Federal Election CommissionWashington, DC 20463

FederalElectionCommission

Annual Report 2002

FederalElectionCommission

Annual Report 2002

Federal Election CommissionWashington, DC 20463

CommissionersEllen L. Weintraub, ChairBradley A. Smith, Vice ChairmanDavid M. Mason, CommissionerDanny L. McDonald, CommissionerScott E. Thomas, CommissionerMichael E. Toner, Commissioner

Statutory OfficersJames A. Pehrkon, Staff DirectorLawrence H. Norton, General CounselLynne A. McFarland, Inspector General

The Annual Report is prepared by:Gregory J. Scott, Assistant Staff Director,

Information DivisionGeorge J. Smaragdis, Senior Public Affairs Specialist,

Information DivisionAmy L. Kort, Ph.D., Senior Technical Writer,

Information DivisionPaul Clark, Ph.D., Statistician,

Data Division

FEDERAL ELECTION COMMISSIONWASHINGTON, D.C. 20463

June 1, 2003

The President of the United StatesMembers of The United States SenateMembers of The United States House of Representatives

Dear Mr. President, Senators and Representatives:

We are pleased to submit for your information the 28th Annual Report of the FederalElection Commission, pursuant to 2 U.S.C. §438(a)(9). The Annual Report 2002describes the activities performed by the Commission in the last calendar year.

Last year was marked by the successful implementation of the Bipartisan CampaignReform Act (BCRA): the Commission completed nine BCRA-related rulemakingswithin the 270-day time period specified by the BCRA. In addition, the Commissionmade permanent its Alternative Dispute Resolution program to ensure the expeditiousprocessing of enforcement matters and approved revisions to the National Mail VoterRegistration form and the Voting System Standards.

This report also includes the seven legislative recommendations the Commission recentlyadopted and transmitted to the President and the Congress for consideration. TheCommission has substantially reduced the number of recommendations for legislativeaction, including only high priority recommendations with broad Commission support.We hope that Congress will consider adopting these proposals, which we believe wouldbring about some necessary changes in campaign finance law.

We hope that you will find this annual report to be a useful summary of theCommission s efforts to implement the Federal Election Campaign Act.

Respectfully,

Ellen L. WeintraubChair

Executive Summary 1

Chapter OneKeeping the Public InformedPublic Disclosure 3Educational Outreach 5Office of Election Administration 7

Chapter TwoInterpreting and Enforcing the LawRegulations 9Advisory Opinions 10Enforcement 11Administrative Fine Program 12Alternative Dispute Resolution Program 14

Chapter ThreeLegal IssuesBCRA Challenges 17Soft Money 17Electioneering Communications 19Coordinated and Independent Expenditures 20Contribution Limitations and Prohibitions 22Disclaimers 22Corporate Contributions 24Personal Use of Campaign Funds 27Foreign Nationals 29Preemption 30Administrative Fines 32

Chapter FourPresidential Public FundingShortfall 35Entitlement to Pre-General Election Presidential Funding 35Repayment of Public Funds—2000 Election 36

Chapter FiveThe CommissionCommissioners 39Inspector General 39Equal Employment Opportunity 39Ethics 39Personnel and Labor/Management Relations 40The FEC’s Budget 40

Table of Contents

Chapter SixLegislative Recommendations 43

Chapter SevenCampaign Finance Statistics 49

Appendices1. Biographies of Commissioners

and Officers 592. Chronology of Events 633. FEC Organization Chart 654. FEC Offices 675. Statistics on Commission Operations 716. 2002 Federal Register Notices 757. Summaries of Selected BCRA-Related

Rulemakings 77

Table of Charts

Chapter OneKeeping the Public InformedChart 1-1:Size of Detailed Database by Election Cycle 4

Chapter TwoInterpreting and Enforcing the LawChart 2-1:Conciliation Agreements by Calendar Year 12Chart 2-2:Median Civil Penalty by Calendar Year 12Chart 2-3:Ratio of Active to Inactive Cases by Calendar Year 13Chart 2-4:Cases Dismissed under EPS 13Chart 2-5:Average Number of Respondents and Enforcement Cases by Calendar Year 13

Chapter FiveThe CommissionChart 5-1:Functional Allocation of Budget 40Chart 5-2:Divisional Allocation 41

Chapter SevenCampaign Finance StatisticsChart 7-1:Number of PACs, 1974-2002 49Chart 7-2:House Candidates’ Sources of Receipts: Election Cycle 50Chart 7-3:Senate Candidates’ Sources of Receipts: Election Cycle 51Chart 7-4:PAC Contributions to Candidates by Party and Type of PAC 52Chart 7-5:PAC Contributions to House and Senate Candidates by Party and Candidate Status 53

Chart 7-6:PAC Contributions to House and Senate Candidates by Type of PAC and Candidate Status 54Chart 7-7:Major Party Federal Account Receipts: 2002 55Chart 7-8:Party Federal and Nonfederal Receipts 56Chart 7-9:Sources of Party Receipts 57

1Executive Summary

The Federal Election Commission faced unprec-edented challenges during 2002. On March 27 Presi-dent Bush signed into law the Bipartisan CampaignReform Act of 2002 (BCRA), which required the Com-mission to promulgate implementing regulationswithin 270 days, and within 90 days for the softmoney provisions. The Commission met the statutorydeadlines, completing nine BCRA-related rulemakingsby December 22, 2002.

At the same time that the agency worked to imple-ment the new law, it also devoted its efforts to defend-ing the constitutionality of the BCRA. A number oflawsuits, consolidated around McConnell v. FEC, thatchallenge provisions of the new law were expected toreach the Supreme Court by mid-2003. The Commis-sion is also defending its new regulations in the U.S.Court for the District of Columbia, in response to acomplaint filed by Representatives Christopher Shaysand Martin Meehan charging that the new rules con-travene the language of the BCRA.

In addition to completing its duties in implementingthe BCRA, the Commission also monitored the 2002election. Although committees generally have lessfinancial activity in non-Presidential election cyclesthan during Presidential elections, 2002 proved to bean especially active year in many respects. For ex-ample, the national party committees raised $1.1 bil-lion for the 2002 cycle, an amount comparable to thatraised for the 2000 elections and 72 percent greaterthan that raised in the last non-Presidential election.The Commission also completed all but one of theaudits required for the publicly funded Presidentialprimary and general and convention committees forthe 2000 elections.

In the area of enforcement, the Commission en-tered into conciliation agreements requiring the pay-ment of more than $1.3 million in total civil penalties,representing a 42 percent increase over 2001 and thehighest total amount in the last six years. Moreover,the median civil penalty for 2002 was the largest me-dian civil penalty in the last 16 years. Additionally, theAlternative Dispute Resolution program, which beganas a Pilot program in 2000, continues to help expeditethe agency’s processing of compliance matters. InSeptember 2002, the Commission voted to establisha permanent Alternative Dispute Resolution Office

and approved a report chronicling the Pilot program’ssuccess over the past two years.

The Commission also made great strides duringthe year to improve its ability to provide campaignfinance disclosure information to the public. Theagency has created a new retrieval system that allowsanyone with access to the FEC’s web site to examineall of the FEC’s campaign finance records. The newsystem allows users to perform complex search func-tions online and save their results. The Commissionbelieves that the enhanced abilities of the new dataretrieval system are a seminal achievement in its mis-sion to make campaign finance information availableto public.

Likewise, the Commission’s Office of Election Ad-ministration (OEA) completed significant work in2002, and the Commission approved its revisions toboth the National Mail Voter Registration form and the2002 Voting Systems Standards (the Standards).The Standards are intended to ensure that electionequipment certified for purchase by participatingstates is accurate, reliable and dependable. In 2002OEA was the only federal office directly involved inproviding assistance to state and local officials whoadminister federal elections. On October 29, 2002,Congress passed the Help America Vote Act, whichprovides, among other things, for a new agency toassist in the administration of federal elections. All ofthe duties, liabilities, assets and personnel of theFEC’s OEA will be transferred to this new agencyupon the appointment of its Commissioners. TheFEC and OEA believe that the 2002 Standards willserve as a necessary policy directive until this newfederal law is implemented. To this end, the Commis-sion additionally approved an Implementation Plan forthe 2002 Standards.

The material that follows details the Commission’s2002 activities. Additional information on most materi-als can be found in the 2002 issues of the FEC news-letter, the Record.

3

Chapter OneKeeping the Public Informed

The FEC’s public disclosure and educational out-reach programs work together to educate the elector-ate about the various aspects of the campaign financelaw. The financial reports of all federal political com-mittees are accessible to members of the generalpublic, which provides an incentive for the regulatedcommunity to comply with the law. Educational out-reach helps committees achieve compliance by pro-viding the information necessary to understand therequirements of the law.

As detailed below, new regulations and otherchanges went into effect during the year that will leadto further enhancement of the disclosure and educa-tional outreach programs.

Public DisclosureDuring 2002, the disclosure of the sources and

amounts of funds spent on federal campaign activitycontinued to be the centerpiece of the Commission’swork. The Commission received the reports filed bycommittees, reviewed them to ensure compliancewith the law, entered the data into the FEC’s com-puter database and made the reports available to thepublic within 48 hours of receipt.

Continued advances in computer technologygreatly enhanced the disclosure process in 2002.Moreover, the Commission acted during the year toaid filers in complying with new disclosure require-ments mandated under the Bipartisan Campaign Re-form Act of 2002 (BCRA). As detailed below, thesechanges benefit both the public and the regulatedcommunity.

Policy Statement on Interim Reporting ProceduresIn November 2002, the Commission issued a policy

statement to help the regulated community complywith the new reporting requirements of the BCRAwhile regulations and forms and instructions to imple-ment those reporting requirements were completed.Congress set a 270-day period for the completion ofmost BCRA rulemakings, including those regardingmost reporting requirements. This deadline fell onDecember 22, 2002. However, many of the BCRA’sstatutory reporting requirements became effective on

November 6, 2002, before the rulemakings and formsdevelopment could be completed.

The Commission issued the policy statement toprovide filers with interim reporting instructions. Usingthese instructions, filers could comply with the post-BCRA reporting requirements while continuing to usethe existing disclosure forms and software until thenew reporting regulations and forms became avail-able. The interim reporting instructions applied to theDecember 5th Post General Election Report, the Janu-ary 31st Year End Report and, for monthly filers only,the February Monthly Report. New or revised report-ing responsibilities introduced by the BCRA and ad-dressed in the Policy Statement included:• The reporting by state, district and local party com-

mittees of federal election activities, including theallocation of some of those activities between federalfunds and “Levin” funds;

• Allocations of payments between federal andnonfederal funds; and

• Disclosure by federal candidates and their commit-tees with respect to a candidate’s funding of his orher own campaign under the BCRA’s “Millionaires’Amendment.”

In the Policy Statement, the Commission addition-ally expressed its intention to exercise its discretionby not pursuing the filers addressed in the statementfor possible reporting violations so long as the filersfully adhered to those instructions and timely filed thereports.

Electronic filingThe Commission’s mandatory electronic filing pro-

gram continued to pay disclosure dividends in 2002.Under the program, committees that receive contribu-tions or make expenditures in excess of $50,000 in acalendar year, or expect to do so, must file their cam-paign finance reports electronically.1 Committees thatare required to file electronically but instead file onpaper are considered nonfilers and could be subjectto enforcement actions. In order to file electronically,committee treasurers obtain passwords from the FEC

1 The mandatory electronic filing rules do not apply toSenate committees.

Chapter One4

and use software to fill out the reports, which they cansend to the Commission via Internet connection, mo-dem or floppy disk. The FEC’s validation systemverifies that the reports meet certain criteria and in-forms the committees of problems that need to befixed.

State Filing WaiversThe Commission’s State Filing Waiver Program

continued to ease the reporting and recordkeepingburdens for political committees and state electionoffices. The program, which began in October 1999,expanded in 2002 to include Alaska, Iowa and Massa-chusetts. Fifty-one states/territories have now quali-fied for the waiver.2 Under the program, filers whosereports are available on the FEC web site need notfile duplicate copies of their reports in states that pro-vide adequate public access to the Commission’s site.

Imaging and Processing of DataThe Commission also continued its work in 2002 to

make the reports it receives quickly and easily avail-able to the public. The Commission scans all of thereports filed with the agency to create digital imagesof the documents, which are then accessible to thepublic in the FEC’s Public Disclosure Office or on theCommission’s web site. In addition to the digital im-aging system, the Commission codes and enters in-formation taken from campaign finance reports intothe agency’s disclosure database, which contains

data from 1977 to the present. Information is codedso that committees are identified consistently through-out the database.

Public access to dataDuring the year the Commission completed one of

the most significant improvements to its disclosuresystem in the history of the agency.

In 2002, as part of its information technology up-grade, the Commission modernized its hardware,software and communications infrastructure to createa new retrieval system that allows anyone with accessto the FEC’s web site—www.fec.gov—to access all ofthe FEC’s campaign finance records. By allowingusers to login with a personal account on the FEC’sweb site, this new system, which debuted in Decem-ber 2002, allows users to sort, filter, export and savethe results of their campaign finance searches. The

2 As of December 31, 2002, the Commission had certi-fied that the following states and territories qualify for filingwaivers:Alabama, Alaska, American Samoa, Arizona, Arkansas,California, Colorado, Connecticut, Delaware, Florida, Geor-gia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kansas, Kentucky,Louisiana, Maine, Massachusetts, Maryland, Michigan,Minnesota, Mississippi, Missouri, Nebraska, Nevada, NewHampshire, New Jersey, New Mexico, New York, NorthCarolina, North Dakota, Ohio, Oklahoma, Oregon, Pennsyl-vania, Rhode Island, South Carolina, South Dakota, Ten-nessee, Texas, Utah, Vermont, Virginia, Virgin Islands,Washington, West Virginia, Wisconsin and Wyoming.Guam, Montana and Puerto Rico are not currently in theState Filing Waiver Program.

CHART 1-1Size of Detailed Database by Election Cycle

Year Number of Detailed Entries*

1990 767,0001991 444,000†

1992 1,400,0001993 472,0001994 1,364,0001995 570,0001996 1,887,1601997 619,1701998 1,652,9041999 840,2412000 2,390,8372001 661,5912002 13,888,456‡

* Figures for even-numbered years reflect the cumulativetotal for each two-year election cycle.† The FEC began entering nonfederal account data in 1991.‡ The FEC began entering transactions of amounts lessthan $200 in 2002.

Keeping the Public Informed 5

ing committee a Request for Additional Information(RFAI). The committee treasurer can then make ad-ditions or corrections to the report, which are thenadded to the public record. Apparent violations, how-ever, may be referred to the Audit Division or to theOffice of General Counsel for possible enforcementaction.

Recently, RAD has introduced a number of innova-tions to help its Campaign Finance Analysts addressan increasing number of campaign finance transac-tions. In May 2002, RAD contracted with ICF Consult-ing to assess efficiencies in its operations and to sug-gest changes that would heighten efficiency. Addi-tionally, RAD’s mentoring program, in which newCampaign Finance Analysts are mentored by moresenior personnel, has proved very effective in allow-ing RAD to fulfill its functions with greater success.Finally, RAD continues to work closely with the Officeof Administrative Review to streamline the complianceprocess for administrative fines.

Educational OutreachThroughout the year, the Commission continued to

promote voluntary compliance with the law by educat-ing committees about the law’s requirements.

Home Page (www.fec.gov)In its sixth year of operation, the Commission’s web

site offers visitors a variety of resources. Visitors cansearch for advisory opinions (AOs) on the web byusing words or phrases or by entering the year andAO number, and can access a variety of rulemakingdocuments, including Notices of ProposedRulemaking and final rules. Visitors can also accessbrochures on a variety of topics, read agency newsreleases, review national election results and voterregistration and turnout statistics, look up reportingdates and download the national mail voter registra-tion form, FEC registration and reporting forms, cop-ies of the Record newsletter, the Campaign Guidesfor PACs, parties and candidates and other agencypublications. In September 2002, the Commissionadded a new section to the web site devoted to theBCRA. The new section provided links to the Federal

3 In AFL-CIO v. FEC, the U.S. District Court for the Dis-trict of Columbia found that the FEC’s practice at the end ofan investigation of disclosing documents obtained during aninvestigation violated the confidentiality provisions of theAct. The Commission filed an appeal on February 15, 2002.

new system also allows users to perform complexsearch functions previously unavailable on the FEC’sweb site or in its Office of Public Disclosure.

The Commission’s disclosure database, whichcontains millions of transactions, enables researchersto select information in a flexible way. For example,the database can instantly produce a profile of acommittee’s financial activity for each election cycle.Researchers can also customize their searches forinformation on contributions by using a variety of ele-ments (e.g., donor’s name, recipient’s name, date,amount or geographic location).

Visitors to the Office of Public Disclosure can usecomputer terminals to inspect digital images of reportsand to access the disclosure database and more than25 different campaign finance indices that organizethe data in different ways. Visitors can also accessthe FEC’s web site, which offers search and retrievalof more than 3 million images of report pages datingback to 1993 and over 2 million database entriessince 1997. Those outside Washington, DC, canaccess the information via the Internet or the DirectAccess Program, or order it using the Commission’stoll-free number.

The Office of Public Disclosure continued to makeavailable microfilmed copies of all campaign financereports, paper copies of reports from Congressionalcandidates and Commission documents, such aspress releases, audit reports, closed enforcementcases (MURs) and agenda documents.3

Review of reportsThe Commission’s Reports Analysis Division

(RAD) reviews all reports to track compliance with thelaw and to ensure that the public record provides a fulland accurate portrayal of campaign finance activity.When Campaign Finance Analysts, formerly knownas Reports Analysts, find that a report contains errorsor suggests violations of the law, they send the report-

Chapter One6

Election Campaign Act as amended by the BCRA,summaries of major BCRA-related lawsuits and con-tinuously updated information on new Commissionregulations, including final rules and theCommission’s rulemakings calendar. The web siteaveraged nearly 4.7 million hits per month and loggeda high of over 7.5 million hits in October 2002. Theaverage daily hits also peaked in October, at over243,000.

Telephone AssistanceA committee’s first contact with the Commission is

often a telephone call to the agency’s toll-free infor-mation hotline. In answering questions about the law,staff research relevant advisory opinions and litiga-tion, as needed. Callers receive, at no charge, FECdocuments, publications and forms. In 2002, the In-formation Division responded to 19,858 callers withcompliance questions. The monthly average was1,665 calls, with a peak of 2,448 in October.

FaxlineThe Commission’s automated Faxline allows the

public to obtain publications or other documentsquickly and easily. During the year, 553 callerssought information from the 24-hour Faxline and re-ceived 776 documents.

Reporting AssistanceDuring 2002, Campaign Finance Analysts, as-

signed to review committee reports, were also avail-able to answer complex reporting and compliance-related questions from committees calling on the toll-free line.

The Commission continued to encourage timelycompliance with the law by mailing committees re-minders of upcoming reporting deadlines three weeksbefore the due dates. The Record, the Commission’snewsletter, and the FEC’s web site also listed report-ing schedules and requirements.

RoundtablesAs part of its education outreach activities, the FEC

holds roundtable sessions for the regulated commu-nity. In 2002 the FEC increased the maximum num-

ber of participants for its roundtables from 12 to 35participants per session, so that members of the regu-lated community could learn about the Commission’snew soft money and electioneering communicationsregulations.4

ConferencesAlso during 2002, the agency conducted a full pro-

gram of conferences to help candidates and commit-tees understand and comply with the law. In Wash-ington, DC, the Commission hosted four conferencesfor candidates, parties, corporations, trade associa-tions, membership organizations and labor organiza-tions. In addition, the agency held a regional confer-ence in San Francisco for all types of committees.

The conferences featured hands-on workshops onthe fundamental areas of the law and specializedsessions on the Commission’s electronic filing pro-gram and on changes to the federal campaign financelaw.

Tours and VisitsIn addition to holding conferences and roundtable

sessions, the Commission welcomes individuals andgroups who visit the FEC. Visitors to the FEC during2002, including 37 student groups and foreign delega-tions, listened to presentations about the campaignfinance law and, in some cases, toured the agency’sOffice of Public Disclosure.

Media AssistanceThe Commission’s Press Office continued to field

questions from the press and navigate reportersthrough the FEC’s vast pool of information. PressOffice staff responded to 9,823 calls and visits frommedia representatives and prepared 135 news re-leases. Many of these releases alerted reporters tonew campaign finance data and illustrated the statis-tics in tables and graphs.

4 Additional roundtables on other BCRA topics were heldin early 2003.

Keeping the Public Informed 7

PublicationsDuring 2002, the Commission published several

documents to help committees, the press and thegeneral public understand the law and find informa-tion about campaign finance. Specifically, the Com-mission published a new Campaign Guide for Con-gressional Candidates and Committees and a newCampaign Guide for Nonconnected Committees.Given that the guides will be revised again in 2003 inorder to incorporate changes made by the BCRA, theCommission chose to conserve its resources by pub-lishing them only on the Commission’s web site.However, paper copies were made available to anyindividual upon request.

Also during the year, the Commission publishedthe eighteenth edition of Selected Court Case Ab-stracts (CCA). The CCA is a collection of summariesof court cases from 1976 to March 2002 pertinent tothe Federal Election Campaign Act. Most of the sum-maries originally appeared in the FEC’s monthlynewsletter, the Record. As in past years, the Com-mission continued to provide more than 10,000 freesubscriptions to the Record. The newsletter summa-rizes recent advisory opinions, compliance cases,audits, litigation and changes in regulations. It alsoincludes graphs and charts on campaign finance sta-tistics.

In addition, the FEC provided the public with theCombined Federal/State Disclosure Directory 2002,which directs researchers to federal and state officesthat provide information on campaign finance, candi-dates’ personal finances, lobbying, corporate registra-tion, election administration and election results. Thedisclosure directory was available not only in print andon the web, but also on computer disks formatted forpopular hardware and software. The web page ver-sion of the Disclosure Directory includes hyperlinks tothe web pages of state offices and e-mail addressesfor state officials.

Office of Election AdministrationThe Commission’s Office of Election Administration

(OEA) completed a number of significant projects in2002.

On July 12, the Commission approved revisions tothe national voter registration form’s categories forallowing applicants to identify their race and ethnicity.The new categories more closely match those usedby other federal agencies, including the U.S. Bureauof Census, and comply with standards set for federalprograms by the Office of Management and Budget.At the same time, the OEA announced changes to thestate-specific information in the national voter regis-tration forms. These changes comply with revisionsmade to state law since the forms were last revised inAugust 2000. One significant change permits indi-viduals in most states to register by downloading theregistration form from the FEC web site and sending itto their state elections officer.5

Also during the year, the Commission unanimouslyapproved the 2002 Voting Systems Standards forrelease and publication. The Standards are intendedto ensure that election equipment certified for pur-chase by participating states will be accurate, reliableand dependable. Although the Standards are volun-tary, 38 states have chosen to adopt them either inwhole or in part and currently use them to designsystems and procure equipment to meet the needs ofa variety of voting populations and election formats.The Commission additionally approved an Implemen-tation Plan for the Standards that provides guidanceto assist states, voting system vendors and local juris-dictions in the transition from the 1990 Voting Sys-tems Standards to the 2002 Standards.

The OEA also devoted efforts to preparing for sig-nificant changes that will result from legislationpassed during the year. On October 29, 2002, Con-gress passed the Help America Vote Act to improveelection administration in federal elections. PL 107-252. The Help America Vote Act includes provisionsthat establish:

5 Residents of Illinois, Massachusetts, Missouri, NewMexico, South Carolina and Ohio must obtain a hard copyof the form from their state elections officer in order to regis-ter. Additionally, although Wisconsin is exempt from theprovisions of the National Voter Registration Act, it nowaccepts the national form.

Chapter One8

• A funding program to replace punch card votingsystems;

• Minimum election administration standards for statesand local entities responsible for the administrationof federal elections; and

• A new agency—the Election Assistance Commis-sion—to assist in the administration of federal elec-tions.

Although the Help America Vote Act of 2002 willaffect the long-term implementation of the Standards,it is unclear when and how these changes will takeeffect. The 2002 Standards will serve as a necessarypolicy directive until the new federal law is imple-mented.

9

Chapter TwoInterpreting andEnforcing the Law

As part of its mission to administer, interpret andenforce the Federal Election Campaign Act, the Com-mission promulgates regulations and issues advisoryopinions to promote compliance with the law. Theregulations explain the law in detail, and implementthe statutory requirements legislated by Congress.Advisory opinions, in turn, clarify how the statute andregulations apply to real-life situations.

The agency’s enforcement actions also promotecompliance by correcting past violations and demon-strating to the regulated community that violations canresult in civil penalties and remedial action.

RegulationsRulemakings are initiated when Congressional

action, judicial decisions, petitions for rulemaking orother changes in the law or campaign practices makeit necessary to update the current rules or create newones.

Proposed rules are published in the Federal Regis-ter, and the Commission seeks public comment onthem. The agency may also invite those making writ-ten comments to testify at a public hearing. TheCommission considers the comments and testimonywhen deliberating on the final rules in open meetings.Once approved, the text of the final regulations andthe accompanying Explanation and Justification arepublished in the Federal Register and sent to the U.S.House of Representatives and Senate. The Commis-sion announces the effective date, which is at least 30days after the publication of the final rules in the Fed-eral Register, in the Explanation and Justification ofthe final rules.

Rulemakings Completed in 2002The Commission completed an historic set of

rulemakings in 2002, when in addition to completingother rulemaking projects, it met the deadlines im-posed by Congress for promulgating regulations toimplement the BCRA. The BCRA required the Com-mission to issue its “soft money” regulations within 90days of the statute’s enactment, with the remainder ofthe implementing regulations to be completed within270 days.

Specifically, the Commission completed work onthe following new rules during 2002:• Independent expenditure reporting regulations that

clarified when and how independent expendituresmust be reported took effect on June 13, 2002.

• Brokerage loans and lines of credit regulations thatoutlined the circumstances in which brokerage loansand lines of credit available to a candidate could beused to help finance his or her campaign withoutbeing considered a contribution took effect on De-cember 31, 2002.

• A reorganization of the regulations on “contributions”and “expenditures” that clarifies the codification ofthese rules took effect on November 6, 2002.

• Nonfederal funds or “soft money” regulations thatprohibit national parties from receiving and spendingsoft money, restrict federal candidates’ and office-holders’ raising of soft money and control how stateand local party committees must and may pay fornewly defined “federal election activities” took effecton November 6, 2002, and January 1, 2003.

• Regulations defining electioneering communicationsand setting forth the conditions under which personsmay make them took effect on November 22, 2002.

• Regulations providing a mechanism by which per-sons making electioneering communications canestablish whether their communication can be re-ceived by 50,000 or more persons in given area tookeffect on November 22, 2002.

• Contribution limits and prohibitions regulations thatincrease the individual contribution limits, strengthenthe foreign national ban and prohibit minors frommaking contributions to candidates and parties tookeffect on January 1 and 13, 2003.

• BCRA-related regulations addressing disclaimers,fraudulent solicitation, civil penalties and personaluse of campaign funds took effect on January 13,2003.

• Regulations that set forth the new reporting require-ments under the BCRA took effect on February 3,2003.

• Coordinated and independent expenditure regula-tions that determine whether an expenditure is coor-dinated or independent and that implement newrestrictions on expenditures by political party com-

Chapter Two10

mittees that are made relative to candidates tookeffect on February 3, 2003.

• BCRA technical amendments regulations that con-form citations took effect on December 26, 2002.

• Regulations that implement the BCRA’s “Millionaires’Amendment,” allowing increased contribution limitsand other compensating advantages for certain can-didates facing wealthy, self-financing opponents,took effect on February 26, 2003.

Other Rulemakings in ProgressIn addition to completing the above rules, the Com-

mission took the following regulatory actions:• It approved a Notice of Proposed Rulemaking seek-

ing comments on proposed rules to address whenand under what circumstances so-called “leadershipPACs” are affiliated with the authorized committeesof federal candidates or officeholders and the ramifi-cations of any such affiliation.

• It approved a Notice of Proposed Rulemaking seek-ing comments on proposed changes to the adminis-trative fines regulations, including proposals to de-crease civil money penalties.

• It determined that no increases needed to be madeat this time under the Inflation Adjustment Act to themaximum civil penalties that could be assessed forviolations of the Federal Election Campaign Act.

• It adopted an interpretive rule to clarify that the travelallocation and reporting requirements of 11 CFR106.3(b) do not apply to the extent that a candidatepays for certain travel expenses using funds autho-rized and appropriated by the federal government.

• It held a public hearing concerning the use of theInternet for campaign purposes.

• It published a petition for rulemaking on candidatedebates, and determined that a rulemaking on thisissue was not appropriate at this time.

Advisory OpinionsThe Commission responds to questions about how

the law applies to specific situations by issuing advi-sory opinions. When the Commission receives a validrequest for an advisory opinion, it generally has 60days to respond. If, however, a candidate’s campaign

submits a valid request within 60 days before an elec-tion, and the request directly relates to that election,the Commission must respond within 20 days. TheOffice of General Counsel prepares a draft opinion,which the Commissioners discuss and vote uponduring an open meeting. A draft opinion must receiveat least four favorable votes to be approved.

The Commission issued the following 15 advisoryopinions in 2002:• AO 2001-17: Disclosing the receipt of contributions

made via a single check that are split between fed-eral and nonfederal accounts (DNC Services Corpo-ration/Democratic National Committee; issued Janu-ary 30, 2002).

• AO 2001-18: Affiliation between the PAC of a jointventure and the SSFs of its corporate owners(BellSouth Corporation; issued January 22, 2002).

• AO 2001-19: No federal preemption of a state lawthat prohibits the use of bingo as a fundraising de-vice for a local party committee (Oakland Demo-cratic Campaign Committee; issued January 10,2002).

• AO 2002-1: No Presidential public funding for a coa-lition of minor parties supporting candidate(s) whotogether gain five percent of the vote (Lenora B.Fulani and James Mangia, et al.; issued March 6,2002).

• AO 2002-2: Preemption of state law barring a lobby-ist from fundraising for a Congressional candidatewho is a member of the Maryland General Assembly(Eric Gally; issued March 6, 2002).

• AO 2002-3: Qualification as a state committee of apolitical party (Green Party of Ohio; issued April 11,2002).

• AO 2002-4: Official name and abbreviated name ofSSF (Austin, Nichols & Co./Pernod Ricard USA;issued April 25, 2002).

• AO 2002-5: Use of campaign funds to pay for travel,including campaign, local officeholder and personalactivities, of a federal candidate who is a local office-holder (Mayor Ann Hutchinson; issued May 10,2002).

• AO 2002-6: Qualification as a state committee of apolitical party (Green Party of California; May 16,2002).

Interpreting and Enforcing the Law 11

• AO 2002-7: Political fundraising services providedby an Internet Service Provider (Careau & Co. andMohre Communications; issued October 10, 2002).

• AO 2002-8: Return of funds transferred from acandidate’s federal campaign committee to his stateexploratory committee (David Vitter for Congress;issued August 1, 2002).

• AO 2002-9: Disclaimer requirements for expressadvocacy communications printed as text messageson cell phone screens (Target Wireless; issued Au-gust 23, 2002).

• AO 2002-10: Qualification as state committee of apolitical party (Green Party of Michigan; issued Au-gust 1, 2002).

• AO 2002-11: Non-affiliation of national and statetrade associations (Mortgage Bankers Associationof America; issued October 10, 2002).

• AO 2002-12: Disaffiliation of SSFs of health insur-ance companies (American Medial Security, Inc.;issued December 10, 2002).

Some of these advisory opinions are discussed ingreater detail in Chapter 3 “Legal Issues.”

Enforcement

The Enforcement ProcessThe Commission learns of possible election law

violations in three ways. The first is the agency’smonitoring process—potential violations are discov-ered through a review of a committee’s reports orthrough a Commission audit. The second is the com-plaint process—anyone may file a sworn complaint,which alleges violations and explains the basis for theallegations. The third is the referral process—pos-sible violations discovered by other agencies arereferred to the Commission.

Each of these can lead to a Matter Under Review(MUR). Internally generated cases include thosediscovered through audits and reviews of reports andthose referred to the Commission by other govern-ment agencies. Externally generated cases spurredby a formal, written complaint receive a MUR numberonce the Office of General Counsel (OGC) deter-mines that the document satisfies specific criteria fora proper complaint.

The General Counsel recommends whether theCommission should find “reason to believe” and openan investigation. If the Commission finds there is“reason to believe” the respondents have committed aviolation, it notifies the respondents and begins toinvestigate the matter. The Commission has authorityto subpoena information and can ask a federal courtto enforce a subpoena. At the end of an investigation,the General Counsel prepares a brief, which statesthe issues involved and recommends whether theCommission should find “probable cause to believe” aviolation has occurred. Respondents may file briefssupporting their positions.

