[Federal Register Volume 75, Number 178 (Wednesday, September 15, 2010)]
[Rules and Regulations]
[Pages 55947-55961]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-22649]


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FEDERAL ELECTION COMMISSION

11 CFR Part 109

[Notice 2010-17]


Coordinated Communications

AGENCY: Federal Election Commission.

ACTION: Final rules.

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SUMMARY: The Federal Election Commission is revising its regulations 
regarding coordinated communications. The Commission is issuing these 
rules and offering a more complete explanation and justification for 
parts of the existing rules to comply with the decision of the Court of 
Appeals for the District of Columbia Circuit in Shays v. FEC and to 
address other issues involving the coordinated communications rules.

DATES: These rules are effective on December 1, 2010.

FOR FURTHER INFORMATION CONTACT:  Ms. Amy L. Rothstein, Assistant 
General Counsel, Ms. Jessica Selinkoff, Attorney, Ms. Joanna S. 
Waldstreicher, Attorney, or Ms. Esther D. Heiden, Attorney, 999 E 
Street, NW., Washington, DC 20463, (202) 694-1650 or (800) 424-9530.

SUPPLEMENTARY INFORMATION:  The Commission is revising its regulations 
regarding coordinated communications at 11 CFR 109.21. The Commission 
is: (1) Adding a new content standard at 11 CFR 109.21(c)(5) for 
communications

[[Page 55948]]

that are the functional equivalent of express advocacy; and (2) 
creating a safe harbor for certain business and commercial 
communications. The Commission is retaining the conduct standards for 
common vendors and former employees at 11 CFR 109.21(d)(4) and (5) and 
is providing further explanation and justification for those rules. The 
Commission is not, at this time, adopting a safe harbor for certain 
public communications paid for by non-profit organizations described in 
26 U.S.C. 501(c)(3) (``501(c)(3) organizations'') or revising the rules 
concerning party coordinated communications at 11 CFR 109.37.

Transmission of Final Rules to Congress

    Under the Administrative Procedure 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 thirty calendar days before they take 
effect. The final rules that follow were transmitted to Congress on 
September 7, 2010.

Explanation and Justification

I. Background

    The Federal Election Campaign Act of 1971, as amended, 2 U.S.C. 431 
et seq. (``the Act''), and Commission regulations limit the amount a 
person may contribute to a candidate and that candidate's authorized 
committee with respect to any election for Federal office, and also 
limit the amount a person may contribute to other political committees 
in a given calendar year. See 2 U.S.C. 441a(a)(1); 11 CFR 110.1(b)(1), 
(c)(1), and (d); see also 2 U.S.C. 441b; 11 CFR 114.2 (prohibitions on 
corporate contributions). A ``contribution'' may take the form of money 
or ``anything of value,'' including an in-kind contribution, provided 
to a candidate or political committee for the purpose of influencing a 
Federal election. See 2 U.S.C. 431(8)(A)(i) and (9)(A)(i); 11 CFR 
100.52(a) and (d)(1), 100.111(a) and (e)(1). An expenditure made in 
coordination with a candidate, a candidate's authorized political 
committee, or political party committee constitutes an in-kind 
contribution to that candidate or party committee subject to 
contribution limits and prohibitions and must, subject to certain 
exceptions, be reported both as a contribution to and as an expenditure 
by that candidate or party committee. See 2 U.S.C. 441a(a)(7); 11 CFR 
109.20 and 109.21(b).

A. The Rulemaking Record

    These final rules for coordinated communications respond to the 
decision of the Court of Appeals for the District of Columbia Circuit 
in Shays v. FEC, 528 F.3d 914 (DC Cir. 2008) (``Shays III Appeal''), 
discussed below. The Commission published a Notice of Proposed 
Rulemaking (``NPRM'') in the Federal Register on October 21, 2009. See 
Notice of Proposed Rulemaking on Coordinated Communications, 74 FR 
53893 (Oct. 21, 2009). The NPRM comment period closed on January 19, 
2010. The Commission received nine comments from 16 commenters on the 
NPRM. The NPRM comments are available at http://www.fec.gov/pdf/nprm/coord_commun/2009/shays3comments.shtml.
    The Commission published a Supplemental Notice of Proposed 
Rulemaking (``SNPRM'') in the Federal Register on February 10, 2010. 
See Supplemental Notice of Proposed Rulemaking on Coordinated 
Communications, 75 FR 6590 (Feb. 10, 2010). The SNPRM invited comments 
on the effect, if any, of the Supreme Court's decision in Citizens 
United v. FEC, 130 S.Ct. 876, 78 U.S.L.W. 4078 (U.S. Jan. 21, 2010), on 
the rulemaking. The SNPRM comment period closed on February 24, 2010. 
The Commission received twelve comments from fifteen commenters on the 
SNPRM. The SNPRM comments are available at http://www.fec.gov/pdf/nprm/coord_commun/2009/snprmcoordinatedcomments.shtml.
    The Commission held a public hearing on March 2 and 3, 2010, at 
which eleven witnesses testified. Audio files of the hearing and a 
transcript of the proceeding are available at http://www.fec.gov/pages/hearings/coordinationshays3hearing.shtml.
    The Commission kept the rulemaking record open until March 17, 
2010. During this post-hearing period, the Commission received three 
additional comments from four commenters. These additional comments are 
available at http://www.fec.gov/law/law_rulemakings.shtml#coordinationshays3.\1\
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    \1\ For purposes of this document, ``comment'' and ``commenter'' 
apply to both written comments and oral testimony at the public 
hearing.
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B. Coordinated Communications Before the Bipartisan Campaign Reform Act 
of 2002

    The Supreme Court first examined independent expenditures and 
coordination or cooperation between candidates and other persons in 
Buckley v. Valeo, 424 U.S. 1, 58 (1976), although coordination was not 
explicitly addressed in the Act at that time. See Public Law 93-443, 88 
Stat. 1263 (1974); Public Law 92-225, 86 Stat. 3 (1972) (codified as 
amended at 2 U.S.C. 431 et seq.). In Buckley, the Court distinguished 
expenditures that were not truly independent--that is, expenditures 
made in coordination with a candidate or the candidate's authorized 
committee--from ``independent expenditures.'' Buckley, 424 U.S. at 46-
47. The Court noted that a third party's ``prearrangement and 
coordination of an expenditure with the candidate or his agent'' 
presents a ``danger that expenditures will be given as a quid pro quo 
for improper commitments from the candidate.'' Id. at 47. The Court 
further noted that the Act's contribution limits must not be 
circumvented through ``prearranged or coordinated expenditures 
amounting to disguised contributions.'' Id. The Court concluded that a 
``contribution'' includes ``all expenditures placed in cooperation with 
or with the consent of a candidate, his agents, or an authorized 
committee of the candidate.'' Id. at 78; see also id. at 47 n.53.
    After Buckley, Congress amended the Act to define an ``independent 
expenditure'' as ``an expenditure by a person expressly advocating the 
election or defeat of a clearly identified candidate which is made 
without cooperation or consultation with any candidate'' and ``not made 
in concert with, or at the request or suggestion of'' a candidate or 
the candidate's authorized committee or agent. 2 U.S.C. 431(p) (1976) 
(current version at 2 U.S.C. 431(17)). Congress also amended the Act to 
provide that an expenditure ``shall be considered to be a 
contribution'' when it is made by any person ``in cooperation, 
consultation, or concert, with, or at the request or suggestion of'' a 
candidate, a candidate's authorized committees, or their agents. 2 
U.S.C. 441a(a)(7)(B)(i) (1976). The Act separately addressed as 
contributions expenditures made for the dissemination, distribution, or 
republication of campaign materials prepared by a candidate, a 
candidate's authorized committees, or their agents. See 2 U.S.C. 
441a(a)(7)(B)(ii) (1976) (now codified at 2 U.S.C. 441a(a)(7)(B)(iii)). 
Although Congress made some further adjustments to the Act in the 
decades following Buckley, the coordination provisions in the Act 
remained substantially unchanged until

[[Page 55949]]

the Bipartisan Campaign Reform Act of 2002 \2\ (``BCRA''), as discussed 
below.
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    \2\ Public Law 107-155, 116 Stat. 81 (2002).
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    The Commission issued new regulations to implement these post-
Buckley changes to the Act. See H.R. Doc. No. 95-1A (1977). The new 
rules defined an ``independent expenditure'' as an ``expenditure by a 
person for a communication expressly advocating the election or defeat 
of a clearly identified candidate which is not made with the 
cooperation or with the prior consent of, or in consultation with, or 
at the request or suggestion of'' a candidate or committee and set 
forth the ``arrangements or conduct'' constituting coordination. 11 CFR 
109.1 (1977). In 2001, the Commission adopted new coordinated 
communications regulations in response to several court decisions.\3\ 
See 11 CFR 100.23 (2001); Explanation and Justification for Final Rules 
on General Public Political Communications Coordinated with Candidates 
and Party Committees; Independent Expenditures, 65 FR 76138 (Dec. 6, 
2000). Drawing on judicial guidance in Christian Coalition, the 
Commission defined a new term, ``coordinated general public political 
communication'' (``GPPC''), to address communications paid for by 
unauthorized committees, advocacy groups, and individuals that were 
coordinated with candidates or party committees. A GPPC that 
``included'' a clearly identified candidate was coordinated if a third 
party paid for it and if it was created, produced, or distributed (1) 
at the candidate's or party committee's request or suggestion; (2) 
after the candidate or party committee exercised control or decision-
making authority over certain factors; or (3) after ``substantial 
discussion or negotiation'' with the candidate or party committee 
regarding certain factors. 11 CFR 100.23(b) and (c) (2001). The 
regulations explained that ``substantial discussion or negotiation may 
be evidenced by one or more meetings, conversations or conferences 
regarding the value or importance of the communication for a particular 
election.'' 11 CFR 100.23(c)(2)(iii) (2001).
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    \3\ See Colo. Republican Fed. Campaign Comm. v. FEC, 518 U.S. 
604 (1996) (concluding that political parties may make independent 
expenditures on behalf of their Federal candidates); FEC v. 
Christian Coalition, 52 F. Supp. 2d 45, 92 (D.D.C. 1999) 
(``Christian Coalition'') (setting forth a test for concluding when 
an ``expressive expenditure'' becomes ``coordinated'' with a 
candidate).
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C. Impact of BCRA on Coordinated Communications

