[Federal Register Volume 78, Number 85 (Thursday, May 2, 2013)]
[Proposed Rules]
[Pages 25635-25638]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-10326]



11 CFR Chapter I

[Notice 2013-07]

Technological Modernization

AGENCY: Federal Election Commission.

ACTION: Advance Notice of Proposed Rulemaking.


SUMMARY: The Federal Election Commission requests comments on whether 
to begin a rulemaking to revise its regulations in 11 CFR chapter I to 
address contributions and expenditures made by electronic means, such 
as by credit card, debit card, Internet-based payment processing, and 
text messaging; to eliminate or update references to outdated 
technologies; and similar issues. The Commission intends to review the 
comments received as it decides what revisions, if any, it will propose 
making to its rules.

DATES: Comments must be received on or before June 3, 2013. The 
Commission will determine at a later date whether to hold a public 
hearing on this Notice. If a hearing is to be held, the Commission will 
publish a notice in the Federal Register announcing the date and time 
of the hearing.

ADDRESSES: All comments must be in writing. Comments may be submitted 
electronically via the Commission's Web site at http://www.fec.gov/fosers, reference REG 2013-01. Commenters are encouraged to submit 
comments electronically to ensure timely receipt and consideration. 
Alternatively, comments may be submitted in paper form. Paper comments 
must be sent to the Federal Election Commission, Attn.: Amy L. 
Rothstein, Assistant General Counsel, 999 E Street, NW., Washington, DC 
20463. All comments must include the full name and postal service 
address of a commenter, and of each commenter if filed jointly, or they 
will not be considered. The Commission will post comments on its Web 
site at the conclusion of the comment period.

General Counsel, or Ms. Jessica Selinkoff, Attorney, 999 E Street NW., 
Washington, DC 20463, (202) 694-1650 or (800) 424-9530.

SUPPLEMENTARY INFORMATION: The Federal Election Commission is 
publishing this Advance Notice of Proposed Rulemaking to obtain 
comments on whether to revise its regulations at 11 CFR chapter I to 
address electronic transactions. Specifically, the Commission is 
considering whether to update its regulations to reflect electronic 
transactions, such as those made by debit cards, credit cards, gift 
cards, Internet-based payment processing, and online banking.\1\ Such a 
rulemaking could address the receipt, deposit, accounting, 
recordkeeping, reporting, redesignation, and reattribution of 
electronic transactions, as well as matching funds, conduit activity, 
and contributions by text message. The Commission is also considering 
whether to revise its regulations by eliminating or updating references 
to outmoded technologies such as telegrams and fax machines.

    \1\ See Rulemaking Priorities for 2012, Agenda Doc. 12-40 (May 
24, 2012), http://www.fec.gov/agenda/2012/mtgdoc_1240.pdf.

    As a general matter, the Commission seeks to ensure that the 
regulated community is able to take advantage of evolving technological 
innovations, while ensuring that the use of the technology is 
consistent with the Federal Election Campaign Act, 2 U.S.C. 431 et 
seq., as amended, (``the Act'') as well as the Presidential Election 
Campaign Fund Act, 26 U.S.C. 9001 et seq., and the Presidential Primary 
Matching Payment Account Act, 26 U.S.C. 9031 et seq. (collectively, 
``Chapters 95 and 96 of Title 26''). More specifically, here the 
Commission invites comments on whether and how it should update its 
regulations to take into account electronic transactions in a manner 
that provides sufficient guidance to the regulated community while 
reducing the need for serial revisions to reflect new and emerging 
technologies. Should regulations identify specific, approved means of 
engaging in electronic transactions? Or should regulations provide only 
general standards or criteria? Would the latter approach increase the 
risk of corruption, abuse, or circumvention of the Act, or Chapters 95 
and 96 of Title 26, that may not be present with a bright-line rule 
that is less technologically flexible?