If the Commission finds “probable cause to believe”the respondents violated the law, the agency attemptsto resolve the matter by entering into a conciliationagreement with them. (Some MURs, however, areconciliated before the “probable cause” stage.) Ifconciliation attempts fail, the agency may file suit indistrict court. A MUR remains confidential until theCommission closes the case with respect to all re-spondents in the matter and releases the informationto the public.

In AFL-CIO v. FEC, the U.S. District Court for theDistrict of Columbia found that the FEC’s practice atthe end of an investigation of disclosing documentsobtained during an investigation violated the confiden-tiality provision of the Act. On February 15, 2002, theCommission appealed this case to the U.S. Court ofAppeals for the District of Columbia Circuit.

Enforcement InitiativesDuring 2002, the Commission continued to use a

prioritization system to focus its limited resources onmore significant enforcement cases.

Now in its tenth year of operation, the EnforcementPriority System (EPS) has helped the Commissionmanage a heavy caseload involving thousands ofrespondents and complex financial transactions. TheCommission instituted the system after recognizingthat the agency did not have sufficient resources topursue all of the enforcement matters that came be-fore it. Under the system, the agency uses formalcriteria to decide which cases to pursue. These crite-

Chapter Two12

ria include the intrinsic seriousness of the allegedviolation, the apparent impact the alleged violationhad on the electoral process, the topicality of theactivity and the development of the law and the sub-ject matter. The Commission continually reviews theEPS to ensure that the agency uses its limited re-sources to its best advantage.

Among the cases concluded in 2002, two enforce-ment actions resulted in the highest and third highestcivil penalties in the Commission’s history, MUR4530 and MUR 5187. These MURs, involving contri-butions by foreign nationals and the corporate reim-bursement of contributions, respectively, resulted inalmost $1.2 million in civil penalties. These andother MURs are further discussed in Chapter 3 “Le-gal Issues.”

Administrative Fine ProgramDuring 2002, the Administrative Fine program

proved to be a fundamental part of the Commission’seffort to promote timely compliance with the law’sreporting deadlines. The program began in July 2000and was originally mandated to last only through De-cember 31, 2001. However, as part of the FY 2002appropriations process, Congress extended it to coverreporting periods through December 31, 2003. Theprogram allows the Commission to assess civil moneypenalties for violations involving:• Failure to file reports on time;• Failure to file reports at all; and• Failure to file 48-hour notices.

CHART 2-1Conciliation Agreementsby Calendar Year

Number Thousands of Dollars

CHART 2-2Median Civil Penaltyby Calendar Year

Dollars

2000

4000

6000

8000

10000

12000

020100999897969594930

20

40

60

80

100

120

020100999897969594930

500

1000

1500

2000

Number of Agreements

Total Civil Penalty Amount

Interpreting and Enforcing the Law 13

CHART 2-3Ratio of Active to Inactive Cases by Calendar Year

(189 Cases) (193 Cases) (207 Cases) (197 Cases) (166 Cases)

CHART 2-4Cases Dismissed Under EPS

CHART 2-5Average Number of Respondents andEnforcement Cases by Calendar Year

Active Cases

Inactive Cases

20022001200019991998

0

20

40

60

80

100

20022001200019991998

Stale Cases

Low-Rated Cases

0

500

1000

1500

2000

2500

3000

20022001200019991998

Cases

Respondents

Chapter Two14

How the Program WorksIn the past, the FEC handled reporting violations

under its regular enforcement procedures, as de-scribed above. The Administrative Fine programstreamlines the process for these violations.

All administrative fine actions are initiated in theReports Analysis Division (RAD). RAD monitors allcommittees for possible filing violations and recom-mends to the Commission those committees thatappear to be in violation. If the Commission finds“reason to believe” (RTB) that a committee violatedthe applicable reporting provisions, RAD provides awritten notification to the committee and its treasurercontaining the factual and legal basis of its finding andthe amount of the proposed civil money penalty. Therespondents have 40 days from the date of the RTBfinding to either pay the civil money penalty or submitto the Office of Administrative Review a written re-sponse, with supporting documentation, outlining whyit believes the Commission’s fine and/or penalty is inerror. If the committee submits a response to theOffice of Administrative Review, RAD forwards itsinformation to that office for consideration by an im-partial Reviewing Officer who was not involved in theoriginal RTB recommendation.

After reviewing the Commission’s RTB finding andthe respondent’s written response, the reviewing of-ficer forwards a recommendation to the Commissionalong with all documentation. Respondents have anopportunity to respond in writing to the reviewingofficer’s recommendation. The Commission thenmakes a final determination as to whether the respon-dent violated the law and, if so, assesses a civilmoney penalty based on the appropriate schedule ofpenalties.

Should a respondent fail to pay the civil moneypenalty or submit a challenge within the original 40days, the Commission will issue a final determinationwith an appropriate civil money penalty. The respon-dent will then have 30 days after receiving theCommission’s final determination to pay the penaltyor seek judicial review.

When a respondent fails either to pay the civilmoney penalty or to seek judicial review after theCommission makes a final determination, the Com-mission may transfer the case to the U.S. Department

of Treasury for collection. Alternatively, the Commis-sion may decide to file suit in the appropriate U.S.district court to collect owed civil money penaltiesunder 2 U.S.C. §437g(a)(6).

Calculating PenaltiesUnder the program, respondents may face admin-

istrative penalties that vary depending on the interac-tion of several factors:• Election sensitivity of the report;• Whether the committee is a late filer (and the num-

ber of days late) or a nonfiler;1

• The amount of financial activity in the report; and• Prior civil money penalties for reporting violations.

Administrative Fines in 2002During 2002, the Commission processed 183

cases and collected a total of $289,035 in fines.Overall, the Commission had publicly released a totalof 483 cases by the end of 2002, with penalties total-ing $700,296.

Also, during the year, a number of court caseschallenging the Commission’s final administrative finedeterminations were resolved in the Commission’sfavor. Three of these cases, Miles for Senate v. FEC,Friends for Houghton v. FEC and Jeremiah T.Cunningham v. FEC are summarized in Chapter 3“Legal Issues.”

Alternative Dispute ResolutionProgram

On September 13, 2002, the Commission voted tomake the ADR Pilot Program a permanent program atthe FEC. The Program was established in October2000 as a pilot to determine the viability of using Al-ternative Dispute Resolution (ADR) procedures toaddress and resolve violations of campaign financelaws. It seeks to expedite the resolution of enforce-ment matters through expanded use of negotiationswith respondents.

1 A committee is a “nonfiler” if it files its report beyond acertain deadline or fails to file at all.

Interpreting and Enforcing the Law 15

Cases are accepted into the ADR Program afterreview by the Office of General Counsel and the ADROffice for suitability. Cases are excluded from ADRconsideration if the matter:• Raises issues requiring a definitive resolution for

precedential value;• Raises issues that bear on Government policy;• May have an impact on other persons or organiza-

tions that are not parties to the proceeding; and• Would benefit from a full public record of the pro-

ceeding.Other internal factors are important in determining

a case’s appropriateness for ADR and are addressedon a case-by-case basis.

Negotiations in the ADR Program are orientedtoward reaching an expeditious resolution through amutually agreeable settlement that promotes compli-ance with the Act and the FEC’s regulations. Media-tion to resolve a negotiation impasse is available bymutual agreement between the respondent(s) and theCommission’s representative. Resolutions reachedthrough direct and, when necessary, mediated nego-tiations are submitted to the Commission for finalapproval. None of the cases handled by the ADRoffice have yet required mediation, although the Officeis committed to calling on the cadre of FEC-desig-nated Mediators when the need arises.

The ADR Program was evaluated this past summerby a national conflict management and resolution firmthat provided the Commission with an independentreview of the Program. The evaluation team inter-viewed respondents and members of the election barand also sought comment from complainants. Theteam concluded, based on comments frominterviewees, that the Pilot Program had achieved itsstated goals. The study found that 90 percent of theinterviewed respondents believed they saved timeand money using the Program and that, based ontheir initial experience with the program, they wouldbe more likely to request or choose to use the pro-cess in the future. The evaluation also concluded thatthe Program saved respondents legal fees and en-abled the Commission to increase significantly thenumber of cases processed.

Since the inception of the Program, the Office hasprocessed 107 cases, of which 65 percent were ac-

cepted into ADR. The other 35 percent of cases wereeither determined to be inappropriate for ADR or in-volved respondents who rejected the ADR option.Seventy-seven percent of this total caseload arosefrom complaints filed with the Commission. The bal-ance of the cases originated as referrals from theReports Analysis or Audit Divisions or from suasponte submissions. Cases not entered in the ADRProgram were returned to OGC for processing. Bythe end of 2002, the 56 cases assigned to ADR dur-ing the Program’s tenure had produced 69 separatenegotiated agreements based on 47 cases—of thattotal all, except four, were approved by the Commis-sion. A number of cases had multiple parties, whichled to multiple agreements. The remaining 9 as-signed cases were in various stages of negotiations atthe close of the year.

The Office concluded the cases in an average of110 days from the time the case was assigned toADR until the agreement was reviewed and/or ap-proved by the Commission. The Office, however,aims to further expedite the process in order to meetits goal of resolving cases, in the negotiation portionof the process, within 77 days.

17

Chapter ThreeLegal Issues

As the independent regulatory agency responsiblefor interpreting, administering and enforcing the Fed-eral Election Campaign Act (the Act), the FederalElection Commission promulgates regulations imple-menting the Act’s requirements and issues advisoryopinions that apply the law to specific situations. TheCommission also has jurisdiction over the civil en-forcement of the Act. In 2002, the majority of thelegal issues facing the Commission related to theimplementation of the Bipartisan Campaign ReformAct of 2002 (BCRA). This chapter examines majorlegal issues confronting the Commission during 2002as it considered regulations, advisory opinions, litiga-tion and enforcement actions. Full summaries ofBCRA rulemakings appear in Appendix 7.

BCRA Challenges

McConnell v. FECOn March 27, 2002, the day President Bush signed

the BCRA into law, Senator Mitch McConnell and theNational Rifle Association (NRA) each filed a com-plaint against the Commission with the U.S. DistrictCourt for the District of Columbia, challenging theconstitutionality of several provisions of the BCRA. InApril and early May, nine other lawsuits were filedchallenging the BCRA. The court consolidated theseeleven BCRA cases around McConnell v. FEC, and athree-judge panel was appointed to hear them.

On April 3, 2002, Senators John McCain, RussellFeingold, Olympia Snowe and James Jeffords andRepresentatives Christopher Shays and MartinMeehan (collectively the Reform Act Sponsors) filedmotions to intervene as defendants.

Senator McConnell alleges in his complaint thataspects of the BCRA violate the First, Fifth and TenthAmendments and the principles of federalism. Forexample, the complaint alleges that the BCRA:• Unconstitutionally favors some speakers over oth-

ers;• Unconstitutionally constrains the rights of officehold-

ers and candidates to raise money for tax-exemptorganizations, political parties and other candidates;

• Burdens First Amendment associational rights byrequiring organizations to disclose the identity of

their supporters to a greater extent than does theFECA; and

• Places unprecedented limits on political parties’ability to make expenditures for political speech.

The NRA’s complaint alleges similar constitutionalviolations resulting from the BCRA’s limits and prohi-bitions on electioneering communications.

The Reform Act Sponsors counter that the BCRA“affirmatively promotes and enhances core FirstAmendment values,” and “ensures that candidates,parties, and citizens have robust opportunities to ex-ercise their fundamental rights of expression and as-sociation.” The court has allowed them to intervene insupport of the BCRA.

These cases were pending in the U.S. DistrictCourt for the District of Columbia at the year’s end.1

Soft MoneyThe BCRA prohibits national party committees,

without exceptions, and federal candidates and office-holders, with exceptions, from raising funds not sub-ject to the prohibitions, limits and reporting require-ments of the Act, i.e. nonfederal funds or “softmoney.” It additionally addresses fundraising by fed-eral and nonfederal candidates and officeholders onbehalf of political party committees, other candidatesand nonprofit organizations. Provisions of the BCRAalso address the activities of state and local partycommittees, significantly expanding the Act’s treat-ment of these committees’ activities. For example,the rules provide a new definition of “federal electionactivity” and provide for a special category of funds,called “Levin funds,” that may be used, usually in

1 On May 2, 2003, a three-judge panel of the UnitedStates District Court for the District of Columbia found vari-ous provisions of the Bipartisan Campaign Reform Actunconstitutional and enjoined the Commission from enforc-ing these provisions. At this writing, the nearly 1,700-pagedecision, composed of a per curiam decision and threeseparate opinions, concurring and dissenting in pertinentparts, has been appealed to the United States SupremeCourt. For further information on this decision seeMcConnell vs FEC, Civil Action No. 02-582, (D.D.C. May 2,2003).

Chapter Three18

allocation with federal funds, by state and local partycommittees for certain federal election activities. TheBCRA required the Commission to promulgate regula-tions implementing these provisions by June 25,2002. These regulations are briefly summarized be-low, along with a court challenge to these regulationsthat was filed by two of the BCRA sponsors, Repre-sentatives Christopher Shays and Martin Meehan.

RegulationsOn June 22, 2002, the Commission promulgated

new and revised rules addressing nonfederal funds or“soft money.” The new and revised rules at 11 CFRParts 100, 102, 104, 106, 108, 110, 114, 300 and9034 regulate and, in some cases, ban the receipt,solicitation and use of nonfederal funds. Specifically,these rules:• Prohibit national party committees from raising or

spending nonfederal funds, including funds to pur-chase or construct a party office facility;

• Require state, district and local party committees tofund certain “federal election activities” with federalfunds, and, in some cases, allow these committeesto fund activities with federal funds allocated withmoney raised according to new limitations, prohibi-tions and reporting requirements (i.e., “Levin funds”)or in some limited circumstances solely with Levinfunds; and

• Address fundraising by federal and nonfederal can-didates and officeholders on behalf of party commit-tees, other candidates and nonprofit organizations.

The regulations introduce a new category of activi-ties, “federal election activities,” which include:• Voter registration activity during the 120 days before

a regularly scheduled federal election and ending onthe day of that election;

• Voter identification, generic campaign activities2 andget-out-the-vote activities that are conducted in con-nection with an election in which one or more candi-dates for federal office appear on the ballot (regard-

less of whether state or local candidates also appearon the ballot);

• A public communication3 that refers to a clearly-identified federal candidate and that promotes, sup-ports, attacks or opposes any federal candidate (thisdefinition applies regardless of whether a nonfederalcandidate is also mentioned or identified in the com-munication and regardless of whether the communi-cation expressly advocates a vote for or against afederal candidate); and

• Services provided by an employee of a state, districtor local party committee who spends more than 25percent of his or her compensated time during thatmonth on activities in connection with a federal elec-tion.

Under the new regulations, state, district and localparty committees must, as a general rule, use federalfunds to make expenditures and disbursements forfederal election activity.4 11 CFR 300.32(a)(2). How-ever, as long as certain conditions are met, they mayuse Levin funds to pay for part or, in some limitedcases, all of the following types of federal electionactivity:5

• Voter registration activity during the period that be-gins 120 days before the date of a regularly sched-uled federal election and ends on the day of thatelection; and

• Voter identification, get-out-the vote or generic cam-paign activity conducted in connection with an elec-tion in which a federal candidate appears on the

2 “Generic campaign activity” means a public communi-cation that promotes or opposes a political party and doesnot promote or oppose a clearly identified federal ornonfederal candidate. 11 CFR 100.25.

3 A “public communication” means any communication bymeans of television (including cable and satellite), radio,newspaper, magazine, billboard, mass mailing, telephonebank or any other form of general public political advertis-ing. Communications over the Internet are not included inthe definition of public communication. 11 CFR 100.26.

4 Additionally, an association or similar group of state orlocal candidates or officeholders must use only federalfunds to make expenditures or disbursements for federalelection activity. 11 CFR 300.32(a)(1).

5 Levin funds may also be used for any purpose that isnot in connection with a federal election or federal electionactivity as long as this use is lawful in the state in which thecommittee is organized. 11 CFR 300.32(b)(2).

Legal Issues 19

ballot (regardless of whether a state or local candi-date also appears on the ballot).

The new rules also address the activities of federaland nonfederal candidates and officeholders. Forexample, the regulations include new restrictions ongeneral solicitations made by federal candidates andofficeholders on behalf of nonprofit organizations.The new requirements also address federal candi-dates’ and officeholders’ activities with regard to fed-eral and nonfederal elections. Under the new regula-tions, federal candidates and officeholders can onlysolicit, receive, direct, transfer, spend or disbursefederal funds in connection with a federal election orto be used for federal election activity. Additionally,federal candidates and officeholders can only solicit,receive, direct, transfer, spend or disburse funds inconnection with a nonfederal election in amounts andfrom sources that are both consistent with state lawand not in excess of the Act’s limits and prohibitions.6

It is important to note, however, that a federal candi-date or officeholder may attend, speak or be a fea-tured guest at a fundraising event for a state, districtor local party committee, including a fundraising eventat which nonfederal funds or Levin funds are raised.

Shays and Meehan v. FECOn October 8, 2002, Representatives Christopher

Shays and Martin Meehan filed a complaint in theU.S. District Court for the District of Columbia chal-lenging the Commission’s “soft money” regulations.They amended their complaint on January 21, 2003,adding challenges to the “coordination” and “election-eering communications” regulations. The complaintcharges that the FEC regulations “contravene thelanguage” of the BCRA and “will frustrate the purposeand intent of the BCRA by allowing soft money tocontinue to flow into federal elections and into thefederal political process.” The plaintiffs ask that the

court invalidate the FEC regulations on the groundsthat they are arbitrary and capricious, an abuse ofdiscretion, in excess of the FEC’s statutory jurisdictionor authority and otherwise not in accordance with law.

Specifically, the plaintiffs allege, for example, thatthese rules contain amendments that were not madeavailable for public comment and that they “under-mined the letter and [the] purpose of the BCRA.” Theplaintiffs contend that these regulations contravenethe BCRA in terms of the:• Creation of so-called “sham party entities”;• Definitions of “solicit,” “direct,” “agent” and “federal

election activity”;• Payment of solicitation costs for raising “Levin

funds”;• Treatment of state party office building funds;• Exemption for certain charitable corporations; and• Description of coordination.

This cases was pending in the U.S. District Courtfor the District of Columbia at the year’s end.

Electioneering CommunicationsThe BCRA amended the Act to address certain

television and radio ads that refer to a clearly identi-fied federal candidate, but do not necessarily ex-pressly advocate the election or defeat of a federalcandidate. In the past these ads have commonly beenreferred to as “issue ads,” and often were not subjectto the Act’s limitations, prohibitions and reporting re-quirements. However, under the BCRA such commu-nications are considered to be “electioneering com-munications” when they are distributed to the relevantelectorate and in proximity to an election. In 2002 theCommission promulgated regulations governing themaking and reporting of electioneering communica-tions.7

RegulationsThe new rules define an “electioneering communi-

cation” as a television or radio communication thatrefers to a clearly identified federal candidate and is

6 This requirement does not apply to a federal candidateor officeholder who is also a candidate for state or localoffice so long as the receipt or spending of funds is permis-sible under state law and refers only to that state or localcandidate and/or to any other candidate for that same stateor local office. 11 CFR 300.63.

7 See also the discussion of Hawaii Right to Life v. FEC,p. 25.

Chapter Three20

publicly distributed for a fee to the relevant electoratewithin 60 days prior to the general election or 30 daysprior to a primary. To be considered an electioneer-ing communication, the communication must meeteach of the following conditions:8

• The communication refers to a clearly identified fed-eral candidate;

• The communication is publicly distributed for a fee;• The communication is distributed during a certain

time period before an election; and• The communication can be received by 50,000 or

more persons in the relevant Congressional district,state or, in the case of a Presidential convention orgeneral election, nationwide.

In implementing the BCRA, the regulations bothrestrict who can pay for electioneering communica-tions and require that the costs of the communicationsbe disclosed once they aggregate in excess of$10,000, along with other information about the indi-vidual or organization who paid for the communicationand the source of certain funds. Corporations andlabor organizations may not make or finance election-eering communications and may not provide funds toany person if they know that the funds are for thepurpose of making electioneering communications.Individuals and organizations that do make election-eering communications must report their activity to theCommission each time that the direct costs for airingand producing electioneering communications aggre-gate in excess of $10,000.

The Commission also issued interim final rules thatprovide methodologies to determine whether a com-

munication will be capable of being received by50,000 or more persons in the relevant jurisdiction.

Coordinated and IndependentExpenditures

The BCRA repealed Commission regulations defin-ing a “coordinated general public political communica-tion” (old 11 CFR 100.23), and instructed the Com-mission to promulgate new rules on “coordinatedcommunications paid for by persons other than candi-dates, authorized committees of candidates, andparty committees.” Coordination is important be-cause, in its landmark Buckley v. Valeo decision, theSupreme Court ruled that expenditures made in coor-dination with a campaign are in-kind contributions tothe campaign. As such, coordinated expenditures aresubject to the Act’s limits. Independent expenditures,on the other hand, are not subject to the contributionlimits. The new rules, summarized below, also ad-dress BCRA-mandated changes to the regulationsgoverning coordinated and independent expenditures.

RegulationsCommission regulations approved on December 5,

2002, define “coordinated” to mean “made in coopera-tion, consultation or concert with, or at the request orsuggestion of, a candidate, a candidate’s authorizedcommittee, or their agents, or a political party commit-tee or its agents.”9 The rules focus most closely on“coordinated communications,” which are treated asan in-kind contribution to the candidate, authorizedcommittee or party committee with whom the commu-nication is coordinated, and must be reported assuch. Apart from communications containing expressadvocacy or the republication of a candidate’s cam-paign materials, communications that are distributedor disseminated prior to 120 days before a primary orgeneral election are not subject to the coordinationregulations.

8 However, six types of communications are exempt fromthe definition of “electioneering communication,” includingcommunications by 501(c)(3) organizations (which are stillbarred from participating in partisan political activity by theInternal Revenue Code) and communications that constitutea reported expenditure. The Commission did not specificallyexempt public service announcements (PSAs). However,generally speaking, PSAs can be communications for whichthe broadcaster or satellite or cable systems operator doesnot charge a fee for publicly distributing. See 67 FR 51136.If no fee is charged for distribution, the communicationwould not meet the definition of an “electioneering commu-nication.”

9 For the purposes of 11 CFR part 109 only, “agent” isdefined at 11 CFR 109.3.

Legal Issues 21

The new regulations provide for a three-part test todetermine whether a communication is coordinated.Satisfaction of all of the three specific tests is requiredfor the conclusion that payments for the coordinatedcommunication are for the purpose of influencing afederal election and constitute an in-kind contribution.The three parts of the test consider:• The source of payment;• A “content standard” regarding the timing and sub-

ject matter of the communication10; and• A “conduct standard” regarding the interactions be-

tween the person paying for the communication andthe candidate or political party committee or theiragents. 11 CFR 109.21(a).11

In addition to contributions, national, state andsubordinate committees of political parties may makecoordinated expenditures up to prescribed limits inconnection with the general election campaigns offederal candidates without counting such expendi-tures against the committees’ contribution limits. 2U.S.C. §441a(d). These expenditures are commonlyreferred to as “coordinated party expenditures,” andthe limits for these expenditures can be found in newsection 11 CFR 109.32.12 Political party committeesmay make coordinated party expenditures in connec-tion with the general election campaign before or afterthe party’s candidate has been nominated. All pre-nomination coordinated expenditures continue to be

subject to the coordinated party expenditure limita-tions, whether or not the candidate on whose behalfthey are made receives the party’s nomination. 11CFR 109.34.

In the BCRA, Congress prohibits political partycommittees, under certain conditions, from makingboth coordinated party expenditures and independentexpenditures with respect to the same candidate, andfrom making transfers and assignments to other politi-cal party committees. 2 U.S.C. §441a(d)(4). For thepurposes of these restrictions only, all political com-mittees established and maintained by a nationalpolitical party (including all Congressional campaigncommittees), and all political committees establishedand maintained by a state political party (includingany subordinate committee of a state committee),shall be considered to be a single political committee.11 CFR 109.35(a). Such a “single” political partycommittee is prohibited from making any post-nomi-nation coordinated party expenditure in connectionwith the general election campaign of a candidate atany time after that political party committee makesany post-nomination independent expenditure withrespect to the candidate. 11 CFR 109.35(b)(1). Simi-larly, such a “single” political party committee is pro-hibited from making any post-nomination independentexpenditure with respect to a candidate at any timeafter that political party committee makes a post-nomination coordinated expenditure in connectionwith the general election campaign of the candidate.11 CFR 109.35(b)(2).

Finally, the new rules consider independent expen-ditures by national party committees. Prior to theenactment of the BCRA, the Commission’s rules pro-hibited a national committee of a political party frommaking independent expenditures in connection withthe general election campaign of a Presidential candi-date. See former 11 CFR 110.7(a)(5). Section441a(d)(4) added by the BCRA, however, precludessuch a broad prohibition. As a result, the Commissionhas added a new section that specifically prohibits anational committee of a political party from makingindependent expenditures with respect to a Presiden-tial candidate only if it serves as the principal cam-

10 A communication that meets any of these four stan-dards meets the content requirement: (1) A communicationthat is an “electioneering communication”; (2) A public com-munication that republishes, disseminates or distributescandidate campaign materials; (3) A public communicationthat expressly advocates the election or defeat of a clearlyidentified candidate for federal office; (4) A public communi-cation that refers to a clearly identified federal candidate orpolitical party, is publicly distributed or disseminated 120days or fewer before a primary or general election or aconvention or caucus with the authority to nominate a candi-date and is directed to voters in the jurisdiction of the clearlyidentified candidate or to voters in a jurisdiction where oneor more candidates of the political party appear on the bal-lot.

11 For a further discussion of the conduct standard, seeAppendix 7, page 95.

12 These limits were formerly located at 11 CFR 110.7.

Chapter Three22

paign committee or authorized committee of its Presi-dential candidate under 11 CFR 9002.1(c). 11 CFR109.36.

Contribution Limitations andProhibitions

On January 1, 2003, new contribution limits tookeffect under the BCRA. Most of the changes to thecontribution limits were included in the Commission’sfinal rules on contribution limitations and prohibitions,as described below. Regulations included in theCommission’s “soft money” rulemaking that increasethe individual contribution limit to state party commit-tees from $5,000 to $10,000 also took effect with thenew year. In addition, in 2002, the Commission pro-mulgated regulations to implement the BCRA’s so-called “Millionaires’ Amendment,” which increases thecontribution limits for certain candidates whose oppo-nent spends large amounts of personal funds on thecampaign and also, in some cases, suspends thelimits for coordinated party expenditures made on thatcandidate’s behalf.

RegulationsOn October 31, 2002, the Commission approved

final rules to implement provisions of the BCRA thatincreased the following contribution limits and alsoprovided for these limits to be indexed for inflation:• Contributions to candidates and political party com-

mittees. The limits on contributions made by indi-viduals and non-multicandidate committees in-creased to $2,000 per election to federal candidatesand to $25,000 per year to national party commit-tees.

• Aggregate biennial contribution limitations for indi-viduals. The former $25,000 annual limit for indi-viduals has been replaced by a new biennial limit of$95,000. This limit includes up to $37,500 in contri-butions to candidate committees and up to $57,500in contributions to any other committees. The$57,500 portion of the biennial limit contains a fur-ther restriction, in that no more than $37,500 of thisamount may be given to committees that are notnational party committees.

• Special contribution limit to Senate candidates. Thelimit on contributions made to Senate candidates bythe Republican and Democratic Senatorial campaigncommittees or the national committees of a politicalparty, or any combination of these committees, in-creased to $35,000 per election cycle.

This rulemaking also included regulations to pro-hibit contributions and donations by minors to federalcandidates and political party committees and to re-vise regulations regarding the reattribution of contribu-tions to different contributors and the redesignation ofcontributions for different elections.

In December, the Commission approved interimfinal rules to implement the so-called “Millionaires’Amendment,” which increases individual contributionlimits and coordinated party expenditure limits forcertain candidates running against self-financed op-ponents. The rules establish monetary thresholdsthat trigger increased individual contribution and coor-dinated party expenditure limits, along with computa-tion formulas used to determine the application of theincreased limits. The computation formulas are nec-essary in part because the difference between thecandidates’ expenditures of personal funds is not theonly factor that determines whether a candidate quali-fies for increased limits. The computations also takeinto account other factors, such as a disparity in othercampaign fundraising. Additionally, the interim rulesaddress new reporting and notification requirementsand repayment restrictions for personal loans from thecandidate.

DisclaimersPrior to the BCRA, the Act and Commission regula-

tions required that communications that solicited acontribution or expressly advocated the election ordefeat of a clearly identified candidate and were dis-tributed through general public political advertisinghad to contain a disclaimer. 2 U.S.C. §441d and 11CFR 110.11. The disclaimer had to indicate who paidfor the communication and, if made in support of acandidate, whether that candidate or a candidate’scommittee authorized the communication. If thecandidate’s committee both authorized and paid forthe communication, then the disclaimer had to state

Legal Issues 23

that the communication was paid for by the campaigncommittee.

In November 2002, provisions of the BCRA tookaffect that amended the Act’s disclaimer requirementsto require disclaimers on more types of communica-tions and, in some cases, to require that more infor-mation be disclosed. In addition to approving regula-tions to implement these portions of the BCRA, theCommission also issued one advisory opinion on thisissue, and one district court ruled on the matter,based on the Commission’s pre-BCRA regulations.

RegulationsThe new regulations apply to all public communica-

tions by all political committees and to any publiccommunication made by any person if the communi-cation contains express advocacy, solicits contribu-tions or is an “electioneering communication.”

Under the new regulations, any public communica-tion13 made by a political committee—including com-munications that do not expressly advocate the elec-tion or defeat of a clearly identified federal candidateor solicit a contribution—must display a disclaimer.The disclaimer must state that the communication ispaid for by the committee. Moreover, a disclaimer fora communication authorized by a candidate orcandidate’s committee, but paid for by any other per-son, must state both who paid for the communicationand that it was authorized by that candidate.

Communications not authorized by a candidate orhis/her campaign committee, including any solicita-tion, must disclose the permanent street address,telephone number or web site address of the personwho paid for the communication, and also state thatthe communication was not authorized by any candi-date.

The new rules include additional requirements fordisclaimers for radio and television communications—the so-called “stand by your ad” rules. When suchcommunications are authorized by a candidate, he orshe must deliver an audio statement identifying him-self or herself, and stating that he or she has ap-proved the communication. For a television commu-nication, this disclaimer must be conveyed by either afull-screen view of the candidate making the state-ment or a clearly identifiable image of the candidatethat appears during the candidate’s voice-over state-ment. Additionally, television communications mustcontain a written disclaimer at the end of the ad.

For a radio or television communication that is notauthorized by a candidate, the name of the politicalcommittee or other person who is responsible for thecommunication and, if applicable, the name of thesponsoring committee’s connected organization isrequired in the disclaimer.

A televised ad must also include a disclaimer con-veyed by a full-screen view of a representative of thepolitical committee or other person making the state-ment, or a voice-over by the representative, and awritten disclaimer must appear at the end of the com-munication.

Printed materials must contain a disclaimer in aprinted box that is set apart from the contents in thecommunication, among other requirements.

Advisory OpinionIn AO 2002-9, the Commission ruled that Target

Wireless may send political ads to wireless phonesubscribers via Short Messaging Service (SMS) with-out including a disclaimer stating who paid for the adand whether it was authorized by a candidate. SMSmessages are limited to 160 characters in length, andthe entire message—including the primary content,the political ad and any disclaimer included—is notcapable of conveying more than this number of let-ters, symbols, spaces, punctuation marks and singledigits.

The Commission regulations governing disclaimersinclude exceptions for small items upon which a dis-claimer cannot be conveniently printed, such asbumper stickers, pins, buttons and pens. 11 CFR

13 The new regulations apply to electioneering communi-cations and “public communications,” including any “com-munication by means of any broadcast, cable or satellitecommunication, newspaper, magazine, outdoor advertisingfacility, mass mailing or telephone bank to the general pub-lic, or any other form of general public political advertising.”For the purposes of the disclaimer regulations only, the term“public communication” also includes political committees’web sites and unsolicited e-mail of more than 500 substan-tially-similar communications. See 11 CFR 100.26.

Chapter Three24

110.11(a)(6)(i). In this case, the Commission deter-mined that because the SMS messages, like bumperstickers, pins and other small objects, are limited inthe size and length of the messages they can contain,the small-item exception from the Commission’s dis-claimer requirement applies to SMS messages.