    In 2002, Congress revised the coordination provisions in the Act. 
See BCRA at secs. 202, 214, 116 Stat. at 90-91, 94-95. BCRA retained 
the statutory provision that an expenditure is a contribution to a 
candidate when it is made by any person ``in cooperation, consultation, 
or concert, with, or at the request or suggestion of'' that candidate, 
the candidate's authorized committee, or the agents of either. See 2 
U.S.C. 441a(a)(7)(B)(i). BCRA added a similar provision governing 
coordination with political party committees: expenditures made by any 
person, other than a candidate or the candidate's authorized committee, 
``in cooperation, consultation, or concert, with, or at the request or 
suggestion of'' a national, State, or local party committee, are 
contributions to that political party committee. 2 U.S.C. 
441a(a)(7)(B)(ii). BCRA also amended the Act to specify that a 
coordinated electioneering communication shall be a contribution to, 
and expenditure by, the candidate supported by that communication or 
that candidate's party. See 2 U.S.C. 441a(a)(7)(C); see also 2 U.S.C. 
434(f)(3) (defining ``electioneering communication'').
    BCRA expressly repealed the GPPC regulation at 11 CFR 100.23 and 
directed the Commission to promulgate new regulations on ``coordinated 
communications'' in their place. See BCRA at sec. 214, 116 Stat. at 94-
95. Although Congress did not define the term ``coordinated 
communications'' in BCRA, the statute specified that the Commission's 
new regulations ``shall not require agreement or formal collaboration 
to establish coordination.'' \4\ BCRA at sec. 214(c), 116 Stat. at 95. 
BCRA also required that, ``[i]n addition to any subject determined by 
the Commission, the regulations shall address (1) payments for the 
republication of campaign materials; (2) payments for the use of a 
common vendor; (3) payments for communications directed or made by 
persons who previously served as an employee of a candidate or a 
political party; and (4) payments for communications made by a person 
after substantial discussion about the communication with a candidate 
or a political party.'' BCRA at sec. 214(c), 116 Stat. at 95; 2 U.S.C. 
441a(7)(B)(ii) note.
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    \4\ The Court of Appeals for the District of Columbia has noted 
that ``[a]part from this negative command--`shall not require'--BCRA 
merely listed several topics the rules `shall address,' providing no 
guidance as to how the FEC should address them.'' Shays v. Federal 
FEC, 414 F.3d 76, 97-98 (DC Cir. 2005).
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D. Coordinated Communications After BCRA

    As detailed below, the Commission promulgated revised coordinated 
communications regulations in 2002 as required by BCRA. Several aspects 
of those revised regulations were successfully challenged in Shays v. 
FEC, 337 F. Supp. 2d 28 (D.DC 2004) (``Shays I District''), aff'd, 
Shays v. FEC, 414 F.3d 76 (DC Cir. 2005) (``Shays I Appeal''), petition 
for reh'g en banc denied, No. 04-5352 (DC Cir. Oct. 21, 2005).
    In 2006, the Commission further revised its coordination 
regulations in response to Shays I Appeal. These revised rules were 
themselves challenged in Shays v. FEC, 508 F. Supp. 2d 10 (D.DC 2007) 
(``Shays III District''), aff'd, Shays III Appeal, 528 F.3d 914.\5\ The 
NPRM in this rulemaking was issued in response to Shays III Appeal.
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    \5\ A third case filed by the same Plaintiff, referred to as 
``Shays II,'' addressed the Commission's approach to regulating 
section 527 organizations and is not relevant to the coordination 
rules at issue in this rulemaking. See Shays v. FEC, 511 F. Supp. 2d 
19 (D.D.C. 2007).
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1. 2002 Rulemaking
    On December 17, 2002, the Commission promulgated regulations as 
required by BCRA. See 11 CFR 109.21 (2003); see also Explanation and 
Justification for Final Rules on Coordinated and Independent 
Expenditures, 68 FR 421 (Jan. 3, 2003) (``2002 E&J''). The Commission's 
2002 coordinated communication regulations set forth a three-prong test 
for determining whether a communication is a coordinated communication, 
and therefore an in-kind contribution to, and an expenditure by, a 
candidate, a candidate's authorized committee, or a political party 
committee. See 11 CFR 109.21(a). First, the communication must be paid 
for by someone other than a candidate, a candidate's authorized 
committee, a political party committee, or the agents of either (the 
``payment prong''). See 11 CFR 109.21(a)(1) (2003). Second, the 
communication must satisfy one of four content standards (the ``content 
prong''). See 11 CFR 109.21(a)(2), (c) (2003). Third, the communication 
must satisfy one of five conduct standards (the ``conduct prong'').\6\ 
See 11 CFR 109.21(a)(3) and (d) (2003). A communication must satisfy

[[Page 55950]]

all three prongs to be a ``coordinated communication.''
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    \6\ A sixth conduct standard clarifies the application of the 
other five to the dissemination, distribution, or republication of 
campaign materials. See 11 CFR 109.21(d)(6) (2003).
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    The Commission also adopted a safe harbor at 11 CFR 109.21(f) for 
responses to inquiries about legislative or policy issues. See 2002 
E&J, 68 FR at 440-41.
a. Content Standards
    The 2002 coordinated communication regulations contained four 
content standards identifying communications whose ``subject matter is 
reasonably related to an election.'' 2002 E&J, 68 FR at 427. The first 
content standard was satisfied if the communication was an 
electioneering communication.\7\ See 11 CFR 109.21(c)(1) (2003). The 
second content standard was satisfied by a public communication \8\ 
made at any time that disseminates, distributes, or republishes 
campaign materials prepared by a candidate, a candidate's authorized 
committee, or agents thereof. See 11 CFR 109.21(c)(2) (2003) and 
109.37(a)(2)(i) (2003). The third content standard was satisfied if a 
public communication made at any time expressly advocates the election 
or defeat of a clearly identified candidate for Federal office. See 11 
CFR 109.21(c)(3) (2003) and 109.37(a)(2)(ii) (2003). The 2002 version 
of the fourth content standard was satisfied if a public communication 
(1) refers to a political party or a clearly identified Federal 
candidate; (2) is publicly distributed or publicly disseminated 120 
days or fewer before an election (the ``120-day time window''); and (3) 
is directed to voters in the jurisdiction of the clearly identified 
Federal candidate or to voters in a jurisdiction in which one or more 
candidates of the political party appear on the ballot. See 11 CFR 
109.21(c)(4) (2003).
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    \7\ ``Electioneering communication'' is defined as ``any 
broadcast, cable, or satellite communication that: (1) Refers to a 
clearly identified candidate for Federal office; (2) is publicly 
distributed within 60 days before a general election for the office 
sought by the candidate; or within 30 days before a primary or 
preference election, or a convention or caucus of a political party 
that has authority to nominate a candidate, for the office sought by 
the candidate, and the candidate referenced is seeking the 
nomination of that political party; and (3) is targeted to the 
relevant electorate, in the case of a candidate for Senate or the 
House of Representatives.'' 11 CFR 100.29; see also 2 U.S.C. 
434(f)(3).
    \8\ ``Public communication'' is defined as ``communication by 
means of any broadcast, cable, or satellite communication, 
newspaper, magazine, outdoor advertising facility, mass mailing, or 
telephone bank to the general public, or any other form of general 
public political advertising.'' 11 CFR 100.26; see also 2 U.S.C. 
431(22).
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b. Conduct Standards
    The 2002 coordinated communication regulations also contained five 
conduct standards. A communication created, produced, or distributed 
(1) at the request or suggestion of, (2) after material involvement by, 
or (3) after substantial discussion with, a candidate, a candidate's 
authorized committee, or a political party committee, would satisfy the 
first three conduct standards. See 11 CFR 109.21(d)(1)-(3) (2003). 
These three conduct standards were not at issue in Shays III Appeal, 
and are not addressed in this rulemaking.
    The remaining two conduct standards, which are at issue in this 
rulemaking, are the (1) ``common vendor'' and (2) ``former employee'' 
standards. The 2002 version of the common vendor conduct standard was 
satisfied if (1) the person paying for the communication contracts 
with, or employs, a ``commercial vendor'' to create, produce, or 
distribute the communication, (2) the commercial vendor has provided 
certain specified services to the political party committee or the 
clearly identified candidate referred to in the communication within 
the current election cycle, and (3) the commercial vendor uses or 
conveys information to the person paying for the communication about 
the plans, projects, activities, or needs of the candidate or political 
party committee, or information used by the commercial vendor in 
serving the candidate or political party committee, and that 
information is material to the creation, production, or distribution of 
the communication. See 11 CFR 109.21(d)(4) (2003).
    The 2002 version of the former employee conduct standard was 
satisfied if (1) the communication is paid for by a person, or by the 
employer of a person, who was an employee or independent contractor of 
the candidate or the political party committee clearly identified in 
the communication within the current election cycle, and (2) the former 
employee or independent contractor uses or conveys information to the 
person paying for the communication about the plans, projects, 
activities, or needs of the candidate or political party committee, or 
information used by the former employee or independent contractor in 
serving the candidate or political party committee, and that 
information is material to the creation, distribution, or production of 
the communication. See 11 CFR 109.21(d)(5) (2003).
    These two conduct standards covered only former employees, 
independent contractors, and vendors \9\ who had provided services to a 
candidate or party committee during the ``current election cycle,'' as 
defined in 11 CFR 100.3. 2002 E&J, 68 FR at 436; 11 CFR 109.21(d)(4) 
and (5) (2003).
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    \9\ See 11 CFR 109.21(d)(4)(ii) for the specific services that a 
vendor must provide in order to trigger the common vendor standard.
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2. Shays I Appeal
    The Court of Appeals in Shays I Appeal held that the Act did not 
preclude content-based standards for coordinated communications. Shays 
I Appeal, 414 F.3d at 99-100 (applying Chevron U.S.A., Inc. v. Natural 
Res. Def. Council, Inc., 467 U.S. 837 (1984)). Nonetheless, the court 
found the 120-day time window in the fourth standard of the content 
prong of the coordinated communication regulations to be unsupported by 
adequate explanation and justification and, thus, arbitrary and 
capricious under the Administrative Procedure Act (``APA''). Shays I 
Appeal, 414 F.3d at 102. Although the Court of Appeals found the 
explanation for the particular time frame to be lacking, the Shays I 
Appeal court rejected the argument that the Commission is precluded 
from establishing a ``bright line test.'' Id. at 99.
    The Shays I Appeal court concluded that the regulation's ``fatal 
defect'' was in offering no persuasive justification for the 120-day 
time window and ``the weak restraints applying outside of it.'' Id. at 
100. The court concluded that, by limiting coordinated communications 
made outside of the 120-day time window to communications containing 
express advocacy or the republication of campaign materials, the 
Commission ``has in effect allowed a coordinated communication free-
for-all for much of each election cycle.'' Id. Indeed, the ``most 
important'' question the court asked was, ``would candidates and 
collaborators aiming to influence elections simply shift coordinated 
spending outside that period to avoid the challenged rules' 
restrictions?'' Id. at 102.
    The Shays I Appeal decision required the Commission to undertake a 
factual inquiry to determine whether the temporal line that it drew 
``reasonably defines the period before an election when non-express 
advocacy likely relates to purposes other than `influencing' a Federal 
election'' or whether it ``will permit exactly what BCRA aims to 
prevent: evasion of campaign finance restrictions through unregulated 
collaboration.'' Id. at 101-02.
3. 2005 Rulemaking
    Following the Shays I Appeal decision, the Commission proposed 
seven alternatives for revising the content prong. See Notice of 
Proposed Rulemaking on Coordinated

