[Federal Register: April 15, 2003 (Volume 68, Number 72)]
[Proposed Rules]
[Page 18483-18522]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr15ap03-43]
[[Page 18483]]
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Part IV
Federal Election Commission
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11 CFR Parts 104, et al.
Public Financing of Presidential Candidates and Nominating Conventions;
Proposed Rule
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FEDERAL ELECTION COMMISSION
11 CFR Parts 104, 107, 110, 9003, 9004, 9008, 9032 through 9036,
and 9038
[Notice 2003-8]
Public Financing of Presidential Candidates and Nominating
Conventions
AGENCY: Federal Election Commission.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Federal Election Commission requests comments on proposed
changes to its rules governing publicly financed presidential
candidates, in both the primary and general elections, and national
nominating conventions. These regulations implement the provisions of
the Presidential Election Campaign Fund Act and the Presidential
Matching Payment Account Act, which establish eligibility requirements
for presidential candidates and convention committees seeking public
financing and indicate how funds received under the public financing
system may be spent. They also require the Commission to audit publicly
financed committees and seek repayment where appropriate. The proposed
rules implement the Bipartisan Campaign Reform Act of 2002, as it
applies particularly to the Presidential Election Campaign Fund Act and
the Presidential Matching Payment Account Act. The proposed rules also
reflect the Commission's experience in administering this program
during the 2000 election cycle and seek to anticipate some questions
that may arise during the 2004 presidential election cycle. No final
decisions have been made by the Commission on any of the proposed
revisions in this document. Further information is provided in the
supplementary information that follows.
DATES: Comments must be received on or before May 9, 2003. If the
Commission receives sufficient requests to testify, it will hold a
hearing on these proposed rules on May 19, 2003, at 10 a.m. Commenters
wishing to testify at the hearing must so indicate in their written or
electronic comments.
ADDRESSES: All comments should be addressed to Ms. Mai T. Dinh, Acting
Assistant General Counsel, and must be submitted in either electronic
or written form. Electronic mail comments should be sent to
pubfund2004@fec.gov and must include the full name, electronic mail
address and postal service address of the commenter. Electronic mail
comments that do not contain the full name, electronic mail address and
postal service address of the commenter will not be considered. If the
electronic mail comments include an attachment, the attachment must be
in the Adobe Acrobat (.pdf) or Microsoft Word (.doc) format. Faxed
comments should be sent to (202) 219-3923, with printed copy follow-up
to ensure legibility. Written comments and printed copies of faxed
comments should be sent to the Federal Election Commission, 999 E
Street, NW., Washington, DC 20463. Commenters are strongly encouraged
to submit comments electronically to ensure timely receipt and
consideration. The Commission will make every effort to post public
comments on its Web site within ten business days of the close of the
comment period. The hearing will be held in the Commission's ninth
floor meeting room, 999 E Street NW., Washington, DC.
FOR FURTHER INFORMATION CONTACT: Ms. Mai T. Dinh, Acting Assistant
General Counsel, Mr. J. Duane Pugh Jr., Senior Attorney, or Mr. Robert
M. Knop, or Ms. Delanie DeWitt Painter, Attorneys, 999 E Street NW.,
Washington, DC 20463, (202) 694-1650 or (800) 424-9530.
SUPPLEMENTARY INFORMATION: The Commission is considering revising parts
of its regulations governing the public financing of presidential
campaigns, 11 CFR parts 9001 through 9039, to more effectively
administer the public financing program during the 2004 election cycle.
These rules implement the provisions of the Presidential Election
Campaign Fund Act, 26 U.S.C. 9001 to 9013 [``Fund Act''], and the
Presidential Matching Payment Account Act, 26 U.S.C. 9031 to 9042
[``Matching Payment Act'']. In addition, the Commission is considering
how the Bipartisan Campaign Reform Act of 2002 [``BCRA''], Public Law
107-155, 116 Stat. 81 (Mar. 27, 2002), in its amendments to the Federal
Election Campaign Act of 1971, 2 U.S.C. 431 to 455 [``FECA''], along
with the Commission's implementing regulations related to BCRA, may
affect the public funding rules. The Commission publishes this Notice
of Proposed Rulemaking [``NPRM''] to invite comments on the proposed
amendments.
Please note that the proposed revisions would affect primary
elections, general elections, and national nominating conventions. The
Commission plans to seek comment at a later date on issues that affect
only minor and new party candidates. The Commission also plans a
separate rulemaking on selected issues related to all Federal
candidates, which may include issues related to publicly funded
candidates, including questions concerning candidate travel, mailing
lists (including list exchanges and list rentals), and allocation of
expenses between candidates.