FEC v. Freedom’s Heritage Forum, et al.On March 28, 2002, the U.S. District Court for the

Western District of Kentucky at Louisville granted theCommission’s motion for summary judgment onclaims that the Freedom’s Heritage Forum, a politicalcommittee that promotes pro-life and other socialissues, failed to include the required disclaimers onexpress-advocacy communications.14 The Commis-sion had argued, among other things, that Freedom’sHeritage Forum (the Forum), distributed seven flyersexpressly advocating the election or defeat of a fed-eral candidate, Thomas Hardy,15 and failed to includedisclaimers. 2 U.S.C. §441d(a). Having previouslyfound that three of the Forum’s flyers contained ex-press advocacy, and that none of them statedwhether they were authorized by a candidate, thecourt granted the Commission summary judgment onits claims that the Forum violated 2 U.S.C. §441d(a).The court imposed a $3,000 penalty—$1,000 for eachviolation.

In their counterclaims, the defendants alleged,among other things, that the Commission violatedtheir rights to equal protection under the FourteenthAmendment by selectively enforcing the Act against

them because of their conservative political views.Under the Sixth Circuit’s three-part test for evaluatinga selective enforcement claim, the enforcement situa-tion in question must:• Single out for prosecution a person belonging to an

identifiable group (such as a group exercising consti-tutional rights) even though the enforcement officialhas in similar situations decided not to prosecuteindividuals not belonging to that group;

• Be initiated with a discriminatory purpose; and• Have a discriminatory effect on the group to which

the defendant belongs.The defendants contended that the Commission

did not prosecute any other group involved in theelection, including a gay or lesbian organization thatpublished an express advocacy communication forMr. Hardy’s opponent and did not include a dis-claimer. The defendants also generally claimed thatthe Commission does not prosecute “liberal politiciansand elected officials.” The court, however, grantedthe Commission’s motion to dismiss this counterclaim,finding that the defendants had not provided sufficientsupporting facts. The court also found that the defen-dants’ general claims of FEC bias were not specificenough to withstand scrutiny under the selective en-forcement test.

On December 5, 2002, the court denied the defen-dants’ requests to alter, amend or vacate this orderand to file counter claims.

Corporate ContributionsThe Act prohibits corporations and labor organiza-

tions from using their treasury funds to make contribu-tions or expenditures in connection with federal elec-tions. 2 U.S.C. §441b. During 2002, a number oflawsuits challenged the constitutionality of that banand related provisions of FEC regulations. Two casesinvolved so-called “MCFL” organizations, whichqualify for a constitutionally-mandated exception fromthe Act’s prohibition on corporate expenditures inconnection with a federal election. See FEC v. Mas-sachusetts Citizens for Life, Inc., (MCFL) 479 U.S.

14 The court also granted the Commission’s motion todismiss with prejudice several counts of its complaint be-cause the FEC had promulgated new coordination regula-tions since the case first entered the courts. Since this deci-sion, however, the Commission has again revisited its coor-dination regulations—as described above—as part of itsBCRA rulemakings.

15 The Commission also requested summary judgment onits claim that Mr. Hardy knowingly accepted corporate con-tributions in violation of 2 U.S.C. §441b(a). The court deter-mined, however, that although a campaign staff memberhad knowingly accepted the illegal contribution, the Com-mission had not provided uncontested evidence that thestaff member acted on Mr. Hardy’s behalf. This issue re-mains to be resolved during a trial.

Legal Issues 25

238 (1986).16 These cases, along with additionalenforcement matters, advisory opinions and districtcourt decisions involving prohibited corporate contri-butions, are described below.

Christine Beaumont v. FECOn November 18, 2002, the U.S. Supreme Court

granted the government’s petition for writ of certiorarion behalf of the FEC, agreeing to review this case onits merits. On January 25, 2002, the U.S. Court ofAppeals for the Fourth Circuit found that the Act’sprohibitions on corporate contributions and expendi-tures were unconstitutional as applied to North Caro-lina Right to Life, Inc., a nonprofit, MCFL-type corpo-ration.17

Hawaii Right to Life, Inc. v. FECIn another case, a nonprofit corporation challenged

the Commission’s definition of a “qualified nonprofitcorporation,” along with both its definition of “ex-pressly advocating” and its newly promulgated ruleson “electioneering communications.” In a complaintfiled on November 22, 2002, in the U.S. District Courtfor the District of Columbia, Hawaii Right to Life, Inc.,(HRTL) asked the court to find that it qualifies for theconstitutionally mandated exception from the Act’sprohibition on corporate expenditures. In the alterna-tive, HRTL challenged the constitutionality of theCommission’s definitions of “electioneering communi-

cation” and “expressly advocating.” 11 CFR 100.29and 100.22. HRTL planned, among other things, toair radio ads in advance of two Hawaii special elec-tions.

HRTL asserted that it could run these ads becauseit met the requirements of a protected nonprofit corpo-ration under MCFL, even though it did not meet thetest of a “qualified nonprofit corporation” under theCommission’s regulations at 11 CFR 114.10(c).HRTL contended that the Commission’s criteria foridentifying “qualified nonprofit corporations” are toonarrow and that, because its business activities andcorporate contributions are de minimis, it shouldqualify for the exemption. HRTL also claimed that theads would contain issue advocacy rather than ex-press advocacy, and that it would be unable to partici-pate in its planned activity unless the court enjoinedthe Commission from enforcing against HRTL the“electioneering communication” and “expressly advo-cating” regulations.

The court ruled that HRTL currently is a nonprofitorganization that qualifies under the MCFL decision(as interpreted in the D.C. Circuit) for the exemptionfrom the ban on corporate expenditures, despite thefact that it engages in de minimis business activitiesand receives insubstantial sums from business corpo-rations. In FEC v. National Rifle Association, thecourt held that $1,000 in contributions from for-profitcorporations in a single year was de minimis, andtherefore did not disqualify the NRA from treatment asan exempt “MCFL-corporation” during that year. 254F.3d 173 (D.C. Cir. 2001). The court chose not to ruleat any time on HRTL’s challenge regarding the consti-tutionality of Commission regulations. The court en-tered a final order that permanently enjoined theCommission from acting inconsistently with the court’sfinding that HRTL is currently a so-called “MCFL-corporation.”

FEC v. Arlen Specter ’96, Inc.Under Commission regulations, a campaign com-

mittee must pay the charter fare for air travel on anFAA-licensed commercial charter carrier. 11 CFR114.9(e). If the campaign pays less than the charterrate, then the difference between the usual and nor-

16 Under Commission regulations a corporation is consid-ered a “qualified nonprofit corporation” if it meets the follow-ing criteria:• Its only express purpose is the promotion of political ideas;• It cannot engage in business activities;• It has no shareholders and no persons who are offered or

receive any benefit that is a disincentive to disassociatefrom the corporation on the basis of the corporation’sposition on a political issue;

• It was not established by a business corporation and doesnot directly or indirectly accept donations or anything ofvalue from business corporations; and

• It is described in the Internal Revenue Code at 26 U.S.C.§501(c)(4). 11 CFR 114.10(c).

17 The Supreme Court heard oral arguments in ChristineBeaumont v. FEC on March 24, 2003.

Chapter Three26

mal cost of the service and the amount paid by thecandidate or committee represents an in-kind contri-bution. 11 CFR 100.7(a)(1)(iii)(A). In March 2002,the U.S. District Court for the Eastern District of Penn-sylvania, pursuant to a stipulation between the Com-mission and Koro Aviation, Inc., (Koro) held that Koroviolated 2 U.S.C. §441b(a) by making unlawful in-kindcorporate contributions to Arlen Specter ’96, Inc., inthe form of air travel services charged at less than theusual and normal rate. The court permanently en-joined Koro from violating 2 U.S.C. §441b(a) by pro-viding goods or services to any federal candidate atless than the usual and normal charge and also or-dered Koro to pay a $25,000 civil penalty.18

Advisory OpinionIn AO 2002-7, the Commission determined that

Careau & Co. and Moher Communications (the Com-panies) may require Internet service provider sub-scribers to pay a monthly service fee that includes upto $2.00 per month in contributions to political commit-tees or donations to charities. The Commission foundthat this activity would not result in prohibited corpo-rate contributions to recipient political committees.

First, no corporate contributions will result from thetransactions—vendors providing processing serviceswill be compensated with contributed funds and theCompanies will be compensated by the federal politi-cal committees for creating the web site and arrang-ing for the processing services.

Second, the funds contributed will be forwarded,minus processing fees, to the political committees orcharities through the use of a merchant account and,thus, will not become corporate treasury funds of theCompanies.

Finally, the screening procedure for the electronicpayment of contributions is well within the “safe har-bor” for determining whether individuals can contrib-ute to federal political committees, as discussed inprevious advisory opinions. AOs 1999-9 and 1999-22.

EnforcementMUR 5187. In MUR 5187 the Commission exam-

ined the use of corporate treasury funds to reimburseindividuals who made contributions to federal candi-dates and political committees. As a result of thisenforcement matter, the Commission entered intoconciliation agreements with Mattel, Inc., (Mattel)former Mattel Senior Vice President Fermin Cuza andformer Mattel consultant Alan Schwartz, resulting incivil penalties of $477,000—one of the highest cumu-lative civil penalties in the history of the Commission.The agreements provide for Mattel to pay $94,000,Mr. Cuza to pay $188,000 and Mr. Schwartz to pay$195,000 in civil penalties.

In addition to the ban on corporate contributions,the Act prohibits making contributions in the name ofanother, knowingly permitting one’s name to be usedto effect such a contribution and knowingly acceptingsuch a contribution. Further, no person may know-ingly help or assist any person in making a contribu-tion in the name of another. This prohibition alsoapplies to any person who provides the money toothers to effect contributions in their names. 2 U.S.C.§441f.

Mr. Cuza, who was in charge of Government Af-fairs at Mattel, directed the hiring of Alan Schwartz—the sole proprietor of Asset Management Systems(AMS)—as a consultant to Mattel. According to theconciliation agreements, Mattel made payments toAMS, at Mr. Cuza’s direction, for various consultingservices and other purposes. In consultation with Mr.Cuza, Mr. Schwartz used these funds to make contri-butions to federal candidates and political commit-tees. Mr. Schwartz also used funds received fromMattel to reimburse individuals for contributions tovarious federal political committees. As a result, Mr.Cuza and Mr. Schwartz, their spouses and familymembers and other individuals made reimbursedcontributions totaling $120,714 to federal politicalcommittees.

The Commission’s investigation stemmed from asua sponte complaint filed by Mattel. The Commis-sion acknowledged that there was evidence that Mr.Cuza concealed the reimbursements from his superi-ors at Mattel, and it also found no evidence that any

18 In March 2003, the U.S. District Court entered a settle-ment agreement among the remaining parties in whichArlen Specter ’96, Inc., and Paul S. Diamond as treasureragreed to pay $25,000 to the United States Treasury.

Legal Issues 27

of the recipient political committees were aware thatMattel was the true source of the contributions.

MUR 5208. In MUR 5208 the Commission consid-ered Amboy National Bank’s (Amboy) violation of theAct’s broad restrictions on contributions and expendi-tures by national banks. The Act prohibits a nationalbank from making contributions “in connection withany election to any political office, or in connectionwith any primary election or political convention orcaucus held to select candidates for any political of-fice.” Moreover, under the Act, Amboy, which doesnot have a corporate PAC, may not use its resourcesor facilities to engage in fundraising activities—includ-ing the collecting and forwarding of contributions. 2U.S.C. §441b(b)(2)(A) and 11 CFR 114.2(f) and114.3(a)(1); see also AO 1987-29.

In the early 1990s, Amboy’s Board of Directorsapproved an expense account program wherein se-nior officers made political contributions from theseaccounts. A Vice President at Amboy performed ac-tivities during regular business hours in connectionwith opening the expense accounts, ordering checksfor drawing on these accounts, drafting, signing andtransmitting contribution checks and updating spread-sheets to track contributions made from each ac-count. When political solicitations were received byAmboy or by individual officers, they were generallyforwarded to this individual, who worked with Amboy’sPresident and Board of Directors Chairman, GeorgeScharpf, to coordinate political contributions and at-tendance at fundraising events in an informal manner.

Senior officers used their expense accounts tomake at least 149 contributions totaling $55,322. Inaddition, Mr. Scharpf directed his executive assistantto collect and forward during work hours contributionsto the New Jersey Bankers Association PAC(JebPAC) that were made from staff members’ per-sonal bank accounts. By using its staff and otherresources to set up and administer the expense ac-count program and to collect and forward contribu-tions, Amboy facilitated the making of these contribu-tions.

In addition to findings against Amboy concerningcorporate facilitation, Amboy and JebPAC also admit-ted to violating the Act’s requirement that a solicitation

for a contribution to a trade association’s PAC includea notice informing the solicitee of his or her right torefuse to contribute without reprisal. 11 CFR114.5(a)(2)-(5). See also AOs 1998-19 and 1985-12.The Commission entered into conciliation agreementswith Amboy, JebPAC and Mr. Scharpf, resulting in$86,000 in civil penalties.

Personal Use of Campaign FundsOn November 25, 2002, the Commission approved

new rules, driven by the BCRA, concerning the per-sonal use of campaign funds. Earlier in the year, theCommission also issued one advisory opinion underits previous rules. The new rules generally continuethe existing prohibition against the personal use ofcampaign funds and retain the so-called “irrespectivetest.” Candidates may not, therefore, use funds in acampaign account to “fulfill a commitment, obligation,or expense of any person that would exist irrespectiveof the candidate’s campaign or duties as a Federalofficeholder.” 11 CFR 113.1(g). Personal use ofcampaign funds includes, but is not limited to, pay-ment of the following: household items or supplies,clothing, except for clothing items of de minimis valuethat are used in a campaign, tuition payments, mort-gage, rent or utility payments, vacations and health orcountry club dues. 11 CFR 113.1(g)(1)(i). The regu-lations have, however, been amended as follows.

RegulationsThe most notable change to the personal use regu-

lations permits a candidate for federal office to receivea salary from the principal campaign committee. Ac-cording to the regulations, a salary may be receivedonly under the following conditions:• The salary must be paid by the principal campaign

committee and may not be paid by any other com-mittee.

• Incumbent federal officeholders may not receivesalary payments under this provision.

• Salary shall not be paid before the filing deadline foraccess to the primary election ballot in the state in

Chapter Three28

which the candidate is running for office, and salarymay not be paid beyond the date when the recipientis no longer a candidate.19

• The salary must not exceed the lesser of either theminimum annual salary for the federal office soughtor what the candidate received as earned income inthe previous year.20

• Payments of salary from the committee must bemade on a pro-rata basis.21

• Individuals who elect to receive a salary from theircampaign committees must provide income taxrecords and additional proof of earnings from rel-evant years upon request from the Commission.

The new regulations also amend the definition of acandidate’s family at 11 CFR 113.1(g)(7). The previ-ous regulations included as a member of acandidate’s family “a person who has a committedrelationship with a candidate, such as sharing ahousehold and having mutual responsibility for eachother’s welfare or living expenses.” 11 CFR113.1(g)(7)(iv). This section has been removed fromthe new regulations and replaced with a provision thatincludes any person who shares a residence with thecandidate. The Commission recognizes that anyperson actually living with the candidate may pay ashare of his or her living expenses without making acontribution to the campaign. The Commission fur-ther noted that the personal funds of a candidatewould include his or her share of a joint account heldwith the person(s) with whom a residence is shared.However, gifts from the campaign to family membersor anyone residing with the candidate are prohibitedbecause they may be used to defray the personalexpenses of the candidate. 11 CFR 113.1 (g)(4).

Because the regulations permit, in certain circum-stances, the de minimis personal use of campaignfunds, recordkeeping requirements for expenses thatmay be partly personal in nature have been added tothe regulations. Such expenses may include, but arenot limited to, the costs of vehicles, travel, meals andlegal services. The new provision requires that logsof these expenses be maintained to help the Commis-sion determine on a case-by-case basis what portionwas for personal use rather than for campaign-relatedactivity or officeholder duties.

The Commission has removed from the regulationsthe section referring to “any other lawful purpose” as apermitted use of campaign funds. The BCRA madesuch an amendment to the list of permitted uses ofcampaign funds at 2 U.S.C. §439a. Thus, in additionto paying expenses in connection with the campaignfor federal office, campaign funds may be used onlyfor those non-campaign purposes included in an ex-haustive list found at 11 CFR 113.2 (a), (b) and (c).

Finally, Congress deleted the statutory phrase “inexcess of any amount to defray” campaign expensesfrom 2 U.S.C. § 439a. Therefore, the Commissionrevised 11 CFR 113.1 and 113.2 so that officeholdersmay spend money from campaign accounts to pay forcampaign and non-campaign expenses incurred as aconsequence of holding federal office. Such ex-penses, according to the Commission, may be paid inany order.

Advisory OpinionThe Commission also considered one advisory

opinion, under the pre-BCRA rules, that dealt with thepersonal use of campaign funds where a federal can-didate who was also a city mayor engaged in travelthat included personal stops, city business and cam-paign activity. In AO 2002-5, the Commission deter-mined Ann Hutchison, the Mayor of Bettendorf, Iowa,could use campaign funds to pay those travel ex-penses that related to days when she met with partyofficials to discuss her federal candidacy and en-gaged in other campaign activity, but could not usecampaign funds to pay expenses related to portionsof the trip that were devoted to either personal activi-ties or city business.

19 The filing deadline for the primary election for federalcandidates is determined by state law. In those states thatdo not have a primary election, candidates may not receivepayment until after January 1st of each even-numberedyear.

20 Additional salary or wages received from other sourceswill count toward the limit that may be received by the can-didate.

21 This provision will prevent a candidate from receiving awhole year’s salary for less than a whole year’s candidacy.

Legal Issues 29

Although the Commission’s regulations at 11 CFR106.3 would otherwise require that all travel expensesfor such a trip be considered campaign related (un-less the campaign activity was incidental), the Com-mission determined that this reasoning would implythat campaign funds could be used to pay for all ofthe travel expenses, including sight-seeing and citybusiness.22 The Commission concluded that this re-sult would be inconsistent with, or even contrary to,the personal use regulations. Thus, the Commissionapplied an incremental approach to determine whichfunds could be used to pay for Mayor Hutchison’stravel, subsistence and lodging expenses during thetrip. However, because the airfare represented a de-fined expense that would have existed irrespective ofany personal or campaign-related activities, the entirecost of the ticket could be paid for by the city ofBettendorf, with no obligation by Ms. Hutchison or hercampaign committee to reimburse the city.

Foreign NationalsThe BCRA strengthened the Act’s prohibitions with

respect to foreign nationals by explicitly banning con-tributions, donations, expenditures, independent ex-penditures and disbursements for electioneering com-munications by foreign nationals. In addition to pro-mulgating new regulations to implement the BCRA’sprovisions, during 2002 the Commission concludedan enforcement matter involving contributions by for-eign nationals, which resulted in record civil penalties.This enforcement matter was conducted prior to theBCRA.

New RegulationsOn October 31, 2002, the Commission approved

regulations that added new section 11 CFR 110.20,implementing the BCRA’s prohibition on contributions,donations, expenditures, independent expenditures

and disbursements solicited, accepted, received ormade directly or indirectly by or from foreign nationalsin connection with state and local elections as well asfederal elections. This ban applies to:• Contributions and donations to candidates, to politi-

cal committees23 and to organizations of politicalparties;

• Contributions and donations to party committee of-fice building funds;

• Disbursements for electioneering communications;• Expenditures, independent expenditures and dis-

bursements in connection with any election; and• The solicitation, acceptance or receipt of contribu-

tions and donations from foreign nationals.The foreign national prohibition also applies to a

person who knowingly provides substantial assistanceto foreign nationals in the making of contributions,donations, expenditures, independent expendituresand disbursements in connection with federal andnonfederal elections. This prohibition covers, but isnot limited to, acting as a conduit or intermediary forforeign national contributions and donations and pro-viding substantial assistance in the soliciting, makingor receiving of such a contribution or donation or themaking of an independent expenditure or disburse-ment by a foreign national. 11 CFR 110.20(g) and(h).

The Commission has additionally included a knowl-edge requirement and defined the term “knowingly”with regard to the prohibitions on the solicitation, ac-ceptance or receipt of foreign national contributions ordonations. The Commission determined that thiswould produce a more appropriate result than a strictliability standard.

MURs 4530, et al.Individuals, corporations and political committees

are subject to civil penalties for soliciting, making and/or accepting prohibited foreign national contributionsand making or accepting contributions in the name of

22 An incremental approach toward travel expenses oftrips with multiple purposes departs from the interpretationof 11 CFR 106.3(b)(3) in AOs 1992-34 and 1994-37. There-fore, the portions of these two opinions dealing with section106.3(b)(3) that are inconsistent with the analysis adoptedin this opinion are superseded.

23 This prohibition applies regardless of whether the com-mittee is a political committee under 11 CFR 100.5. See 11CFR 110.20(c)(2).

Chapter Three30

another. 2 U.S.C. §§441e and 441f. On September20, 2002, the Commission made public its final actionon enforcement cases related primarily to foreignactivity in connection with the 1996 elections—MUR4530, et al.24 The combined enforcement actionsresulted in $719,500 in civil penalties, and committeeswere required to disgorge certain prohibited funds.The cumulative civil penalty in these matters is thehighest in Commission history to date.

Examples of foreign nationals making contributionsinclude Georgios Psaltis, a Greek foreign national,who was the sole owner of the Psaltis Corporation.The Psaltis Corporation made $50,000 in contribu-tions to the Democratic National Committee (DNC),which was also a respondent in these enforcementactions. The Psaltis Corporation had no U.S.-derivedincome at the time of the contributions. Rather, thefunds were provided, at least in part, by Mr. Psaltishimself. In another instance, Gilberto Pagan, a citizenof the Dominican Republic, contributed $5,000 to theDNC using a check drawn on the Royal Bank ofCanada. Moreover, although the DNC was informedof Mr. Pagan’s status as a foreign national, the checkwas not timely refunded or disgorged. The DNCagreed to pay a $115,000 civil penalty stemming fromits acceptance of prohibited contributions.

The Commission also found violations of the Act incases where a foreign national directed, dictated,controlled or directly or indirectly participated in thedecision-making process of a person, including do-mestic corporations, with regard to decisions concern-ing the making of contributions in connection withelections for local, state or federal office. For ex-ample, when ACPC, Inc., which is incorporated inDelaware, made a corporate contribution of $50,000to the DNC, Alfredo Riviere, the corporation’s Presi-

dent at the time and a Venezuelan national, partici-pated in that decision. See 11 CFR 110.20.

Finally, the Commission examined situations wherecontributions—including contributions from foreignnationals—were made through another person, inviolation of the Act’s ban on contributions in the nameof another. 2 U.S.C. §441f and 11 CFR 110.4(b).Yah Lin “Charlie” Trie, a U.S. citizen, was amongthose found to have violated this provision. He madenumerous contributions to the DNC directly, throughhis wife, his companies and other U.S. residents.These contributions were then reimbursed with fundsprimarily from a foreign national, Ng Lap Seng, a citi-zen of China who resides in Macau. Similarly,Pauline Kanchanalak, a foreign national and Presi-dent of Ban Chang International (USA), Inc., a Cay-man Island corporation with offices in Washington,DC, channeled over $700,000 through DuangnetKronenberg and Praitun Kanchanalak, both perma-nent U.S. residents, to the DNC and other politicalcommittees. These funds came from the treasuries ofBan Chang International, a foreign corporation, andits U.S. subsidiary, and from the personal funds ofPauline Kanchanalak and other foreign nationals.

PreemptionThe Act and Commission regulations “supersede

and preempt any provision of State law with respectto election to Federal office.” 2 U.S.C. §453; 11 CFR108.7(a).25 According to the Conference Committeereport on the 1974 Amendments to the Act, “Federallaw occupies the field with respect to criminal sanc-tions relating to limitations on campaign expenditures,the sources of campaign funds used in Federal races,

24 In addition to violations involving the Act’s prohibitionson the contributions from foreign nationals, the conciliationagreements addressed violations of the Act’s prohibitionson corporate contributions and facilitation and its contribu-tion limits, as well as the requirements of Commission regu-lations that political committee treasurers refund within 30days any deposited contributions that are discovered to beillegal.

25 New regulations that implement the BCRA made twoadditions to the list of state laws that the Act does not su-persede: (1) the application of state law to the funds usedfor the purchase or construction of a state or local partyoffice building to the extent described in 11 CFR 300.35;and (2) donations made by minors to state, district and localparty committees. 11 CFR 108.7(c)(5) and (6) and110.19(b)(3). See also the Explanation and Justification forthe rules on contribution limitations and prohibitions (67 FR69928), pages 69938 and 69939.

Legal Issues 31

the conduct of Federal campaigns, and similar of-fences, but does not affect the States’ rights” as toother election-related conduct, such as voter fraudand ballot theft. H.R. Rep. No. 93-1438, 93rd Cong.2d Sess. 69 and 100-101 (1974). The Commissionissued two advisory opinions in 2002 relating to theAct’s preemption of state law.

Bingo License.In AO 2001-19, the Commission considered a 1995

Michigan statute that excludes “political committees,”as defined by state law, from the list of organizationsqualified to obtain a bingo license (1995 PA 275, MCL432.103 et seq.), and found that the Act did not super-sede this law. The Oakland Democratic CampaignCommittee (the Committee), which operated two bin-gos to raise funds to influence federal elections, hadreceived notification from the Michigan Bureau ofState Lottery that it fell within the definition of a “com-mittee” under the Michigan statute and, as a result,was no longer eligible for a state bingo license. TheCommission stated no opinion regarding whether theCommittee falls under the Michigan statute’s definitionof “political committee,” stating that this is a matter tobe decided by Michigan officials, pursuant to statelaw. In concluding that the Act did not supersedestate law, the Commission noted that FEC regulationsspecifically recognize state authority regarding gam-ing activity by permitting certain committees to usegaming devices such as raffles, only “so long as statelaw permits” their use. 11 CFR 114.5 (b)(2). Addi-tionally, the Commission explained that theCommittee’s situation differed significantly from situa-tions dealt with in past opinions, in which the Commis-sion preempted state laws that disqualified an entireclass of contributors to federal campaigns. AOs2000-23, 1995-48, 1993-25 and 1989-12.

Soliciting Contributions and Serving onFundraising Committee.

In AO 2002-2, the Commission determined that theAct preempts provisions of Maryland law with respectto certain activities planned by Eric Gally, a registeredlobbyist who intended to:• Hold a private fundraiser for friends and family mem-

bers in his home in order to solicit contributions to a

federal candidate who was also a member of theGeneral Assembly; and

• Solicit other friends and family for contributions tothis candidate.

Provisions of the Maryland statute prohibit lobbyistsfrom soliciting or transmitting a political contribution toa member of the General Assembly and from servingon a fundraising committee or political committee of acandidate who is a member of the General Assembly.Md. Code Ann., State Gov’t §15-714(d)(1)(i) and (ii)(2001).

Commission regulations, however, provide thatfederal law supersedes state law with respect to fed-eral candidates and political committees with regardto the organization and registration of committees, thedisclosure of receipts and expenditures and the limita-tions on contributions and expenditures. 11 CFR108.7(b).26 The Act and Commission regulations gov-ern the sources of funds used in federal races, prohib-iting and limiting contributions and solicitations byvarious entities. Moreover, they specifically cover Mr.Gally’s solicitation activities by the application of spe-cific exceptions to the definition of “contribution” for anindividual’s volunteer services and for a volunteer’suse of his or her home for campaign-related activi-ties—including up to $1,000 per election for food,beverages and invitations. 2 U.S.C. §431(8)(B)(i) and(ii); 11 CFR 100.7(b)(3), (4) and (6). The Act andCommission regulations also address the transmittalof contributions. For example, they prohibit transmit-tal by certain persons and set a time period in which aperson who receives a contribution for a political com-mittee must transmit it to the committee. 2 U.S.C.§432(b); 11 CFR 102.6(b)(1), 110.6(b)(2)(ii) and102.8. Thus, the Commission determined that, asapplied to these fundraising activities for a federalcandidate, these provisions of Maryland law addressactivities reserved for regulation under federal law.

26 See Federal Election Commission Regulations, Expla-nation and Justification, House Document No. 95-44, at 51.See also, H.R. Rep. No. 93-1438, 93d Cong., 2d Sess. 100-101 (1974).

Chapter Three32

Administrative FinesThe Commission’s Administrative Fine program

was extended in 2001 to cover violations that relate toreporting periods through December 31, 2003. Underthe administrative fines regulations, respondents maychallenge the Commission’s RTB finding and/or pro-posed civil money penalty based, among other things,on “the existence of extraordinary circumstances be-yond the respondents’ control that were for a durationof at least 48 hours and prevented them from timelyfiling the report.” 11 CFR 111.35. The regulationsalso provide several broad examples of circum-stances that will not be considered “extraordinarycircumstances.”27 In 2002, district courts ruled on anumber of challenges to the Commission’s final ad-ministrative fine determinations, three of which aredescribed below.

Cunningham v. FECThe U.S. District Court for the Southern District of

Indiana granted the Commission’s motion for sum-mary judgment against the Robert W. Rock for Con-gress committee (the Committee) and its treasurer,Jeremiah T. Cunningham. The Committee had filedsuit challenging the Commission’s determination thatthe Committee had failed to file timely its 2000 Post-General report and alleging that the civil money pen-alty assessed by the Commission was excessive,erroneous and unwarranted.

The court found that the Committee had waivedbefore the court any arguments it failed to raise be-fore the Commission during its administrative pro-ceedings (see 11 CFR 111.38). The court additionallyruled that the Commission’s penalty determination,assessed in accordance with its administrative finesregulations, was not arbitrary and capricious. Underthe Act, when calculating civil penalties, the Commis-sion must consider the amount of the violation in-volved (that is, the level of activity of the report that

was untimely filed) and the existence of any priorviolations. The Act delegates solely to the Commis-sion the determination of what other factors to takeinto account in calculating the civil penalty at 2 U.S.C.§437g(a)(4)(C)(i)(II)—a decision that the court con-cluded was not for courts “to second guess.”

Friends for Houghton v. FECThe U.S. District Court for the Western District of

New York granted the Commission’s motion for sum-mary judgment and dismissed this case concerningFriends for Houghton’s (the Committee) appeal of acivil money penalty for failure to timely file theCommittee’s 2000 Pre-Primary Report. According tothe allegations in the complaint, on September 1,2000, the Commission sent a notice to the Committeeindicating that it may have failed to file its pre-primaryreport, and that it would have four business days fromthe date of the notice to file the report. Because of theLabor Day holiday, the fourth business day after theCommission’s notice was September 8. The Commit-tee filed the report on that day.

On October 17, 2000, the Commission found rea-son to believe that the Committee and its treasurerhad violated 2 U.S.C. §434(a). Having filed its pre-primary report less than five days before the election,the committee was subject to the schedule of penal-ties for reports that are “not filed.” The Commissionassessed a civil money penalty in the amount of$9,000 in accordance with 11 CFR 111.43. In itscomplaint, the Committee asked the court to order theCommission to modify both its determination that theCommittee was a nonfiler and its assessment of thecivil money penalty.

The Act requires the Commission to notify anyprincipal campaign committee of a House or Senatecandidate that may have failed to file a required pre-election report or a quarterly report before an electionof its failure to file such report, prior to taking actionagainst that committee. If the committee does not filethe report within four business days of the notification,the Commission must publish, before the election, thename of that committee as having failed to file thereport. 2 U.S.C. §437g(b). In addition to this statutoryrequirement, Commission regulations provide that

27 On April 16, 2003, new rules took effect that makeseveral amendments to the administrative fine rules. Thefinal rules were published in the March 17, 2003, FederalRegister (67 FR 12572).

Legal Issues 33

election-sensitive reports are subject to the scheduleof penalties for “late” reports if they are filed after theirdue date, but more than four days before an election.Committees filing later than that, or failing to file at all,are subject to the schedule of penalties for reportsthat are “not filed.”

The court observed that while the Commission’snotice informed the Committee that the Commissionwas considering taking action against it and providedthe Committee with a four business-day window to fileits report and avoid the publication of its name, “Sec-tion 437g(b) does not . . . attach any additional signifi-cance to the four business-day rule. More specifically,437g(b) does not indicate that, by filing within fourbusiness days, the late filing is excused [and] that theperson avoids a monetary penalty.”

Thus, while a committee has four additional busi-ness days to file a report in order to avoid the publica-tion of its name before the election, neither the Actnor Commission regulations provide a grace periodfor calculating a penalty under the Administrative Fineprogram.