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Communications, 70 FR 73946 (Dec. 14, 2005) (``2005 NPRM''). The 
Commission also used licensed data that provided empirical information 
regarding the timing, frequency, and cost of television advertising 
spots in the 2004 election cycle. See Supplemental Notice of Proposed 
Rulemaking on Coordinated Communications, 71 FR 13306 (Mar. 15, 2006).
    Although not challenged in Shays I Appeal, the ``election cycle'' 
time frame of the common vendor and former employee conduct standards 
at 11 CFR 109.21(d)(4) and (5), among other aspects of that prong, was 
also reconsidered in the 2005 NPRM. The Commission sought comment on 
how the ``election cycle'' time limitation works in practice and 
whether the strategic value of information on a candidate's plans, 
products, and activities lasts throughout the election cycle. 2005 
NPRM, 70 FR at 73955-56.
    In 2006, the Commission promulgated revised rules that retained the 
content prong at 11 CFR 109.21(c), but revised the time periods in the 
fourth content standard. See Explanation and Justification for Final 
Rules on Coordinated Communications, 71 FR 33190 (June 8, 2006) (``2006 
E&J''). Relying on the licensed empirical data, the Commission revised 
the coordinated communication regulation at 11 CFR 109.21(c)(4) and 
applied different time periods for communications coordinated with 
Presidential candidates (120 days before a state's primary through the 
general election), congressional candidates (separate 90-day time 
windows before a primary and before a general election), and political 
parties (tied to either the Presidential or congressional time periods, 
depending on the communication and election cycle). See id.
    The 2006 coordinated communication regulations also reduced the 
period of time during which a common vendor's or former employee's 
relationship with the authorized committee or political party committee 
referred to in the communication could satisfy the conduct prong, from 
the entire election cycle to 120 days. 2006 E&J, 71 FR at 33204. The 
2006 E&J noted that, especially in regard to the six-year Senate 
election cycles, the ``election cycle'' time limit was ``overly broad 
and unnecessary to the effective implementation of the coordination 
provisions.'' Id. The 2006 E&J reasoned that 120 days was a ``more 
appropriate'' limit. Id.
    The Commission also adopted new safe harbors at 11 CFR 
109.21(d)(2)-(5) for use of publicly available information, 11 CFR 
109.21(g) for endorsements and solicitations by Federal candidates, and 
11 CFR 109.21(h) for the establishment and use of a firewall. See 2006 
E&J, 71 FR at 33201-02, 33205-07.
4. Shays III Appeal
    On June 13, 2008, the Court of Appeals issued its opinion in Shays 
III Appeal. The court addressed both the content and conduct prongs of 
the coordinated communication regulations.
a. Content Standards
    The Shays III Appeal opinion held that the Commission's decision to 
apply ``express advocacy'' as the only content standard \10\ outside 
the 90-day and 120-day windows ``runs counter to BCRA's purpose as well 
as the APA.'' Shays III Appeal, 528 F.3d at 926. The court found that, 
although the administrative record demonstrated that the ``vast 
majority'' of advertisements were run in the more strictly regulated 
90-day and 120-day windows, a ``significant number'' of advertisements 
ran before those windows and ``very few ads contain magic words.'' \11\ 
Id. at 924. The Shays III Appeal court held that ``the FEC's decision 
to regulate ads more strictly within the 90/120-day windows was 
perfectly reasonable, but its decision to apply a `functionally 
meaningless' standard outside those windows was not.'' Id. at 924 
(quoting McConnell v. FEC, 540 U.S. 93, 193 (2003) (concluding that 
Buckley's `magic words' requirement is ``functionally meaningless''), 
overruled in part by Citizens United, 130 S. Ct. at 913); see also 
McConnell v. FEC, 251 F. Supp. 2d 176, 303-04 (D.DC 2003) (Henderson, 
J.); id. at 534 (Kollar-Kotelly, J.); id. at 875-79 (Leon, J.)) 
(discussing ``magic words'').
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    \10\ The court did not address the republication of campaign 
materials, see 11 CFR 109.21(c)(2), in its analysis of the period 
outside the time windows.
    \11\ ``Magic words'' are ``examples of words of express 
advocacy, such as `vote for,' `elect,' `support,' * * * `defeat,' 
[and] `reject.' '' McConnell v. FEC, 540 U.S. 93, 191 (2003) 
(quoting Buckley, 424 U.S. at 44 n.52).
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    The court noted that ``although the FEC * * * may choose a content 
standard less restrictive than the most restrictive it could impose, it 
must demonstrate that the standard it selects `rationally separates 
election-related advocacy from other activity falling outside FECA's 
expenditure definition.' '' \12\ Shays III Appeal, 528 F.3d at 926 
(quoting Shays I Appeal, 414 F.3d at 102). The court stated that ``the 
`express advocacy' standard fails that test,'' but did not explicitly 
articulate a less restrictive standard that would meet the test. Id.
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    \12\ An ``expenditure'' includes ``any purchase, payment, 
distribution, loan, advance, deposit, or gift of money or anything 
of value, made by any person for the purpose of influencing any 
election for Federal office.'' 2 U.S.C. 431(9); see also 11 CFR 
100.111(a).
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    The court expressed particular concern about a possible scenario in 
which, ``more than 90/120 days before an election, candidates may ask 
wealthy supporters to fund ads on their behalf, so long as those ads do 
not contain magic words.'' Id. at 925. The court noted that the 
Commission ``would do nothing about'' such coordination, ``even if a 
contract formalizing the coordination and specifying that it was `for 
the purpose of influencing a federal election' appeared on the front 
page of the New York Times.'' Id. The court held that such a rule not 
only frustrates Congress's purpose to prohibit funds in excess of the 
applicable contribution limits from being used in connection with 
Federal elections, but ``provides a clear roadmap for doing so.'' Id.
b. Conduct Standards
    The Shays III Appeal court also invalidated the 120-day period of 
time during which a common vendor's or former campaign employee's 
relationship with an authorized committee or political party committee 
could satisfy the conduct prong at 11 CFR. 109.21(d)(4) and (d)(5). 
Shays III Appeal, 528 F.3d at 928-29. The Shays III Appeal court found 
that with respect to the change in the 2006 coordinated communication 
regulations from the ``current election cycle'' to a 120-day period, 
``the Commission's generalization that material information may not 
remain material for long overlooks the possibility that some 
information * * * may very well remain material for at least the 
duration of a campaign.'' Id. at 928. The court therefore found that 
the Commission had failed to justify the change to a 120-day time 
window, and, as such, the change was arbitrary and capricious. Id. The 
court concluded that, while the Commission may have discretion in 
drawing a bright line in this area, it had not provided an adequate 
explanation for the 120-day time period, and that the Commission must 
support its decision with reasoning and evidence. Id. at 929.

E. Current Rulemaking

    On October 21, 2009, the Commission published the NPRM in this 
rulemaking in response to Shays III Appeal. See 74 FR 53893. The 
deadline for public comment on the NPRM was January 19, 2010. Two days 
after the close of the NPRM's comment period, on January 21, 2010, the 
Supreme Court issued its decision in Citizens United. Because

[[Page 55952]]

Citizens United raised issues that were potentially relevant to this 
rulemaking, the Commission published the SNPRM. See 75 FR 6590. As 
discussed more fully below, the SNPRM re-opened the comment period and 
sought additional comment as to the effect of the Citizens United 
decision on the proposed rules, issues, and questions raised in the 
NPRM.

II. Coordinated Communications Content Prong Revisions (11 CFR 
109.21(c)(3) and (c)(5))

    The Commission is revising the content prong of the coordinated 
communication rules at 11 CFR 109.21(c) in response to Shays III 
Appeal. As explained further below, the Commission is adding a new 
standard to the content prong of the coordinated communication rules. 
New 11 CFR 109.21(c)(5) covers public communications that are the 
functional equivalent of express advocacy.
    The new functional equivalent content standard was the second of 
four alternative approaches that the Commission proposed in the NPRM. 
The Commission also proposed adopting a content standard that would 
cover public communications that promote, support, attack, or oppose a 
political party or a clearly identified candidate (the ``PASO 
standard''). In addition, the Commission proposed clarifying the 
express advocacy content standard by including a cross-reference to 11 
CFR 100.22. Finally, the Commission proposed covering all public 
communications made for the purpose of influencing an election that are 
the product of an explicit agreement between a candidate, authorized 
committee, or political party committee and the person paying for the 
communication (the ``Explicit Agreement'' standard). The proposed 
approaches that the Commission is not adopting are discussed in Part 
III, below.

A. Functional Equivalent of Express Advocacy--11 CFR 109.21(c)(5)

    The new content standard applies to any public communication that 
is the ``functional equivalent of express advocacy.'' New 11 CFR 
109.21(c)(5) specifies that a communication is the functional 
equivalent of express advocacy if it is susceptible of no reasonable 
interpretation other than as an appeal to vote for or against a clearly 
identified Federal candidate. The new content standard applies without 
regard to the timing of the communication or the targeted audience.
    Shays III Appeal required the Commission to adopt a content 
standard that `` `rationally separates election-related advocacy from 
other activity falling outside FECA's expenditure definition.' '' Shays 
III Appeal, 528 F.3d at 926 (quoting Shays I Appeal, 414 F.3d at 102). 
Specifically, the Court indicated that the Commission must choose a 
content standard that is more inclusive than ``express advocacy'' to 
apply outside the 90-day and 120-day time windows. Id. The Commission 
has determined that the functional equivalent of express advocacy 
content standard best meets these criteria. In this, the Commission 
agrees with the majority of the commenters that the concept of the 
functional equivalent of express advocacy, which the Supreme Court 
first articulated in McConnell, then explained in FEC v. Wisconsin 
Right to Life, Inc. (``WRTL''), and later applied in Citizens United, 
is broader than express advocacy and provides a rational basis for 
separating electoral from non-electoral speech. See Citizens United, 
130 S. Ct. at 889-90; WRTL, 551 U.S. 449, 469-70 (2007); McConnell, 540 
U.S. at 204-06, overruled in part by Citizens United, 130 S. Ct. at 
913.
1. Origin and Application of the New Standard
    The functional equivalent of express advocacy standard has its 
origins in the Supreme Court's decision in McConnell. In that case, the 
Supreme Court rejected a facial challenge to BCRA's prohibition on the 
use of corporate and labor organization treasury funds to pay for 
electioneering communications, ``to the extent that issue ads broadcast 
during the 30- and 60-day periods preceding federal primary and general 
elections are the functional equivalent of express advocacy.'' 
McConnell, 540 U.S. at 206.
    In WRTL, the Supreme Court explained the standard when it addressed 
BCRA's prohibitions on corporate and labor organization funding of 
electioneering communications, as they applied to three particular ads 
financed by a nonprofit corporation. As discussed below, the Court's 
controlling opinion set forth a test for determining when 
communications contain the ``functional equivalent of express 
advocacy.'' 551 U.S. at 466-67, 469-70. Following the WRTL decision, 
the Commission promulgated rules that incorporated the functional 
equivalent of express advocacy test, discussed below, in a provision 
governing the funding of electioneering communications by corporations 
and labor organizations.\13\
---------------------------------------------------------------------------

    \13\ See 11 CFR 114.15. The Commission intends to issue a 
separate NPRM to address the regulations at 11 CFR 114.15 in light 
of the Supreme Court's decision in Citizens United.
---------------------------------------------------------------------------