Presidential Candidates
I. Winding Down Costs
The Commission is considering several changes to its rules
governing winding down costs for both primary and general election
candidates. Many issues that have arisen in the Commission's audits of
publicly funded presidential candidates have involved winding down
costs.
A. Restrictions on Winding Down Costs
The Commission is revisiting the issue of limiting winding down
expenses. The current regulations at 11 CFR 9034.4(a)(3) permit primary
candidates to make disbursements for winding down costs, and to receive
and use matching funds to make those disbursements, over an indefinite
period of time after the candidate's Date of Ineligibility [``DOI''].
Similarly, under 11 CFR 9004.4(a)(4), general election candidates may
use public funds after the end of the expenditure report period to pay
for the costs of winding down the general election campaign. The rules
treat both primary and general election winding down costs as qualified
campaign expenses.
The Commission has permitted publicly financed candidates to use
Federal funds to pay for certain winding down expenses since 1976. See
Informational Letter Re: Advisory Opinion Request 1976-54. In 1979, the
Commission stated that winding down costs ``although perhaps incurred
after a candidate's date of ineligibility may nevertheless be
considered qualified campaign expenses if they are associated with the
termination of the candidate's campaign.'' Explanation and
Justification for the Rules Governing Presidential Election Campaign
Fund and Presidential Primary Matching Fund, 44 FR 20336, 20340 (Apr.
4, 1979). In 1983, the Commission considered a time limitation for
winding down costs, but ultimately did not include it in the final
rules because of concerns raised by comments opposing the change.
Explanation and Justification for the Rules Governing Presidential
Primary Matching Fund, 48 FR 5224, 5228 (Feb. 4, 1983).
The Commission again contemplated restrictions on the amount of
winding down costs in 1995. Explanation and Justification for the Rules
Governing Public Financing of Presidential Primary
[[Page 18485]]
and General Election Candidates, 60 FR 31854, 31865-31866 (June 16,
1995). The Commission stated that winding down costs ``can result in
additional audit fieldwork and preparation of addenda to audit
reports'' and that as part of an ``effort to streamline and shorten the
audit process,'' the Commission sought comment on ways to reduce
winding down time for campaigns. Id. The Commission considered limiting
winding down expenses to a dollar amount or a fixed percentage of the
candidate's total expenditures during the campaign or matching funds
certified to a primary candidate. Id. at 31866. Alternatively, the
Commission considered ``a cutoff date after which winding down expenses
would no longer be considered qualified campaign expenses.'' Id.
Commenters objected that campaigns need resources to respond during the
audit process, to defend themselves in enforcement actions and to
verify the proper payment of the campaign's remaining bills. Id.
Ultimately, the Commission did not add new restrictions to the rules
governing winding down costs, stating that it would be ``quite
difficult to select an amount or time frame sufficient to meet
reasonable expenses incurred in winding down the campaign.'' Id.
In recent election cycles, the winding down period for some
candidates has extended over several years, and the amount of winding
down costs has increased. During the audit and repayment process,
presidential committees and the Commission's auditors estimate future
winding down costs, and may sometimes reach substantially disparate
winding down estimates. Issues have arisen as to the appropriate
amounts and types of winding down expenses and as to the length of time
committees need to wind down. These disputes lengthen the audit and
repayment process and can provide a basis for judicial challenges to
the Commission's repayment determinations. Both actual and estimated
future winding down costs are included in a primary election
candidate's Statement of Net Outstanding Campaign Obligations
[``NOCO''] or a general election candidate's Statement of Net
Outstanding Qualified Campaign Expenses [``NOQCE'']. Consequently, if
the Commission auditors' figures are lower than the committee's
estimates, a dispute may arise in determining the candidate's NOCO or
NOQCE and any remaining entitlement, surplus funds, or resulting
repayment. Disallowed winding down expenses can increase the amount of
any surplus funds and the resulting repayment determination, or they
can reduce or eliminate a deficit and the corresponding amount of a
primary candidate's entitlement to matching funds. Therefore, the
Commission is again considering ways to limit winding down expenses in
order to establish a fair and readily determined amount to ensure
public funds are used in accordance with statutory purposes, campaigns
are treated consistently with respect to winding down costs, and to
provide for more expeditious completion of these matters. Thus, the
proposed rules establish both an ending date and maximum amount for
winding down costs.
The Commission proposes new sections governing winding down
expenses at 11 CFR 9004.11 and 11 CFR 9034.11 that would delineate new
restrictions on both the amount and timing of winding down costs.