Miles for Senate v. FECThe U.S. District Court for the District of Minnesota

granted judgment in favor of the Commission in thiscase. The Miles for Senate Committee, Steven H.Miles and Barbara Steinberg (the plaintiffs) filed suitagainst the Commission on January 18, 2001, appeal-ing a civil money penalty the Commission assessedagainst Miles for Senate (the Committee) and its trea-surer, Barbara Steinberg, LTD. The plaintiffs hadargued, among other things, that Commission regula-tions that distinguish between certified or registeredmail and regular mail for the purpose of determiningwhen a report is filed are arbitrary and capricious andin excess of the Commission’s rulemaking authority.11 CFR 104.5(e).

The court found that Mr. Miles and Ms. Steinberglacked standing to request judicial review, and thatthe plaintiffs’ arguments were untimely because theydid not raise them during the Commission’s adminis-trative process. Moreover, the court found that, evenif the plaintiffs had raised their arguments in a timelymanner, the arguments were unpersuasive and failed

as a matter of law. In their motion to the court, theplaintiffs had argued that the Commission regulationthat distinguishes between first class mail and regis-tered or certified mail exceeds the Commission’srulemaking authority and draws an arbitrary distinc-tion. 11 CFR 104.5(e). The court, however, did notfind that the regulation exceeded the Commission’sauthority to make regulations to implement the Act:“Because the regulation merely incorporates thesame distinction as that made by the statute, it is im-possible to find that the regulation is inconsistent withthe statute.” 2 U.S.C. §434(a)(5). The court alsoconcluded that it could not respond to the plaintiffs’arguments concerning whether distinguishing amongpostmarks was a “bad policy.” Such arguments, thecourt explained, should be addressed to legislatorsand administrators rather than to the courts.

35

Chapter FourPresidential Public Funding

Public funding has been a key part of our Presiden-tial election system since 1976. The program isfunded by the $3 tax checkoff and administered bythe Federal Election Commission. Through the publicfunding program, the federal government providesmatching funds to qualified candidates for their pri-mary campaigns, federal funds to major and minorparties for Presidential nominating conventions andgrants to Presidential nominees for the general elec-tion campaigns.

ShortfallThe Commission projects the temporary shortfall in

matching funds that has occurred in the past twoPresidential elections may recur in 2004, and it ap-pears that the January 2004 payout may be onlyabout 53 cents on the dollar. The funds considered“available” by the Department of Treasury will beabout $19.3 million, and the funds to which candi-dates will be entitled will be about $36.6 million.Thus, the payouts will have to be reduced accord-ingly. February and March payouts also will be lessthan 100 percent, but by the April 2004 payouts, thetemporary shortfall will have ended under this projec-tion because the check-off proceeds flowing intoTreasury Department accounts will be adequate tomake up the earlier deficiencies.

Entitlement to Pre-General ElectionPresidential Funding

In 2002 the Commission continued to examineissues related to the public funding of minor partyPresidential candidates. Under the Presidential Elec-tion Campaign Fund Act (the Fund Act), a Presidentialcandidate1 of one or more political parties (not includ-ing a major party) is entitled to pre-general election

payments if he or she was a candidate for such officein the preceding election and received between fiveand 25 percent of the popular vote. Additionally, thePresidential nominee of a minor party is entitled topre-general election payments if that party’s candi-date in the prior election received between five and 25percent of the total vote.2 26 U.S.C. §§9004(a)(2)(A)and (B); 11 CFR 9004.2(a) and (b).

In AO 2002-1, in response to a request fromLenora B. Fulani and James Mangia, the Commissiondetermined that the entitlement for pre-general elec-tion Presidential funding in 2008 may not be deter-mined by aggregating the 2004 vote totals of severalminor party Presidential candidates. Instead, eachminor party must use the vote totals received by itsown Presidential candidate to determine the publicfunding entitlement, if any, of that party’s candidate inthe next Presidential election. 26 U.S.C. §9004.

The Commission reached this determination basedon the language of the Fund Act and Commissionregulations, which describe one Presidential candi-date per political party, rather than several Presiden-tial candidates of either the same party or of multipleparties. The Commission additionally consideredBuckley v. Valeo, in which the Supreme Court exam-ined the legislative history of the Fund Act and deter-mined that “Congress’ interest in not funding hopelesscandidates with large sums of public money, neces-sarily justifies the withholding of public assistancefrom candidates without a significant modicum of sup-port.” 424 U.S. 1 at 96 (1976). The Commissionconcluded that providing pre-general election fundingto a minor party based on the prior performances ofseveral minor party candidates within the same party,or of a group of Presidential candidates who join to-gether in one coalition despite differing party affilia-tions, runs counter to these concerns.

1 The Fund Act defines a Presidential “candidate” in thiscontext as an individual who has been nominated by amajor party to the office of President or Vice President orhas qualified to have his or her name on the ballot in atleast 10 states as a party’s Presidential or Vice-Presidentialcandidate. 26 U.S.C. §9002(2).

2 In both cases, other eligibility conditions must be met.The Fund Act defines a “minor party” as a political partywhose Presidential candidate in the preceding electionreceived, as the party’s candidate, at least five percent, butless than 25 percent, of the total popular votes for all Presi-dential candidates in that election. 26 U.S.C. §9002(7).

Chapter Four36

Repayment of Public Funds—2000Election

Once a Presidential election is over, the Commis-sion audits all of the candidates and committees thatreceived public funds to ensure that they used thosefunds only for qualified campaign expenses and thatthey maintained proper records and filed accuratereports. These audits are mandated under the FundAct. Sometimes an audit finds that a candidate orcommittee exceeded its expenditure limits, spent pub-lic funds on nonqualified expenses or ended the cam-paign with a surplus. In those cases, the Commissionmay require the candidate or committee to make arepayment to the U.S. Treasury (the Treasury).

Repayments may also stem from Commission de-terminations that contributions that were initiallythought to be matchable were later found to havebeen nonmatchable. Such determinations may or maynot result from the FEC’s audit of the committee. Dur-ing 2002, the Commission made final determinationsthat the campaigns of eight Presidential candidatesand one convention committee had to make repay-ments stemming from the 2000 elections.

Bradley CommitteeThe Commission determined that Bill Bradley’s

primary committee, Bill Bradley for President, Inc.,had to repay the Treasury $14,055, representingmatching funds that the committee received in excessof its entitlement, and an additional $28,085, repre-senting stale-dated checks.

Buchanan CommitteesThe Commission determined that Patrick

Buchanan’s general election campaign, BuchananFoster, Inc. (BFI), had to repay $58,033 to the Trea-sury. This amount represented $33,479 in surplusfunds and $24,554 that the committee received ininterest on invested public funds. The audit alsofound that BFI purchased a mailing list from the pri-mary committee, Buchanan Reform, Inc., at a costthat was $147,496 in excess of the fair market valueof the list. Thus, in determining BFI’s assets, the Au-

dit staff listed this overpayment as an amount receiv-able due from the primary committee.3

Bush CommitteesThe Commission determined that Bush-Cheney

2000, Inc. (BC2000), President Bush’s general elec-tion committee, had to repay $487,222 to the Trea-sury. The bulk of this amount represented incomethat the committee received from interest earned oninvested public funds and from selling the use of filmfootage related to its media ads. A portion of thisrepayment, $95,509, represented contributions thecommittee received when it paid the first-class fare forair travel on licensed commercial charter carriers,rather than the charter rate.4 An additional portionrepresented stale-dated checks. The remaining re-payment represented the amount that BC2000 ex-ceeded the $67,560,000 expenditure limitation forpublicly funded Presidential candidates in the 2000general election.

The Commission additionally determined that theBush-Cheney Compliance Committee, Inc., had tomake a $33,415 repayment representing stale-datedchecks. President Bush’s primary election committeedid not accept public funds and, thus, was not re-quired to be audited.

3 The Buchanan committees appealed the Commission’sdetermination.

4 Commission regulations provide that the campaign maypay the first-class rate if the airplane is owned or leased bya corporation, other than a corporation licensed to offercommercial travel services, and the travel is between citiesserved by regularly scheduled commercial service. 11 CFR114.9(e)(1). If the corporation is licensed to offer commer-cial air travel services and the campaign pays the first-classrate, rather than the charter rate, then the difference be-tween the first-class and charter rates represents a contri-bution to the campaign. If the Commission determines thata major party Presidential candidate who has acceptedpublic funding also accepts contributions to defray qualifiedcampaign expenses (other than contributions to make updeficiencies in payments from the Presidential ElectionCampaign Fund), then the candidate must repay thatamount to the Treasury. 11 CFR 9007.2(b)(5).

Presidential Public Funding 37

Gore CommitteesThe Commission’s final audit found that Gore 2000,

Inc., former Vice President Al Gore’s primary commit-tee, had to repay $170,591, representing surplusfunds, and $2,485 representing stale-dated checks.

Mr. Gore’s general election committee, Gore/Lieberman, Inc. (Gore/Lieberman), had to repay$11,625 representing interest earned on investedpublic funds. Gore/Lieberman and the Gore/Lieberman General Election Legal and AccountingCompliance Fund were additionally required to repay$3,262 to the Treasury, representing stale-datedchecks.

Keyes CommitteeThe Commission determined that Keyes 2000, Inc.,

Ambassador Alan Keyes’s primary committee, did notreceive public funds in excess of its entitlement, buthad to repay $104,448 to the Treasury representingboth nonqualified campaign expenses and costs as-sociated with continuing to campaign. The largestportion of this repayment, $74,439, representednonqualified campaign expenses. In most cases,Keyes 2000, Inc., lacked adequate documentation toshow the purpose of these expenses. Keyes 2000,Inc., was also required to repay $30,009, representingpublic funds it spent continuing to campaign after thecandidate’s date of ineligibility. In addition, Keyes2000, Inc., had to pay the Treasury $8,003, represent-ing stale-dated checks. See 11 CFR 9034.3(a)(3)(ii)and 9034.4(b)(3).

McCain CommitteesThe Commission’s final audit determined that

Senator John McCain’s 2000 primary committee,McCain 2000, Inc., and the McCain Compliance Com-mittee, Inc., had to repay $99,037 to the Treasury.The bulk of the repayment, $85,017, representedstale-dated checks. The audit also identified apparentnon-qualified campaign expenses, which includedsome expenses not related to the campaign andsome lost or stolen equipment. McCain 2000, Inc.,did not receive matching funds in excess of its entitle-ment.

Nader CommitteeThe Commission made a determination that Ralph

Nader’s primary committee, Nader 2000 PrimaryCommittee, Inc. (NPC), did not receive public funds inexcess of its entitlement, but was required to repay tothe Treasury $11,398, representing stale-datedchecks. The audit also found that NPC erroneouslyreceived 1,550 contributions that were instead in-tended for the general election campaign. Thus, theaudit did not consider the resulting $96,744 in contri-butions when calculating the amount of matchingfunds NPC was entitled to receive after Mr. Nader’sdate of ineligibility.

Quayle CommitteeThe Commission determined that Dan Quayle’s

2000 Presidential primary committee, Quayle 2000,Inc., did not receive matching funds in excess of itsentitlement; however, the Commission determinedthat it must repay to the Treasury $5,307, represent-ing stale-dated checks.

Reform Party 2000 Convention CommitteeFederal law permits all eligible national committees

of major and minor parties to receive public funds topay the official costs of their Presidential nominatingconventions. In 2002 the Commission determinedthat the Reform Party 2000 Convention Committee(the Convention Committee), which organized theReform Party’s national Presidential nominating con-vention in Long Beach, California, had to repay theTreasury $333,558, primarily representing payments itmade for activities and services not related to thatconvention. Most of this amount represented fundspaid to a consulting firm that did not perform servicesfor the nominating convention but instead appeared tohave worked on an Emergency National Conventionin Las Vegas. In March 2000 the U.S. District Courtfor the Western District of Virginia, Lynchburg Divi-sion, concluded that the Las Vegas Convention wasnot a properly convened convention of the Reformparty. Thus, payments associated with the Las Vegasconvention were not expenses for which the Conven-tion Committee could use public funds.

39

Chapter FiveThe Commission

CommissionersThe Commission welcomed two new members

during 2002.Michael E. Toner was nominated to the Federal

Election Commission by President Bush on March 2,2002, and appointed on March 29, 2002.

Prior to his appointment, Mr. Toner was ChiefCounsel to the Republican National Committee andserved as General Counsel to the Bush/Cheney Tran-sition and Bush/Cheney 2000 Presidential Campaign.

Ellen L. Weintraub was appointed to the Commis-sion on December 6, 2002, and sworn-in on Decem-ber 9. Before joining the Commission, Ms. Weintraubwas Of Counsel at Perkins Coie, LLP, in Washington,DC.

During 2002, David M. Mason served as Chairmanof the Commission and Karl J. Sandstrom served asits Vice Chairman. On December 18, 2002, the Com-mission elected Commissioner Weintraub as its Chairand Bradley A. Smith as Vice Chairman for 2003.

For biographies of the Commissioners and statu-tory officers, see Appendix 1.

Inspector GeneralUnder the Inspector General Act, the Commission’s

Office of the Inspector General (OIG) is authorized toconduct audits and investigations of FEC programs tofind waste, fraud and abuse and to promote economy,effectiveness and efficiency within the Commission.

In 2002, the OIG began an audit of theCommission’s disclosure process in response to arequest from Congressman Stephen Horn, Chairmanof the Subcommittee on Government Efficiency, Fi-nancial Management and Intergovernmental Rela-tions. The objectives of the audit are to: 1) determinethe extent, if any, of disclosure differences betweencandidate contributions reported by political commit-tees and related political committee contributionsreportedly received by candidates; and 2) determinewhether an adequate process is in place to remedy areporting discrepancy. The OIG planned to completethe audit in early 2003.

In June 2002, the OIG issued a review entitledLimited Scope Building Security Review. The objec-

tives of the study were to assess the effectiveness ofthe FEC closed circuit television (CCTV) security sys-tem and provide suggestions to improve overall secu-rity. The OIG concluded that the FEC’s CCTV secu-rity system is generally effective in providing surveil-lance of the FEC building.

Equal Employment OpportunityDuring 2002, the FEC’s Office of Equal Employ-

ment Opportunity and Special Programs drafted pro-posed guidance for the Commission’s EEO ComplaintAlternative Dispute Resolution Program and policiesregarding Reasonable Accommodations for Peoplewith Disabilities. During Black History Month, six out-standing African American employees were recog-nized. The Office also increased the total participa-tion of Commission employees in both the U.S. Sav-ings Bond Drive and the Combined Federal Cam-paign. Finally, the EEO Office partnered with theHealth Unit to sponsor various Health and Welfareprograms.

EthicsStaff members in the General Counsel’s office

serve as the Commission’s ethics officials and admin-ister the Ethics in Government Act program. During2002, the Office of Government Ethics (OGE) com-pleted a routine review of the Commission’s ethicsprogram. OGE found the ethics program to be incompliance with applicable statutes and regulations,and it noted that the agency’s ethics program is wellmanaged by ethics officials.

The ethics staff provided ethics orientation to allnew employees and annual ethics briefings to all em-ployees required to file public and confidential finan-cial disclosure reports. Staff also administered thefinancial disclosure report system, which helps ensurethat employees remain impartial in the performance oftheir official duties. In addition, the ethics staff pro-vided guidance to employees on the Standards ofEthical Conduct for Employees of the ExecutiveBranch. Finally, the staff submitted required reportsto the Office of Government Ethics, including the an-nual agency ethics program report, financial disclo-

Chapter Five40

sure reports filed by Presidential candidates andtravel payment reports.

Personnel and Labor/ManagementRelations

The Personnel Office provides policy guidance andoperational support to FEC managers and staff in thearea of human resources. During 2002, OPM’s Officeof Merit Systems Oversight and Effectiveness con-ducted a review of FEC’s human capital program.OPM’s review focused on staffing, workforce manage-ment and human resources management accountabil-ity. Overall, OPM found the FEC’s human capitalprogram operating within the merit system principles.In particular, OPM commended the FEC’s personneloffice for the high level of service they provide to theirclients, in terms of both quality and timeliness.

The Personnel Office also developed agency policyfor the administration of numerous federal leave pro-grams, provided training for senior management in avariety of areas, and enhanced Commission securityby issuing new identification cards for Commissionemployees and contractors. In addition, the Person-nel Office represented the Commission as chief nego-tiator in contract negotiations with the union.

FEC’s Budget

Fiscal Year 2002The Commission received a fiscal year (FY) 2002

appropriation of $43,657,000. In addition, the FECreceived a Supplemental Appropriation of $750,000for expenses related to obtaining additional space tohouse staff to implement the Bipartisan CampaignReform Act’s (BCRA) amendments to the FederalElection Campaign Act (the Act). The final total FY2002 appropriation was $44,407,000 for 362 full-timeemployees (FTE). The Commission obligated over$1.2 million of FY 2002 funds for forced move andconstruction costs to obtain additional space.

FY 2002 Enacted $43,657,000 362 FTEFY 2002 Supplemental $ 750,000 0 FTE

FY 2002 Total $44,407,000 362 FTE

Fiscal Year 2003The initial FEC FY 2003 budget request for the

FEC was $45,244,000 for 362 FTE. Upon enactmentof the BCRA amendments to the Act, the Commissionrequested additional funds for implementing theBCRA changes. The request included an additional31 FTE and brought the total request for FY 2003 to$50,610,200 and 393 FTE. (The FEC agreed thatenactment of a FY 2002 supplemental request for$750,000 for additional space would reduce this re-quest by $750,000.)

Awaiting resolution of the FY 2003 appropriation,the Commission operated under a series of Continu-ing Resolution appropriations at the FY 2002 level.

The enacted FY 2003 appropriation, reduced by a.65% across-the-board rescission, was $49,541,871with 389 FTE.

Budget Allocation: FYs 2002 and 2003Budget allocation comparisons for FYs 2002 and

2003 appear in the table and charts that follow.

CHART 5-1Functional Allocation of Budget

FY 2002 FY 2003

Personnel $29,682,755 33,198,800

Travel/Transportation 229,407 447,000

Space Rental 3,705,377 3,797,000

Phones/Postage 454,004 468,500

Printing 337,039 632,500

Training/Tuition 216,667 302,000

Depositions/Transcripts 168,303 125,000

Contracts 1,418,859 2,985,000

Equipment Rental/Maint 423,556 470,000

Software/Hardware 3,481,897 3,508,000

Federal Agency Services 1,346,096 1,548,571

Supplies 368,649 405,000

Publications 433,000 537,000

Equipment Purchases 1,909,047 983,000

Other 44,670 134,500

Total $44,219,324 49,541,871

The Commission 41

FY 2002 Actual

FY 2003 Projected

Allocation of Budget

Allocation of Staff

Commissioners

Inspector General

Staff Director

Administration

Audit

Information

Office of Election Administration

Office of General Counsel

Data Systems Development

Public Disclosure Division

Reports Analysis Division

ADP/Electronic Filing

Commissioners

Inspector General

Staff Director

Administration

Audit

Information

Office of Election Administration

Office of General Counsel

Data Systems Development

Public Disclosure Division

Reports Analysis Division

ADP/Electronic Filing

0 5 10 15 20 25 30 35

0 5 10 15 20 25 30 35Percent

Percent

CHART 5-2Divisional Allocation

43

Chapter SixLegislative Recommendations

In May 2003, the Federal Election Commissionsubmitted to Congress and the President seven legis-lative recommendations. The Commission substan-tially reduced the number of recommendations forlegislative action, including only high priority recom-mendations with broad Commission support. Thoseseven recommendations follow.

Compliance

Making Permanent the Administrative FineProgram for Reporting Violations (2003)Section: 2 U.S.C. §437g

Recommendation: The Commission recommendsthat Congress make permanent the Commission’sauthority to assess administrative fines for straightfor-ward violations of the law requiring timely reporting ofreceipts and disbursements. The Commission’s cur-rent Administrative Fine program only covers viola-tions that relate to reporting periods through Decem-ber 31, 2003.

Explanation: On November 12, 2001, PresidentBush signed the Fiscal Year 2002 Treasury and Gen-eral Government Appropriations Act, which extendedthe Administrative Fine Program to cover violations of2 U.S.C. § 434(a) that relate to reporting periodsthrough December 31, 2003. Since the AdministrativeFine program was implemented with the 2000 JulyQuarterly report, the Commission has processed andmade public 519 cases, with $722,221 in fines col-lected. The Administrative Fine program has beenremarkably successful: over the course of the pro-gram, the number late and nonfiled reports has gener-ally decreased. As a result, the Administrative Fineprogram has become an integral part of theCommission’s mission to administer and enforce theAct. By making the program permanent, Congresswould ensure that the Commission would not lose oneof the most cost-effective and successful programs inits history.

Under the Administrative Fine program, the Com-mission considers reports to be filed late if they arereceived after the due date, but within 30 days of thatdue date. Election-sensitive reports are considered

late if they are filed after their due date, but at leastfive days before the election. (Election sensitive re-ports are those filed immediately before an electionand include pre-primary, pre-special, pre-general,October quarterly and October monthly reports).Committees filing reports after these dates are con-sidered nonfilers. Civil money penalties for late re-ports are determined by the amount of activity on thereport, the number of days the report was late andany prior penalties for violations under the administra-tive fines regulations. Penalties for nonfiled reportsare also determined by the amount of activity on thereport and any prior violations. Committees have theoption to either pay the civil penalty assessed or chal-lenge the Commission’s finding and/or proposed pen-alty.

Ethics

Allowing the FEC to Restrict the PoliticalActivities of its Employees (2003)Section: 2 U.S.C. §437c(f), 5 U.S.C. §7323(b)(1)

Recommendation: The Commission recommendsthat Congress amend the FECA by adding a newsubsection (f)(5) to 2 U.S.C. §437c, which would pro-hibit an FEC Commissioner or employee from publiclysupporting or opposing a candidate, political party orpolitical committee subject to the FEC’s jurisdiction,regardless of whether the activity is performed in con-cert with a political party, partisan political group or acandidate for partisan public office.

Explanation: In 1993, the enactment of the HatchReform Act (Pub. L. 103-94) lifted many of the originalHatch Act’s restrictions on many Federal employeeswith regard to participation in political campaigns.The Hatch Reform Act places special limitations onCommission employees, prohibiting them from re-questing or receiving political contributions from, orgiving political contributions to, an employee, a Mem-ber of Congress or an officer of a uniformed service,as well as from taking an active part in political man-agement or political campaigns. 5 U.S.C.§§7323(b)(1) and 7323(b)(2).

Chapter Six44

The Hatch Reform Act specifically states, “employ-ees should be encouraged to exercise fully, freely,and without fear of penalty or reprisal, and to the ex-tent not expressly prohibited by law, their right to par-ticipate or to refrain from participating in the politicalprocesses of the nation.” 5 U.S.C. §7321. It alsoprovides that “[a]n employee retains the right to voteas he chooses and to express his opinion on politicalsubjects and candidates.” 5 U.S.C. §7323(c). OPMhas authority to issue regulations regarding the HatchReform Act. See 5 U.S.C §1103(a)(5) and 5 U.S.C.§7325. With regard to agencies such as the Commis-sion whose employees are limited in their politicalactivity, OPM regulations allow such employees to“[e]xpress his or her opinion as an individual privatelyand publicly on political subjects and candidates.” 5CFR 734.402. The OPM regulations provide thatsuch activity may not be done “in concert with a politi-cal party, partisan political group or a candidate forpartisan political office.”

There are no provisions in the Hatch Reform Actthat empower any agency other than OPM to interpretits provisions, and there is currently no provision inFECA that directly refers to the Hatch Reform Act orprevious Hatch restrictions. OPM has issued regula-tions expressly limiting the extent to which the politicalactivities of employees may be limited beyond therestrictions in the Hatch Reform Act. See 11 CFR734.104. These OPM regulations, as well as theCommission’s current lack of independent statutoryauthority, could be read to block any additional regu-latory restrictions that the Commission might wish toplace on the political activities of Commission employ-ees. See Statement of Basis and Purpose for 11CFR 734.104, 59 Fed. Reg. 48765. The Hatch Re-form Act and the OPM regulatory regime also raisesquestions regarding the viability of the foundation forCommission’s current regulations on the political ac-tivity of Commissioners and Commission employeesat 11 CFR 7.11. These questions could be resolved ifthe Commission’s regulatory restrictions on politicalactivity of employees could be explicitly based onindependent statutory authority in FECA.

Given its role in the political process, the Commis-sion believes that public support of, or opposition to,any candidate, political party or political committee

subject to its jurisdiction by Commissioners or em-ployees could seriously harm its credibility as a non-partisan agency and thus its ability to fulfill its mission.Therefore, to provide an independent statutory basisfor regulating the political activities of its employeesbeyond the Hatch Reform Act, the Commission rec-ommends that Congress enact a new statutory provi-sion, as part of 2 U.S.C. §437c(f), to prohibit an FECCommissioner or employee from publicly supportingor opposing a candidate, political party or politicalcommittee subject to the FEC’s jurisdiction, regard-less of whether the activity is performed in concertwith a political party, partisan political group or a can-didate for partisan public office.

Disclosure

Increasing and Indexing all Registration andReporting Thresholds for Inflation (2003)Section: 2 U.S.C. §§431 and 434

Recommendation: The Commission recommendsthat Congress increase and index for inflation all reg-istration and reporting thresholds.

Explanation: Most of the Act’s registration andreporting thresholds were set in 1974 and 1979. Be-cause over twenty years of inflation had effectivelyreduced the Act’s contribution limits in real dollars, theBCRA increased some contribution limits to partiallyadjust for inflation, and then indexed those limits:contributions to candidates and national party commit-tees by individuals and non-multicandidate commit-tees, the biennial aggregate contribution limit for indi-viduals and the limit on contributions to Senate candi-dates by certain national party committees. TheCommission proposes extending this approach to allregistration and reporting thresholds, which have simi-larly been effectively reduced as a result of inflation.

Increasing and then indexing these thresholdswould ease the registration and reporting burdens onsmaller political committees who, in some cases, areunaware of the Act’s registration and reporting provi-sions. Moreover, by increasing and then indexing thethresholds for inflation, Congress would help to en-sure that some committees and persons who lack the

Legislative Recommendations 45

resources and technical expertise to comply with theAct’s registration and reporting requirements wouldnot have to do so. Finally, because of the effect ofinflation, increasing and then indexing the registrationand reporting thresholds would continue to capturethe significant financial activity envisioned when Con-gress enacted the FECA.

Electronic Filing of Senate ReportsSection: 2 U.S.C. §§432(g) and 434(a)(11)

Recommendation: The Commission recommendsthat Congress require:• Mandatory electronic filing, at a date to be deter-

mined by Congress, for those persons and politicalcommittees filing designations, statements, reportsor notifications pertaining only to Senate elections ifthey have, or have reason to expect to have, aggre-gate contributions or expenditures in excess of$50,000 in a calendar year.

• Electronically filed designations, statements, reportsor notifications pertaining only to Senate elections tobe forwarded to the Commission within 24 hours ofreceipt and to be made accessible to the public onthe Internet, if Congress does not change the pointof entry for filings pertaining only to Senate elec-tions.

Explanation: Public Law 106-58 required, amongother things, that the Commission make electronicfiling mandatory for political committees and otherpersons required to file with the Commission who, in acalendar year, have, or have reason to expect tohave, total contributions or total expenditures exceed-ing a threshold set by the Commission. The Commis-sion set this threshold at $50,000 and, in theCommission’s experience, that threshold has workedwell. Extending electronic filing to political commit-tees and persons who file designations, statements,reports or notifications pertaining only to Senate elec-tions would standardize the information received,thereby enhancing public disclosure of campaignfinance information. Additionally, data from electroni-cally filed reports is received, processed and dissemi-nated more easily and efficiently, resulting in betteruse of resources.

Electronic filing (by means other than diskette) isalso unaffected by disruptions in the delivery of first

class mail, such as those arising from the terroristattacks on the U.S. Postal Service. As a result ofthese disruptions, some amendments to Senate cam-paign reports that were filed via regular mail in late2001 took months to arrive at the Secretary of theSenate (and the FEC), delaying disclosure. In con-trast, amendments electronically filed during the sametime period by other types of filers were received andprocessed in a timely manner.

Filing Reports Using Overnight Delivery, Priorityor Express MailSection: 2 U.S.C. §§434(a)(2)(A)(i), (a)(4)(A)(ii) and(a)(5)

Recommendation: The Commission recommendsthat Congress amend 2 U.S.C. §§434(a)(2)(A)(i),(a)(4)(A)(ii) and (a)(5) to offer filers additional meansof ensuring timely filing of designations, reports, andstatements. Specifically, the Commission recom-mends that Congress equate the date of receipt byone of the following delivery services with the regis-tered or certified mail postmark dates currently setforth in section 434:• Overnight delivery with an online tracking system

that allows delivery status to be verified; and• Priority Mail or Express Mail with U.S. Postal Service

delivery confirmation.Explanation: Section 434 of the Act permits com-

mittees that do not file electronically to rely upon aregistered or certified mail postmark as evidence thattheir designations, reports and statements were filedon time. For example, quarterly, monthly, semiannualand post-general election reports must be postmarkedby the due date, and pre-primary and pre-generalelection reports must be postmarked 15 days beforethe election.

Overnight delivery, Priority Mail and Express Mailwere not widely used when the registered or certifiedmail provisions were adopted as part of the 1979amendments to the FECA. Since that time, theseservices have come into wide use and are frequentlyused by political committees to file their FEC designa-tions, reports and statements. Equating the date ofreceipt by one of these services with the registered orcertified mail date would aid the regulated community

Chapter Six46

in its efforts to comply with the Act’s reporting require-ments.

Overnight delivery, Priority Mail and Express Mailensure that there is written evidence that a packagewas mailed and received. Additionally, due to theirreliability and speed, the Commission’s ability to col-lect, process and disseminate information would beimproved if Congress were to amend 2 U.S.C.§§434(a)(2)(A)(i), (a)(4)(A)(ii) and (a)(5) to includethese services.

Contribution Limits

Multicandidate Political Committee ContributionLimitations and Non-multicandidate PoliticalCommittee Contribution Limitations (2003)Section: 2 U.S.C. §§441a(a)(2) and 441a(c)

Recommendation: The Commission recommendsthat Congress consider indexing for inflation the con-tribution limitations applicable to multicandidate politi-cal committees and adjusting the amount such com-mittees may contribute to national party committees toharmonize these limits with the limits applicable tonon-multicandidate political committees.

Explanation: A political committee qualifies formulticandidate status if it has been registered with theCommission for six months or more, has receivedcontributions from more than 50 persons, and hascontributed to five or more Federal candidates. 2U.S.C. §441a(a)(4). FECA, prior to the BCRA, pro-vided a significantly higher limit on contributions tocandidates for political committees withmulticandidate status than for those without that sta-tus ($5,000 per election versus $1,000 per election).The BCRA raised and indexed for inflation the contri-bution limit on non-multicandidate committees (to$2,000 per election), and such limit eventually willbecome higher than the limit imposed onmulticandidate committees. Thus, this contributionlimit itself one day will create a substantial disincen-tive to achieve multicandidate committee status.

In addition, the limit for contributions to nationalparty committees from multicandidate committees is$15,000 per year (as it was prior to the BCRA), yetthe BCRA increased the limit on contributions to the

same national party committees from non-multicandidate committees to $25,000 per year. 2U.S.C. §441a(a)(2)(B), (1)(B). Moreover, only thecontribution limit for non-multicandidate committees isindexed for inflation, which means that over time thecurrent $10,000 difference will only increase.

Congress should consider revising the statute togive multicandidate committees allowances at leastas generous as those given to non-multicandidatecommittees.

Public Financing

Averting Impending Shortfall in PresidentialPublic Funding Program (revised 2003)Section: 26 U.S.C. §§6096, 9008(a) and 9037(a)

Recommendation: The Commission strongly rec-ommends that Congress take immediate action toavert a projected impending shortfall in the Presiden-tial public funding program in the 2004 election year.

Explanation: The Presidential public funding pro-gram experienced a shortfall for the election of 2000because participation in the check-off program is de-clining and the checkoff is not indexed to inflationwhile payouts are indexed. This shortfall impactedforemost upon primary candidates. In January 2000,when the U.S. Treasury made its first payment for the2000 election, it was only able to provide approxi-mately 50 percent of the public funds that qualifiedPresidential candidates were entitled to receive. Spe-cifically, only $16.9 million was available for distribu-tion to qualified primary candidates on January 1,2000, after the Treasury paid the convention grantsand set aside the general election grants.1 However,the entitlement (i.e., the amount that the qualifiedcandidates were entitled to receive) on that date was$34 million, twice as much as the amount of availablepublic funds. By January 2001, total payments madeto primary candidates was in excess of $61 million.