1. Updating Outmoded Regulations

    The Commission is considering whether it should update its 
regulations to reflect recent technological advances. For example, 
certain regulations refer to technologies that are obsolete or seldom 
used today, such as a ``telegram'' (11

[[Page 25636]]

CFR 104.6(c)(1)); ``typewriters'' (11 CFR 114.9(d)); and a ``carbon 
copy'' of a check (11 CFR 102.9(b)(2)(iii)). Other regulations refer to 
technologies now used only in limited circumstances, such as microfilm, 
facsimiles and computer tape. See, e.g., 11 CFR 105.5 (microfilm copies 
provided by the Secretary of the Senate), 108.6 (microfilm or facsimile 
copies maintained by State officers). How should the Commission 
consider addressing these references to seldom used or obsolete 
technologies? What other, similar technological references in 11 CFR 
chapter I should the Commission consider updating or addressing in a 
    Several regulations refer to ``writing,'' ``signature,'' and 
``printing'' requirements. The Commission is considering whether it 
should revisit these requirements to address electronic documents and 
records. For example, Commission regulations provide a means for a 
contributor to redesignate a contribution in ``a writing, signed by the 
contributor.'' 11 CFR 110.1(b), 110.2(b); see also 11 CFR 110.1(f) 
(designations), 110.1(k) (joint contributions and reattributions). 
Other regulations require documents to be ``signed'' before being filed 
with the Commission, without explicitly providing for the possibility 
of electronic signatures. See, e.g., 11 CFR 111.4 (submission of 
complaints), 111.23 (designation of counsel), 300.37(d) (certifications 
by certain tax-exempt organizations). And some regulations apply to 
``printed'' documents and communications without expressly addressing 
whether an electronic communication or an attachment to an electronic 
message, such as a portable document file or ``PDF,'' is ``printed.'' 
See, e.g., 11 CFR 104.7 (``best efforts''), 110.11(c)(2) (disclaimers 
for printed communications). The Commission invites comments on whether 
and, if so, how it should consider updating these provisions.
    Previously, the Commission concluded that a particular method of 
obtaining redesignations of contributions through a combination of 
electronic and traditional means met the written signature requirements 
in the redesignation provisions at 11 CFR 110.1(b)(5) and 110.2(b)(5), 
because that method ``provides a level of assurance as to the 
contributor's identity and intent comparable to that of a written 
signature.'' \2\ At the same time, the Commission encouraged the use of 
innovations in technology to effectuate electronic redesignations and 
stated that it would consider, on a case-by-case basis, other methods 
of electronic redesignation.\3\ If the Commission decides to revise the 
redesignation regulations to include electronic redesigations, what 
other methods should it consider? How should the Commission revise the 
redesignation rules and other regulations that require ``writings'' or 
signatures in order to minimize the need for serial revisions to adapt 
to new and emerging technologies?

    \2\ See Interpretive Rule Regarding Electronic Contributor 
Redesignations, 76 FR 16233 (Mar. 23, 2011), available at http://www.fec.gov/law/cfr/ej_compilation/2011/notice_2011-02.pdf.
    \3\ Id.

    The Commission is also considering whether to revise regulations 
that require certain communications to be mailed or hand-delivered to 
the Commission without providing for the possibility of electronic 
transmission. See, e.g., 11 CFR 1.3 (Privacy Act requests), 112.1(e) 
(advisory opinion requests). Should the Commission update these 
regulations in light of current technology? If so, how?

2. Providing for Electronic Contributions and Transactions

    The Act, Chapters 95 and 96 of Title 26, and Commission regulations 
generally refer to contributions by cash or check and to disbursements 
by check or draft without taking into account electronic transactions. 
Yet, according to the most recent triennial study conducted by the 
Federal Reserve System, payments by check have been decreasing and the 
``number of noncash payments in the United States . . . increased at a 
compound annual rate of 4.6 percent'' from 2006 to 2009.\4\ Electronic 
payments--that is, payments made by debit cards; credit cards; 
automated clearinghouses; and prepaid debit, credit, banking, and gift 
cards--``collectively exceed three-quarters of all noncash payments'' 
in the United States.\5\

    \4\ Federal Reserve System, 2010 Federal Reserve Payments Study: 
Noncash Payment Trends in the United States: 2006-2009 4 (Apr. 5, 
2011), available at www.frbservices.org/files/communications/pdf/press/2010_payments_study.pdf.
    \5\ Id.

    Consistent with this trend, people increasingly use electronic 
means to contribute to political committees. A series of studies by the 
Pew Research Center of the 2006, 2008, and 2010 elections shows that 
the number of Internet users who make online contributions to 
candidates is increasing.\6\ And among adults who donated to 
presidential candidates in the 2012 election, 50 percent donated online 
or via email.\7\ As of September 2012--only a few months after the 
Commission had approved the use of text messaging to make 
contributions--ten percent of those who made contributions in the 
presidential race did so by ``text message from a cell phone or cell 
phone app.'' \8\