    The Supreme Court applied the functional equivalent of express 
advocacy test a second time in Citizens United. In that decision, the 
Court found, among other things, that the provision in BCRA prohibiting 
corporations and labor organizations from using their general treasury 
funds to pay for electioneering communications was unconstitutional. 
See Citizens United, 130 S. Ct. at 889-90, 913.
    The final rule at 11 CFR 109.21(c)(5) adopts the Supreme Court's 
functional equivalent of express advocacy test. ``As explained by The 
Chief Justice's controlling opinion in WRTL, the functional-equivalent 
test is objective: `a court should find that [a communication] is the 
functional equivalent of express advocacy only if [it] is susceptible 
of no reasonable interpretation other than as an appeal to vote for or 
against a specific candidate.' '' Citizens United, 130 S. Ct. at 889-90 
(quoting WRTL, 551 U.S. at 469-470).
    In applying the test, the Commission will follow the Supreme 
Court's reasoning and application of the test to the communications at 
issue in WRTL and Citizens United.
    In WRTL, the Court found that the particular ads in question were 
not the functional equivalent of express advocacy. WRTL ran three 
similar radio advertisements. The transcript of ``Wedding'' reads as 
follows:

    PASTOR: And who gives this woman to be married to this man?
    BRIDE'S FATHER: Well, as father of the bride, I certainly could. 
But instead, I'd like to share a few tips on how to properly install 
drywall. Now you put the drywall up * * *
    VOICE-OVER: Sometimes it's just not fair to delay an important 
decision. But in Washington it's happening. A group of Senators is 
using the filibuster delay tactic to block federal judicial nominees 
from a simple yes or no vote. So qualified candidates don't get a 
chance to serve. It's politics at work, causing gridlock and backing 
up some of our courts to a state of emergency. Contact Senators 
Feingold and Kohl and tell them to oppose the filibuster. Visit: 
BeFair.org. Paid for by Wisconsin Right to Life (befair.org), which 
is responsible for the content of this advertising and not 
authorized by any candidate or candidate's Committee.

    WRTL aired a similar radio advertisement entitled ``Loan,'' which 
only differs from ``Wedding'' in its introduction. The ``Loan'' radio 
script begins:

    LOAN OFFICER: Welcome Mr. and Mrs. Shulman. We've reviewed your 
loan

[[Page 55953]]

application, along with your credit report, the appraisal on the 
house, the inspections, and well * * *
    COUPLE: Yes, yes * * * we're listening.
    OFFICER: Well, it all reminds me of a time I went fishing with 
my father. We were on the Wolf River Waupaca * * *
    VOICE-OVER: Sometimes it's just not fair to delay an important 
decision. But in Washington it's happening * * *.

The remainder of the script is identical to ``Wedding.''

    The third WRTL communication is a television advertisement, 
``Waiting,'' where ``the images on the television ad depict a middle-
aged man being as productive as possible while his professional life is 
in limbo. The man reads the morning paper, polishes his shoes, scans 
through his Rolodex, and does other similar activities.'' WRTL, 551 
U.S. at 459 n.5. The television script reads:

    VOICE-OVER: There are a lot of judicial nominees out there who 
can't go to work. Their careers are put on hold because a group of 
Senators is filibustering--blocking qualified nominees from a simple 
yes or no vote. It's politics at work and it's causing gridlock.

The Supreme Court stated that ``the remainder of the script is 
virtually identical to `Wedding.' '' Id.

    In finding that the advertisements were not the functional 
equivalent of express advocacy and explaining its rationale, the 
Supreme Court stated:

    Under this test, WRTL's three ads are plainly not the functional 
equivalent of express advocacy. First, their content is consistent 
with that of a genuine issue ad: The ads focus on a legislative 
issue, take a position on the issue, exhort the public to adopt that 
position, and urge the public to contact public officials with 
respect to the matter. Second, their content lacks indicia of 
express advocacy: The ads do not mention an election, candidacy, 
political party, or challenger; and they do not take a position on a 
candidate's character, qualifications, or fitness for office.

WRTL, 551 U.S. at 470.

    In Citizens United, the Court applied the same ``functional-
equivalent test'' to a 90-minute documentary about then-Senator Hillary 
Clinton, who was a candidate in the Democratic Party's 2008 
Presidential primary elections. Citizens United, 130 S. Ct. at 887. The 
Court found:

    Under this test, Hillary is equivalent to express advocacy. The 
movie, in essence, is a feature-length negative advertisement that 
urges viewers to vote against Senator Clinton for President. In 
light of historical footage, interviews with persons critical of 
her, and voiceover narration, the film would be understood by most 
viewers as an extended criticism of Senator Clinton's character and 
her fitness for the office of the Presidency. The narrative may 
contain more suggestions and arguments than facts, but there is 
little doubt that the thesis of the film is that she is unfit for 
the Presidency. The movie concentrates on alleged wrongdoing during 
the Clinton administration, Senator Clinton's qualifications and 
fitness for office, and policies the commentators predict she would 
pursue if elected President. It calls Senator Clinton 
``Machiavellian'' and asks whether she is ``the most qualified to 
hit the ground running if elected President.'' The narrator reminds 
viewers that ``Americans have never been keen on dynasties'' and 
that ``a vote for Hillary is a vote to continue 20 years of a Bush 
or a Clinton in the White House.''
    Citizens United argues that Hillary is just ``a documentary film 
that examines certain historical events.'' We disagree. The movie's 
consistent emphasis is on the relevance of these events to Senator 
Clinton's candidacy for President. The narrator begins by asking 
``could [Senator Clinton] become the first female President in the 
history of the United States?'' And the narrator reiterates the 
movie's message in his closing line: ``Finally, before America 
decides on our next president, voters should need no reminders of * 
* * what's at stake--the well being and prosperity of our nation.''
    As the District Court found, there is no reasonable 
interpretation of Hillary other than as an appeal to vote against 
Senator Clinton. Under the standard stated in McConnell and further 
elaborated in WRTL, the film qualifies as the functional equivalent 
of express advocacy.

Id. at 890 (internal citations to record omitted).
    As stated above, in its application of the functional equivalent of 
express advocacy test, the Commission will be guided by the Supreme 
Court's reasoning and application of the test. A communication will be 
considered the functional equivalent of express advocacy if it is 
susceptible of no reasonable interpretation other than as an appeal to 
vote for or against a clearly identified Federal candidate.
2. Proposed Rule and Comments Received
    The new functional equivalent content standard at 11 CFR 
109.21(c)(5) is identical to the one proposed in the NPRM. Sixteen 
commenters provided comments on the proposed content standard. Of the 
sixteen, eleven commenters supported the proposal and five opposed it.
    Three commenters argued that the functional equivalent of express 
advocacy standard does not apply to coordinated communications. They 
noted that the court cases in which the standard was developed did not 
address coordinated speech. In their view, the functional equivalent of 
express advocacy standard, like the express advocacy standard, was 
developed as a constitutional limitation for independent speech by 
persons other than candidates and political committees and was never 
intended to apply to candidates, political parties, or those who 
coordinate with them.
    Eight commenters disagreed and argued that the functional 
equivalent of express advocacy test could be appropriately used in the 
coordinated communication context. In particular, several commenters 
asserted that nothing in the test is expressly or impliedly limited to 
independent speech; rather, the functional equivalent test, which 
focuses on the communication's content, incorporates general principles 
of campaign finance law that are equally applicable to coordinated 
speech.
    A number of the commenters supporting the functional equivalent 
standard noted that the standard ``both has the imprimatur of the 
Supreme Court and the virtue of using language with which the regulated 
community is now familiar.'' As one commenter stated:

    [A]lthough it is not perfect, the Wisconsin Right to Life 
standard is something that people are familiar with, it is already 
in [Commission] regulations, and in fact, the regulated community 
has had experience under that standard in the 2008 election, and * * 
* both corporate and union and other types of organizations seem to 
have effectively used that standard just two days before the 
Citizens United opinion in a special election in Massachusetts.

    The Commission received eight comments on whether the proposed 
functional equivalent content standard would satisfy the concerns of 
the Shays III Appeal court. A majority of those commenters who 
addressed the topic concluded that the test would satisfy the court. In 
particular, several commenters asserted that a functional equivalent 
content standard would rationally separate election-related speech from 
non-electoral speech. Two of these commenters observed that the 
proposed functional equivalent standard would accomplish this goal 
because it is an objective standard that was designed by the Supreme 
Court as a means of identifying election-related advocacy. One 
commenter noted that the Supreme Court had developed the functional 
equivalent of express advocacy test to ``address exactly what Shays III 
criticized--regulation based solely on a `functionally meaningless' 
express advocacy standard.''
    By contrast, three commenters maintained that a functional 
equivalent content standard would be overly similar to the express 
advocacy content standard, which was rejected by the Shays III Appeal 
court. These

[[Page 55954]]

commenters argued that the proposed standard, like the express advocacy 
standard, is under-inclusive, and would fail to rationally separate 
election-related speech from other communications as required by Shays 
III Appeal.
    Several commenters urged the Commission to adopt a standard that 
would protect lobbying and similar policy communications, and that 
would neither deter nor prohibit the legitimate efforts of groups to 
influence legislation and policy. These commenters observed that groups 
often work closely with officeholders who are also Federal candidates 
on public communications involving legislative efforts, grassroots 
lobbying, issue advocacy, and educational messages that are completely 
unrelated to elections. They noted that groups often coordinate with 
these officeholders on the timing and content of communications in 
order to generate public support for legislation.
    The Commission received thirteen comments on whether a functional 
equivalent content standard should incorporate any elements of the 
regulations at 11 CFR 114.15 implementing the Supreme Court's decision 
in WRTL, or whether the Commission should use criteria other than those 
set forth in WRTL and Citizens United for determining when a 
communication is the functional equivalent of express advocacy.
    The commenters were divided in their approach. Six commenters 
opposed adding additional criteria to the proposed functional 
equivalent content standard; they argued that there was no need, after 
Citizens United, for any regulatory elaboration of the test. 
Conversely, one commenter argued that the functional equivalent test as 
developed by the Supreme Court was neither objective nor clear, and 
urged the Commission to enumerate specific words that would indicate 
that a communication was unambiguously related to an election because 
of a reference to a candidacy, voting, or election. Another commenter 
supported incorporating all the elements of 11 CFR 114.15 into a 
functional equivalent content standard, while a different commenter 
argued that the rules at 11 CFR 114.15 are too vague. Five commenters 
argued in favor of a bright line rule. Two commenters urged the 
Commission to adopt language from the WRTL decision stating that, in 
considering whether a communication is the functional equivalent of 
express advocacy, ``the tie goes to the speaker.'' \14\ WRTL, 551 U.S. 
at 474 & n.7.
---------------------------------------------------------------------------

    \14\ The NPRM also sought comment on the application of the 
functional equivalent of express advocacy test to a number of 
examples. The Commission received no comments on those examples. As 
noted above, the Commission will follow the Supreme Court's 
reasoning and application of the test.
---------------------------------------------------------------------------