1 The Commission certified a total of $28.9 million inconvention grants, and $147.2 million was set aside for useby general election candidates.

Legislative Recommendations 47

The Commission projects the temporary shortfall inmatching funds that has occurred in the past twopresidential elections may recur in 2004. Under themost realistic assumptions, it appears that the Janu-ary 2004 payout may be only about 53 cents on thedollar. The funds considered ‘available’ by the De-partment of Treasury will be about $19.3 million, thefunds to which candidates will be entitled will be about$36.6 million and the payouts therefore will have to bereduced accordingly. February and March payoutsalso will be less than 100 percent, but by the April2004 payouts, the temporary shortfall will have beencured under this projection. This is because thecheckoff proceeds flowing into Treasury Departmentaccounts will be adequate to make up the earlier defi-ciencies.

The Commission recommends several specificlegislative changes. First, the statute should be re-vised so that Treasury will be able to rely on expectedavailable proceeds from the voluntary checkoff, ratherthan relying solely on actual proceeds on hand as ofthe dates of the matching fund payments. Since largeinfusions of voluntary checkoff proceeds predictablyoccur in the first few months of the election year, in-cluding such estimated proceeds in the calculation offunds available for matching fund payouts would virtu-ally eliminate the shortfall in the near future. Becauseestimates for expected payouts are an acceptablepart of the calculations (e.g., setting aside sufficientfunds to cover general election payouts), estimates ofthe checkoff proceeds could be incorporated, as well.A very simple change in the wording of 26 U.S.C.§9037 would accomplish this: changing “are avail-able” to “will be available.” Expected paymentsshould be based on sound statistical methods to pro-duce a cautious, conservative estimate of the fundsthat will be available to cover convention and generalelection payments.

A second revision in the statute would further thelong-term stability of the presidential public fundingprogram: indexing the voluntary checkoff amount toinflation. Although the checkoff amount was in-creased from $1 to $3 beginning with 1993 returns,there was no indexing built in to account for furtherinflation thereafter. Since the payments are indexed

to inflation, the statute all but assures a permanentshortfall.

49

Chapter SevenCampaign Finance Statistics

CHART 7-1Number of PACs, 1974-2002

0

500

1000

1500

2000

0201009998979695949392919089888786858483828180797877767574

Corporate

Nonconnected

Trade/Membership/Health

Labor

Other

Chapter Seven50

CHART 7-2House Candidates’Sources of Receipts:Election Cycle

Challengers

Millions of Dollars

Incumbents

Millions of Dollars

Open Seat Candidates

Millions of Dollars

0

50

100

150

200

250

300

350

400

20022000199819961994

0

50

100

150

200

250

300

350

400

20022000199819961994

0

50

100

150

200

250

300

350

400

20022000199819961994

Individuals

PACs

Candidate

Other Receipts

Campaign Finance Statistics 51

CHART 7-3Senate Candidates’Sources of Receipts:Election Cycle

Challengers

Millions of Dollars

Open Seat Candidates

Millions of Dollars

Incumbents

Millions of Dollars

0

50

100

150

200

250

20022000199819961994

0

50

100

150

200

250

20022000199819961994 0

50

100

150

200

250

20022000199819961994

Individuals

PACs

Candidate

Other Receipts

Chapter Seven52

CHART 7-4PAC Contributions to Candidatesby Party and Type of PAC

Other

PACs

Non-

Connected

PACs

Trade/

Member/

Health

PACs

Labor

PACs

Corp.

PACs

0

20

40

60

80

100

Millions of Dollars Millions of Dollars

2000 Election Cycle 2002 Election Cycle

Other

PACs

Non-

Connected

PACs

Trade/

Member/

Health

PACs

Labor

PACs

Corp.

PACs

0

20

40

60

80

100

Democratic Candidates

Republican Candidates

Campaign Finance Statistics 53

CHART 7-5PAC Contributions to House and SenateCandidates by Party and Candidate Status

Millions of Dollars Millions of Dollars

0

50

100

150

200

250

DemocratsRepublicans0

50

100

150

200

250

NonincumbentsIncumbents

2002

2000

1998

Chapter Seven54

CHART 7-6PAC Contributions to House Candidatesby Type of PAC and Candidate Status

Percent Percent

2002

2000

1998

0

20

40

60

80

100

TradeNoncon.LaborCorp.0

20

40

60

80

100

TradeNoncon.LaborCorp.

Incumbents Challengers

Campaign Finance Statistics 55

National Committee

National Senatorial Committee

National Congressional Committee

State/Local Committees

0

50

100

150

200

RepublicansDemocrats

CHART 7-7Major Party FederalAccount Receipts: 2002

Chapter Seven56

Democratic National Committee (DNC)

1999-00$377.9 million

1997-98$178.8 million

1995-96$306.1 million

1997-98$122.6 million

1995-96$210.3 million

Republican National Committee (RNC)

Nonfederal Receipts

Federal Receipts

2001-02$176.8 million

1999-00$262.7 million

2001-02$300.5 million

CHART 7-8Party Federal andNonfederal Receipts

Campaign Finance Statistics 57

CHART 7-9Sources of Party Receipts

DNC Federal Receipts by Source RNC Federal Receipts by Source

Millions of Dollars Millions of Dollars

DNC Nonfederal Receipts by Source RNC Nonfederal Receipts by Source

Millions of Dollars Millions of Dollars

Individuals$200 or less

Individualsover $200

PACs

Other

0 50 100 150 200 250 300

Individuals$200 or less

Individualsover $200

PACs

Other

0 50 100 150 200 250 300

Individuals

Other Sources

0 50 100 150 200 250

Individuals

Other Sources

0 50 100 150 200 250

2002

2000

59

Appendix 1Biographies ofCommissionersand Officers

Commissioners

David M. Mason, ChairmanApril 30, 20031

David Mason was nominated to the Commission byPresident Clinton on March 4, 1998, and confirmed bythe U.S. Senate on July 30, 1998. Prior to his appoint-ment, Mr. Mason served as Senior Fellow, Congres-sional Studies, at the Heritage Foundation. He joinedHeritage in 1990 as Director of Executive BranchLiaison. In 1995 he became Vice President, Govern-ment Relations, and in 1997 Mr. Mason was desig-nated Senior Fellow with a focus on research, writingand commentary on Congress and national politics.

Prior to his work at the Heritage Foundation, Com-missioner Mason served as Deputy Assistant Secre-tary of Defense and served on the staffs of SenatorJohn Warner, Representative Tom Bliley and then-House Republican Whip Trent Lott. He worked innumerous Congressional, Senate, Gubernatorial andPresidential campaigns, and was himself the Republi-can nominee for the Virginia House of Delegates inthe 48th District in 1982.

Commissioner Mason attended Lynchburg Collegein Virginia and graduated cum laude from ClaremontMcKenna College in California. He is active in politicaland community affairs at both the local and nationallevel. He and his wife reside in Lovettsville, Virginia,with their ten children.

Karl J. Sandstrom, Vice-ChairmanApril 30, 2001

Karl Sandstrom was nominated to the Commissionby President Clinton on July 13, 1998, and confirmedby the U.S. Senate on July 30, 1998. Prior to his ap-pointment, Commissioner Sandstrom served asChairman of the Administrative Review Board at theDepartment of Labor. From 1988 to 1992 he was StaffDirector of the House Subcommittee on Elections,during which time he also served as the Staff Directorof the Speaker of the House’s Task Force on Elec-

toral Reform. From 1979 to 1988, CommissionerSandstrom served as the Deputy Chief Counsel to theHouse Administration Committee of the House ofRepresentatives. In addition, he has taught publicpolicy as an Adjunct Professor at American University.

Commissioner Sandstrom received a B.A. degreefrom the University of Washington, a J.D. degree fromGeorge Washington University and a Masters of theLaw of Taxation from Georgetown University LawCenter.

Commissioner Sandstrom departed from the Com-mission on December 9, 2002.

Bradley A. Smith, CommissionerApril 30, 2005

Bradley Smith was nominated to the Commissionby President Clinton on February 9, 2000, and con-firmed by the U.S. Senate on May 24, 2000. Prior tohis appointment, Commissioner Smith was Professorof Law at Capital University Law School in Columbus,Ohio, where he taught Election Law, ComparativeElection Law, Jurisprudence, Law & Economics andCivil Procedure.

Prior to joining the faculty at Capital in 1993, hehad practiced with the Columbus law firm of Vorys,Sater, Seymour & Pease, served as United StatesVice Consul in Guayaquil, Ecuador, worked as a con-sultant in the health care field and served as GeneralManager of the Small Business Association of Michi-gan, a position in which his responsibilities includedmanagement of the organization’s political actioncommittee.

Commissioner Smith received his B.A. cum laudefrom Kalamazoo College in Kalamazoo, Michigan,and his J.D. cum laude from Harvard Law School.

Danny L. McDonald, CommissionerApril 30, 2005

Now serving his fourth term as Commissioner,Danny McDonald was first appointed to the Commis-sion in 1981 and was reappointed in 1987, 1994 and2000. Before his original appointment, he managed10 regulatory divisions as the general administrator ofthe Oklahoma Corporation Commission. He had pre-

1 Term expiration date.

Appendices60

viously served as secretary of the Tulsa County Elec-tion Board and as chief clerk of the board. He wasalso a member of the Advisory Panel to the FEC’sNational Clearinghouse on Election Administration.

A native of Sand Springs, Oklahoma, Mr.McDonald graduated from Oklahoma State Universityand attended the John F. Kennedy School of Govern-ment at Harvard University. He served as FEC Chair-man in 1983, 1989, 1995 and 2001.

Scott E. Thomas, CommissionerApril 30, 2003

Scott Thomas was appointed to the Commission in1986 and reappointed in 1991 and 1998. He servedas acting Chairman during the last four months of1998, and as Chairman throughout 1999. He previ-ously served as Chairman in 1987 and 1993. Prior toserving as a Commissioner, Mr. Thomas was theexecutive assistant to former Commissioner ThomasE. Harris. He originally joined the FEC as a legal in-tern in 1975. He worked as a staff attorney in the Of-fice of General Counsel and later became an Assis-tant General Counsel for Enforcement.

A Wyoming native, Mr. Thomas graduated fromStanford University and holds a J.D. degree fromGeorgetown University Law Center. He is a memberof the District of Columbia and U.S. Supreme Courtbars.

Darryl R. Wold, CommissionerApril 30, 2001

Darryl Wold was nominated to the Commission byPresident Clinton on November 5, 1997, and con-firmed by the U.S. Senate on July 30, 1998. Prior tohis appointment, Commissioner Wold had been inprivate law practice in Orange County, California,since 1974. In addition to his own practice, he wascounsel to Reed and Davidson, a California law firm,for election law litigation and enforcement defensematters. Mr. Wold’s practice included representingcandidates, ballot measure committees, political ac-tion committees and others with responsibilities underfederal, state and local election laws. Mr. Wold’sbusiness practice emphasized business litigation andcounseling closely-held companies.

Commissioner Wold graduated cum laude fromClaremont McKenna College in California and earnedan LL.B. from Stanford University. He is a member ofthe California and U.S. Supreme Court bars.

Commissioner Wold departed from the Commis-sion on March 29, 2003.

Michael E. Toner, CommissionerApril 30, 2007

Michael E. Toner was nominated to the FederalElection Commission by President George W. Bushon March 4, 2002, and appointed on March 29, 2002.Prior to his appointment, Mr. Toner was Chief Coun-sel to the Republican National Committee. Mr. Tonerjoined the RNC in 2001 after serving as GeneralCounsel of the Bush-Cheney Transition and GeneralCounsel of the Bush-Cheney 2000 Presidential Cam-paign. Before joining the Bush campaign in Austin,Mr. Toner was Deputy Counsel at the RNC from1997-1999. Prior to his tenure at the RNC, he servedas counsel to the Dole/Kemp Presidential Campaignin 1996.

Commissioner Toner was an associate attorney atWiley, Rein, & Fielding in Washington, DC, from1992-1996. His work there included advising politicalcommittees and corporate clients in federal and stateelection law compliance. He was also involved in anumber of First and Fourteenth Amendment appellatematters, including two cases that reached the U.S.Supreme Court.

Commissioner Toner received a J.D., cum laudefrom Cornell Law School in 1992, an M.A. in PoliticalScience from Johns Hopkins University in 1989 and aB.A. with distinction from the University of Virginia in1986. He is a member of the District of Columbia andVirginia bars as well as the United States SupremeCourt bar, the Fourth U.S. Circuit Court of Appealsand the U.S. District Courts for the District of Colum-bia and the Eastern District of Virginia.

Appendices 61

Ellen L. Weintraub, CommissionerApril 30, 2007

Ellen Weintraub was appointed to the Federal Elec-tion Commission on December 6, 2002, by PresidentGeorge W. Bush, and took office on December 9,2002. She is the third woman to serve on the Com-mission. Prior to her appointment, Ms. Weintraub wasOf Counsel to Perkins Coie, LLP, and a member of itsPolitical Law Group. There, she counseled clients onfederal and state campaign finance laws, politicalethics, nonprofit law and lobbying regulation. Duringthe election contest arising out of the 1996 election ofSenator Mary Landrieu (D-LA), Ms. Weintraub servedon the legal team that advised the Senate RulesCommittee. Her tenure with Perkins Coie representedMs. Weintraub’s second stint in private practice, hav-ing previously practiced as a litigator with the NewYork firm of Cahill Gordon & Reindel.

Before joining Perkins Coie, Ms. Weintraub wasCounsel to the Committee on Standards of OfficialConduct for the U.S. House of Representatives (theHouse Ethics Committee). Like the Commission, theCommittee on Standards is a bipartisan body, evenlydivided between Democratic and Republican mem-bers. There, Ms. Weintraub focused on implementingthe Ethics Reform Act of 1989 and subsequentchanges to the House Code of Official Conduct. Shealso served as editor in chief of the House EthicsManual and as a principal contributor to the SenateEthics Manual. While at the Committee, Ms.Weintraub counseled Members on investigations andoften had lead responsibility for the Committee’s pub-lic education and compliance initiatives.

Ms. Weintraub received her B.A., cum laude, fromYale College and her J.D. from Harvard Law School.A native New Yorker, she is a member of the NewYork and District of Columbia bars and the SupremeCourt bar. She currently resides in Maryland with herhusband, Bill Dauster, and their three children.

Statutory OfficersJames A. Pehrkon, Staff Director

James Pehrkon became Staff Director on April 14,1999, after serving as Acting Staff Director for eight

months. Prior to that, Mr. Pehrkon served 18 years asthe Commission’s Deputy Staff Director with responsi-bilities for managing the FEC’s budget, administrationand computer systems. Among the agency’s first em-ployees, Mr. Pehrkon is credited with setting up theFEC’s data processing department and establishingthe Data Systems Development Division. He directedthe data division before assuming his duties asDeputy Staff Director.

An Austin, Texas, native, Mr. Pehrkon received anundergraduate degree from Harvard University anddid graduate work in foreign affairs at GeorgetownUniversity.

Lawrence H. Norton, General CounselLawrence Norton became General Counsel of the

FEC on September 17, 2001. Prior to joining theCommission, Mr. Norton served as an AssociateDirector at the Commodity Futures TradingCommission for five years. He also worked as anAssistant Director at the Federal Trade Commissionand as an Assistant Attorney General in the MarylandAttorney General’s office.

Mr. Norton graduated Order of the Coif from theUniversity of Maryland School of Law.

Lynne A. McFarland, Inspector GeneralLynne McFarland became the FEC’s first perma-

nent Inspector General in February 1990. She cameto the Commission in 1976, first as a reports analyst.Later, she worked as a program analyst in the Officeof Planning and Management.

A Maryland native, Ms. McFarland holds a sociol-ogy degree from Frostburg State College and is amember of the Institute of Internal Auditors.

63

January1 — Chairman David M. Mason and Vice Chair-

man Karl Sandstrom begin their one-yearterms of office.

9 — In Miles for Senate v. FEC, the U.S. DistrictCourt for the District of Minnesota grantsjudgement in the Commission’s favor incase challenging administrative fine.

9 — FEC conducts roundtable on “ReportingRequirements for 2002.”

24 — FEC releases semi-annual PAC count.25 — In Beaumont v. FEC, the U.S. Court of Ap-

peals for the 4th Circuit upholds a districtcourt decision that found that the Act’s cor-porate contribution ban wasunconstitutional as applied to MCFL-typecorporation.

31 — 2001 year-end report due.

February1 — FEC approves notice explaining applicability

of Commission travel allocation rules.5-7 — FEC holds conference for candidates, par-

ties and PACs in San Francisco, CA.11 — Robert Biersack appointed to be FEC’s

Deputy Press Officer.

March20 — FEC holds public hearing on “The Internet

and Federal Elections.”25-26— FEC holds conference for candidates and

party committees in Washington, DC.27 — President Bush signs Bipartisan Campaign

Reform Act of 2002 (BCRA).27 — Senator Mitch McConnell and the National

Rifle Association each file complaint withU.S. District Court for the District of Colum-bia challenging constitutionality of severalprovisions of BCRA. The complaint is styledas McConnell v. FEC.

29 — Appointment of Michael E. Toner to Com-mission; Commissioner Darryl Wold departs.

April15 — Quarterly report due18 — FEC approves Notice of Proposed

Rulemaking on reducing administrative finesfor late filers and nonfilers.

22-24— FEC holds conference for corporations inWashington, DC.

23 — FEC submits amended FY2003 budget re-quest seeking additional $5,366,200 and 31full-time employees in order to fund imple-mentation of BCRA.

30 — FEC approves Voting Systems Standardsfor release and publication.

May9 — FEC approves Notice of Proposed

Rulemaking on implementing BCRA’s “softmoney” provisions.

14 — Revised Campaign Guide for NonconnectedCommittees available.

14 — FEC submits 23 legislative recommenda-tions to Congress and President.

22-24— FEC holds conference for trade associationsin Washington, DC.

24 — FEC approves “Brokerage Loans and Linesof Credit” final rules.

June1 — FEC issues Annual Report 2001.

4-5 — FEC holds public hearing on “Soft Money.”22 — FEC approves “Soft Money” rules, meeting

90-day deadline of BCRA.26-28— FEC holds conference for membership and

labor organizations.

July12 — FEC approves revisions to National Mail

Voter Registration Form.15 — Quarterly report due.15 — FEC releases semi-annual PAC count.

August1 — FEC approves Notice of Proposed

Rulemaking on “Electioneering Communica-tions.”

Appendix 2Chronology of Events

Appendices64

15 — FEC approves Notice of ProposedRulemaking on “Contribution Limitations andProhibitions.”

22 — FEC approves Notice of ProposedRulemaking on “Disclaimers, FraudulentSolicitation, Civil Penalties and PersonalUse of Campaign Funds.”

28-29— FEC holds public hearing on “ElectioneeringCommunications.”

29 — Revised Campaign Guide for CongressionalCandidates and Committees available.

September9 — Congressional fundraising summary.

12 — FEC approves Notice of ProposedRulemaking on “Coordinated and Indepen-dent Expenditures.”

October2 — FEC holds “New Soft Money Rules”

roundtable.3 — ADR Program made permanent.

11 — FEC approves Notice of ProposedRulemaking on “BCRA Reporting.”

11 — FEC approves “Electioneering Communica-tions” final rules.

11 — FEC approves “FCC Database on Election-eering Communications” interim final rules.

15 — FEC publishes filing dates for Hawaii 2ndDistrict special election.

15 — Quarterly report due.23-24— FEC holds public hearing on “Coordinated

and Independent Expenditures.”24 — Pre-General report due.

November5 — Post-General report due.8 — FEC approves “Contribution Limitations and

Prohibitions” final rules.25 — FEC approves “Disclaimers, Fraudulent

Solicitation, Civil Penalties and PersonalUse of Campaign Funds” final rules.

29 — FEC approves “Interim Reporting Proce-dures” policy statement.

December4-5 — Oral arguments on McConnell v. FEC before

three-judge District Court panel.5 — FEC approves “Coordinated and Indepen-

dent Expenditures” final rules.6 — Appointment of Ellen L. Weintraub to Com-

mission.9 — Commissioner Karl Sandstrom departs.

12 — FEC approves “BCRA Reporting” final rules.18 — Commission elects Ellen L. Weintraub Chair

and Bradley A. Smith Vice Chairman for2003.

19 — FEC approves Notice of ProposedRulemaking on “Leadership PACs.”

19 — FEC approves “Millionaires’ Amendment”interim final rules, completing BCRArulemaking within 270 days of enactment ofBCRA.

65

Appendix 3FEC Organization Chart

General Counsel Lawrence H. Norton

Public Financing,Ethics and

Special Projects

Deputy Staff Directorfor Management

Data SystemsDevelopment

Planning andManagement

AdministrationEqual Employment

Opportunity

CommissionSecretary

PublicDisclosure

Audit

Inspector GeneralLynne McFarland

Staff DirectorJames A. Pehrkon

Information

CongressionalAffairs

PersonnelLabor/Management

Press Office

Policy 3

ReportsAnalysis

Litigation

Enforcement

The Commissioners

1 Ellen L. Weintraub was elected 2003 Chair.2 Bradley A. Smith was elected 2003 Vice Chairman.3 Policy covers regulations, advisory opinions, legal review and administrative law.

AdministrativeReview

Alternative DisputeResolution

ElectionAdministration

Deputy Staff Directorfor Audit & Review

David M. Mason, Chairman1

Karl J. Sandstrom, Vice Chair-man2

Michael E. Toner, CommissionerDanny L. McDonald, Commis-sionerBradley A. Smith, CommissionerScott E. Thomas, Commissioner

67

Appendix 4FEC Offices

This appendix briefly describes the offices withinthe Commission, located at 999 E Street, NW, Wash-ington, DC 20463. The offices are listed alphabeti-cally, with local telephone numbers given for officesthat provide services to the public. Commission of-fices can also be reached toll-free at 800-424-9530and locally at 202-694-1100.

AdministrationThe Administration Division consists of a Finance

Office and an Administration Office. The Finance Of-fice administers the agency’s accounting and payrollprograms. The Administration Office is responsible forprocurement, contracting, space management,records management, telecommunications, buildingsecurity and maintenance. In addition, the officehandles printing, document reproduction and mailservices.

AuditMany of the Audit Division’s responsibilities con-

cern the Presidential public funding program. Thedivision evaluates the matching fund submissions ofPresidential primary candidates and determines theamount of contributions that may be matched withfederal funds. As required by law, the division auditsall public funding recipients.

In addition, the division audits those committeesthat, according to FEC determinations, have not metthe threshold requirements for substantial compliancewith the law. Audit Division resources are also used inthe Commission’s investigations of complaints.

Commission SecretaryThe Commission Secretary is responsible for all

administrative matters relating to Commission meet-ings, as well as Commission votes taken outside ofthe meetings. This includes preparing meeting agen-das, agenda documents, Sunshine Act notices, meet-ing minutes and vote certifications.

The Secretary also logs, circulates and tracks nu-merous materials not related to Commission meet-ings, and records the Commissioners’ votes on thesematters. All matters on which a vote is taken are en-tered into the Secretary’s database.

CommissionersThe six Commissioners—no more than three of

whom may represent the same political party—areappointed by the President and confirmed by the Sen-ate.

The Commissioners serve full time and are respon-sible for administering and enforcing the Federal Elec-tion Campaign Act. They generally meet twice aweek, once in closed session to discuss matters that,by law, must remain confidential, and once in a meet-ing open to the public. At these meetings, they formu-late policy and vote on significant legal and adminis-trative matters.

Congressional, Legislative andIntergovernmental Affairs

This office serves as primary liaison with Congressand Executive Branch agencies. The office is respon-sible for keeping Members of Congress informedabout Commission decisions and, in turn, for keepingthe agency up to date on legislative developments.Local phone: 202-694-1006; toll-free 800-424-9530.

Data Systems DevelopmentThis division provides computer support for the

entire Commission. Its responsibilities are divided intotwo general areas.

In the area of campaign finance disclosure, theData Systems Development Division enters informa-tion into the FEC database from all reports filed bypolitical committees and other entities. The division isalso responsible for the computer programs that sortand organize campaign finance data into indexes.

These indexes permit a detailed analysis of cam-paign finance activity and provide a tool for monitoring

Appendices68

contribution limits. The indexes are available onlinethrough the Data Access Program (DAP), a sub-scriber service managed by the division. The divisionalso publishes the Reports on Financial Activity seriesof periodic studies on campaign finance and gener-ates statistics for other publications.

Among its duties related to internal operations, thedivision provides computer support for the agency’sautomation systems and for administrative functionssuch as management information, document tracking,personnel and payroll systems as well as the MURprioritization system.

Local phone: 202-694-1250; toll-free phone: 800-424-9530.

Equal Employment Opportunity(EEO) and Special Programs

The EEO Office advises the Commission on theprevention of discriminatory practices and managesthe agency’s EEO Program.

The office is also responsible for developing a Spe-cial Emphasis Program tailored to the training andadvancement needs of women, minorities, veterans,special populations and disabled employees. In addi-tion, the EEO office recommends affirmative actionrecruitment, hiring and career advancement. Theoffice encourages the informal resolution of com-plaints during the counseling stage.

Additionally, the office develops and manages avariety of agency-wide special projects. These includethe Combined Federal Campaign, the U.S. SavingsBonds Drive and workshops intended to improve em-ployees’ personal and professional lives.

General CounselThe General Counsel’s Office consists of four Divi-

sions. The Policy Division drafts, for Commissionconsideration, advisory opinions and regulations aswell as other legal memoranda interpreting the federalcampaign finance law. In addition, the Policy Divisionprovides legal advice in response to legislative inquir-ies and advises other divisions within the agency onlegal matters. The Policy Division also provides staff

training throughout the agency concerning changes inthe law. The Enforcement Division investigates al-leged violations of the law, negotiates conciliationagreements and recommends civil penalties for indi-viduals and entities that have violated the Act. TheLitigation Division handles all civil litigation, includingTitle 26 cases that come before the Supreme Court,and represents and advises the Commission regard-ing any legal actions brought by or against the Com-mission. The Public Financing, Ethics and SpecialProjects (PFESP) Division provides legal advice tothe Commission on matters relating to the public fi-nancing program, including eligibility matters, auditreviews and repayments. In addition, PFESP is re-sponsible for all of the enforcement matters that relateto publicly funded candidates. PFESP also reviews allTitle 2 (non-Presidential) audit reports, handles allenforcement matters stemming from these audits, isresponsible for debt settlement reviews and adminis-trative termination reviews and administers theCommission’s ethics program.

InformationIn an effort to promote voluntary compliance with

the law, the Information Division provides technicalassistance to candidates, committees and othersinvolved in elections through the Internet, letters,phone conversations, publications and conferences.Responding to phone and written inquiries, membersof the staff provide information on the statute, FECregulations, advisory opinions and court cases. Staffalso lead workshops on the law and produce guides,pamphlets and videos on how to comply with the law.Located on the second floor, the division is open tothe public. Local phone: 202-694-1100; toll-freephone: 800-424-9530 (press 1, then 3 on a touch-tone phone).

Inspector GeneralThe FEC’s Inspector General (IG) has two major

responsibilities: to conduct internal audits and investi-gations to detect fraud, waste and abuse within theagency and to improve the economy and effective-

Appendices 69

ness of agency operations. The IG is required to re-port its activities to Congress on a semiannual basis.These reports may include descriptions of any seriousproblems or deficiencies in agency operations as wellas corrective steps taken by the agency.

Law LibraryThe Commission law library, a government docu-

ment depository, is located on the eighth floor and isopen to the public. The library contains a basic refer-ence collection, which includes materials on cam-paign finance reform, election law and current politicalactivity. Visitors to the law library may use its comput-ers to access the Internet and FEC databases. FECadvisory opinions and computer indices of enforce-ment proceedings (MURs) may be searched in thelaw library or the Public Disclosure Division. Localphone: 202-694-1600; toll-free: 800-424-9530.

Office of Administrative ReviewThe Office of Administrative Review (OAR) was

established in 2000 after statutory amendments per-mitted the Commission to impose civil money penal-ties for violations of certain reporting requirements.Under the program, if the Commission finds “reasonto believe” (RTB) that a committee failed to file a re-quired report or notice, or filed it late, it will notify thecommittee of its finding and the amount of the pro-posed civil money penalty. Within 40 days, the com-mittee may challenge the RTB finding. OAR reviewsthese challenges and may recommend that the Com-mission uphold the RTB finding and civil money pen-alty, uphold the RTB finding but modify or waive thecivil money penalty, determine that no violation oc-curred or terminate its proceedings. OAR also servesas the Commission’s liaison with the U.S. Departmentof the Treasury on debt collection matters involvingunpaid civil money penalties under this program.

Office of Alternative DisputeResolution

The FEC established the Alternative Dispute Reso-lution (ADR) office to provide parties in enforcementactions with an alternative method for resolving com-plaints that have been filed against them or for ad-dressing issues identified in the course of an FECaudit. The program is designed to promote compli-ance with the federal campaign finance law and Com-mission regulations, and to reduce the cost of pro-cessing complaints by encouraging settlements out-side the agency’s normal enforcement track.

Office of Election AdministrationThe Office of Election Administration (OEA) assists

state and local election officials by responding to in-quiries, publishing research and conducting work-shops on all matters related to election administration.Additionally, OEA answers questions from the publicand briefs foreign delegations on the U.S. electionprocess, including voter registration and voting statis-tics.

Local phone: 202-694-1095; toll-free phone: 800-424-9530 (press 4 on a touch-tone phone).

Personnel and Labor/ManagementRelations

The Personnel Office provides policy guidance andoperational support to managers and staff in a varietyof human resource management areas, includingposition classification, training, job advertising, recruit-ment and employment. The office also processespersonnel actions such as step increases, promotionsand leave administration. In addition, the office per-forms personnel records maintenance and offers em-ployee assistance program counseling. Finally, thePersonnel office administers the Commission’s labor-management relations program and provides a com-prehensive package of employee benefits, wellnessand family-friendly programs.

Appendices70

Planning and ManagementThis office develops the Commission’s budget and,

each fiscal year, prepares a management plan deter-mining the allocation and use of resources throughoutthe agency. Planning and Management monitors ad-herence to the plan and provides monthly reportsmeasuring the progress of each division in achievingthe plan’s objectives.

Press OfficeStaff in the Press Office are the Commission’s offi-

cial media spokespersons. In addition to publicizingCommission actions and releasing statistics on cam-paign finance, they respond to all questions from rep-resentatives of the print and broadcast media. Lo-cated on the first floor, the office also handles re-quests under the Freedom of Information Act. Localphone: 202-694-1220; toll-free 800-424-9530 (press 1on a touch-tone phone).

Public DisclosureThe Public Disclosure Division processes incoming

campaign finance reports from federal political com-mittees and makes the reports available to the public.Located on the first floor, the division’s PublicRecords Office has a library with ample work spaceand knowledgeable staff to help researchers locatedocuments and computer data. The FEC encouragesthe public to review the many resources available,which include computer indexes, advisory opinionsand closed MURs.

The division’s Processing Office receives incomingreports and processes them into formats that can beeasily retrieved. These formats include paper, micro-film and digital computer images that can be easilyaccessed from terminals in the Public Records Officeand those of agency staff.

The Public Disclosure Division also managesFaxline, an automated faxing service for ordering FECdocuments, forms and publications, available 24hours a day, 7 days a week.

Local phone: 202-694-1120; toll-free phone: 800-424-9530 (press 3 on a touch-tone phone); Faxline:202-501-3413.

Reports AnalysisCampaign finance analysts assist committee offi-

cials in complying with reporting requirements andconduct detailed examinations of the campaign fi-nance reports filed by political committees. If an error,omission or prohibited activity (e.g., an excessivecontribution) is discovered in the course of reviewinga report, the analyst sends the committee a letterwhich requests that the committee either amend itsreports or provide further information concerning aparticular problem. By sending these letters (RFAIs),the Commission seeks to ensure full disclosure and toencourage the committee’s voluntary compliance withthe law. Analysts also provide frequent telephoneassistance to committee officials and encourage themto call the division with reporting questions or compli-ance problems. Local phone: 202-694-1130; toll-freephone 800-424-9530 (press 2 on a touch-tonephone).

Staff Director and Deputy StaffDirectors

The Staff Director is responsible for appointingstaff, with Commission approval, and for implementingagency policy. The Staff Director monitors the admin-istration of the agency by overseeing theCommission’s public disclosure activities, audit pro-gram, outreach efforts and review of reports.

Two Deputy Staff Directors assist in this supervi-sion, one in the areas of budget, administration andcomputer systems and the other in the areas of auditand review.