    \6\ See, e.g., Aaron Smith, Pew Internet and American Life 
Project, The Internet and Campaign 2010 21 (Mar. 17, 2011), 
available at http://www.pewinternet.org/~/media//Files/Reports/2011/
Internet%20and%20Campaign%202010.pdf (finding that online 
contributions increased from three percent in the 2006 mid-term 
elections to four percent in 2010); Aaron Smith, Pew Internet and 
American Life Project, The Internet's Role in Campaign 2008 38-39 
(Apr. 15, 2009), available at http://www.pewinternet.org/~/media//
(showing that nine percent made online contributions).
    \7\ Aaron Smith & Maeve Duggan, Pew Internet and American Life 
Project, Presidential Campaign Donations in the Digital Age (Oct. 
25, 2012), available at http://www.pewinternet.org/~/media/Files/
Reports/2012/PIP--State--of--the--2012--race--donations.pdf (finding 
further that 67 percent donated in person, over the telephone, or 
through the mail).
    \8\ Id.

a. General Industry Practice

    In light of these trends, the Commission is considering whether and 
how to revise its regulations to address electronic contributions and 
other transactions. As a preliminary matter, the Commission seeks 
information on general industry practice. How are commercial and 
consumer electronic transactions conducted generally? What are the 
industry standards, practices, and safeguards? How do vendors and 
third-party payment processors, such as PayPal, verify the payer's 
identity and attribute payments made by credit card? What types and 
forms of information are typically collected and maintained? What are 
the standard practices of third-party payment processors, such as 
PayPal or Square? What are the intermediate steps in processing 
electronic transactions? Do vendors or third-party payment processors 
typically process multiple recipients' funds through merchant accounts? 
What are the general timeframes for each step of these electronic 
processes? What are typical accounting practices with regard to 
merchant accounts? How do these practices differ, if at all, for 
prepaid debit, credit, banking and gift card transactions? How might 
practices change in light of emerging technologies? Are there other 
forms of electronic payment--such as by electronic wallet or swipe,\9\ 
P2P (or

[[Page 25637]]

person to person) platform,\10\ mobile app, or Twitter hashtag \11\--
that the Commission should consider if it decides to revise its rules?

    \9\ See, e.g., Tara Siegel Bernard & Claire Cain Miller, Swiping 
Is the Easy Part, N.Y. Times, Mar. 24, 2011, at B1, available at 
    \10\ See, e.g., Fed. Fin. Inst. Examination Council, Online 
Person-to-person (P2P), Account-to-Account Payments and Electronic 
Cash, IT Examination HandBook InfoBase, http://ithandbook.ffiec.gov/it-booklets/retail-payment-systems/payment-instruments,-clearing,-and-settlement/card-based-electronic-payments/online-person-to-person-(p2p),-account-to-account-(a2a)-payments-and-electronic-
cash.aspx (last visited Feb. 26, 2013).
    \11\ See, e.g., Heather Kelly, Twitter and Amex to Let You Pay 
with a Hashtag, CNN (Feb. 12, 2013), http://www.cnn.com/2013/02/11/tech/social-media/twitter-hashtag-purchases; see also https://chirpify.com/ (social media purchase platform).

b. Political Committee Practice

    The Commission also seeks information on how political committees 
receive electronic contributions. Do political committees' practices 
differ from general commercial industry standards and practices? If so, 
how do they differ? Are political committees' practices comparable to 
those of nonprofit organizations that receive electronic donations at 
the Federal, State, or local level? What legal or practical 
considerations or constraints drive any such differences? What role, if 
any, should commercial industry standards and practices play in the 
Commission's consideration of requirements for electronic contributions 
received by political committees?
    The Commission also seeks information on recordkeeping practices 
for electronic transactions. Commission regulations require political 
committees to maintain records of contributions and disbursements in 
ways that do not explicitly account for electronic transactions. See, 
e.g., 11 CFR 102.9(a)(4) (requiring a ``photocopy of each check or 
written instrument or a digital image of each check or written 
instrument''), 102.9(b)(2) (requiring records such as cancelled checks, 
receipts, and carbon copies for disbursements over $200). Although the 
Commission has interpreted its recordkeeping regulations in the context 
of electronic transactions,\12\ should the Commission revise these 
regulations to address expressly recordkeeping requirements for 
electronic transactions, such as, for example, requiring political 
committees that receive credit card contributions to maintain records 
with cardholders' names and credit card numbers? See, e.g., 11 CFR 
9034.2(b) (requirements for credit card contributions eligible for 
matching funds). Would this requirement be consistent with current 
industry practices? Would it need to be updated periodically to reflect 
changing technology? What should the recordkeeping requirements be for 
contributions made by prepaid debit, credit, banking and gift cards? 
Should the regulations take a less specific approach, like that in 11 
CFR 104.14(b), which requires records to ``provide in sufficient detail 
the necessary information and data from which the filed reports and 
statements may be verified, explained, clarified, and checked for 
accuracy and completeness''? Alternatively, are the current rules 
flexible enough to account for electronic recordkeeping practices 
without being revised?

