Federal or Levin funds, 
avoids these concerns.'' \2\
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    \2\ These concerns are more of an issue for these types of party 
fundraisers where Federal funds and non-Federal funds may both be 
raised than for national party committee fundraisers where only 
Federal funds may be raised.
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    The Commission seeks comments on these proposed revisions to the 
explanation and justification or comments that provide alternative 
rationales for the complete exemption in current 11 CFR 300.64(b). 
Additionally, the district court voiced concern that the current 
300.64(b) ``creates the potential for abuse.'' See 337 F. Supp.2d at 
91. The Commission seeks public comment as to any potential for abuse 
under the current rule.
    The Commission also notes, as the Shays court observed, that under 
BCRA, outside the context of State, district and local party 
fundraisers, ``nonfederal money solicitation is almost completely 
barred.'' Id. at 92. From time to time, the Commission has been asked 
to permit attendance and participation by Federal officeholders and 
candidates at various functions other than those for State, district 
and local parties, where non-Federal funds will be raised. Subject to 
various restrictions, the Commission has allowed this. See, e.g., 
Advisory Opinions 2003-36 and 2003-03. The Commission requests comment 
on whether these advisory opinions, allowing attendance at such 
functions, struck the proper balance. Alternatively, are these advisory 
opinions inconsistent with BCRA's language and intent? Does the 
permission granted in 2 U.S.C. 441i(e)(3) to attend, speak, or be a 
featured guest at State, district and local party events, by 
implication, prohibit Federal officeholders and candidates from doing 
so at other fundraising events unless such events are solely and 
exclusively raising Federal funds? \3\
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    \3\ See 2 U.S.C. 441i(e)(1)(B) (permitting solicitations by 
Federal candidates for State candidates so long as such 
solicitations comply with the source prohibitions and amount 
restrictions under the Act for Federal candidates). See also 2 
U.S.C. 441i(e)(4) (permitting certain solicitations, with 
restrictions, by Federal officeholders and candidates for funds to 
be used by certain tax-exempt organizations to be used for certain 
types of Federal election activity).
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    Should the Commission specifically bar attendance by a Federal 
officeholder or candidate at a non-State, district or local party 
fundraising event when the officeholder or candidate knows or 
reasonably should know that solicitations otherwise prohibited when 
made by the candidate or officeholder will take place at the event? 
Alternatively, should Advisory Opinions 2003-03 and 2003-36 be 
incorporated into the Commission's regulations? If so, should other 
modifications be added?

Alternative Proposed 11 CFR 300.64

    Although providing a revised explanation and justification for 
current 11 CFR 300.64 would comply with the district court's decision 
in Shays v. FEC, the Commission is also considering an alternative 
approach. This approach would replace current section 300.64 with a 
rule barring candidates and Federal officeholders from soliciting, 
receiving, directing, transferring or spending any non-Federal funds, 
including Levin funds, when speaking at party fundraising events.
    The proposed rule would redesignate the introductory paragraph of 
11 CFR 300.64 as paragraph (a) and amend it to state that Federal 
officeholders and candidates may not solicit, receive, direct, 
transfer, or spend non-Federal funds at any such event. Current section 
300.64(a) would be redesignated as paragraph (b) without any 
substantive changes, and current section 300.64(b) would be deleted 
entirely.

Proposed 11 CFR 300.64(a)

    The proposed rule would limit the scope of section 300.64 by 
replacing the complete exemption for speaking ``without restriction or 
regulation'' in current 11 CFR 300.64(b) with a narrower exception 
under which Federal candidates and officeholders would still be able to 
speak at or attend any party fundraising event (as the

[[Page 9016]]

statute clearly authorizes), but they would not be able to solicit, 
receive, direct, transfer or spend non-Federal funds, including Levin 
funds, at the party fundraising event. This proposed rule would 
interpret section 441i(e)(3) as an exception that makes clear that the 
mere attendance or speaking by a candidate in this circumstance should 
not be equated with a solicitation prohibited by section 441i(e)(1). 
However, this safe harbor would not apply to a candidate or Federal 
officeholder who uses words that solicit or direct non-Federal funds. 
See 11 CFR 300.2(m) (definition of ``to solicit'') and 300.2(n) 
(definition of ``to direct'').
    The district court in Shays v. FEC held that this interpretation is 
another permissible reading of the statute. See 337 F. Supp.2d at 89-
90. The Commission seeks public comment on this alternative approach.
    The alternative approach raises an issue about interpreting BCRA in 
light of Shays v. FEC. In that opinion, the district court stated: 
``the plain reading of [BCRA] makes clear that Levin funds are funds 
`subject to [FECA's] limitations, prohibitions, and reporting 
requirements.' '' Shays v. FEC, 337 F. Supp.2d at 118. Does this mean 
that 2 U.S.C. 441i(e)(1) does not prohibit covered persons from 
soliciting Levin funds? Although 2 U.S.C. 441i(b)(2)(B)(iii) and (C) 
nonetheless generally prohibit State parties from treating funds raised 
by covered persons as Levin funds, do the cross-references between 
subsection (e)(3) and subparagraph (b)(2)(C) create an exception 
permitting State party committees to treat funds solicited by covered 
persons at fundraising events as Levin funds? The Commission seeks 
comment on how it should interpret 2 U.S.C. 441i(b)(2), (e)(1), and 
(e)(3), in light of Shays v. FEC.
    In addition, if the Commission were to adopt this alternative 
approach, would it be appropriate to permit written notices or oral 
disclaimers similar to those discussed in Advisory Opinions 2003-03 and 
2003-36 for other fundraising events? The opinions addressed 
appearances, speeches, and solicitations by covered persons at 
fundraising events where non-Federal funds were being raised. Those 
opinions permitted covered persons to solicit funds and comply with 2 
U.S.C. 441i(e)(1) by using either written notices or oral disclaimers. 
Alternatively, would another type of notice or disclaimer be more 
appropriate?

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

    The Commission certifies that the attached proposed rule, if 
promulgated, would not have a significant economic impact on a 
substantial number of small entities. The basis for this certification 
is that the proposed rule is an exception from the requirements of a 
general rule applicable to Federal officeholders and candidates. In 
addition, the other organizations affected by this rule are State, 
district and local party committees of the two major political parties, 
which 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 any of these 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 committees and 
parties, political candidates, reporting and recordkeeping 
requirements.

    For reasons set out in the preamble, Subchapter C of Chapter 1 of 
title 11 of the Code of Federal Regulations would be amended to read 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 300.64 would be revised to read as follows:


Sec.  300.64  Exception for attending, speaking, or appearing as a 
featured guest at fundraising events (2 U.S.C. 441i(e)(3)).

    (a) Notwithstanding the provisions of 11 CFR 100.24, 300.61 and 
300.62, a Federal candidate or individual holding Federal office may 
attend, speak, or be a featured guest at a fundraising event for a 
State, district, or local committee of a political party, including but 
not limited to a fundraising event at which Levin funds are raised, or 
at which non-Federal funds are raised. Such candidate or individual 
holding Federal office shall not solicit, receive, direct, transfer or 
spend non-Federal funds, including Levin funds, at any such event.
    (b) State, district, or local committees of a political party may 
advertise, announce or otherwise publicize that a Federal candidate or 
individual holding Federal office will attend, speak, or be a featured 
guest at a fundraising event, including, but not limited to, 
publicizing such appearance in pre-event invitation materials and in 
other party committee communications.

    Dated: February 17, 2005.
Scott E. Thomas,
Chairman, Federal Election Commission.
[FR Doc. 05-3471 Filed 2-23-05; 8:45 am]
BILLING CODE 6715-01-U