71Appendix 5Statistics on CommissionOperations

Summary of Disclosure Files

Total FilersExisting in

2002

Gross Receiptsin 2002(dollars)

ContinuingFilers as of

12/31/02

FilersTerminated

as of12/31/02

Number ofReports andStatements

in 2002

GrossExpenditures

in 2002(dollars)

Presidential Candidate 254 49 205 476 17,574,833 26,297,530Committees

Senate Candidate Committees 567 153 414 3,951 410,878,206 380,989,618

House Candidate Committees 2,606 690 1,916 26,049 656,362,442 636,039,444

Party Committees

Federal Party Committees 592 141 451 5,104 1,463,327,331 1,475,450,141Reported Nonfederal 194 12 182 631 685,214,286 712,063,343 Party Activity

Delegate Committees 8 5 3 6 15,066 16,764

Nonparty Committees

Labor Committees 337 20 317 3,867 167,613,721 157,862,766Corporate Committees 1,742 219 1,523 17,179 195,088,306 179,566,144Membership, Trade and 2,515 279 2,236 22,253 345,068,453 339,156,333 Other Committees

Communication Cost Filers 287 1 286 111 0 10,447,847

Independent Expenditures by 348 30 318 176 1,249,509 2,149,070Persons Other ThanPolitical Committees

Appendices72

Total

Administrative DivisionContracting and procurement transactions 1,230Publications prepared for print 16Pages of photocopying 21,600,200

Information DivisionTelephone inquiries 31,546Information letters 172Distribution of FEC materials 5,424Prior notices (sent to inform filers

of reporting deadlines) 24,150Other mailings 25,673Visitors 90Public appearances by Commissioners

and staff 17Roundtable workshops 3Publications 29

Press OfficeNews releases 135Telephone inquiries from press 8,168Visitors 1,055Freedom of Information Act

(FOIA) requests 28Fees for materials requested under FOIA

(transmitted to U.S. Treasury) 0

Office of Election AdministrationTelephone inquiries 3,715National surveys conducted 4Individual research requests 344Materials distributed * 18,170Election presentations/conferences 37Foreign briefings 95Publications 6Public Hearings 1

* Computer coding and entry of campaign finance informationoccur in two phases. In the first phase, Pass I, summary informa-tion is coded and entered into the computer within 48 hours of theCommission’s receipt of the report. During the second phase, PassIII, itemized information is coded and entered.

,

Total

Reports Analysis DivisionDocuments processed 19,932Reports reviewed 46,882Telephone assistance and meetings 18,440Requests for additional information (RFAIs) 10,593Second RFAIs 3,900Data coding and entry of RFAIs and

miscellaneous documents 15,096Compliance matters referred to Office

of General Counsel or Audit Division 16

Data Systems Development Division *Documents receiving Pass I coding 27,224

, Documents receiving Pass III coding 55,685Documents receiving Pass I entry 79,803Documents receiving Pass III entry 30,739Transactions receiving Pass III entry

• In-house 1,409,409• Contract 347,510

Public Disclosure DivisionCampaign finance material processed

(total pages) 3,087,490Cumulative total pages of documents

available for review 22,450,832Requests for campaign finance reports 5,054Visitors 7,527Total people served 23,559Information telephone calls 10,978Computer printouts provided 31,827Faxline requests 553Total income (transmitted to U.S. Treasury) 18,251Contacts with state election offices 4,219Notices of failure to file with state

election offices 12

Divisional Statistics for Calendar Year 2002

* Figure includes National Voter Registration Act materials.

73Appendices

1976 3 1 41977 6 6 121978 98 ‡ 10 1081979 75 ‡ 9 8419805 48 ‡ 11 591981 27 ‡ 13 401982 19 1 201983 22 0 221984 15 2 171985 4 9 131986 10 4 141987 12 4 161988 8 0 81989 2 7 91990 1 6 71991 5 8 131992 9 3 121993 10 2 121994 5 17 221995 12 0 121996 23 0 231997 7 6 131998 5 7 121999 20 7 272000 14 0 142001 15 1 162002 20 13 33Total 495 147 642

Audit Reports Publicly Released

Total

Office of General CounselAdvisory opinions

Requests pending at beginning of 2002 5Requests received 15Issued 15Not issued 3Pending at end of 2001 2

Compliance cases †

Pending at beginning of 2002 166Opened 118Closed 98Pending at end of 2002 186

Law Library Telephone inquiries 768 Visitors 542

Legal Review FECAPending at beginning of 2002 7Opened in 2002 29Closed in 2002 27Pending at end of 2002 9

LitigationCases pending at beginning of 2002 35Cases opened 21Cases closed 15Cases pending at end of 2002 41Cases won 8Cases lost 1Cases won/lost 2Miscellaneous Cases‡ 4

RegulationsNotices of Proposed Rulemaking 9Final or Interim Final Rules with Explanation and Justification 12Public Rulemaking Hearings 4

† In annual reports previous to 1994, the category “compliancecases” included only Matters Under Review (MURs). As a result ofthe Enforcement Priority System (EPS), the category has beenexpanded to include internally-generated matters in which theCommission has not yet made reason to believe findings.

‡Three cases were voluntarily withdrawn by the plaintiff: onewas withdrawn prior to a deposition motion; two were withdrawnafter deposition motions. One case was concluded pursuant to asettlement agreement.

Year Title 2 * Title 26 † Total

* Audits for cause: The FEC may audit any registeredpolitical committee: 1) whose reports do not substantially complywith the law; or 2) if the FEC has found reason to believe that thecommittee has committed a violation. 2 U.S.C. §§438(b) and437g(a)(2).

† Title 26 audits: The Commission must give priority to thesemandatory audits of publicly funded committees.

‡ Random audits: Most of these audits were performed underthe Commission’s random audit policy (pursuant to the former 2U.S.C. §438(a)(8)). The authorization for random audits was re-pealed by Congress in 1979.

Appendices74

Presidential 17 0 14 3Presidential Joint Fundraising 0 0 0 0Senate 3 0 3 0House 12 1 11 2Party (National) 0 0 0 0Party (Other) 2 6 1 7Nonparty (PACs) 0 8 4 4Total 34 15 33 16

Status of Audits, 2002

Pending Opened Closed Pendingat Beginning at End

of Year of Year

Audits Completed by Audit Division, 1975 – 2002

Total

Presidential 126Presidential Joint Fundraising 12Senate 28House 182Party (National) 47Party (Other) 159Nonparty (PACs) 88Total 642

75

Appendix 62002 Federal RegisterNotices

2002-1Interpretation of Allocation of Candidate Travel Ex-penses; Interpretation (67 FR 5445, February 6,2002)

2002-2The Internet and Federal Elections; Candidate-Re-lated Materials on Web Sites of Individuals, Corpora-tions and Labor Organizations; Notice of Public Hear-ing (67 FR 6883, February 14, 2002)

2002-3Independent Expenditure Reporting; Final Rule (67FR 12834, March 20, 2002)

2002-4The Voting System Standards and an Opportunity toPublicly Voice Previously Submitted Comments; No-tice of Public Hearing (67 FR 13334, March 22, 2002)

2002-5Administrative Fines; Notice of Proposed Rulemaking(67 FR 20461, April 25, 2002)

2002-6Candidate Debates; Petition for Rulemaking and No-tice of Availability (67 FR 31164, May 9, 2002)

2002-7Prohibited and Excessive Contributions: Non-FederalFunds or Soft Money; Notice of Proposed Rulemaking(67 FR 35654, May 20, 2002)

2002-8Brokerage Loans and Lines of Credit; Final Rule (67FR 38353, June 4, 2002)

2002-9Reorganization of Regulations on “Contribution” and“Expenditure”; Notice of Proposed Rulemaking (67 FR40881, June 14, 2002)

2002-10Independent Expenditure Reporting; Final Rule andEffective Date (67 FR 40586, June 13, 2002)

2002-11Prohibited and Excessive Contributions: Non-FederalFunds or Soft Money; Final Rule (67 FR 49064, July29, 2002)

2002-12Reorganization of Regulations on “Contribution” and“Expenditure”; Final Rule (67 FR 50582, August 5,2002)

2002-13Electioneering Communications; Notice of ProposedRulemaking (67 FR 51131, August 7, 2002)

2002-14Contribution Limitations and Prohibitions; Notice ofProposed Rulemaking (67 FR 54366, August 22,2002)

2002-15Disclaimers, Fraudulent Solicitation, Civil Penaltiesand Personal Use of Campaign Funds; Notice of Pro-posed Rulemaking (67 FR 55348, August 29, 2002)

2002-16Coordinated and Independent Expenditures; Notice ofProposed Rulemaking (67 FR 60042, September 24,2002)

2002-17Contribution Limitations and Prohibitions; Cancellationof Public Hearing (67 FR 62410, October 7, 2002)

2002-18Filing Dates for the Hawaii Special Election in the 2ndCongressional District (67 FR 63658, October 15,2002)

2002-19Bipartisan Campaign Reform Act of 2002 Reporting;Notice of Proposed Rulemaking (67 FR 64555, Octo-ber 21, 2002)

Appendices76

2002-20Electioneering Communications; Final Rule (67 FR65190, October 23, 2002)

2002-21FCC Database on Electioneering Communications;Interim Final Rules with Requests for Comments (67FR 65212, October 23, 2002)

2002-22Contribution Limitations and Prohibitions; Final Rule(67 FR 69928, November 19, 2002)

2002-23Filing Dates for the Hawaii Special Election in the 2ndCongressional District (67 FR 70599, November 25,2002)

2002-24FEC Policy Statement: Interim Reporting Procedures(67 FR 71075, November 29, 2002)

2002-25Disclaimers, Fraudulent Solicitation, Civil Penaltiesand Personal Use of Campaign Funds; Final Rule (67FR 76962, December 13, 2002)

2002-26Bipartisan Campaign Reform Act of 2002 Reporting;Final Rule (68 FR 404, January 3, 2003)

2002-27Coordinated and Independent Expenditures; FinalRule (68 FR 421, January 3, 2003)

2002-28Leadership PACs; Notice of Proposed Rulemaking(67 FR 78753, December 26, 2002)

2002-29BCRA Technical Amendments; Final Rule (67 FR78679, December 26, 2002)

2002-30Contribution Limitations and Prohibitions; Delay ofEffective Date and Correction; Final Rule (67 FR78959, December 27, 2002)

2002-31Brokerage Loans and Lines of Credit; Final Rule andAnnouncement of Effective Date (67 FR 79844, De-cember 31, 2002)

Appendices 77

Appendix 7Summaries of SelectedBCRA-RelatedRulemakings

This appendix summarizes the regulatory changesthe Commission has made as a result of the Biparti-san Campaign Reform Act of 2002. The excerpts arearranged chronologically.

Nonfederal Fund or “Soft Money”On June 22, 2002, the Commission promulgated

new and revised rules based on provisions of theBipartisan Campaign Reform Act of 2002 (BCRA) thatrestrict and, in some cases, ban the receipt, solicita-tion and use of nonfederal funds (sometimes called“soft money”). These rules:• Prohibit national parties from raising or spending

nonfederal funds;• Require state, district and local party committees to

fund certain “federal election activities” with federalfunds and, in some cases, with money raised ac-cording to new limitations, prohibitions and reportingrequirements (i.e., “Levin funds”1 ), or with a combi-nation of such funds; and

• Address fundraising by federal and nonfederal can-didates and officeholders on behalf of party commit-tees, other candidates and nonprofit organizations.

The final rules and their Explanation and Justifica-tion were published in the July 29 Federal Register(67 FR 49064) and are available on the FEC web siteat http://www.fec.gov/pdf/nprm/soft_money_nprm/fr67n145p49063.pdf.

Part I: General Information and TerminologyOrganization. In order to implement the BCRA, the

Commission has revised its existing regulations andadded new 11 CFR part 300, which contains most ofthe rules governing party committees’ use ofnonfederal funds and the so-called “Levin funds.” Newpart 300 contains five subparts, which address theuse of nonfederal funds by each of the following enti-ties:• National party committees;• State, district and local party committees;• Federal candidates and officeholders;

• State and local candidates; and• Tax-exempt organizations.

The rules applicable to each of these entities areaddressed in detail below, in Part II: Application.

Federal election activity. Many provisions of theBCRA are framed in terms of “federal election activi-ties.” As used in 11 CFR part 300, “federal electionactivity” means any of the following activities:• Voter registration activity during the 120 days before

a regularly-scheduled federal election and ending onthe day of that election;

• Voter identification, generic campaign activities2 andget-out-the-vote activities that are conducted in con-nection with an election in which one or more candi-dates for federal office appear on the ballot (regard-less of whether state or local candidates also appearon the ballot);

• A public communication3 that refers to a clearlyidentified federal candidate and that promotes, sup-ports, attacks or opposes any federal candidate(This definition applies regardless of whether anonfederal candidate is also mentioned or identifiedin the communication and regardless of whether thecommunication expressly advocates a vote for oragainst a federal candidate.); and

• Services provided by an employee of a state, districtor local party committee who spends more than 25percent of his or her compensated time during thatmonth on activities in connection with a federal elec-tion. 11 CFR 100.24(b).

The Commission has also adopted regulations at11 CFR 100.24(a) that define certain terms used inthe above definition of “federal election activity”:

• “In connection with an election in which a candidatefor federal office appears on the ballot” means:

1 See p. 80 for a full description of “Levin funds.”

2 “Generic campaign activity” means a public communi-cation that promotes or opposes a political party and doesnot promote or oppose a clearly identified federal ornonfederal candidate. 11 CFR 100.25.

3 A “public communication” means any communicationby means of television (including cable and satellite), radio,newspaper, magazine, billboard, mass mailing, telephonebank or any other form of general public political advertis-ing. Communications over the Internet are not included inthis definition of public communication. 11 CFR 100.26.

Appendices78

• In an even-numbered year, the period beginning on the day of the earliest filing deadline for primary election ballot access under state law—or on January 1 in states that do not hold primaries— and ending on the day of the general election or the general election runoff if a runoff is held; or

• In an odd-numbered year, the period beginning on the day that the date is set for a special election in which a federal candidate appears on the ballot, and ending on the day of that election.

• “Voter registration activity” means contacting indi-viduals by telephone, in person or by other individu-alized means to assist them in registering to vote.This activity includes, but is not limited to, printingand distributing registration and voting information,providing individuals with voter registration formsand assisting individuals with completing and filingthese forms.

• “Get-out-the-vote activity” means contacting regis-tered voters by telephone, in person or by otherindividualized means in order to assist them in voting(unless the activity is undertaken by state or localcandidates and/or officeholders, or an organizationof such candidates or officeholders, and refers onlyto one or more state or local candidates). This activ-ity includes, but is not limited to:

• Providing individual voters, within 72 hours of an election, with information about when and where polling places are open; and

• Transporting, or offering to transport, voters to polling places.

• “Voter Identification” means creating or enhancingvoter lists by adding information about voters’ likeli-hood of voting in a particular election or voting for aparticular candidate (unless the activity is under-taken by state or local candidates and/or officehold-ers, or an organization of such candidates or office-holders, and refers only to one or more state or localcandidates).

The regulations also identify activities that are notincluded in the definition of “federal election activity.”These are:

• A public communication that refers solely to one ormore clearly identified candidate(s) for state or localoffice and does not promote, support, attack or op-

pose a clearly identified candidate for federal office.A public communication would, however, be consid-ered a federal election activity if it constituted voterregistration, generic campaign activity, get-out-the-vote activity or voter identification;

• A contribution to a candidate for state or local office,unless the contribution is designated for voter regis-tration, voter identification activity, generic campaignactivity, get-out-the vote activity, employee servicesfor these activities or a public communication;

• The costs of state, district or local political conven-tions, meetings or conferences; and

• The costs of grassroots campaign materials thatname or depict only a candidate for state or localoffice. 11 CFR 100.24(c).

Agent. In most cases, regulations that apply to aparty committee, a federal candidate or officeholder ora state or local candidate also apply to any “agent”acting on behalf of that individual or organization. Forthe purposes of 11 CFR part 300, the term “agent” isdefined as any person who has “actual authority, ei-ther express or implied” to engage in specifically-listed activities on behalf of another person or organi-zation. 11 CFR 300.2(b).

Directly or indirectly established, maintained, fi-nanced or controlled. Most of the new regulations thatapply to a party committee or a federal candidate orofficeholder also apply to any entity “directly or indi-rectly established, maintained, financed or controlled”by the committee, candidate or officeholder. The newregulation at 11 CFR 300.2(c), which is based on theexisting “affiliation” regulation at 11 CFR 100.5(g)(4),includes a series of factors that must be considered,in the context of an overall relationship, to determinewhether the presence of one or more of these factorsindicates that the individual or committee established,finances, maintains or controls the organization. Anentity will not be considered to be directly or indirectlyestablished, financed, maintained or controlled basedsolely upon activities undertaken before November 6,2002.

Appendices 79

Part II: Application

National Party Committees, Including NationalCongressional Campaign Committees

General prohibitions. Beginning on November 6,2002, national party committees may not solicit,4 re-ceive, direct to another person or spend nonfederalfunds, that is, funds that are not subject to the limits,prohibitions and reporting requirements of the Act.Moreover, such committees must use only federalfunds to raise funds that are used, in whole or in part,for expenditures and disbursements for federal elec-tion activity. 11 CFR 300.10.

Tax-exempt organizations. National party commit-tees may not solicit funds for, or make or direct dona-tions to, tax-exempt 501(c) organizations, or an orga-nization that has applied for this tax status, if the orga-nization makes expenditures or disbursements inconnection with federal elections, including federalelection activity.5 11 CFR 300.11(a). The committeemay establish whether or not the organization makesexpenditures or disbursements in connection withfederal elections by obtaining a signed certificationfrom an authorized representative of the organization.The certification should state that within the currentelection cycle the organization has not made, anddoes not intend to make, such expenditures and dis-bursements, including payments for debts incurred inan earlier cycle.6 11 CFR 300.11(c) and (d).

National party committees may solicit funds for, ormake or direct donations to, so-called “527 organiza-tions” only if these organizations are:• Political committees under Commission regulations;

or• State, district or local party committees or authorized

campaign committees of state or local candidates.11 CFR 300.11(a)(3).

Office Building Funds. After November 5, 2002,national party committees may no longer accept fundsinto party office building accounts and may not usesuch funds for the purchase or construction of anyoffice facility. Any funds remaining in an office buildingaccount on November 6 must be disgorged to theU.S. Treasury or returned to donors no later thanDecember 31, 2002. Any refund check not cashed byFebruary 28, 2003, must be disgorged to the Treasuryby March 31. 11 CFR 300.12.

Transition rules. If a national party committee hasnonfederal funds in its possession on November 6,2002, it may use these funds to retire outstandingdebts or other obligations relating to the 2002 elec-tions, including runoff elections and recounts, untilJanuary 1, 2003. Any remaining nonfederal fundsmust be disgorged to the Treasury or returned to do-nors no later than December 31, 2002. Any refundchecks not cashed by February 28, 2003, must bedisgorged to the Treasury by March 31. Thenonfederal accounts of national party committeesmust file termination reports with the Commissiondisclosing the disposition of all funds deposited innonfederal accounts and building fund accounts. 11CFR 300.12 and 300.13.

State, District and Local Party Committees andOrganizations

Under the new regulations, state, district and localparty committees that have receipts or make dis-bursements for federal election activity may maintain,as appropriate, up to four different types of accounts:• Federal accounts, for deposit of funds that comply

with the limitations, prohibitions and reporting re-quirements of the Act;

• Nonfederal accounts, for deposit of funds that aregoverned by state law;

4 For the purposes of 11 CFR part 300, to “solicit”means to “ask that another person make a contribution,donation, transfer of funds, or otherwise provide anything ofvalue, whether the contribution, donation, transfer of funds,or thing of value, is to be made or provided directly, orthrough a conduit or intermediary.” Merely providing infor-mation or guidance as to the requirement of a particular lawdoes not constitute a solicitation. 11 CFR 300.2(m).

5 Note that national party committees may solicit fundsfor, or make or direct donations to, permissible tax-exemptorganizations only if the funds are subject to the limitations,prohibitions and reporting requirements of the Act.

6 In no case is a committee prohibited from respondingto a request for information about a tax-exempt group thatshares the party’s political or philosophical goals. 11 CFR300.11(f).

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• Allocation accounts, which may be established tomake allocable expenditures and disbursements;and

• Levin accounts, for deposit of a new category offunds, called “Levin funds,” that comply with some ofthe limits and prohibitions of the Act and are alsogoverned by state law.7

Levin funds. A state, district or local party commit-tee may spend only those Levin funds that it raises foritself, and these funds can be used only for certaintypes of voter registration, voter identification, get-out-the-vote and generic campaign activity. Note thatcertain types of federal election activities may not befinanced with Levin funds:• Public communications that refer to a clearly identi-

fied candidate; and• The services of employees who devote more than

25 percent of their compensated time to activities inconnection with a federal election.

National party committees may not raise or spendLevin funds.

When a party committee receives a donation ofLevin funds, this donation:• Must be permissible under the laws of the state in

which the party committee raising and spending thefunds is organized;

• May be solicited from some sources that cannotcontribute under the Act (e.g., corporations, unionsand federal government contractors) so long as thedonation is not from foreign nationals or fromsources that are impermissible under state law;

• Is limited to $10,000 in a calendar year from anyperson, including any entity established, maintained,financed or controlled by that person (if state lawlimits donations to an amount less than $10,000,then the lower limit applies); and

• Must be raised using only federal funds or Levinfunds to pay the direct costs of the fundraising (in-cluding expenses for the solicitation of funds and forthe planning and administration of actual fundraisingactivities and programs) if any portion of the fundswill be used for federal election activity. 11 CFR300.31 and 300.32(a)(4).

Each state, district and local party committee has aseparate Levin fund donation limit, and such commit-tees are not considered to be affiliated for the pur-poses of determining Levin fund donation limits. Levinfunds expended or disbursed by a given state, districtor local party committee must be raised solely by thatparticular committee, and these committees cannotraise Levin funds through joint fundraising efforts oraccept transfers of Levin funds from other commit-tees. Additionally, these committees cannot accept oruse as Levin funds any funds that come from, or inthe name of, a national party committee, federal can-didate or federal officeholder. 11 CFR 300.31 and300.34(b).

Levin fund expenditures and disbursements. As ageneral rule, state, district and local party committeesmust use federal funds to make expenditures anddisbursements for federal election activity.8 11 CFR300.32(a)(2). However, as long as certain conditionsare met, a state, district, or local party committee mayuse Levin funds to pay for part, or is some limitedcircumstances, all of the following types of federalelection activity:9

• Voter registration activity during the period that be-gins 120 days before the date of a regularly-sched-uled federal election and ends on the day of thatelection; and

• Voter identification, get-out-the vote activities orgeneric campaign activity conducted in connectionwith an election in which a federal candidate ap-

7 An organization may also deposit Levin funds in anonfederal account that must function as a nonfederal andLevin account. In order to make a disbursement of Levinfunds from such an account, the organization must be ableto show through a reasonable accounting method approvedby the Commission that the organization had received intothis account sufficient federal contributions or Levin dona-tions to make the disbursement. 11 CFR 300.30(c)(3)(ii).

8 Additionally, an association or similar group of state orlocal candidates or officeholders must use only federalfunds to make expenditures or disbursements for federalelection activity. 11 CFR 300.32(a)(1).

9 Levin funds may also be used for any purpose that isnot federal election activity as long as this use is lawful inthe state in which the committee is organized. 11 CFR300.32(b)(2).

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pears on the ballot (regardless of whether a state orlocal candidate also appears on the ballot). 11 CFR300.32(b).

Levin funds may not be used, however, to pay forany part of a federal election activity if:• The activity refers to a clearly identified federal can-

didate; or• Any portion of the funds will be used to pay for a

television or radio communication, other than a com-munication that refers solely to a clearly identifiedstate or local candidate. 11 CFR 300.32(c).

Levin funds may be used to pay for the entirety ofpermissible federal election activity disbursementsonly if the party committee’s disbursements do notexceed $5,000 in the aggregate in a calendar year.Disbursements and expenditures that aggregate inexcess of $5,000 per year must be paid entirely withfederal funds or allocated between federal funds andLevin funds, according to the minimum allocationpercentages described below. 11 CFR 300.33(a).

Allocating expenses. State, district and local partycommittees that allocate federal election activity ex-penses between federal and Levin funds must allo-cate to their federal account one of following minimumpercentages, depending on the composition of theballot for that year:• If a Presidential candidate, but no Senate candidate,

appears on the ballot, then at least 28 percent of theexpenses must be allocated to the federal account.

• If both a Presidential candidate and a Senate candi-date appear on the ballot, then at least 36 percent ofthe expenses must be allocated to the federal ac-count.

• If a Senate candidate, but no Presidential candidate,appears on the ballot, then at least 21 percent of theexpenses must be allocated to the federal account.

• If neither a Presidential nor a Senate candidate ap-pear on the ballot, at least 15 percent of the ex-penses must be allocated to the federal account.

An organization must make payments for allocableexpenses either from a federal account or from anallocation account. If payments are made from a fed-eral account, Levin funds may be transferred to thisaccount, during the 70-day window for such transfers,in order to cover the Levin-fund portion of the ex-pense. 11 CFR 300.33(d).

Expenses that may not be allocated. Certain costsof federal election activity are not allocable:• Expenditures for public communications that refer to

a clearly identified federal candidate and that pro-mote, support, attack or oppose any federal candi-date must be paid entirely with federal funds.

• Salaries and wages for employees who spend morethan 25 percent of their compensated time permonth on federal election activities, or on activities inconnection with federal elections, must be paid en-tirely with federal funds. Salaries and wages for em-ployees who spend 25 percent or less of their com-pensated time in this manner must be paid withfunds that comply with state law.

• The direct costs of raising federal funds to be usedfor federal election activities must be paid with fed-eral funds; if Levin funds are being raised, federalfunds or Levin funds may be used. No nonfederalfunds may be used to pay for an allocable portion ofthe fundraising costs for federal or Levin funds usedfor federal election activity. 11 CFR 300.33(c).

Office buildings. Under the amended Act and regu-lations, a state, district or local party committee mayspend federal funds or nonfederal funds (includingLevin funds) to purchase or construct a party officefacility, so long as the funds are not contributed ordonated by a foreign national. If a committee choosesto use nonfederal funds or Levin funds, the funds aresubject to state law, and the Act will not preempt thelimits and prohibitions of state law except to prohibitdonations by foreign nationals. Moreover, ifnonfederal or Levin funds are used, the office facilitymust not be purchased or constructed for the purposeof influencing the election of any federal candidate inany particular election. If federal funds are used topurchase or construct the facility, the Act will preemptthe limits and prohibitions of state law. 11 CFR300.35(a) and (b).

Additionally, a state, district or local party commit-tee may generate income by leasing out a portion ofits office building at the usual and normal charge. Ifthe building is purchased in whole or in part withnonfederal funds, then all rental income must be de-posited in the committee’s nonfederal account and

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used only for nonfederal purposes. The rental incomeand its use must also comply with state law. If thebuilding is purchased entirely with federal funds, thenthe rental income may be deposited in thecommittee’s federal account. Any such income mustbe disclosed in the committee’s reports to the Com-mission. 11 CFR 300.35(c).

Reporting and recordkeeping for organizations thatare not political committees. A state, district or localparty committee (or an association of state or localcandidates or officeholders) that is not a political com-mittee under the Act is not required to file reports, butmust be able to demonstrate through a reasonableaccounting method that it has enough funds on handthat comply with the limits and prohibitions of the Actto cover any payment of federal funds (or Levin funds)that it makes for federal election activity. The organi-zation must keep records to this effect and makethese records available to the Commission upon re-quest. Payments by such organizations for federalelection activity are not “expenditures” for the purposeof determining whether an organization qualifies as apolitical committee with registration and reportingrequirements, unless the payment otherwise qualifiesas an expenditure under 2 U.S.C. §431(9).10 11 CFR300.36(a).

Reporting and recordkeeping for political commit-tees.11 A state, district or local party committee (or anassociation of state or local candidates or officehold-ers) that is a political committee under the Act mustfile on a monthly schedule and report all receipts anddisbursements of federal funds for federal electionactivity, including the federal portion of allocated ex-

penses. 11 CFR 300.36(b)(1) and (b)(2). See also 11CFR 100.5.

A state, district or local party committee that is apolitical committee but that has less than $5,000 ofaggregate receipts and disbursements for federalelection activity per calendar year—and any associa-tion of state or local candidates or officeholders that isa political committee—must report all receipts anddisbursements of federal funds. (The party committeeneed not report receipts and disbursements of Levinfunds.) Such a committee or association of candi-dates and officeholders should not report federalfunds or Levin funds disbursed for federal electionactivity as “expenditures” on their reports, unless thedisbursement otherwise qualifies as an expenditure.12

11 CFR 300.36(b)(1) and 300.36(c)(1). See also 2U.S.C. §421(9) and 11 CFR 100.8.

A state, district or local party committee that has$5,000 or more of aggregate receipts and disburse-ments for federal election activity per calendar yearmust disclose its activity in greater detail, includingreceipts and disbursements of federal funds and ofLevin funds used for federal election activity. 11 CFR300.36(b)(2) and 300.36(c)(1). Such a committeemust also report the allocation percentages used.

Contributions and expenditures of federal funds forfederal election activity apply toward the $50,000threshold for determining whether a committee mustfile its reports electronically under the Commission’smandatory electronic filing program. Receipts anddisbursements for federal election activity that do notqualify as contributions and expenditures (includingLevin fund receipts and disbursements) do not, how-ever, count toward this threshold. 11 CFR 104.18 and300.36(c)(2). See also 11 CFR 100.7 and 100.8.

Tax exempt organizations. Like national party com-mittees, state, district and local party committees maynot solicit funds for, or make or direct donations to,tax-exempt 501(c) organizations, or to organizationsthat have applied for tax-exempt status, if the organi-

10 Certain organizations that make “expenditures,” asdefined at 11 CFR 100.8(a), in excess of $1,000 in a calen-dar year become political committees under the Act andmust register and report with the Commission. 11 CFR100.5. In a separate rulemaking, the Commission has reor-ganized 11 CFR 100.7 and 100.8. See “Reorganization ofRegulations on “Contribution” and “Expenditure” (67 FR50582, August 5, 2002).

11 These requirements added by the BCRA are in addi-tion to the Act’s existing requirements to report expendituresof federal funds. 2 U.S.C. §434 and 11 CFR part 104.

12 Associations, or other similar organizations, of state orlocal candidates may spend federally permissible funds forfederal election activity, but they cannot raise or spendLevin funds.

Appendices 83

zation makes expenditures or disbursements in con-nection with federal elections, including federal elec-tion activity.13 Committees may solicit funds for, ormake or direct donations to, so-called “527 organiza-tions” only if these organizations are:• Political committees under Commission regulations;• State, district or local party committees;• Authorized campaign committees of state or local

candidates; or• A political committee under state law that supports

only state or local candidates and that does notmake expenditures or disbursements in connectionwith federal elections, including expenditures ordisbursements for federal election activity.

In order to establish whether or not an organizationmakes expenditures or disbursements in connectionwith federal elections, party committees may obtain asigned certification from an authorized representativeof the organization. The certification should state thatwithin the current election cycle the organization hasnot made, and does not intend to make, such expen-ditures and disbursements, including payments fordebts incurred from making such expenditures anddisbursements in an earlier cycle. 11 CFR 300.37.

Contribution limit. In addition, the new rules raisethe individual contribution limit to a state party com-mittee to $10,000 per year.

Fundraising by Federal Candidates andOfficeholders

The new regulations restrict and, in some cases,prohibit the solicitation and use of nonfederal funds byfederal candidates and federal officeholders,14 includ-ing agents acting on their behalf and entities that aredirectly or indirectly established, maintained, financed

or controlled by one or more federal candidate orofficeholder. 11 CFR 300.60 and 300.61.

Federal elections. Under the Act and regulations,federal candidates and officeholders can only solicit,receive, direct, transfer, spend or disburse federalfunds in connection with a federal election or for fed-eral election activity in amounts subject to the limits,prohibitions and reporting requirements of the Act. 11CFR 300.61.

Nonfederal elections. Federal candidates and of-ficeholders can only solicit, receive, direct, transfer,spend or disburse funds in connection with anonfederal election in amounts and from sources thatare both consistent with state law and not in excess ofthe Act’s limits and prohibitions. However, if a federalcandidate or officeholder is also a candidate for stateor local office, then he or she may raise and spendnonfederal funds that only comply with state law, solong as the solicitation, receipt and spending of fundsrefers only to the state or local candidate and/or an-other state or local candidate for that same office.Individuals simultaneously running for federal andnonfederal office may only raise and spend federalfunds for the federal election. 11 CFR 300.62 and300.63.