    The new content standard applies to all speakers subject to revised 
11 CFR 109.21 \15\--including individuals and advocacy organizations--
without regard to when a communication is made or its intended 
audience. The functional equivalent of express advocacy test has been 
applied by the Supreme Court as a stand-alone test for separating 
election-related speech that is not express advocacy from non-election 
related speech. Additionally, the Supreme Court developed the 
functional equivalent of express advocacy test for communications by 
the full range of speakers covered by the coordinated communication 
rules. As noted by the commenters, groups often work closely with 
officeholders on public communications involving legislation, 
grassroots lobbying, issue advocacy, and educational messages that are 
completely unrelated to elections. In recognition of these interests, 
the Commission has decided to use an objective, well-established 
standard that has been sanctioned by the Supreme Court and that is 
familiar to those subject to it. As the court noted in Shays III 
Appeal, ``the FEC, properly motivated by First Amendment concerns, may 
choose a content standard less restrictive than the most restrictive it 
could impose.'' 528 F.3d at 926.
---------------------------------------------------------------------------

    \15\ Party coordinated communications are addressed in 11 CFR 
109.37.
---------------------------------------------------------------------------

    In addition, the functional equivalent of express advocacy content 
standard best serves to separate election-related advocacy from other 
speech in the periods outside the 90- and 120-day pre-election time 
windows, where the content standard likely will have its greatest 
impact. See 11 CFR 109.21(c)(4) (public communications satisfy content 
standard within the pre-election windows with references to clearly 
identified candidates or political parties). Like the express advocacy 
and republication content standards at 11 CFR 109.21(c)(2) and (c)(3), 
the new content standard applies both inside and outside of the 90- and 
120-day time windows in the fourth content standard at 11 CFR 
109.21(c)(4). Outside of those time windows, a significantly lower 
percentage of ads have the purpose and effect of influencing Federal 
elections. See 2006 Final Rule at 33193-97; Citizens United, 130 S. Ct. 
at 895 (``It is well known that the public begins to concentrate on 
elections only in the weeks immediately before they are held. There are 
short timeframes in which speech can have influence.'').
    As required by Shays III Appeal, the new content standard also 
captures more communications than the express advocacy content standard 
outside of the 90-day and 120-day time windows. As one commenter noted, 
the functional equivalent of express advocacy necessarily encompasses 
more than express advocacy. As discussed above, the functional 
equivalent of express advocacy content standard would apply to all 
communications that are ``susceptible of no reasonable interpretation 
other than as an appeal to vote for or against a clearly identified 
Federal candidate.'' For each of these reasons, the Commission 
concludes that the functional equivalent test satisfies the concerns of 
the Shays III Appeal court. Accordingly, the Commission has decided to 
adopt the functional equivalent of express advocacy test as a new 
content prong for determining whether a communication is coordinated.

B. Technical Amendment--11 CFR 109.21(c)(3)

    The Commission is making a technical change to the express advocacy 
content standard at 11 CFR 109.21(c)(3) by adding a cross-reference to 
the definition of express advocacy at 11 CFR 100.22.
    This change is identical to the one proposed as part of Alternative 
2 in the NPRM. The Commission received no comments on this aspect of 
proposed Alternative 2.\16\
---------------------------------------------------------------------------

    \16\ See Part III(B) below, regarding the proposal in the NPRM 
to address the Shays III Appeal court's concerns solely by adding a 
cross reference to the express advocacy definition in the express 
advocacy content standard.
---------------------------------------------------------------------------

III. Proposed Content Standards Not Adopted

    The Commission is not adopting any of the other proposals from the 
NPRM for revising the content prong of the coordinated communications 
rule. In addition to the functional equivalent of express advocacy 
content standard discussed above, the NPRM contained three alternative 
proposals: (1) Adopting a content standard to cover public 
communications that promote, support, attack, or oppose a political 
party or a clearly identified Federal candidate (the ``PASO 
standard''); (2) clarifying the express advocacy content standard by 
adding a reference to the definition of express advocacy in 11 CFR 
100.22; and

[[Page 55955]]

(3) adopting a new content standard and a new conduct standard to 
address public communications for which there is explicit agreement 
(the ``Explicit Agreement'' standard).

A. Proposed Alternative 1--Promote, Support, Attack or Oppose 
(``PASO'')

    The Commission is not adopting proposed Alternative 1, which would 
have amended 11 CFR 109.21(c) by replacing the express advocacy 
standard with a PASO standard. Under the proposed PASO standard, any 
public communication that promoted, supported, attacked, or opposed a 
political party or a clearly identified Federal candidate would have 
met the content prong of the coordinated communications test, without 
regard to when the communication was made or the targeted audience. The 
Commission is also not adopting a definition of PASO as proposed in the 
NPRM.
1. Background
    In BCRA, Congress created a number of new campaign finance 
provisions that apply to communications that PASO Federal candidates. 
For example, Congress included public communications that refer to a 
candidate for Federal office and that PASO a candidate for that office 
as one type of Federal election activity (``Type III'' Federal election 
activity). BCRA requires that State, district, and local party 
committees, Federal candidates, and State candidates pay for PASO 
communications entirely with Federal funds. See 2 U.S.C. 
431(20)(A)(iii) and 441i(b), (e), and (f); see also 2 U.S.C. 441i(d) 
(prohibiting national, State, district, and local party committees from 
soliciting donations for tax-exempt organizations that make 
expenditures or disbursements for Federal election activity).
    Congress also included PASO as part of the backup definition of 
``electioneering communication,'' should that term's primary definition 
be found to be constitutionally insufficient. See 2 U.S.C. 
434(f)(3)(A)(ii). In addition, Congress incorporated by reference Type 
III Federal election activity as a limit on the exemptions that the 
Commission may make from the definition of ``electioneering 
communication.'' See 2 U.S.C. 434(f)(3)(B)(iv); see also 2 U.S.C. 
431(20)(A)(iii). Congress did not define PASO or any of its component 
terms.
    Accordingly, the Commission incorporated PASO in its regulations 
defining ``Federal election activity,'' and in the soft money rules 
governing State and local party committee communications and the 
allocation of funds for these communications. See 11 CFR 100.24(b)(3) 
and (c)(1), 300.33(c), 300.71, and 300.72. The Commission also 
incorporated PASO as a limit to the exemption for State and local 
candidates from the definition of ``electioneering communication,'' and 
as a limit to the safe harbors from the coordinated communications 
rules for endorsements and solicitations. See 11 CFR 100.29(c)(5) and 
109.21(g). To date, the Commission has not adopted a regulatory 
definition of either PASO or any of its component terms.
    The Supreme Court in McConnell upheld the statutory PASO standard 
in the context of BCRA's provisions limiting party committees' Federal 
election activities to Federal funds, noting that ``any public 
communication that promotes or attacks a clearly identified federal 
candidate directly affects the election in which he is participating.'' 
McConnell, 540 U.S. at 170. The Court further found that Type III 
Federal election activity was not unconstitutionally vague because the 
``words `promote,' `oppose,' `attack,' and `support' clearly set forth 
the confines within which potential party speakers must act in order to 
avoid triggering the provision.'' Id. at 170 n.64. The Court stated 
that the PASO words ```provide explicit standards for those who apply 
them' and `give the person of ordinary intelligence a reasonable 
opportunity to know what is prohibited.''' Id. (quoting Grayned v. City 
of Rockford, 408 U.S. 104, 108-09 (1972)). The Court stated that this 
is ``particularly the case'' with regard to Federal election activity, 
``since actions taken by political parties are presumed to be in 
connection with election campaigns.'' Id.
2. Comments Received
    The commenters were divided on the proposed PASO content standard. 
Some commenters asserted that PASO would be most consistent with BCRA's 
purpose; that it would be a ``fair proxy'' for determining when a 
communication is for the purpose of influencing a Federal election; and 
that it would be most responsive to the Shays III Appeal court's 
requirement that the Commission adopt a content standard that 
rationally separates election-related advocacy from other activity 
falling outside of the Act's expenditure definition. Other commenters, 
however, argued that the PASO standard would reach non-electoral speech 
and, thus, would not rationally separate election-related advocacy from 
activity falling outside of the Act's expenditure definition as 
required by Shays III Appeal. Additionally, some of these commenters 
argued that the PASO standard should not be extended to contexts other 
than those defined in BCRA and approved by the Supreme Court in 
McConnell--that is, Federal election activities of political parties. 
See McConnell, 540 U.S. at 170.
    The Commission notes that it has used PASO in both the coordinated 
communications safe harbor for endorsements and solicitations, and in 
the new coordination safe harbor for commercial communications 
discussed in Part V below, even though such uses were not required by 
BCRA. See 11 CFR 109.21(g) and (i). Nonetheless, the Commission is not 
adopting the PASO standard because it has decided that the Shays III 
Appeal court's mandate is best addressed by adopting a content standard 
based on the functional equivalent of express advocacy, for the reasons 
given in Part II above.
    Nor is the Commission adopting any definition of PASO, as proposed 
in the NPRM. In the NPRM, the Commission stated that it was considering 
possible definitions of PASO ``[a]s part of its consideration of a PASO 
content standard.'' Because the Commission is not adopting a PASO 
content standard, it is also not adopting a definition of that 
standard.

B. Proposed Alternative 3--Clarification of the Express Advocacy 
Content Standard

    The Commission is not adopting proposed Alternative 3, which would 
have addressed Shays III Appeal solely by incorporating a cross-
reference to the express advocacy definition at 11 CFR 100.22 in the 
express advocacy content standard at 11 CFR 109.21(c)(3).
    As discussed above, Shays III Appeal interpreted the existing 
express advocacy content standard as follows: ``more than 90/120 days 
before an election, candidates may ask wealthy supporters to fund ads 
on their behalf, so long as those ads do not contain magic words.'' 
Shays III Appeal, 528 F.3d at 925 (emphasis added). However, ``magic 
words'' are only one part of the Commission's express advocacy 
regulation. See 11 CFR 100.22.
    The Commission proposed adding an explicit reference to 11 CFR 
100.22 to the express advocacy content standard at 11 CFR 109.21(c)(3) 
to clarify that, outside of the 90- and 120-day windows, communications 
containing more than just ``magic words'' are coordinated 
communications, provided that the conduct and payment prongs of the 
coordinated communication test are also met. The Commission sought 
comment on whether, by itself, the clarification of 11 CFR 109.21(c)(3) 
as encompassing not only ``magic words,''

[[Page 55956]]

but also the entirety of the express advocacy definition at 11 CFR 
100.22, would fully address the Shays III Appeal court's concern about 
the current limitations of the content prong.
    Ten commenters addressed this proposal, all of whom opposed it. 
Eight commenters challenged the definition of ``express advocacy'' at 
11 CFR 100.22, which is beyond the scope of this rulemaking. Two 
commenters asserted that the proposal ``is still an express advocacy 
test and, for that reason * * * would be radically under-inclusive and 
would not comply with the [Shays III Appeal] remand.''
    The Commission agrees that merely clarifying the express advocacy 
content standard at 11 CFR 109.21(c)(3) by adding a cross-reference to 
the definition of the term at 11 CFR 100.22 would not, by itself, 
satisfy the direction of the court in Shays III Appeal. The Commission 
therefore is not adopting the proposal in Alternative 3 of the NPRM.
    Although the Commission is not adopting proposed Alternative 3 as a 
response to the Shays III Appeal court decision, it is adding a cross 
reference to the definition of express advocacy as described in Part II 
above.