    \12\ See Advisory Opinion 1995-09 (NewtWatch) (approving a 
proposal to maintain records supporting electronic fund transfers); 
Advisory Opinion 1993-04 (Cox); Advisory Opinion 1994-40 (Alliance 
for American Leadership); see also Federal Election Commission, 
Campaign Guide: Congressional Candidates and Committees 75-76 (Aug. 
2011), available at http://www.fec.gov/pdf/candgui.pdf (describing 
recordkeeping for credit card disbursements).

    Other recordkeeping considerations that arise in the context of 
electronic transactions relate to the use of merchant accounts. The Act 
and Commission regulations require all receipts to be deposited into a 
political committee's campaign depository account within ten days of 
receipt. 2 USC 432(h)(1); 11 CFR 103.3(a); see also 11 CFR 
102.2(a)(1)(vi) (disclosure of campaign depositories). Although the 
Commission has previously opined on the treatment of merchant accounts 
in specific factual situations,\13\ the Commission seeks information on 
the current uses of merchant accounts by political committees. Do 
contributions to political committees made via credit card or other 
electronic means customarily pass through a merchant account before 
being deposited by the committees in their campaign depositories? 
Should merchant accounts themselves be considered campaign 
depositories? Why or why not? How can an electronic contribution that 
is processed through a merchant account containing funds designated for 
multiple recipients be traced for recordkeeping, disclosure and audit 
purposes in a manner that provides assurances comparable to a ``paper 
trail''? \14\

    \13\ See, e.g., Advisory Opinion 1999-22 (Aristotle Publishing) 
(concluding that political committees receiving credit card 
contributions through merchant account should disclose that account 
as a campaign depository).
    \14\ See, e.g., Advisory Opinion 1993-04 (Cox), n. 2 (discussing 
recordkeeping and ``paper trails''); Advisory Opinion 1999-22 
(Aristotle Publishing) (approving a vendor's use of a single 
merchant ID to process contributions subsequently forwarded to 
multiple political committees).

    In several recent advisory opinions, the Commission has addressed 
electronic contributions to political committees that are processed by 
incorporated commercial vendors or payment processors. In some of these 
opinions, the Commission concluded that the transaction was permissible 
under 11 CFR 110.6, which prohibits corporations from acting as 
conduits or intermediaries, because the corporation was acting as a 
vendor to the political committee recipient.\15\ In other advisory 
opinions, the Commission concluded that the transaction was permissible 
because the corporations were providing services to the 
contributors.\16\ Most recently, the Commission explained that some 
contributions made through electronic payment processors were not 
subject to 11 CFR 110.6 because they were not contributions to an 
intermediary earmarked for a candidate.\17\ Should the Commission 
consider revising its regulations at 11 CFR 110.6 to address electronic 
contributions processed by incorporated commercial vendors and payment 
processors? If so, what approach should the regulations take? Should 
the regulations also address how to treat fees paid to commercial 
vendors and payment processors to process electronic contributions?

    \15\ Advisory Opinion 2007-04 (Atlatl); Advisory Opinion 2004-19 
(DollarVote); see also Advisory Opinion 2012-09 (Points for 
    \16\ Advisory Opinion 2011-06 (Democracy Engine); Advisory 
Opinion 2006-08 (Brooks); see also Advisory Opinion 2011-19 
    \17\ Advisory Opinion 2012-22 (skimmerhat); but see Advisory 
Opinion Request 2012-08 (Repledge) (no advisory opinion issued).