Publicly funded campaign committees should wind down in as quick and
efficient manner as possible. The proposed restrictions are intended to
contain winding down costs and periods, but allow campaigns a
reasonable amount of winding down costs and a long enough winding down
period to respond during the audit and repayment process and verify the
payment of bills to terminate the campaign. The proposed restrictions
would work in concert. Thus, candidates would be unable to continue to
use public funds to pay for winding down costs if they reach the
monetary limit prior to the end of their winding down period or if
their winding down period ends before they reach the monetary limit.
The proposed rules at 11 CFR 9004.11 and 9034.11 include both a
temporal restriction and a limitation of the total amount of winding
down expenses. The proposed time restriction would permit a candidate
to use public funds to pay for winding down expenses only until the end
of the ``winding down period.'' The winding down period would begin on
the day after the candidate's date of ineligibility, for primary
candidates who do not participate in the general election, or the day
after the end of the expenditure report period for publicly funded
general election candidates, or the day following the date 30 days
after the general election for candidates who participate in the
general election but do not receive public funds for the general
election. The winding down period would end no earlier than the latest
of: (1) 30 days after the candidate's receipt of an audit report that
does not contain any repayment determinations; (2) 60 days after
service of notice to the candidate of the Commission's repayment
determination, if the committee does not dispute the repayment
determination; or (3) 30 days after service of notice of the
Commission's repayment determination following an administrative
review.
The proposed winding down period would allow sufficient time for
campaigns to seek administrative review of repayment determinations.
The 30-day period following a candidate's receipt of an audit report
that does not contain a repayment determination would allow sufficient
time to complete winding down because the audit and repayment process
would have concluded. The 60-day period allowed for winding down after
service to a candidate of a repayment determination that the candidate
does not dispute reflects the amount of time permitted for candidates
to respond to repayment determinations at 11 CFR 9007.2(c)(2) and
9038.2(c)(2). If a candidate disputes any repayment determination by
responding and seeking administrative review, the winding down period
would extend to 30 days after service of notice of the Commission's
repayment determination following administrative review. This is
consistent with 11 CFR 9007.2(d)(2) and 9038.2(d)(2), which require
candidates to make a post-administrative review repayment within 30
days after service of the Commission's post-administrative review
repayment determination. The Commission notes that if it is unable by
an affirmative vote of at least 4 of its members to make a repayment
determination after an administrative review, the 30-day period would
run from the date of service of notice of the Commission's final action
concerning the administrative review.
The proposed rules would accommodate repayment determinations
related to Commission audit reports, addenda to audit reports and 11
CFR 9039.3 inquiries. Thus, if a candidate did not dispute a repayment
determination in an audit report but did subsequently dispute a
repayment determination arising from an inquiry pursuant to 11 CFR
9039.3, the candidate's winding down period would extend until 30 days
after service of notice of the Commission's repayment determination
upon administrative review related to the 11 CFR 9039.3 investigation.
In addition, the time restriction's terms are ``no earlier than'' the
expiration of the specified time period to permit the Commission the
administrative flexibility of choosing a convenient end point, like the
end of a month, and to allow for staff to estimate time for
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Commission approval and transmittal to the committee of the audit
report or repayment determination.
To reflect this new time restriction, the Commission also proposes
revising 11 CFR 9004.9(a)(4) and 9034.5(b)(2) to require candidates'
NOCO or NOQCE Statements to break down estimated winding down costs
through the end of the winding down period, rather than the expected
termination of the committee's political activity.
In addition to the temporal restriction, the proposed rules at 11
CFR 9004.4(a)(4) and 9034.4(a)(3) would limit the total amount of
winding down expenses that may be paid for, in whole or part, with
public funds. This ``winding down limitation'' would limit the total
amount of publicly funded winding down expenses for primary candidates
to the lesser of either: (1) 5% of the overall expenditure limitation;
or (2) 5% of the total of the candidate's expenditures subject to the
overall expenditure limitation as of the candidate's DOI, plus the
candidate's expenses exempt from the overall expenditure limitation as
of DOI, such as fundraising, legal and accounting compliance expenses
and other expenses. For general election candidates, the winding down
limitation would be the lesser of: (1) 2.5% of the expenditure
limitation; or (2) 2.5% of the total of the candidate's expenditures
subject to the expenditure limitation as of the end of the expenditure
report period, plus the candidate's expenses exempt from the
expenditure limitation, such as fundraising expenses, as of the end of
the expenditure report period.