C. Proposed Alternative 4--The ``Explicit Agreement'' Standard

    The Commission is not adopting proposed Alternative 4, which would 
have revised 11 CFR 109.21(c)(5), (d)(7), and (e), to provide that both 
the content and conduct prongs of the coordinated communication test 
would be satisfied by a formal or informal agreement between a 
candidate, candidate's committee or political party committee, and a 
person paying for a ``public communication,'' as defined in 11 CFR 
100.26. Under the proposal, either the agreement or the communication 
would have had to be made for the purpose of influencing a Federal 
election. Like the other proposed content standards, the proposed 
``Explicit Agreement'' alternative would have applied without regard to 
when the communication was made or the targeted audience. The 
Commission sought comment on whether the Explicit Agreement alternative 
should be adopted in conjunction with another content proposal.
    The proposed Explicit Agreement alternative was an attempt to 
address a concern that appears to have motivated the courts in both 
Shays I Appeal and Shays III Appeal: communications plainly intended to 
influence a Federal election could be explicitly coordinated outside 
the 90- and 120-day windows, so long as such communications did not 
contain the ``magic words'' of express advocacy. See Shays III Appeal, 
528 F.3d at 925-26; Shays I Appeal, 414 F.3d 98. In concluding that the 
current coordinated communications regulations ``frustrate Congress's 
goal of `prohibiting soft money from being used in connection with 
Federal elections,' '' the Shays III Appeal court stated that, 
``[o]utside the 90/120-day windows, the regulation allows candidates to 
evade--almost completely--BCRA's restrictions on the use of soft 
money.'' Id. (quoting McConnell, 540 U.S. at 177 n. 69).
    The Shays III Appeal court presented an example (the ``NY Times 
hypothetical'') to illustrate that ``the regulation still permits 
exactly what we worried about'' in Shays I Appeal: ``more than 90/120 
days before an election, candidates may ask wealthy supporters to fund 
ads on their behalf, so long as those ads do not contain magic words,'' 
and the Commission would do nothing about this, ``even if a contract 
formalizing the coordination and specifying that it was `for the 
purpose of influencing a Federal election' appeared on the front page 
of the New York Times.'' Id. The Shays III Appeal court's discussion 
referenced the identical concern raised in Shays I Appeal, where the 
court noted that:

    [M]ore than 120 days before an election or primary, a candidate 
may sit down with a well-heeled supporter and say, ``Why don't you 
run some ads about my record on tax cuts?'' The two may even sign a 
formal written agreement providing for such ads. Yet so long as the 
supporter neither recycles campaign materials nor employs the 
``magic words'' of express advocacy--``vote for,'' ``vote against,'' 
``elect,'' and so forth--the ads won't qualify as contributions 
subject to FECA.

Shays III Appeal, 528 F.3d at 921 (quoting Shays I Appeal, 414 F.3d 
98).
Comments Received
    Of the twelve commenters who addressed the Explicit Agreement 
proposal, none supported the proposal on its own. Five commenters did, 
however, support the proposal if it were adopted in addition to another 
content standard. Two commenters supported the Explicit Agreement 
standard only if it were adopted in addition to the PASO content 
standard, and three commenters supported the proposal only if it were 
adopted in addition to a functional equivalent of express advocacy 
content standard.
    Seven commenters expressed concern that the ``fact specific'' 
determination of whether a communication or agreement was made for the 
purpose of influencing a Federal election would require broad and 
intrusive investigations to determine the speaker's intent. Eight 
commenters noted that the Supreme Court has rejected intent-based 
standards requiring broad discovery, most explicitly and recently in 
WRTL: ``an intent-based test would chill core political speech by 
opening the door to a trial on every ad.'' WRTL, 551 U.S. at 467.
    Six commenters asserted that the adoption of a revised content 
standard that rationally separates election-related advocacy from other 
communications would satisfy the Shays III Appeal court's concerns. 
These commenters argued that the NY Times hypothetical was intended to 
show the weakness of the existing content standard. As one commenter 
stated, ``The court's point here was about how bad the express advocacy 
content standard is, not an endorsement of an `explicit agreement' 
conduct standard.''
    The Commission agrees with the majority of commenters that the 
Explicit Agreement proposal is not necessary and would not be the best 
way to carry out the Shays III Appeal court's mandate. The court 
required the Commission to adopt a content standard that ``rationally 
separates election-related advocacy from other activity falling outside 
FECA's expenditure definition.'' Shays III Appeal, 528 F.3d at 926. The 
revised content prong of the coordinated communication test does so. It 
``rationally separates'' election-related advocacy from other 
communications about which a candidate may coordinate with an outside 
group, such as issue advertisements, by filtering out non-electoral 
communications.\17\ See 2002 E&J at 430.
---------------------------------------------------------------------------

    \17\ The court has twice upheld the Commission's determination 
to promulgate coordinated communications rules that ``drew 
distinctions based on content.'' Shays I Appeal, 414 F.3d at 100; 
see also Shays III Appeal, 528 F.3d at 924.
---------------------------------------------------------------------------

    The Commission agrees with the commenters who stated that the NY 
Times hypothetical served to demonstrate the Shays III Appeal court's 
concerns about the sufficiency of the express advocacy standard outside 
the 90- and 120-day windows. The revised content standard addresses 
this concern. Thus, the Commission is not required to adopt the 
Explicit Agreement proposal, which would have significantly altered the 
structure of the current rules.
    Furthermore, the Explicit Agreement proposal would require the 
Commission to determine whether the agreement or communication in 
question was made for the purpose of influencing an election. This 
inquiry could require the Commission to examine the subjective intent 
of the parties to an agreement.

[[Page 55957]]

Although it is possible, as Shays III Appeal suggested, that a 
candidate's supporter would explicitly state that communications are 
being coordinated for the purpose of influencing an election, in most 
cases meeting the Explicit Agreement standard would require other proof 
demonstrating that the agreement or communication was made for the 
purpose of influencing an election. In such cases, the Commission would 
need to investigate and evaluate the parties' subjective intent, a task 
that the Supreme Court has cautioned against. See, e.g., WRTL, 551 U.S. 
at 467 (``[A]n intent-based test would chill core political speech by 
opening the door to a trial on every ad[.]'').
    The Commission also recognizes commenters' concerns regarding the 
practical difficulty of investigating the purpose of agreements or 
communications. Although the presence of the conduct standard 
inevitably requires investigation into parties' actions, the content 
standard serves to limit those inquiries to election-related activity. 
This screening function is particularly important when considering 
communications made at any time, without regard to their proximity to a 
Federal election.
    For these reasons, the Commission has decided not to adopt the 
Explicit Agreement proposal.

IV. Coordinated Communications Conduct Prong--Common Vendor and Former 
Employee Standards (11 CFR 109.21(d)(4) and (d)(5))

    The Commission is not adopting any changes to the common vendor or 
former employee conduct standards at this time. In order to comply with 
the Shays III Appeal decision, the Commission has decided to retain the 
current 120-day time period in the common vendor and former employee 
conduct standards, while providing a more detailed explanation and 
justification about why this time frame is sufficient to prevent 
circumvention of the Act.
    BCRA required the Commission to promulgate new coordinated 
communications rules that address ``payments for the use of a common 
vendor'' and ``payments for communications directed or made by persons 
who previously served as an employee of a candidate or a political 
party.'' BCRA at sec. 214(c), 116 Stat. at 95; 2 U.S.C. 441a(7)(B)(ii) 
note. In response to these requirements, the Commission adopted two 
conduct standards in the 2002 coordinated communications rulemaking, at 
11 CFR 109.21(d)(4) and (d)(5), that directly addressed common vendors 
and former employees of candidates and party committees. See 2002 E&J, 
68 FR 421.
    The 2002 regulation provided that the fourth standard of the 
conduct prong (the ``common vendor'' standard) was satisfied if three 
conditions were met. First, the person paying for the communication 
must contract with or employ a ``commercial vendor'' to create, 
produce, or distribute the communication. 11 CFR 109.21(d)(4)(i). 
Second, the commercial vendor must have provided certain specified 
services to the candidate clearly identified in the communication, the 
candidate's authorized committee, the candidate's opponent, the 
opponent's authorized committee, or a political party committee during 
the same election cycle. 11 CFR 109.21(d)(4)(ii) (2002). Third, the 
commercial vendor must use or convey to the person paying for the 
communication information about the plans, projects, activities, or 
needs of the candidate, candidate's opponent, or political party 
committee, and that information must be material to the creation, 
production, or distribution of the communication. 11 CFR 
109.21(d)(4)(iii)(A). Alternatively, the commercial vendor must use or 
convey to the person paying for the communication information used 
previously by the commercial vendor in providing services to the 
candidate, the candidate's authorized committee, the candidate's 
opponent, the opponent's authorized committee, or the political party 
committee, and that information must be material to the creation, 
production, or distribution of the communication. 11 CFR 
109.21(d)(4)(iii)(B). Material information that was obtained from a 
publicly available source does not meet this conduct standard. 11 CFR 
109.21(d)(4)(iii).
    Similarly, the fifth conduct standard (the ``former employee'' 
standard) was satisfied if two conditions were met. First, the 
communication must be paid for by a person or by the employer of a 
person who was an employee or independent contractor of the candidate 
clearly identified in the communication, or the candidate's authorized 
committee, the candidate's opponent, the opponent's authorized 
committee, or a political party committee during the same election 
cycle. 11 CFR 109.21(d)(5)(i) (2002). Second, the former employee or 
independent contractor must use, or convey to the person paying for the 
communication, information about the plans, projects, activities, or 
needs of the candidate or political party committee that is material to 
the creation, production, or distribution of the communication. 11 CFR 
109.21(d)(5)(ii)(A). Alternatively, the former employee or independent 
contractor must use, or convey to the person paying for the 
communication, information used previously by the former employee or 
independent contractor in providing services to the candidate, the 
candidate's authorized committee, the candidate's opponent, the 
opponent's authorized committee, or the political party committee that 
is material to the creation, production, or distribution of the 
communication. 11 CFR 109.21(d)(5)(ii)(B). Material information that 
was obtained from a publicly available source does not meet this 
conduct standard. 11 CFR 109.21(d)(5)(ii).
    In the 2002 rulemaking, the Commission adopted the election cycle 
as the time period during which a common vendor or former employee must 
have provided services to an authorized committee or political party 
committee to come within these conduct standards. The time period 
effectively operates as a screening mechanism: it provides a bright 
line to limit potentially difficult investigations into whether 
particular information is material to a communication, by recognizing 
that information loses its strategic value as it ages. In 2006, the 
Commission reduced the time period from the entire election cycle to 
the previous 120 days. See 11 CFR 109.21(d)(4)(ii) and (d)(5)(i); 2006 
E&J, 71 FR at 33204.
    The 120-day time period was challenged in Shays III Appeal. While 
the court did not disagree with the time period on its merits, it found 
that ``the FEC has provided no explanation for why it believes 120 days 
is a sufficient time period to prevent circumvention of the Act.'' 
Shays III Appeal, 528 F.3d at 929. The court recognized that the 
Commission has discretion in determining where to draw a bright line, 
but concluded that ``it must support its decision with reasoning and 
evidence, for `a bright line can be drawn in the wrong place.''' Id. 
(quoting Shays I Appeal, 414 F.3d at 101). Thus, although the Shays III 
Appeal court held that the Commission had failed to justify 
sufficiently the 120-day period applicable to both common vendors and 
former employees, it did not hold that the 120-day period was 
inherently improper.
    In the NPRM, the Commission proposed three alternatives for the 
common vendor and former employee conduct standards: retain the 120-day 
period with a more thorough explanation and justification; replace the 
120-day period with a two-year period ending on the date of the general