    Other regulations that do not expressly address electronic 
contributions also have been interpreted by the Commission to apply to 
electronic transactions. In Advisory Opinion 1990-04 (American 
Veterinary Medical Association), for example, the Commission approved 
credit card transactions under 11 CFR 102.6, which addresses combined 
payments of contributions and dues by check. The Commission also has 
construed 11 CFR 102.8, which applies when a contribution is received, 
and 11 CFR 110.1(b)(6) and 110.2(b)(6), which describe when a 
contribution is made, in the context of electronic contributions.\18\ 
Should the Commission

[[Page 25638]]

revise these regulations to address electronic contributions expressly? 
If so, should the regulations take the same approach as those taken 
previously? If not, why not, and what approach should they take 

    \18\ Advisory Opinion 2012-35 (Global Transaction Services 
Group, Inc.); Advisory Opinion 2008-08 (Zucker); see also Advisory 
Opinion 2012-26 (Cooper for Congress, ArmourMedia, Inc., and m-Qube, 
Inc.); Advisory Opinion 2012-09 (Points for Politics); Federal 
Election Commission, Campaign Guide: Congressional Candidates and 
Committees 23, 74 (Aug. 2011), available at http://www.fec.gov/pdf/candgui.pdf (describing when a credit card contribution is 

    Recently, the Commission approved the use of text messaging to 
process contributions in a series of advisory opinions.\19\ Should the 
Commission amend its regulations to address contributions made by text 
message? If so, should the regulations take the same approach as the 
advisory opinions? Should any revised regulations also address issues 
that were not addressed in the advisory opinions, such as how political 
committees should report the receipt of contributions made by text 
message? What related issues should the Commission address?

    \19\ See Advisory Opinion 2012-17 (Red Blue T LLC, ArmourMedia, 
Inc., and m-Qube, Inc.); Advisory Opinion 2012-26 (Cooper for 
Congress, ArmourMedia, Inc., and m-Qube, Inc.); Advisory Opinion 
2012-28 (CTIA--The Wireless Association); Advisory Opinion 2012-30 
(Revolution Messaging, LLC); Advisory Opinion 2012-31 (AT&T Inc.).

    The Commission is also considering whether and, if so, how to 
revise the paper-oriented definitions of ``money'' and determinations 
of ``disbursement'' in its regulations. For example, the regulatory 
definition of ``contribution'' defines ``money'' as ``currency * * *, 
checks, money orders, or any other negotiable instruments payable on 
demand.'' 11 CFR 100.52(c); see also 11 CFR 100.111(d) (similarly 
defining ``money'' in the definition of ``expenditure''), 102.10 
(requiring disbursements to be made by check or ``similar draft'' drawn 
on accounts established at the committee's campaign depository). In 
several advisory opinions, the Commission has interpreted the term 
``similar draft'' to include electronic disbursements.\20\ Should the 
Commission revise its regulations to provide expressly that 
contributions, expenditures, and disbursements include funds 
transferred electronically? Should any revised regulations take the 
same approach as the advisory opinions? If not, why not, and what 
approach should they take instead?

    \20\ See, e.g., Advisory Opinion 1993-04 (Cox) (approving a 
``computer driven billpayer service'' that included the disbursement 
of funds by electronic transfer); Advisory Opinion 1982-25 (Sigmund) 
(concluding that a wire transfer qualifies as a ``similar draft'').

    Finally, the Commission is considering whether to revise its 
regulations that expressly apply only to cash contributions so that 
they also expressly apply to certain electronic contributions. For 
example, cash contributions in excess of $100 are prohibited. 11 CFR 
110.4. The Commission seeks comments on whether prepaid debit, credit, 
banking, and gift cards are functionally the same as cash. If so, 
should the regulation be revised to prohibit contributions in excess of 
$100 made by prepaid debit, credit, banking, and gift cards? If not, 
why not?

c. Rulemaking vs. Other Guidance

    The Commission seeks comments on whether a rulemaking is the best 
way for it to address questions raised by the receipt of electronic 
contributions, and the making of electronic disbursements, by political 
committees. As noted above, the Commission to date has provided 
guidance on electronic transactions largely through advisory opinions, 
interpretive rules, and campaign guides. Are these the best ways for 
the Commission to provide guidance on the subject in light of rapidly 
evolving technologies, or would rules on the subject also be helpful? 
How should the Commission craft regulations in order to minimize the 
need for serial revisions in the face of new and emerging technologies? 
Given the speed at which technology has been advancing, the Commission 
welcomes comments suggesting general regulatory criteria or standards 
that are flexible and adaptable enough to apply to new or emerging 
technology or business arrangements.

3. Other Electronic Modernization Issues

    The Commission welcomes comments, including any pertinent data, 
concerning any electronic modernization issues that are not addressed 
in this notice and that relate to the Commission's administration of 
the Act or Chapters 95 and 96 of Title 26.

    Dated: April 25, 2013.

    On behalf of the Commission.
Ellen L. Weintraub,
Chair, Federal Election Commission.
[FR Doc. 2013-10326 Filed 5-1-13; 8:45 am]