Attending, speaking or appearing as a featuredguest at a fundraising event. A federal candidate orofficeholder may attend, speak or be a featured guestat a fundraising event for a state, district or local com-mittee of a political party, including a fundraisingevent at which nonfederal funds or Levin funds areraised. The committees may advertise, announce orotherwise publicize that a federal candidate or office-holder will attend, speak or be a featured guest at thefundraising event. Candidates and federal officehold-ers may speak at such an event without restriction orregulation. 11 CFR 300.64.

Tax-exempt organizations. A federal candidate orofficeholder may make a general solicitation on behalfof a tax-exempt organization, without limits on thesource or amount of funds, if the organization doesnot make expenditures or disbursements in connec-tion with federal elections, including the federal elec-tion activities listed below. Moreover, a candidate oroffice holder may make a general solicitation on be-

13 In no case is a committee prohibited from respondingto a request for information about a tax-exempt group thatshares the party’s political or philosophical goals. 11 CFR300.37(f).

14 The regulations at 11 CFR 300.2(o) define an “Indi-vidual holding Federal office” as an individual elected to orserving in the office of the U.S. President or Vice President,or in the U.S. Congress.

Appendices84

half of an organization that conducts activities in con-nection with an election if:• The organization’s principal purpose is not to con-

duct election activities, including the federal electionactivities listed below; and

• The solicitation is not to obtain funds for activities inconnection with an election, including federal elec-tion activities. 11 CFR 300.65(a) and (c). See300.52(a)(2)(ii).

Under certain circumstances, a federal candidateor officeholder may also make a specific solicitationexplicitly to obtain funds to pay for federal electionactivities conducted by a tax-exempt organizationwhose principal purpose is to undertake such activi-ties. The federal election activities for which such aspecific solicitation may be made are:• Voter registration activity during the period that be-

gins 120 days before the date of a regularly sched-uled federal election and ends on the day of thatelection; and

• Voter identification, get-out-the vote activity or ge-neric campaign activity conducted in connection withan election in which a federal candidate appears onthe ballot (regardless of whether a state or localcandidate also appears on the ballot). 11 CFR300.65(c).

Such solicitations are permissible, however, only ifthey are made solely to individuals and the amountsolicited does not exceed $20,000 during any calen-dar year. 11 CFR 300.65(b) and (c).

Because the BCRA permits limited solicitations byfederal candidates and officeholders only for the spe-cific federal election activities listed above, these indi-viduals must not make any solicitations on behalf of a501(c) organization, or an organization that has ap-plied for this tax status, for other types of electionactivities, such as public communications promotingor supporting federal candidates. 300.65(d).

Determining “principal purpose.” A federal candi-date or officeholder may determine a tax-exemptorganization’s “principal purpose” by obtaining asigned certification from an authorized representativeof the organization stating that:• The organization’s principal purpose is not to con-

duct election activities, including the federal electionactivities listed above; and

• The organization does not intend to pay debts in-curred from making federal election disbursementsand expenditures (including debts for federal elec-tion activity) in a prior election cycle. 11 CFR300.65(e).

State and Local CandidatesThe new regulations prohibit a state or local candi-

date or officeholder, or any agents acting on his or herbehalf,15 from spending nonfederal funds on a publiccommunication that refers to a clearly identified fed-eral candidate (regardless of whether a state or localcandidate is also identified) and that promotes, sup-ports, attacks or opposes a federal candidate. Thisprohibition applies whether or not the communicationexpressly advocates a vote for or against a federalcandidate.

Tax-Exempt OrganizationsThe Commission has also added a subpart to 11

CFR 300, subpart C, which addresses the BCRA’slimits and prohibitions on the use of soft money fromthe perspective of certain tax-exempt organizations.The regulations under this subpart contain the restric-tions on fundraising and donations by national partycommittees and state, district and local party commit-tees and fundraising by federal candidates and office-holders that are also addressed in the subparts de-voted to each of these types of entity. 11 CFR300.50, 300.51 and 300.52.

Advisory Opinions SupersededThese new and revised rules partially supersede

the following advisory opinions relating to party officebuilding funds: AOs 2001-12, 2001-1, 1998-8, 1998-7,1997-14, 1993-9, 1991-5 and 1986-40. Other advisoryopinions may no longer be relied upon to the extentthat they conflict with the BCRA.

15 For example, this prohibition would apply to an indi-vidual who is both a federal office holder and a state candi-date. The regulations at 11 CFR 300 subpart E do not applyto an association of state or local candidates or officehold-ers.

Appendices 85

16 The interim rules were published in the October 23,2002, Federal Register (67 FR 65212). The full text of thefinal rules and the Explanation and Justification is availableon the FEC web site at http://www.fec.gov/register.htm.

Electioneering CommunicationsOn October 10, 2002, the Commission approved

final rules to implement provisions of the BCRA regu-lating television or radio communications that refer toa clearly identified federal candidate and are distrib-uted to the relevant electorate within 60 days prior tothe general election or 30 days prior to a primary.

The final rules and their Explanation and Justifica-tion were published in the October 23, 2002, FederalRegister (67 FR 65190) and are available on the FECweb site at www.fec.gov/pages/bcra/rulemakings/electioneering_communications.htm.

“Electioneering Communication” DefinedAn electioneering communication is any broadcast,

cable or satellite communication which fulfills each ofthe following conditions:

The communication refers to a clearly identifiedcandidate. A communication refers to a clearly identi-fied federal candidate if it contains the candidate’sname, nickname or image, or makes any unambigu-ous reference to the person or their status as a candi-date, such as “the Democratic candidate for Senate.”11 CFR 100.29(b)(2).

The communication is publicly distributed. Gener-ally, a communication is publicly distributed if it isdisseminated for a fee by a television station, radiostation, cable television system or satellite system.

In the case of Presidential and Vice-Presidentialcandidates, the communication is publicly distributedif it can be received by 50,000 or more people:• In a state where a primary election or caucus is be-

ing held within 30 days;• Anywhere in the United States during the period

between 30 days prior to the nominating conventionand the conclusion of that convention; or

• Anywhere in the United States within 60 days priorto the general election. 11 CFR 100.29(b)(3)(ii).

The Commission will publish on its web site a list ofthe applicable event in each state that triggers the 30-day period for Presidential and Vice-Presidential can-didates.

Electioneering communications are limited to paidprogramming. The station must seek or receive pay-ment for distribution of the communication. Both

infomercials and commercials are included within thedefinition. 11 CFR 100.29(b)(3)(i).

The communication is distributed during a certaintime period before an election. Electioneering commu-nications are transmitted within 60 days prior to ageneral election or 30 days prior to a primary electionfor federal office, including elections in which the can-didate is unopposed. A “primary election” includesany caucus or convention of a political party whichhas the authority to nominate a candidate to federaloffice. 11 CFR 100.29(a)(2).

This condition regarding the timing of the communi-cation applies only to elections in which the candidatereferred to is running.

In the case of Congressional candidates only, thecommunication is targeted to the relevant electorate.The communication targets the relevant electorate if itcan be received by 50,000 or more people in the dis-trict (in the case of a U.S. House candidate) or state(in the case of a Senate candidate) that the candidateseeks to represent. 11 CFR 100.29(b)(5).

The Federal Communications Commission (FCC)will provide on its web site the information necessaryto determine whether a communication can be re-ceived by 50,000 people. Under interim rules promul-gated by the FEC, if this information is not yet avail-able, the person making a communication may arguethat it could not have been received by 50,000 peopleof the relevant electorate. 16 To make this argument,they may:• Use written documentation from the entity that trans-

mitted the communication;• Demonstrate that the communication is not distrib-

uted on a station located in a metropolitan area; or• Demonstrate that the person possesses information

which leads them to reasonably believe that thecommunication could not be received by 50,000 ormore people in the relevant area.

Appendices86

ExemptionsThe regulations at 11 CFR 100.29(c)(1) through (6)

exempt certain communications from the definition of“electioneering communication:”• A communication that is disseminated through a

means other than a television station, radio station,cable television system or satellite system. For ex-ample, printed media—including newspapers, maga-zines, bumper stickers, yard signs and billboards—are not included, nor are communications over theInternet, e-mail or the telephone;

• A news story, commentary or editorial broadcast bya television station, radio station, cable televisionsystem or satellite system. However, the facilitiesmay not be owned or controlled by a political party,political committee or candidate, unless the commu-nication satisfies the exemption for news stories at11 CFR 100.132(a) and (b);

• Expenditures or independent expenditures that mustotherwise be reported to the FEC;

• A candidate debate or forum or a communicationthat solely promotes a debate or forum. Communica-tions promoting the debate or forum must be madeby or on behalf of the sponsor;

• Communications by state or local candidates that donot promote, support, attack or oppose federal can-didates; and

• Communications by 501(c)(3) organizations. How-ever, these organizations are still barred from partici-pating in partisan political activity by the InternalRevenue Code. Making electioneering communica-tions may jeopardize their tax-exempt status.

ApplicationCorporations and Labor Organizations. Corpora-

tions and labor organizations are prohibited from mak-ing or financing electioneering communications. 11CFR 114.2(b)(2)(iii). Further, they may not providefunds to any person if they know, have reason toknow or are willfully blind to the fact that the funds arefor the purpose of making electioneering communica-tions. 11 CFR 114.14(a) and (c).

Qualified Nonprofit Corporations. Qualified non-profit corporations (QNC) may make electioneeringcommunications. To qualify, the entity must be a non-profit corporation incorporated under 26 U.S.C.

§501(c)(4) that is ideological in nature and qualifiesfor exemptions under 11 CFR 114.10.

If a QNC makes electioneering communicationsthat aggregate in excess of $10,000 in a calendaryear, it must certify that it is eligible for the QNC ex-emption. The certification must include the name andaddress of the corporation and the signature andprinted name of the individual making the qualifyingstatement. It must also certify that the corporationmeets the standards of a QNC, either by satisfying allof the qualifications at 11 CFR 114.10(c)(1)-(5), orthrough a court ruling pursuant to 11 CFR114.10(e)(1)(i)(B). The certification is due no laterthan when the first electioneering communicationsreport is required to be filed. 11 CFR 100.29(e).

QNCs still may not make contributions to federalpolitical committees, nor may they accept any fundsfrom corporations or labor organizations. 11 CFR114.10(d)(2) and (3). Also, these regulations do notsupercede any section of the Internal Revenue Coderegarding 501(c)(4) organizations. 11 CFR 100.29(i).

“527” Organizations. The prohibition against theuse of corporate funds to make or finance electioneer-ing communications does not apply to certain organi-zations incorporated under 26 U.S.C. §527.

Incorporated state party committees and state can-didate committees registered as 527 organizationsare exempt from the corporate prohibition providedthat the committee:• Is not a political committee as defined at 11 CFR

100.5;• Incorporates for liability purposes only;• Does not use any funds donated by corporations or

labor organizations to fund the electioneering com-munication; and

• Complies with the FEC’s reporting requirements forelectioneering communications. 11 CFR114.2(b)(2)(iii).

Unincorporated, unregistered “527” organizationsmay also make electioneering communications, sub-ject to the disclosure requirements and the prohibitionagainst corporate and labor funds.

Individuals and Partnerships. Individuals and part-nerships may make or finance electioneering commu-nications, provided that certain conditions are met.Those that accept funds provided by corporations or

Appendices 87

labor organizations may not use those funds to payfor electioneering communications, nor may they givethese funds to another to defray the costs of makingan electioneering communication. 11 CFR 114.14(b).

They must be able to demonstrate through a rea-sonable accounting procedure that no prohibitedfunds were used to pay for the electioneering commu-nication. 11 CFR 114.14(d).

Disclosure RequirementsThe BCRA requires that persons who make elec-

tioneering communications that in the aggregate costmore than $10,000 must file disclosure reports withthe FEC within 24 hours of the disclosure date. Re-porting requirements for electioneering communica-tions are included in the reporting rulemaking summa-rized on page 98.

Contribution Limitations andProhibitions

On October 31, 2002, the Commission approvedfinal rules to implement provisions of the BCRA that:• Increase the contribution limits for individuals and

political committees;• Modify recordkeeping requirements for political com-

mittee treasurers;• Prohibit certain contributions and donations by mi-

nors; and• Strengthen the current statutory prohibitions on con-

tributions and donations by foreign nationals.The final rules and their Explanation and Justifica-

tion were published in the November 19, 2002, Fed-eral Register (67 FR 69928) and are available on theFEC web site at www.fec.gov/pages/bcra/rulemakings/part_110_rules.htm.

Contribution Limits IncreasedOn January 1, 2003, a number of contribution limits

increased, and some of the limits became indexed forinflation.

Contributions to candidates and political party com-mittees. The limits on contributions made by individu-als and non-multicandidate committees increased to$2,000 per election to federal candidates and $25,000

per year to national party committees. 11 CFR110.1(b)(1) and 110.1(c)(1). These limits will be in-dexed for inflation, as described below.

Aggregate biennial contribution limitations for indi-viduals. The former $25,000 annual limit for individu-als has been replaced by a new biennial limit of$95,000. This limit includes up to $37,500 in contribu-tions to candidate committees and up to $57,500 incontributions to any other committees. The $57,500portion of the biennial limit contains a further restric-tion, in that no more than $37,500 of this amount maybe given to committees that are not national partycommittees. 11 CFR 110.5(b)(1).17 The biennial limitwill be indexed for inflation.

Special contribution limit to Senate candidates.The limit on contributions made to Senate candidatesby the Republican and Democratic Senatorial cam-paign committees or the national committees of apolitical party, or any combination of these commit-tees, will increase to $35,000 per election cycle. 11CFR 110.2(e)(1). This special limit will also be in-dexed for inflation.

Indexing. Under the old regulations, the coordi-nated party expenditure and Presidential candidateexpenditure limits were indexed for inflation. The newrules extend the inflation indexing to contributions tocandidates and national party committees by individu-als and non-multicandidate committees, the biennialaggregate contribution limit for individuals and thelimit on contributions to Senate candidates by certainnational party committees. 11 CFR 110.17(a) and (b).

For the “per election” limit on contributions to candi-dates, the indexing changes will take effect on the dayafter the general election and remain in effect throughthe day of the next regularly scheduled general elec-tion. 11 CFR 110.1(b)(1)(ii). For example, an in-crease in the limit made in January 2005 would be

17 Under the so-called Millionaires’ Amendment, indi-vidual limits to Congressional candidates increase if thecandidate’s opponent makes expenditures from his or herpersonal funds above a certain threshold. Contributionsexcess of the Act’s limits made under this provision will notbe subject to the overall biennial limit. The Commission hasaddress the Millionaires’ Amendment in a separaterulemaking, described on page 100.

Appendices88

Donors Recipients Special Limits

Candidate PAC1 State, District and National PartyCommittee Local Party Committee2 Committee3

Individual $2,000* per $5,000 $10,000 per year $25,000* Biennial limit ofelection4 per year combined limit per year $95,000*

($37,500 to allcandidates and$57,5005 to allPACs and parties)

State, District $5,000 $5,000 Unlimited transfersand Local per election per year to other party committeesParty combined combinedCommittee2 limit limit

National Party $5,000 per $5,000 Unlimited transfers $35,000* toCommittee3 election per year to other party committees Senate candidate

per campaign6

PAC $5,000 per $5,000 $5,000 per year $15,000Multicandidate7 election per year combined limit per year

PAC $2,000* per $5,000 $10,000 per year $25,000*

Not election per year combined limit per yearMulticandidate7

Contribution Limits

* These limits will be indexed for inflation.1 These limits apply to both separate segregated funds (SSFs) and political action committees (PACs). Affiliated committeesshare the same set of limits on contributions made and received.2 A state party committee shares its limits with local and district party committees in that state unless a local or districtcommittee’s independence can be demonstrated. These limits apply to multicandidate committees only.3 A party’s national committee, Senate campaign committee and House campaign committee are each considered national partycommittees, and each have separate limits, except with respect to Senate candidates—see Special Limits column.4 Each of the following is considered a separate election with a separate limit: primary election, caucus or convention with theauthority to nominate, general election, runoff election and special election.5 No more than $37,500 of this amount may be contributed to state and local parties and PACs.6 This limit is shared by the national committee and the Senate campaign committee.7 A multicandidate committee is a political committee that has been registered for at least six months, has received contributionsfrom more than 50 contributors and—with the exception of a state party committee—has made contributions to at least fivefederal candidates.

Appendices 89

effective from November 3, 2004, to November 7,2006, and would only affect elections held after No-vember 3, 2004. On the other hand, the indexingchanges for the calendar-year-based limits will affectthe calendar-based period that follows, or from Janu-ary 1 of the odd-numbered year through December 31of the next even-numbered year. 11 CFR 110.1(c)(ii),110.2(e)(2) and 110.5(b)(3). The Commission willannounce the amount of the adjusted expenditure andcontribution limits in the Federal Register and on theFEC web site at www.fec.gov. These indexing provi-sions will first be applied in 2005. 11 CFR 110.17(e).

The applicable expenditure and contribution limitswill be adjusted according to the Consumer PriceIndex (CPI). The limits will be adjusted in odd-num-bered years, and will be increased by the percentagedifference between the CPI during the 12 monthspreceding the beginning of that calendar year and theCPI during the base year, which is 2001. The rulescontain a rounding provision so that the inflation-ad-justed amount will be rounded to the nearest multipleof $100. 11 CFR 110.17(c) and (d).

Redesignations and ReattributionsThe Commission has streamlined its rules for des-

ignating contributions to a particular election. Whenan individual or non-multicandidate committee makesan excessive contribution to a candidate’s authorizedcommittee, the committee may automatically redesig-nate excessive contributions to the general election ifthe contribution:• Is made before that candidate’s primary election;• Is not designated in writing for a particular election;• Would be excessive if treated as a primary election

contribution; and• As redesignated, does not cause the contributor to

exceed any other contribution limit. 11 CFR110.1(b)(5)(ii)(B)(1)-(4).

In the case of an authorized committee of a Presi-dential candidate who accepts public funding for thegeneral election, this presumption is available only tothe extent that the candidate is permitted to acceptcontributions to a general election legal and account-ing compliance (GELAC) fund.

The redesignation presumption also includes abackward-looking provision where an undesignated,

excessive contribution made after the primary, butbefore the general election, may be automaticallyapplied to the primary if the campaign committee hasmore net debts outstanding from the primary than theexcessive portion of the contribution. Theredesignation, of course, may not cause the contribu-tor to exceed any contribution limits. 11 CFR110.1(b)(5)(ii)(C).

The candidate committee is required to notify thecontributor of the redesignation by paper mail, e-mail,fax or other written method within 60 days of thetreasurer’s receipt of the contribution. Also, at thetime of notification, the contributor must be given theopportunity to request a refund. 11 CFR110.1(b)(5)(ii)(B)(5)-(6) and 110.1(b)(5)(ii)(C)(6)-(7).

Similarly, the Commission has also updated itsrules regarding reattributions. When an excessivecontribution is made via a written instrument withmore than one individual’s name imprinted on it, butonly has one signature, the permissible portion will beattributed to the signer and the excessive portion maynow be attributed to the other individual whose nameis imprinted on the written instrument, without obtain-ing a second signature, so long as the reattributiondoes not cause the contributor to exceed any othercontribution limit. 11 CFR 110.1(k)(3)(ii)(B)(1).

Political committees employing this presumptionmust notify all contributors in writing or via e-mailwithin 60 days of the committee treasurer’s receipt ofthe check. At the time of notification, the committeemust offer the contributor who signed the check arefund of the excessive portion. 11 CFR110.1(k)(3)(ii)(B)(2) and (3).

Recordkeeping. To facilitate audits that determinecompliance with the contribution limits, political com-mittee treasurers are now required to maintain eithera full-size photograph or a digital image of each checkor written instrument by which a contribution of $50 ormore is made. 11 CFR 102.9(a)(4). Under a newsection added to the rule outlining the explicit stan-dard for acceptable accounting methods, thecommittee’s records must demonstrate that, prior tothe primary election, recorded cash on hand was at alltimes equal to or in excess of the sum of general elec-tion contributions received minus the sum of generalelection disbursements made. 11 CFR 102.9(e)(2). In

Appendices90

addition, for the political committee redesignations orreattributions to be effective, any signed writings fromcontributors that accompany the contribution and thecommittee’s notices must be retained.

Prohibition on Contributions and Donations byMinors

Under the new regulations, individuals who areunder 18 years old are prohibited from making contri-butions to federal candidates and contributions ordonations to committees of political parties 11 CFR110.19(a) and (b). By including the term “donation” inthis regulation, the prohibition encompasses bothfederal and nonfederal accounts of political partycommittees. Thus, this provision preempts state lawto the extent that state law may permit minors tomake donations to state, district and local party com-mittees. In the Explanation and Justification for thisrule, the Commission indicated that prohibiting dona-tions by minors to all committees of state, district andlocal parties has a federal purpose because donationsof nonfederal funds to state parties could otherwisebe used, in part, to finance “federal election activi-ties.”18

The final rules make clear that individuals under 18may, however, participate in volunteer work for fed-eral candidates and political party committees andmay continue to make contributions to unauthorizedcommittees that are not political party committees,such as PACs, under certain conditions. See 11 CFR110.19(c).

Prohibition on Contributions, Donations,Expenditures, Disbursements by ForeignNationals

New section 11 CFR 110.20 implements BCRA’sprohibition on contributions, donations, expendituresand disbursements solicited,19 accepted, received ormade directly or indirectly by or from foreign nationals

in connection with state and local elections as well asfederal elections. This ban applies to:• Contributions and donations to political committees

and organizations of political parties;• Contributions and donations to party committee

building funds;• Disbursements for electioneering communications;20

and• Expenditures, independent expenditures, and dis-

bursements in connection with any election.21

The Commission has included a knowledge re-quirement and knowledge standards with regard tothe solicitation, acceptance or receipt of foreign na-tional contributions or donations, determining that thiswould produce a less harsh result than a strict liabilitystandard.

Knowledge. The final rules contain in the definitionof “knowingly” three standards of knowledge that fo-cus on the sources of funds received. Meeting anyone of these standards would satisfy the knowledgeelement of this rule.

The first standard is actual knowledge that fundshave come from a foreign source. The second is anawareness on the part of the person soliciting, accept-ing or receiving the contribution or donation of certainfacts that would lead a reasonable person to concludethat there is a substantial probability that the contribu-tion or donation is coming from a foreign source. Thethird standard is an awareness on the part of theperson soliciting, accepting or receiving a contributionor donation of facts that should have prompted a rea-sonable inquiry into whether the source of the funds isa foreign national, but the person neglected to under-take such an inquiry. 11 CFR 110.20(a)(4)(i)-(iii).

The rule further outlines the types of informationthat should lead a recipient to question the origin of acontribution or donation under this section. They are:• Use by a contributor or donor of a foreign passport

or passport number;• Use by a contributor or donor of a foreign address;

18 “Federal election activity,” is defined on page 77.19 The term “solicit” at section 11 CFR 110.20 has the

same meaning as in section 11 CFR 300.2(m), “to ask an-other person to make a contribution or donation, or transferof funds, or to provide anything of value, including through aconduit or intermediary.”

20 “Electioneering communication” is defined on page 85.

21 An additional ban on foreign national donations toPresidential inaugural committees will be addressed in alater rulemaking.

Appendices 91

• A check or other written instrument is drawn on anaccount or a wire transfer from a foreign bank; or

• Contributors or donors live abroad. 11 CFR110.20(a)(5)(i)-(iv).

Knowledge safe harbor. The Commission hasadopted a narrowly tailored safe harbor for the knowl-edge standards in 11 CFR 110.20(a)(4)(iii). A personshall be deemed to have conducted a reasonableinquiry into a possible foreign national contribution ifhe or she seeks and obtains copies of current andvalid U.S. passport papers for U.S. citizens who arecontributors or donors and to whom any of the abovefour types of information are applicable. 11 CFR110.20(a)(7).

Assisting foreign national contributions or dona-tions. The foreign national prohibition applies to aperson who knowingly provides substantial assistanceto foreign nationals in the making of contributions,donations, expenditures, independent expendituresand disbursements in connection with federal andnonfederal elections. This prohibition covers, but isnot limited to, acting as a conduit or intermediary forforeign national contributions and donations. Theprohibition does not, however, include those whoperform strictly ministerial activity undertaken pursu-ant to the instructions of a employer, manager or su-pervisor. 11 CFR 110.20(g).

Disclaimers, FraudulentSolicitation, Civil Penalties andPersonal Use of Campaign Funds

On November 25, 2002, the Commission approvedfinal rules to implement provisions of the BCRA that:• Specify new requirements for disclaimers accompa-

nying radio, television, print and other campaigncommunications;

• Make changes regarding the personal use of cam-paign funds by candidates and federal officeholders;

• Allow non-incumbent federal candidates to paythemselves salaries from campaign funds if theyfollow a number of important conditions, as de-scribed below:

• Expand the scope of the statutory prohibition onfraudulent misrepresentation; and

• Increase the civil penalties for violating the prohibi-tion on contributions made in the name of another.

The final rules and their Explanation and Justifica-tion were published in the December 13, 2002, Fed-eral Register (67 FR 76962) and are available on theFEC web site at www.fec.gov/pages/bcra/rulemakings/other_provisions.htm.

DisclaimersThe new regulations replace pre-BCRA 11 CFR

110.11 with a new section of the same number thatimplements statutory changes to the disclaimer re-quirements. The disclaimer requirements in this newsection apply to public communications, including any“communication by means of any broadcast, cable orsatellite communication, newspaper, magazine, out-door advertising facility, mass mailing or telephonebank to the general public, or any other form of gen-eral public political advertising.” See 11 CFR 100.26.These requirements also apply to political commit-tees’ web sites, to unsolicited e-mail of more than 500substantially-similar communications and to any “elec-tioneering communication.” All disclaimers must be“clear and conspicuous” regardless of the medium inwhich the communication is transmitted. A disclaimeris not clear and conspicuous if it is difficult to read orhear, or if its placement is easily overlooked. 11 CFR110.11(c)(1).

Basic Requirements. Any public communicationmade by a political committee—including communica-tions that do not expressly advocate the election ordefeat of a clearly identified federal candidate or so-licit a contribution—must display a disclaimer. 11 CFR110.11(a)(1).

The disclaimer for a communication paid for andauthorized by a candidate or candidate’s committeemust state that the communication is paid for by thecandidate’s committee. The disclaimer for a communi-cation authorized by the candidate or candidate’scommittee, but paid for by any other person, muststate both who paid for the communication and that itwas authorized by that candidate.

Communications not authorized by a candidate orhis/her campaign committee, including any solicita-tion, must disclose the permanent street address,telephone number or web site address of the person

Appendices92

who paid for the communication, and also state thatthe communication was not authorized by any candi-date. 11 CFR 110.11(b).

Specific requirements for radio and television com-munications. For radio and television communicationsauthorized by a candidate, the candidate must deliveran audio statement identifying himself or herself, andstating that he or she has approved the communica-tion. For a television communication, this disclaimermust be conveyed by either:• A full-screen view of the candidate making the state-

ment; or• A “clearly identifiable photographic or similar image

of the candidate” that appears during the candidate’svoice-over statement. 11 CFR 110.11(c)(3)(ii)(A) and(B).

Additionally, television communications must con-tain a “clearly readable” written statement that ap-pears at the end of the communication for a period ofat least four seconds with a reasonable degree ofcolor contrast between the background and the dis-claimer statement. The written statement must occupyat least four percent of the vertical picture height. 11CFR 110.11(c)(3)(iii).

For a radio or television communication that is notauthorized by a candidate, the name of the politicalcommittee or other person who is responsible for thecommunication and, if applicable, the name of thesponsoring committee’s connected organization isrequired in the disclaimer.22

In the case of a televised ad, the disclaimer mustalso include a statement that is conveyed by a fullscreen view of a representative of the political com-mittee or other person making the statement, or avoice-over by the representative. In addition, thedisclaimer must appear in writing at the end of thecommunication in a “clearly readable” manner with areasonable degree of color contrast to the back-ground, and it must be shown for a period of four sec-onds. 11 CFR 110.11(c)(4).

The regulations include safe harbor guidelines fortelevision communication disclaimers:

• A still picture of the candidate shall be considered“clearly identifiable” if it occupies at least 80 percentof the vertical screen height; and

• Disclaimers that are printed in black text on a whitebackground, as well as disclaimers that have at leastthe same degree of contrast with the backgroundcolor as the degree of contrast between the back-ground color and the color of the largest text used inthe communication, will be considered “clearly read-able.” 11 CFR 110.11(c)(3)(iii)(C).

Specific requirements for printed communications.Printed materials must contain a printed box that isset apart from the contents in the communication.The disclaimer print in this box must be of sufficienttype size to be “clearly readable” by the recipient ofthe communication, and the print must have a reason-able degree of color contrast between the backgroundand the printed statement. 11 CFR 110.11(c)(2)(ii)and (iii).

The regulations contain a safe harbor that estab-lishes a fixed, twelve-point type size as a sufficientsize for disclaimer text in newspapers, magazines,flyers, signs and other printed communications thatare no larger than the common poster size of 24inches by 36 inches. 11 CFR 110.11(c)(2)(i). Dis-claimers for larger communications will be judged ona case-by-case basis.

The regulations additionally provide two safe har-bor examples that would comply with the color-con-trast requirement:• The disclaimer is printed in black text on a white

background; or• The degree of contrast between the background

color and the disclaimer text color is at least as greatas the degree of contrast between the backgroundcolor and the color of the largest text in the commu-nication. 11 CFR 110.11(c)(2)(iii).23

Personal Use of Campaign FundsThe new rules retain the existing prohibition against

the personal use of campaign funds, as well as theso-called “irrespective test.” Candidates may not,therefore, use funds in a campaign account to “fulfill a

22 In addition, communications transmitted through tele-phone banks, as defined by 11 CFR 100.28, must carry thissame disclaimer statement.

23 Please note these examples do not constitute the onlyways to satisfy the color contrast requirement.

Appendices 93

commitment, obligation, or expense of any personthat would exist irrespective of the candidate’s cam-paign or duties as a Federal officeholder.” 11 CFR113.1(g). Personal use of campaign funds includes,but is not limited to, payment of the following: house-hold food items or supplies, clothing (except for cloth-ing items of de minimis value), tuition payments (otherthan those associated with training campaign staff),mortgage, rent or utility payments, vacations andhealth or country club dues, unless they are part of aspecific campaign activity that takes place on thepremises. 11 CFR 113.1(g)(1)(i). The regulationshave, however, been amended as follows.

Candidate salaries. The most notable change per-mits a candidate for federal office to receive a salaryfrom his or her principal campaign committee.24 Ac-cording to the regulations, a salary may be receivedunder the following conditions:• The salary must be paid by the principal campaign

committee only, and not any other authorized com-mittees.

• Incumbent federal officeholders may not receivesalary payments from campaign funds.

• The salary must not be paid before the filing dead-line for access to the primary election ballot in thestate in which the candidate is running for office, andsalary may not be paid beyond the date when he orshe is no longer a candidate.25

• The salary must not exceed the lesser of either theminimum annual salary for the federal office soughtor what the candidate received as earned income inthe previous year. Thus, any salary paid by the cam-paign committee will be equal to the lesser of thesetwo amounts.

• Additional salary or wages received from othersources count toward the limit that may be receivedby the candidate.

• Payments of salary from the committee must bemade on a pro-rata basis.

• Individuals who elect to receive a salary from theircampaign committees must provide income taxrecords and additional proof of earnings from rel-evant years upon request from the Commission.

Members of a candidate’s family. The new regula-tions amend the definition of a candidate’s family at11 CFR 113.1(g)(7). The previous regulations in-cluded as a member of a candidate’s family, “a per-son who has a committed relationship with a candi-date, such as sharing a household and having mutualresponsibility for each other’s welfare or living ex-penses.” 11 CFR 113.1(g)(7)(iv). This section hasbeen removed from the new regulations and replacedwith a provision that includes any person who sharesa residence with the candidate.

The Commission recognized that any person actu-ally living with the candidate may pay a share of his orher living expenses without making a contribution tothe campaign. The Commission further noted that thepersonal funds of a candidate would include his or hershare of a joint account held with the person(s) withwhom a residence is shared. However, gifts from thecampaign to family members or anyone residing withthe candidate are prohibited because they may beused to support personal expenses of the candidate.11 CFR 113.1(g)(4).