[[Page 55958]]

election; and resume using the former current election cycle period. 
The Commission sought comment on whether each proposed alternative 
would comply with the court's holding in Shays III Appeal. The 
Commission also sought comment on whether it should adopt a different 
time period than the proposed alternatives. In trying to determine the 
most appropriate period of time, the Commission asked a number of 
questions, including questions about the factors that may affect the 
period of time that campaign information remains relevant, and whether 
particular types of information remain useful to a campaign for shorter 
or longer periods of time. The Commission also asked whether the shelf 
life of campaign information depends on the particular election, or the 
specific type of vendor or media involved.
    At the hearing, Commissioners specifically requested empirical or 
statistical data to be submitted to help determine which alternative 
would best implement the court's holding. The consensus at the hearing 
and in written comments appeared to be that no such data exist; several 
commenters stated that they doubted whether such data existed, and none 
of the commenters provided any. The Commission also conducted its own 
research of the existing political science and social science 
literature, and this research also failed to uncover any data of this 
kind. Indeed, given the variables involved, such as the different types 
of campaign information and the dynamics of different campaigns, the 
Commission is doubtful that it could fashion an empirical or 
statistical study that would produce meaningful results.
    Two commenters opposed retaining the 120-day period. One commenter 
suggested that a 120-day period does not accurately reflect the period 
during which a vendor or former employee is likely to possess and 
convey timely campaign information. The other advocated for a ``strong 
presumption of coordination standard.'' Neither provided empirical or 
statistical data to support adoption of a time-period longer than 120 
days.
    The bulk of the commenters who addressed this issue, however, 
asserted that virtually no information that would be material to the 
creation, production, or distribution of a public communication made 
for the purpose of influencing an election would retain its relevance 
for longer than 120 days. Several commenters explained that the shelf 
life of campaign information has been shortened because the Internet 
and cable news outlets continue to reduce the duration of the news 
cycle. They agreed that information such as overall campaign strategy 
or campaign ``master plans,'' purchases of television ad time, donor 
lists and mailing lists, polling results, and monetary resources and 
spending loses relevance or becomes public within the 120-day period.
    Although the Shays III Appeal court stated that a ``detailed state-
by-state master plan prepared by a chief strategist may very well 
remain material for at least the duration of a campaign,'' several 
commenters stated that, based on their personal campaign experience, 
this is not the case. Shays III Appeal at 928 (quoting Shays III 
District at 51). The commenters testified that overall campaign 
strategies and master plans grow stale as a campaign progresses, and 
generally become outdated well within 120 days. They stated that 
strategies and master plans developed at the outset of a campaign often 
change in response to the give and take of political campaigns. They 
stated that what may be a battle plan at one point in time changes, and 
could change drastically, as events overtake that plan and as 
participants ``react[] to the environment on the ground in the 
election.'' One commenter said she felt that ``if I miss one particular 
meeting one week, the plan has completely changed * * * the next.''
    The commenters also noted that in many cases, a campaign's overall 
strategy becomes a matter of public knowledge through its 
advertisements, interactions with the press, and other public avenues. 
In fact, several commenters noted that often ``the entire press and 
political world knows what the master plan is'' because ``master plans 
are drawn up to be presented to the press to show the road map to 
victory.''
    Commenters also addressed the purchase of television advertising 
time, noting that the information is publicly available from television 
stations. Through this publicly available information, candidates and 
political committees can determine when and where their allies and 
opponents are devoting resources, and make decisions about their own 
television communications accordingly. Information obtained from a 
publicly available source is the antithesis of the valuable proprietary 
information known only to campaign insiders that is the focus of the 
coordinated communications rules. For this reason, such information is 
exempted from the common vendor and former employee conduct standards. 
See 11 CFR 109.21(d)(4)(iii) and (d)(5)(ii).
    Likewise, some commenters pointed out that potentially the most 
valuable type of information to a campaign--information about a 
campaign's contributors, available funds, and expenditures--is also 
publicly available, through the campaign finance reports filed with the 
Commission. Candidates' authorized committees and political party 
committees must file reports with the Commission at least every 
calendar quarter and in many instances more often, detailing all 
receipts and disbursements. See 11 CFR 104.3 and 104.5. This 
information will thus necessarily become publicly available within the 
120-day window. As noted above, information obtained from a publicly 
available source does not satisfy the common vendor and former employee 
conduct standards in 11 CFR 109.21(d)(4) and (d)(5), an exemption that 
was not challenged in Shays III Appeal.
    Several commenters also pointed to the Commission's own regulations 
concerning the allocation of polling costs, which provide that after 
sixty days polls lose 95 percent of their value, and argued that the 
regulation demonstrates how quickly polling information becomes stale. 
See 11 CFR 106.4(g). The Shays III Appeal court also took note of this 
regulation, pointing out that the regulation indicates that polling 
data retains some value for 180 days. One commenter stated that this 
regulation no longer reflects the realities of political campaigns, 
however, and that ``two-month-old polls are not worth five percent'' of 
their original value. Another commenter pointed out that the 
Commission's regulation concerning polling data was written ``decades 
ago,'' and observed that polling practices have changed dramatically in 
the intervening years, shortening the lifespan of polling results 
significantly.
    Several commenters addressed the shelf life and materiality of 
contributor lists and mailing lists. Most agreed that campaign 
contributor lists do not provide information that is not also publicly 
available through reports submitted to the Commission. They also 
indicated that these lists are of little use to third parties wishing 
to create or distribute public communications in support of a campaign, 
because the contributors on the list already presumably support the 
candidate, and there is thus little incentive for a third party to 
target its communications to those supporters.
    The Commission has decided to retain the 120-day period in the 
common vendor and former employee provisions at 11 CFR 109.21(d)(4) and 
(d)(5)

[[Page 55959]]

because, based on the record, 120 days has been shown to be a 
sufficient time period to prevent circumvention of the Act. The clear 
thrust of the comments is that campaign information must be both 
current and proprietary (that is, non-public) to be subject to the 
coordinated communications regulation. The information in the 
rulemaking record shows the widespread public availability of certain 
types of campaign information that used to remain confidential for much 
longer in years past, as well as the rapidity with which campaign 
strategy changes in response to the give-and-take of the campaign 
process. The record also indicates that changes in technology have 
significantly reduced the duration of the news cycle, further 
decreasing the time that campaign information remains relevant. 
Moreover, there is no information in the rulemaking record showing that 
the use or conveyance by common vendors and former employees of 
information material to public communications outside of the 120-day 
period has become problematic in the four years that the 120-day period 
has been in effect. Therefore, the Commission concludes that it is 
extremely unlikely that a common vendor or former employee may possess 
information that remains material when it is more than four months old.
    The Commission is maintaining the 120-day time period because of 
the weight of comments and testimony stating that information is not 
valuable beyond 120 days. Accordingly, adopting either of the 
alternatives extending the common vendor and former employee conduct 
standards beyond 120 days would be unsupported by the rulemaking 
record.

V. Safe Harbor for Certain Business and Commercial Communications (11 
CFR 109.21(i))

    The Commission is adopting a new coordinated communications safe 
harbor at 11 CFR 109.21(i) to address certain commercial and business 
communications, as proposed in the NPRM. The safe harbor excludes from 
the definition of a coordinated communication any public communication 
in which a Federal candidate is clearly identified only in his or her 
capacity as the owner or operator of a business that existed prior to 
the candidacy, so long as the public communication does not PASO that 
candidate or another candidate who seeks the same office, and so long 
as the communication is consistent with other public communications 
made by the business prior to the candidacy in terms of the medium, 
timing, content, and geographic distribution.
    The new safe harbor is intended to encompass the types of 
commercial and business communications that were the subjects of 
several recent enforcement actions. Matter Under Review (``MUR'') 6013 
(Teahen), MUR 5517 (Stork), and MUR 5410 (Oberweis) concerned 
advertisements paid for by businesses owned by Federal candidates that 
had been operating prior to the respective candidacies. Each 
advertisement included the name, image, and voice of the candidate 
associated with the business that paid for the advertisement.
    Although each of these advertisements served an apparent business 
purpose and lacked any explicit electoral content, the advertisements 
were nonetheless coordinated communications under 11 CFR 109.21. See 
also MUR 4999 (Bernstein). The advertisements met the payment prong 
because the candidates' businesses paid for them. They met the content 
prong because they referred to the candidates by name and picture and 
were distributed in the candidate's district within the relevant time 
windows before the election. They met the conduct prong through the 
candidates' participation in the production of the advertisements.
    To avoid capturing such advertising in the future in the 
coordinated communications rules, the Commission proposed a new safe 
harbor for bona fide business communications. In the NPRM, the 
Commission asked a series of questions about the proposed safe harbor. 
The Commission sought comment on whether to exclude these kinds of 
commercial and business communications from regulation as coordinated 
communications, and whether the proposed safe harbor would accomplish 
this goal. The Commission also sought comment on whether the proposed 
safe harbor could be used to circumvent the Act's contribution 
limitations and prohibitions; what changes to the proposed safe harbor 
might better capture only bona fide business communications without 
also encompassing election-related communications; and whether the 
rationale for adopting a similar safe harbor in the 2007 electioneering 
communications rulemaking would apply in the coordinated communications 
context.
    None of the commenters expressed opposition to the proposed safe 
harbor, and only one commenter explicitly discussed it. Although that 
commenter did not oppose the safe harbor as proposed, the commenter 
indicated that it would also support limiting the safe harbor to 
communications on behalf of businesses whose names include candidates' 
names.
    The Commission has decided not to impose the additional limitation 
suggested by the commenter. The new safe harbor is already limited to 
public communications in which a candidate is referred to solely in his 
or her capacity as owner or operator of the business, thus limiting its 
reach to businesses with a bona fide business or commercial reason to 
use the candidate's name or likeness in their communications. The 
public communication must also be consistent with previous public 
communications with respect to its medium (e.g., television or 
newspaper), timing (e.g., frequency, time of year, and for television 
or radio communications, duration and time of day), content, and 
geographic distribution. Finally, as is the case with the existing safe 
harbors for endorsements and solicitations, only public communications 
that do not PASO either the candidate referred to in the communication 
or any other candidate seeking the same office can qualify for the new 
safe harbor. Taken together, these multiple safeguards make the 
additional limitation suggested by the commenter unnecessary.
    The Commission considered a similar safe harbor in the 2002 
electioneering communications rulemaking, but declined to adopt it then 
because some public communications might be considered to serve 
electoral purposes ``even if they also serve a business purpose 
unrelated to the election.'' Explanation and Justification for Final 
Rules on Electioneering Communications, 67 FR 65190, 65202 (Oct. 23, 
2002). More recently, however, the Commission recognized that many 
electioneering communications ``could reasonably be interpreted as 
having a non-electoral, business or commercial purpose,'' Explanation 
and Justification for Final Rules on Electioneering Communications, 72 
FR 72899, 72904 (Dec. 26, 2007), and adopted a safe harbor for 
communications that propose a commercial transaction. 11 CFR 114.15(b). 
Similarly, here, the Commission recognizes that commercial 
advertisements that meet the criteria in the new safe harbor serve non-
electoral business and commercial purposes. The new safe harbor at 11 
CFR 109.21(i) is an appropriate means of excluding bona fide business 
and commercial communications from regulation as coordinated 
communications.