Recordkeeping of personal uses. Because theregulations permit, in certain circumstances, the deminimis personal use of campaign funds,recordkeeping requirements for expenses that may bepartly personal in nature have been added to theregulations. Such expenses may include, but are notlimited to, the costs of vehicles, travel, meals andlegal services.26 The new provision requires that logsof these expenses be maintained to help the Commis-sion determine on a case-by-case basis what portionwas for personal use rather than for campaign relatedactivity or officeholder duties.

“Any other lawful purpose.” The BCRA deleted thephrase “for any other lawful purpose” from the list of24 This amendment to the regulations supersedes Advi-

sory Opinion 1999-1.25 The filing deadline for the primary election for federal

candidates is determined by state law. In those states thatdo not have a primary election, candidates may not receivepayment until after January 1st of each even-numberedyear.

26 See 11 CFR 113.1(g)(1)(ii)(A), (B), (C), and (D) and 11CFR 113.2.

Appendices94

permitted uses of campaign funds at 2 U.S.C. §439a.Therefore, the Commission has removed the sectionreferring to “any other lawful purpose” regarding theuse of campaign funds. Thus, in addition to payingexpenses in connection with the campaign for federaloffice, campaign funds may be used only for non-campaign purposes included in an exhaustive listfound at 11 CFR 113.2 (a), (b), and (c).

Contributions to other candidates. In a previousrulemaking, the Commission amended the regulationsregarding contribution limits. The Commission hasnoted, however, that the contribution limits for autho-rized candidate committees has not changed as aresult of the BCRA. Authorized committees may makecontributions of $1,000 or less to authorized commit-tees of other federal candidates. U.S.C.§432(c)(3)(B). They may also make contributions tostate and local candidates in furtherance of the fed-eral candidate’s election. See 2 U.S.C. §439a(a)(1).

Payment of campaign and officeholder expensesfrom campaign accounts. Congress has deleted thephrase “in excess of any amount to defray” campaignexpenses from 2 U.S.C. §439a. Therefore, the Com-mission has revised 11 CFR 113.1 and 113.2 so thatofficeholders may spend money from campaign ac-counts to pay for campaign and non-campaign ex-penses incurred as a consequence of holding federaloffice. Such expenses, according to the Commission,may be paid in any order.

Prohibitions on Fraudulent SolicitationsThe final rule prohibits a person from fraudulently

misrepresenting that the person is speaking, writing orotherwise acting for, or on behalf of, a federal candi-date or political party, or an employee or agent ofeither, for the purpose of soliciting contributions ordonations. Persons are also banned from willfully andknowingly participating in, or conspiring to participatein, any scheme to do so. 11 CFR 110.6(b)(1) and (2).The regulation implementing this new provision, to-gether with the pre-BCRA fraudulent misrepresenta-tion regulation formerly found at 11 CFR 110.9(b), iscombined in new 11 CFR 110.16.

Civil PenaltiesThe BCRA amends the Federal Election Campaign

Act (the Act) to impose greater penalties for knowingand willful violations of the Act regarding contributionsmade in the name of another.27 The Commission hasamended the regulations to impose a civil penalty forsuch violations that is not less than 300 percent of theamount of any contribution, but is no more than$50,000 or 1,000 percent of the amount of the contri-bution involved. 11 CFR 111.24.

Coordinated and IndependentExpenditures

On December 5, 2002, the Commission approvedfinal rules to implement provisions of the BCRA that:• Define coordination between a candidate or a politi-

cal party and a person making a communication;• Define coordination between a candidate and a po-

litical party committee making a communication; and• Set forth requirements for political party committees

regarding the permitted timing of independent andcoordinated expenditures, and transfers and assign-ments.

Note that new reporting requirements for certainindependent expenditures are summarized on p. 98.

The final rules and their Explanation and Justifica-tion were published in the January 3, 2003, FederalRegister (68 FR 421) and are available on the FECweb site at www.fec.gov/pages/bcra/rulemakings/coordinated_independent_expenditures.htm.

CoordinationThe BCRA repealed Commission regulations defin-

ing a “coordinated general public political communica-tion” (old 11 CFR 100.23), and instructed the Com-mission to promulgate new rules on “coordinatedcommunications paid for by persons other than candi-dates, authorized committees of candidates, and

27 The Act’s civil penalties are set forth in two tiers ofmonetary penalties at 2 U.S.C. §§437g(a)(5), (6), and (12).The first tier addresses violations of the Act, whereas thesecond tier speaks to “knowing and willful” violations of theAct. The Commission addressed changes to the second tierregarding contributions in the name of another.

Appendices 95

party committees.” Pub. L. 107-155, sec. 214(c)(March 27, 2002).

New 11 CFR 109.20(a) implements 2 U.S.C.§§441a(a)(7)(B)(i) and (ii) by defining “coordinated” tomean “made in cooperation, consultation or concertwith, or at the request or suggestion of, a candidate, acandidate’s authorized committee, or their agents, ora political party committee or its agents.”28

The rules in section 109.21 define a “coordinatedcommunication,” which is treated as an in-kind contri-bution to the candidate, authorized committee or partycommittee the communication is coordinated with,and must be reported as such. The new regulationsprovide for a three-part test to determine whether acommunication is coordinated. Satisfaction of all ofthe three specific tests justifies the conclusion thatpayments for the coordinated communication are forthe purpose of influencing a federal election. Thethree parts of the test consider:• The source of payment;• A “content standard” regarding the subject matter of

the communication; and• A “conduct standard” regarding the interactions be-

tween the person paying for the communication andthe candidate or political party committee. 11 CFR109.21(a).

Source of Payment. A coordinated communicationis paid for by someone other than a candidate, anauthorized committee or a political party committee.However, a person’s status as a candidate would notexempt him or her from the coordination regulationswith respect to payments he or she makes on behalfof a different candidate. 11 CFR 109.21(a)(1).

Content Standard. The purpose of the four contentstandards is to determine whether the subject matterof a communication is reasonably related to an elec-tion. A communication that meets any of these fourstandards meets the content requirement:

• A communication that is an “electioneering commu-nication”;

• A public communication that republishes, dissemi-nates or distributes candidate campaign materials,

unless the activity meets one of the exceptions at 11CFR 109.23(b) discussed in the conduct standardsbelow;

• A public communication that expressly advocatesthe election or defeat of a clearly identified candidatefor federal office; or

• A public communication that: • Refers to a political party or a clearly identified

federal candidate; • Is publicly distributed or disseminated 120 days or

fewer before a primary or general election or a convention or caucus with the authority to nomi- nate a candidate; and

• Is directed to voters in the jurisdiction of the clearly identified candidate or to voters in a jurisdiction where one or more candidates of the political party appear on the ballot. 11 CFR 109.21(c)(1)-(4).

Conduct Standard. Under the final rules, if one ofthe conduct standards is met, and the first two partsof the test (the content standards and the source ofpayment) are also met, then the communication iscoordinated. 11 CFR 109.21(d). The conduct stan-dards are as follows:• Request or Suggestion. This test has two prongs,

and satisfying either satisfies the test. The first prongis satisfied if the person creating, producing or dis-tributing the communication does so at the requestor suggestion of a candidate, authorized committee,political party committee or agent of any of these.The second prong of the “request or suggestion”conduct standard is satisfied if a person paying forthe communication suggests the creation, productionor distribution of the communication to the candi-date, authorized committee, political party committeeor agent of any of the above, and the candidate orpolitical party committee assents to the suggestion.11 CFR 109.21(d)(1).

• Material Involvement. This test is satisfied if a candi-date, candidate committee, political party committeeor an agent of any of these was “materially involvedin decisions” regarding any of the following aspectsof a public communication paid for by someone else:

• Content of the communication; • Intended audience;

28 “Agent” is defined at 11 CFR 109.3, for the purposes ofpart 109 only.

Appendices96

• Means or mode of the communication; • Specific media outlet used; • Timing or frequency of the communication; or • Size or prominence of a printed communication or

duration of a communication by means of broad- cast, cable or satellite. 11 CFR 109.21(d)(2).

• Substantial Discussion. A communication meets thisstandard if it is created, produced or distributed afterone or more substantial discussions between theperson paying for the communication, or theperson’s agents, and the candidate clearly identifiedin the communication or that candidate’s committee,that candidate’s opponent or opponent’s committee,a political party committee, or an agent of the above.A discussion would be “substantial” if informationabout the plans, projects, activities or needs of thecandidate or political party committee that is materialto the creation, production or distribution of the com-munication is conveyed to the person paying for thecommunication. 11 CFR 109.21(d)(3).

• Employment of Common Vendor. This conduct stan-dard explains what a common vendor is and pro-vides that the use of a common vendor in the cre-ation, production or distribution of a communicationsatisfies the conduct standard if:

• The person paying for the communication con- tracts with, or employs, a “commercial vendor” to create, produce or distribute the communication.29

• The commercial vendor, including any officer, owner or employee of the vendor, has a previous or current relationship with the candidate or politi- cal party committee that puts the commercial ven- dor in a position to acquire information about the campaign plans, projects, activities or needs of the candidate or political party committee. This previ- ous relationship is defined in terms of nine specific services related to campaigning and campaign communications. Note that these services would have to have been rendered during the election cycle in which the communication is first publicly distributed.

• The commercial vendor uses or conveys informa- tion about the campaign plans, projects, activities or needs of the candidate or political party commit- tee, or information previously used by the commer- cial vendor in serving the candidate or political party committee, to the person paying for the com- munication, and that information is material to the creation, production or distribution of the communi- cation. 11 CFR 109.21(d)(4).

• Former Employee/Independent Contractor. Thisstandard applies to communications paid for by aperson who has previously been an employee or anindependent contractor of a candidate’s campaigncommittee or a political party committee during theelection cycle. The standard requires that the formeremployee use or convey material information aboutthe plans, projects, activities or needs of the candi-date or political party committee, or material informa-tion used by the former employee in serving thecandidate or political party committee, to the personpaying for the communication, and the information ismaterial to the creation, production or distribution ofthe communication. 11 CFR 109.21(d)(5).30

• Dissemination, distribution or republication of cam-paign material. A communication that republishes,disseminates or distributes campaign material onlysatisfies the first three conduct standards on thebasis of the candidate’s conduct—or that of his orher committee or agents—that occurs after the origi-nal preparation of the campaign materials that are

29 The term “commercial vendor” is defined at 11 CFR116.1(c).

30 A candidate or political party committee would not beheld responsible for receiving or accepting an in-kind contri-bution that resulted only from conduct described in thefourth and fifth conduct standards. 11 CFR 109.21(d)(4) and(d)(5). However, the person paying for a communicationthat is coordinated because of conduct described in thefourth or fifth conduct standards would still be responsiblefor making an in-kind contribution for purposes of the contri-bution limitations, prohibitions and reporting requirements ofthe Act. 11 CFR 109.21(b)(2).

Appendices 97

disseminated, distributed or republished. 11 CFR109.21(d)(6).31

Agreement or formal collaboration. Neither agree-ment (defined as a mutual understanding on any partof the material aspects of the communication or itsdissemination) nor formal collaboration (defined asplanned or systematically organized work) is neces-sary for a communication to be a coordinated commu-nication. 11 CFR 109.21(e).

Safe harbor for responses to inquires about legisla-tive or policy issues. A candidate’s or political partycommittee’s response to an inquiry about thatcandidate’s or party’s positions on legislative or policyissues, which does not include discussion of cam-paign, plans, projects, activities or needs, will notsatisfy any of the conduct standards. 11 CFR109.21(f)

Party Coordinated Communications. Although Con-gress did not specifically direct the Commission topromulgate a new regulation on coordinated commu-nications paid for by political party committees, theCommission promulgated final rules to set forth thecircumstances under which communications paid forby a party committee would be considered to be coor-dinated with a candidate, a candidate’s authorizedcommittee or their agents. These rules generallyapply the same coordination standards that are ap-plied to communications paid for by other persons.11 CFR 109.37.

Coordinated and Independent Expenditures byParty Committees

National, state and subordinate committees of po-litical parties may make expenditures up to prescribedlimits in connection with the general election cam-paigns of federal candidates without counting such

expenditures against the committees’ contributionlimits. 2 U.S.C. §441a(d). These expenditures arecommonly referred to as “coordinated party expendi-tures,” and the limits for these expenditures can befound in new section 11 CFR 109.32.32

When coordinated party expenditures can bemade. Political party committees can make coordi-nated party expenditures in connection with the gen-eral election campaign before or after the party’s can-didate has been nominated. All pre-nomination coor-dinated expenditures continue to be subject to thecoordinated party expenditure limitations, whether ornot the candidate on whose behalf they are madereceives the party’s nomination. 11 CFR 109.34.

Restrictions on making both independent expendi-tures and coordinated expenditures. In BCRA, Con-gress prohibits political party committees, under cer-tain conditions, from making both coordinated partyexpenditures and independent expenditures with re-spect to the same candidate, and from making trans-fers and assignments to other political party commit-tees. 2 U.S.C. §441a(d)(4). Congress plainly in-tended to combine certain political party committeesinto a collective entity or entities for purposes of theserestrictions. 2 U.S.C. §441a(d)(4)(B).

For the purposes of these restrictions only, all po-litical parties established and maintained by a nationalpolitical party (including all Congressional campaigncommittees), and all political committees establishedand maintained by a state political party (includingany subordinate committee of a state committee),shall be considered to be a single political committee.11 CFR 109.35(a).

Under the BCRA and the new regulations, a politi-cal party committee is prohibited from making anypost-nomination coordinated party expenditure inconnection with the general election campaign of acandidate at any time after that political party commit-tee makes any post-nomination independent expendi-ture with respect to the candidate. 11 CFR109.35(b)(1). Similarly, a political party committee isprohibited from making any post-nomination indepen-dent expenditure with respect to a candidate at anytime after that political party committee makes a post-

32 These limits were formerly located at 11 CFR 110.7.

31 Please note that the financing of the distribution orrepublication of campaign materials, while considered an in-kind contribution by the person making the expenditure, isnot considered an expenditure by the candidate’s autho-rized committee unless the dissemination, distribution orrepublication of campaign materials is coordinated. Addi-tionally, republications of campaign materials coordinatedwith party committees are in-kind contributions to such partycommittees, and are reportable as such. 11 CFR 109.23(a).

Appendices98

nomination coordinated expenditure in connectionwith the general election campaign of the candidate.11 CFR 109.35(b)(2).

Prohibited Transfers. Congress provided in theBCRA that a “committee of a political party” thatmakes coordinated party expenditures with respect toa candidate must not, during an election cycle, trans-fer any funds to, assign authority to make coordinatedparty expenditures under 2 U.S.C. §441a(d) to, orreceive a transfer of funds from, a “committee of thepolitical party” that has made or intends to make anindependent expenditure with respect to the candi-date. 2 U.S.C. §441a(d)(4)(C). The final rules gener-ally track this statutory language. 11 CFR 109.35(c).

National party independent expenditures on behalfof Presidential candidates. Prior to the enactment ofthe BCRA, the Commission’s rules prohibited a na-tional committee of a political party from making inde-pendent expenditures in connection with the generalelection campaign of a Presidential candidate. Seeformer 11 CFR 110.7(a)(5). However, section441a(d)(4), added by the BCRA, precludes such abroad prohibition. As a result, the Commission hasadded a new section that specifically prohibits a na-tional committee of a political party from making inde-pendent expenditures with respect to a Presidentialcandidate if it serves as the principal campaign com-mittee or authorized committee of its Presidentialcandidate under 11 CFR 9002.1(c). 11 CFR 109.36.

BCRA ReportingOn December 12, 2002, the Commission approved

final rules on reporting requirements related to theBCRA, including:• Reporting of independent expenditures;• Reporting of electioneering communications;• Quarterly reporting by the principal campaign com-

mittees of House and Senate candidates;• Monthly reporting by national committees of political

parties; and• Reporting funds for state and local party office build-

ings.The final rules and their Explanation and Justifica-

tion were published in the January 3, 2003, Federal

Register (68 FR 404) and are available on the FECweb site at http://www.fec.gov/pages/bcra/rulemakings/rulemakings_bcra.htm.

Independent ExpendituresThe BCRA requires political committees and other

persons who make independent expenditures at anytime during a calendar year—up to and including the20th day before an election—to disclose this activitywithin 48 hours each time that the expenditures ag-gregate $10,000 or more. This reporting requirementis in addition to the pre-BCRA requirement to file 24-hour notices of independent expenditures each timethat disbursements for independent expendituresaggregate at or above $1,000 during the last 20days—up to 24-hours—before an election. 2 U.S.C.§§434(b), (d) and (g). The new rules address whenand how such reports should be filed.

Independent expenditures aggregating less than$10,000. Committees must report on Schedule E ofForm 3X independent expenditures that aggregateless than $10,000 with respect to a given electionduring the calendar year that are made up to andincluding the 20th day before an election. The reportmust be filed no later than the filing date of thecommittee’s next regularly scheduled report. 11 CFR104.4(a) and (b)(1). Individuals other than politicalcommittees disclose on FEC Form 5 independentexpenditures aggregating in excess of $250 with re-spect to a given election during the calendar year thatare made during this time period. The report must befiled by the filing deadline of the next report under thequarterly filing schedule. 11 CFR 109.10(b).

Both committees and individuals must file an addi-tional report each time that independent expendituresmade less than 20 days, but more than 24 hours,before an election aggregate in excess of $1,000.These reports must be received by the Commissionby the end of the day following the date that the com-munication is publicly disseminated. All individualsand committees, even those supporting or opposingSenate candidates, must file 24-hour notices of inde-pendent expenditures with the Commission. Elec-tronic filers must file these reports electronically, and

Appendices 99

paper filers may file by fax or e-mail. Additionally,electronic filers and paper filers may file 24-hour re-ports using the FEC web site’s online program. 11CFR 104.4(c), 109.10(d) and 100.19(d)(3).

Independent expenditures aggregating $10,000and above. Once an individual’s or committee’s inde-pendent expenditures reach or exceed $10,000 in theaggregate at any time up to and including the 20th daybefore an election, they must be reported within 48hours of the date that the expenditure is publicly dis-tributed. All 48-hour reports must filed with and re-ceived by the Commission at the end of the secondday after the independent expenditure is publicly dis-tributed. Electronic filers must file these reports elec-tronically, and paper filers may file by fax or e-mail. 11CFR 104.4(b)(2), 109.10(c) and 100.19(d)(3).

Verification of independence. All 24- and 48-hourreports must contain, among other things, a verifica-tion under penalty of perjury as to whether the expen-diture was made in cooperation, consultation or con-cert with a candidate, a candidate’s committee, apolitical party committee or an agent of any of these.11 CFR 104.4(d)(1) and 109.10(e)(1)(v).

Aggregating independent expenditures for report-ing purposes. Independent expenditures are aggre-gated toward the various reporting thresholds on aper-election basis within the calendar year. Consider,as examples, the following scenarios, all of whichoccur outside of the 20-day window before an electionwhen 24-hour notices are required:• If a committee makes $5,000 in independent expen-

ditures with respect to a Senate candidate, and$5,000 in independent expenditures with respect toa House candidate, then the committee is not re-quired to file 48-hour reports, but must disclose thisactivity on its next regularly-scheduled report.

• If the committee makes $5,000 in independent ex-penditures with respect to a clearly identified candi-date in the primary, and an additional $5,000 in inde-pendent expenditures with respect to the same can-didate in the general, then again no 48-hour notice isrequired and the expenditures are disclosed on thecommittee’s next report.

• If the committee makes $6,000 in independent ex-penditures supporting a Senate candidate in theprimary election and $4,000 opposing that Senate

candidate’s opponent in the same election, then thecommittee must file a 48-hour report.

The date that a communication is publicly dissemi-nated serves as the date that a person or committeemust use to determine whether the total amount ofindependent expenditures has, in the aggregate,reached or exceeded the threshold reporting amountsof $1,000 or $10,000. The calculation of the aggre-gate amount of the independent expenditures mustinclude both disbursements for independent expendi-tures and all contracts obliging funds for disburse-ments of independent expenditures. 11 CFR 104.4(f).

Electioneering CommunicationsThe BCRA requires persons who make election-

eering communications that aggregate more than$10,000 to file disclosure statements with the Com-mission within 24 hours of the disclosure date. 2U.S.C. §434(f)(1). The new regulations implement thisprovision, and require that the statement be receivedby the Commission by 11:59 on the day following thedisclosure date. Electronic filers must file these re-ports electronically, and paper filers may file by fax ore-mail. 11 CFR 100.19(f).

The regulations define “disclosure date” as:• The first date on which an electioneering communi-

cation is publicly distributed, provided that the per-son making the electioneering communication hasmade disbursement(s), or has executed contract(s)to make disbursements, for the direct costs of pro-ducing or airing33 one or more electioneering com-munication aggregating in excess of $10,000; or

• Any other date during the same calendar year onwhich an electioneering communication is publiclydistributed, provided that the person making thecommunication has made disbursement(s) or ex-ecuted contract(s) to make disbursements for the

33 The direct costs of producing or airing electioneeringcommunications are defined as the costs charged by avendor, such as studio rental time, staff salaries, costs ofvideo or audio recording media and talent, or the cost ofairtime on broadcast, cable and satellite radio and televisionstations, studio time, material costs and the charges for abroker to purchase the airtime. 11 CFR 104.20(a)(2).

Appendices100

direct costs of airing one or more electioneeringcommunication aggregating in excess of $10,000since the most recent disclosure date. 11 CFR104.20(a)(1)(i).

Disbursements made at any time for the directcosts of producing or airing the publicly-distributedelectioneering communication, or other unreportedelectioneering communications, count toward thethreshold. However, costs already reported for earlierelectioneering communications are not included.

Each statement must disclose:• The identification of the person who made the dis-

bursement, or who executed a contract to make adisbursement, and the person’s principal place ofbusiness if the person is not an individual;

• The identification of any person sharing or exercisingdirection or control34 over the activities of the personwho made the disbursement or executed the con-tract;

• The identification of the custodian of books and ac-counts from which the disbursements were made;

• The amount of each disbursement or amount obli-gated in excess of $200 during the period coveredby the statement, the date of the transaction and theperson who received the funds;

• All clearly-identified candidates referred to in theelectioneering communication and the elections inwhich they are candidates;

• The disclosure date; and• The name and address of each donor who, since the

first day of the preceding calendar year, has donatedin the aggregate $1,000 or more to the person mak-ing the disbursements, or to the separate segre-gated bank account if the disbursements were paidexclusively from that bank account. 11 CFR104.20(c).

Filing Frequency for House and SenateCommittees and National Party Committees

House and Senate Candidates. The BCRA re-quires that all principal campaign committees ofHouse and Senate candidates file quarterly in non-election years as well as in election years. 2 U.S.C.§434(a)(2)(B). As a result, House and Senate cam-paign committees may no longer file on a semi-annualbasis during non-election years. 11 CFR 104.5(a).

National party committees. Under the BCRA, na-tional party committees must file on a monthly basis inall years. 2 U.S.C. §434(a)(4)(B). Thus, under thenew regulations a national committee of a politicalparty, including a national Congressional campaigncommittee, must always file monthly and may nolonger file on a quarterly basis in election years andsemi-annually in non-election years. 11 CFR104.5(c)(4).

Funds for Party Office BuildingsCommission regulations on nonfederal funds (or

“soft money”) provide that donations used by a state,district or local party committee for the purchase orconstruction of an office building are subject to statelaw if they are donated to a nonfederal account. How-ever, if funds or things of value are contributed to orused by the party’s federal account to buy or build anoffice building, then the amounts donated are contri-butions. 11 CFR 300.12 and 300.35. The new rulesclarify that any funds or things of value received by afederal account and used for the purchase or con-struction of an office facility, regardless of any specificcontributor designation, are contributions and nottreated any differently from other funds or goods do-nated to the federal account. 11 CFR 104.3(g).

Millionaires’ AmendmentOn December 19, 2002, the Commission approved

interim final rules that increase individual contributionlimits and coordinated party expenditure limits forcertain candidates running against self-financed op-ponents. The rules address:

34 Persons sharing or exercising direction or controlmeans officers, directors, executive directors or theirequivalent, partners and, in the case of unincorporatedorganizations, owners of the entity or person making thedisbursement for the electioneering communication. 11 CFR104.20(a)(3).

Appendices 101

• Monetary thresholds that trigger the increased indi-vidual contribution and coordinated party expendi-ture limits;

• Computation formulas used to determine the appli-cation of the increased limits;

• The specific amounts of the increases in individualcontribution limits;

• New reporting and notification requirements; and• Repayment restrictions for personal loans from the

candidate.

Threshold AmountsThe provisions of the BCRA’s Millionaires’ Amend-

ment increase the individual contribution and coordi-nated party expenditure limits for House and Senatecandidates whose opponents’ personal spendingexceeds their own by more than certain thresholdamounts. The difference between the candidates’expenditures of personal funds can be reduced by adisparity in other campaign fundraising. The thresholdamounts for House and Senate candidates differ. ForHouse candidates, the threshold amount is $350,000;for Senate candidates, it is two times the sum of$150,000 plus an amount equal to the voting agepopulation of the state in question multiplied by$0.04.35

Opposition Personal Funds AmountAs noted above, opposition personal spending that

exceeds the threshold amounts does not by itselftrigger increased contribution limits. The regulationsalso take into account expenditures from the personalfunds of the candidate seeking increased limits underthe Millionaires’ Amendment as well as fundraising bythe campaigns.

Campaigns must use the appropriate “oppositionpersonal funds amount” formula to determine whetheran opposing candidate has spent sufficient personalfunds in comparison to the amounts raised by thecampaigns to trigger increased contribution and coor-dinated party expenditure limits. The opposition per-sonal funds formula takes half the difference betweenthe gross receipts of the candidate and the gross

receipts of the opponent and subtracts that from theamount by which the opponent is outspending thecandidate using their personal funds.36 Hence, a can-didate with a significant fundraising advantage over aself-financed opponent might not receive an in-creased contribution limit. In this way, the new rulesavoid giving increased contribution limits to candi-dates whose campaigns have a significant fundraisingadvantage over their opponents.

Increased Contribution LimitsWhen a House candidate’s opposition personal

funds amount exceeds the $350,000 threshold:• The contribution limits for the candidate triple; and• The national and state party committees may make

coordinated expenditures on behalf of the candidatethat are not subject to the usual 2 U.S.C. §441a(d)limits.

For Senate candidates, the extent to which acandidate’s opposition personal funds amount ex-ceeds the threshold determines the amount of theincrease in contribution limits. If it exceeds:• Twice the threshold,37 then the contribution limits for

the candidate are tripled;

36 Depending on the date of computation, the formula iseither a – b; a – b – ((c – d)/2); or a – b – ((e – f)/2), where:• a = opponent’s personal funds spending;• b = candidate’s personal funds spending;• c = candidate’s receipts (contributions not from candidate);• d = opponent’s receipts (contributions not from opponent);• e = candidate’s receipts (contributions not from candidate);• f = opponent’s receipts (contributions not from opponent).The values for c and d are determined on June 30 of theyear before the election (report due on July 15), and thevalues for e and f are determined on December 31 of theyear before the election (year-end report due on January31). Prior to July 16 of the year before the election, valuesfor c, d, e, and f are not included in the equations, and the“opposition personal funds amount” formula is a – b.

35 Differently formulated: Two times $150,000 + (.04 x(voting age population)) = Senate threshold. 37 $300,00 + ($0.08 x VAP).

Appendices102

• Four times the threshold,38 then the contributionlimits for the candidate are raised six-fold;

• Ten times the threshold,39 then the contribution limitsfor the candidate are raised six-fold, and the nationaland state party committees may make unlimitedcoordinated expenditures on the candidate’s behalf.

Avoiding Excessive Contributions Under theIncreased Limits

Campaigns that accept contributions under theincreased limits must continually monitor the opposi-tion personal funds amount to ensure their continuedeligibility for the increased limits and to make surethat they have not accepted excessive contributions.Similarly, national and state party committees mustmonitor the opposition personal funds amount forcampaigns in which they are making coordinatedparty expenditures in excess of the regular coordi-nated party expenditure limits (at 11 CFR 109.32(b)).

Senate candidates (and their authorized commit-tees) must not accept and national and state partycommittees making coordinated party expenditureson behalf of Senate candidates must not make anycontribution or coordinated party expenditure thatcauses the aggregate contributions accepted andcoordinated party expenditures made under the in-creased limits to be greater than 110 percent of theopposition personal funds amount.

Similarly, House candidates (and their authorizedcommittees) must not accept and national and stateparty committees making coordinated party expendi-tures on behalf of House candidates must not makeany contribution or coordinated party expenditure thatcauses the aggregate contributions accepted andcoordinated party expenditures made under the in-creased limits to be greater than 100 percent of theopposition personal funds amount.

Reporting and NotificationIn order to facilitate this continual monitoring of

fundraising and personal spending by candidates and

party committees, new reporting and notification re-quirements have been added to the regulations.

At the outset, candidates must declare on theirStatement of Candidacy (FEC Form 2) the amount bywhich their personal spending on the campaign willexceed the applicable threshold amount. 11 CFR101.1(a). Also, to facilitate opposition personal fundscalculations, by July 15 of the year before the electionand January 31 of the year in which the election takesplace, each principal campaign committee must file areport disclosing the aggregate gross receipts for theprimary and general elections, and the candidate’saggregate contributions from personal funds for theprimary and general elections (FEC Form 3Z-1). 11CFR 104.19.

Additionally, a Senate candidate’s principal cam-paign committee must notify the Secretary of the Sen-ate, the Commission and each opposing candidatewithin 24 hours when the candidate makes an expen-diture from personal funds that aggregates in excessof the threshold (FEC Form 10). 11 CFR 400.21(a). AHouse candidate’s principal campaign committeemust notify the Commission, each opposing candidateand the national party committee of each opposingcandidate within 24 hours when the candidate makesan expenditure from personal funds that aggregatesin excess of the threshold (FEC Form 10). 11 CFR400.21(b).

From that time on, the committee must also notifyall of the above-listed entities within 24 hours when-ever the candidate makes an additional expenditurefrom personal funds in excess of $10,000. 11 CFR400.22. Both the initial and additional notificationsmust be made by faxing or e-mailing a copy of FECForm 10 to all of the entities mentioned above.40 11CFR 400.24.

Within 24 hours after they become eligible, candi-dates who qualify for increased coordinated partyexpenditure limits (or their principal campaign commit-

40 Note that, for Senate candidates, the original Form 10will be filed with the Secretary of the Senate in the mannerthat all forms are normally filed. Similarly, for House candi-dates, the original Form 10 will be filed electronically withthe Commission.39 $1,500,000 + ($0.40 x VAP).

38 $600,000 + ($0.16 x VAP).

Appendices 103

tees) must file FEC Form 11 to inform their nationaland state party committees and the Commission ofthe opposition personal funds amount.

National or state political party committees thatmake coordinated expenditures on behalf of a candi-date whose limits have been raised must notify theCommission and the candidate on whose behalf theexpenditure is made within 24 hours, using ScheduleF. 11 CFR 400.30(c)(2).

Senate candidates operating under the increasedlimits (or their principal campaign committees) mustfile FEC Form 12 within 24 hours after the aggregateamount of contributions accepted and coordinatedparty expenditures made under the increased limitsreaches 110 percent of the opposition personal fundsamount.

House candidates operating under the increasedlimits (or their principal campaign committees) mustfile FEC Form 12 within 24 hours after the aggregateamount of contributions accepted and coordinatedparty expenditures made under the increased limitsreaches 100 percent of the opposition personal fundsamount.

Repayment of Personal Loans from CandidateApart from the calculations and disclosure require-

ments surrounding the increased contribution limits,the new rules also restrict the repayment of loansmade by the candidate to his or her committee. Thenew rules apply to all candidates, without regard toany of the Millionaires’ Amendment provisions. Forpersonal loans from the candidate to his or her autho-rized committee that aggregate more than $250,000,the following rules apply:• The committee may use contributions to repay the

candidate for the entire amount of the loan or loansonly if those contributions were made on or beforethe day of the election; and

• The committee may use contributions to repay thecandidate only up to $250,000 from contributionsmade after the date of the election.11 CFR 116.11(b).

Furthermore, if the committee uses the amount ofcash-on-hand as of the date of the election to repaythe candidate for loans in excess of $250,000, it mustdo so within 20 days of the election. 11 CFR

116.11(c). During that time, the committee must treatthe portion of candidate loans that exceed $250,000,minus the amount of cash-on-hand as of the day afterthe election, as a contribution by the candidate. 11CFR 116.11(c).

Additional InformationThese rules, and their Explanation and Justifica-

tion, were published in the January 27, 2003, FederalRegister (68 FR 3970) and are available on the FECweb site at http://www.fec.gov/pages/bcra/rulemakings/millionaire.htm.