[[Page 55960]]

VI. Safe Harbor for Public Communications in Support of Certain Tax-
Exempt Nonprofit Organizations

    The Commission is not adopting the safe harbor proposed in the NPRM 
to address certain communications paid for by certain tax-exempt 
nonprofit organizations and in which Federal candidates and 
officeholders appear. The safe harbor would have excluded from the 
definition of a coordinated communication any public communication paid 
for by a non-profit organization described in 26 U.S.C. 501(c)(3) 
(``501(c)(3) organizations''), in which a candidate expresses or seeks 
support for the payor organization, or for a public policy or 
legislative initiative espoused by the payor organization, unless the 
public communication PASOs the candidate or another candidate who seeks 
the same office.
    The proposed safe harbor was intended to address communications 
like the one that was the subject of a recent enforcement action. See 
MUR 6020 (Alliance/Pelosi). The enforcement action involved a 
television advertisement paid for by a 501(c)(3) organization. In the 
advertisement, a Federal candidate appeared, discussed environmental 
issues, and asked viewers to visit a Web site sponsored by the 
organization paying for the advertisement. The advertisement was a 
public communication that was distributed nationwide, including in the 
candidate's congressional district, within ninety days before the 
candidate's primary election, and therefore satisfied the fourth 
coordinated communications content standard at 11 CFR 109.21(c)(4). The 
advertisement solicited general support for the organization's Web site 
and cause, but did not ``solicit[] funds * * * for [an] 
organization[]'' under the existing solicitation safe harbor at 11 CFR 
109.21(g)(2).\18\
---------------------------------------------------------------------------

    \18\ The safe harbor at 11 CFR 109.21(g)(2) provides that a 
public communication in which a Federal candidate solicits funds for 
another Federal or non-Federal candidate, a political committee, or 
certain tax-exempt organizations as permitted by 11 CFR 300.65, is 
not a coordinated communication with respect to the soliciting 
candidate unless the public communication PASOs the soliciting 
candidate or an opponent of that candidate.
---------------------------------------------------------------------------

    The NPRM sought comment on whether the Commission should adopt such 
a safe harbor. The Commission asked whether the proposed safe harbor 
was necessary and permissible, and what restrictions or conditions 
should apply to the safe harbor if it were adopted.
    The seven commenters who addressed the proposed safe harbor were 
divided. Two commenters opposed the proposed safe harbor, arguing that 
it would be subject to abuse. These commenters noted that the proposed 
safe harbor ``does not distinguish between ads primarily about the 
charity from those primarily about the candidate.'' The commenters 
expressed concern that candidates could take advantage of the proposed 
safe harbor to coordinate with 501(c)(3) organizations to create and 
distribute ads ``to promote [the candidates'] campaign agenda, to set 
forth their policy views, or to associate themselves with a public-
spirited endeavor, all for the purpose of influencing that candidate's 
election.'' Other commenters supported the proposed safe harbor. One 
commenter argued that worthy charitable causes should not be limited in 
the means of expression available to them by campaign finance 
regulations. Another commenter argued that not all joint efforts 
between public officials and 501(c)(3) organizations are necessarily 
campaign-related, and asserted that some communications by 501(c)(3) 
organizations are more effective if their timing and content can be 
coordinated with lawmakers.
    But even some of the commenters that supported the proposed safe 
harbor indicated that it may not be necessary at this time. These 
commenters acknowledged that 501(c)(3) organizations ``risk the loss of 
their tax-exempt status if they engage in any form of partisan 
political activity'' and are, thus, ``very wary'' about engaging in any 
activity that would possibly bring their activities within the 
coordinated communications rules. The commenters stated that the 
Internal Revenue Service regulations governing 501(c)(3) organizations 
prohibit a broader range of political activity than Commission 
regulations, and that few of those 501(c)(3) organizations would 
therefore benefit from the proposed safe harbor.
    The Commission is not adopting the proposed safe harbor for public 
communications in support of 501(c)(3) organizations. The enforcement 
action that prompted the proposed safe harbor, MUR 6120 (Alliance/
Pelosi), is the only Commission enforcement action in which a 501(c)(3) 
organization paid for a public communication that satisfied all three 
prongs of the coordinated communications rule. The lack of any 
additional complaints against 501(c)(3) organizations under the 
coordinated communication rules indicates that there is no significant 
need for the proposed safe harbor at this time. Even without a safe 
harbor for communications in support of 501(c)(3) organizations, the 
Commission retains its prosecutorial discretion to dismiss enforcement 
matters involving such communications.

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

    The Commission certifies that the attached rules will not have a 
significant economic impact on a substantial number of small entities.
    The primary basis for this certification is as follows. First, any 
individuals and not-for-profit enterprises that will be affected by 
these rules are not ``small entities'' under 5 U.S.C. 601. The 
definition of ``small entity'' does not include individuals. A not-for-
profit enterprise is included in the definition as a ``small 
organization'' only if it is independently owned and operated and not 
dominant in its field. 5 U.S.C. 601(4). The National party committees 
are dominant in their field and do not meet the definition of ``small 
organization.'' Most State, district, and local party committees also 
do not meet the definition of ``small organization.'' State, district, 
and local party committees are not independently owned and operated 
because they are not financed and controlled by a small identifiable 
group of individuals, and they are affiliated with the larger national 
political party organizations. In addition, the State political party 
committees representing the Democratic and Republican parties have a 
major controlling influence within the political arena of their State 
and are thus dominant in their field. District and local party 
committees are generally considered affiliated with the State 
committees and need not be considered separately.
    Second, any separate segregated funds that will be affected by 
these rules are not-for-profit political committees that do not meet 
the definition of ``small organization'' because they are financed by a 
combination of individual contributions and receive financial support 
from corporations, labor organizations, membership organizations, or 
trade associations, and therefore are not independently owned and 
operated.
    Third, most of the other political committees that will be affected 
by these rules are also not-for-profit committees that do not meet the 
definition of ``small organization.'' Most political committees are not 
independently owned and operated because they are not financed by a 
small identifiable group of individuals. Most political committees rely 
on contributions from a large number of

[[Page 55961]]

individuals to fund the committees' operations and activities.
    Fourth, the number of State party committees representing minor 
political parties or any other political committees that might be 
considered ``small organizations'' that might be affected by these 
rules would not be substantial. These rules affect political committees 
only if they coordinate expenditures with candidates or political party 
committees in connection with a Federal election.
    Fifth, to the extent that any other entities affected by these 
rules may fall within the definition of ``small entities,'' any 
economic impact of complying with these rules will not be significant 
because any economic impact will not affect the revenue stream of such 
entities. These rules do not impose any new requirements on commercial 
vendors. Any indirect economic effects that the rules might have on 
commercial vendors result from the decisions of their clients rather 
than Commission requirements.
    Finally, to the extent that some small entities may be 
significantly affected by the attached rules, these rules are 
promulgated pursuant to a court order. Thus, any economic impact of 
these rules would be caused by the court mandate, rather than agency 
decisions contained in these rules.

List of Subjects in 11 CFR Part 109

    Coordinated and independent expenditures.

0
For the reasons set out in the preamble, Subchapter A of Chapter 1 of 
Title 11 of the Code of Federal Regulations is amended as follows:

PART 109--COORDINATED AND INDEPENDENT EXPENDITURES (2 U.S.C. 
431(17), 441a(a) AND (d), AND PUB. L. 107-155 SEC. 214(c))

0
1. The authority citation for part 109 continues to read as follows:

    Authority:  2 U.S.C. 431(17), 434(c), 438(a)(8), 441a, 441d; 
Sec. 214(c) of Pub. L. 107-155, 116 Stat. 81.


0
2. Section 109.21 is amended by:
0
A. Revising the introductory text of paragraph (c), revising paragraph 
(c)(3), and adding new paragraph (c)(5);
0
B. Republishing paragraphs (d)(4)(ii) and (d)(5)(i); and
0
C. Adding new paragraph (i).


Sec.  109.21  What is a ``coordinated communication''?

* * * * *
    (c) Content standards. Each of the types of content described in 
paragraphs (c)(1) through (c)(5) of this section satisfies the content 
standard of this section.
* * * * *
    (3) A public communication, as defined in 11 CFR 100.26, that 
expressly advocates, as defined in 11 CFR 100.22, the election or 
defeat of a clearly identified candidate for Federal office.
* * * * *
    (5) A public communication, as defined in 11 CFR 100.26, that is 
the functional equivalent of express advocacy. For purposes of this 
section, a communication is the functional equivalent of express 
advocacy if it is susceptible of no reasonable interpretation other 
than as an appeal to vote for or against a clearly identified Federal 
candidate.
* * * * *
    (d) * * *
    (4) * * *
    (ii) That commercial vendor, including any owner, officer, or 
employee of the commercial vendor, has provided any of the following 
services to the candidate who is clearly identified in the 
communication, or the candidate's authorized committee, the candidate's 
opponent, the opponent's authorized committee, or a political party 
committee, during the previous 120 days:
    * * *
    (5) * * *
    (i) The communication is paid for by a person, or by the employer 
of a person, who was an employee or independent contractor of the 
candidate who is clearly identified in the communication, or the 
candidate's authorized committee, the candidate's opponent, the 
opponent's authorized committee, or a political party committee, during 
the previous 120 days; and
* * * * *
    (i) Safe harbor for commercial transactions. A public communication 
in which a Federal candidate is clearly identified only in his or her 
capacity as the owner or operator of a business that existed prior to 
the candidacy is not a coordinated communication with respect to the 
clearly identified candidate if:
    (1) The medium, timing, content, and geographic distribution of the 
public communication are consistent with public communications made 
prior to the candidacy; and
    (2) The public communication does not promote, support, attack, or 
oppose that candidate or another candidate who seeks the same office as 
that candidate.

    Dated: September 7, 2010.

    On behalf of the Commission,
Matthew S. Petersen,
Chairman, Federal Election Commission.
[FR Doc. 2010-22649 Filed 9-14-10; 8:45 am]
BILLING CODE 6715-01-P