The Commission notes that the fundraising exemption for general
election candidates is applicable only to those candidates who may
accept contributions to defray qualified campaign expenses pursuant to
26 U.S.C. 9003(b)(2) or 9003(c)(2): minor party candidates and major
party candidates who may solicit contributions to make up a deficiency
in public funds received. See 11 CFR 100.152, 9003.3(b) and (c). Those
general election candidates who may solicit contributions may also
exempt legal and accounting compliance expenses from their expenditure
limitations. See 11 CFR 100.146, 9003.3(b) and (c). Thus, the proposed
rule would address the calculation of the winding down limitation for
those general election candidates who may solicit contributions by
calculating the total of their expenditures subject to the limit and
their exempt expenses. The winding down limitation for fully funded
major party general election candidates would generally be 2.5% of the
expenditure limitation. For both primary and general candidates,
expenses for transportation of Secret Service and national security
staff and media transportation expenses that are reimbursed by the
media do not count against the expenditure limitations. See 11 CFR
9004.6(a), 9034.6(a). In addition, taxes on non-exempt function income
such as interest, dividends and sale of property are exempt from a
primary candidate's overall expenditure limitation. See 11 CFR
9034.4(a)(4).
Notwithstanding the amount determined based on these calculations,
the proposed rule would permit all primary and general election
candidates to spend a minimum of $100,000 on winding down costs. The
$100,000 minimum winding down limitation is proposed to recognize that
publicly funded committees face winding down expenses related to the
requirements of the audit and repayment process that do not vary with
the size of the committees. The Commission seeks comment on whether
$100,000 is the appropriate minimum amount and whether it should be
adjusted for inflation or replaced with a percentage of the expenditure
limitation.
In practice, the winding down limitation for primary candidates
with large campaigns and for fully funded major party general election
candidates would be the maximum winding down limitation: 5% of the
overall expenditure limitation for primary candidates or 2.5% of the
expenditure limitation for general election candidates. For primary
candidates with smaller campaigns, the winding down limitation would
equal 5% of their expenses prior to DOI. The winding down limitation
for most minor party general election candidates and major party
candidates who must solicit contributions to make up a deficiency in
public funds would equal 2.5% of their expenses during the expenditure
report period. For purposes of calculating the amount of the winding
down limitation based on a primary or general candidate's expenses, a
candidate's expenses would include both disbursements and accounts
payable as of the DOI or the end of the expenditure report period for
the following categories of expenses (as listed on page 2 of FEC Form
3P): operating expenses (line 23), fundraising (line 25), exempt legal
and accounting (line 26), and other disbursements (line 29). The
following payments would not be included in the expenses used to
calculate the winding down limitation: Transfers to other authorized
committees (line 24), loan repayments (line 27), or contribution
refunds (line 28). The winding down limitation would not include any
expenditures in excess of the general election candidate's expenditure
limitation or the primary candidate's overall expenditure limitation;
thus, making expenditures or accepting in-kind contributions that
exceed the expenditure limits would not provide a basis for an
increased winding down limitation. The maximum winding down limitation
would be calculated based upon a percentage of the primary candidate's
overall expenditure limitation or the general election candidate's
expenditure limitation pursuant to 26 U.S.C. 441a(b), similar to the
calculation of the 20% fundraising exemption or the 15% compliance
exemption. See 11 CFR 100.146, 100.152, 9002.11(b)(5) and 9035.1(c)(1)
and (2).
All expenses incurred and paid by a candidate during the winding
down period, including fundraising costs, would be subject to the
winding down limitation. Expenses for legal and accounting compliance
costs paid for with public funds would count against the winding down
limitation, but compliance costs paid by a General Election Legal and
Accounting Compliance Fund [``GELAC''] would not count against the
winding down limitation.
The Commission reviewed the amounts spent for winding down costs by
all publicly funded candidates during the 2000 election cycle. It
compared their approximate winding down costs to the proposed winding
down limitation. Of three publicly funded general election candidates,
one would have spent less than 1% of the expenditure limitation, the
second would have spent less than 2% of his expenditures, while the
third would have spent only slightly more than the 2.5% winding down
limitation. The last committee paid some of its winding down expenses
with GELAC funds, which reduced its percentage to less than 2%. Ten
primary candidates received matching funds in 2000. Three of these
primary candidates' winding down limitations would have been calculated
based on the maximum winding down limitation of 5% of the overall
expenditure limitation. Of these, one would have exceeded the winding
down limitation, spending more than approximately 8% of the expenditure
limitation. Six primary candidates' winding down limitations would have
been calculated based on their expenditures. Of these, four candidates
would have exceeded the 5% winding down limitation, with winding down
costs ranging between approximately
[[Page 18487]]
13% and 42% of their expenditures. One candidate that would have been
subject to the minimum winding down limitation of $100,000 spent
substantially less than that amount. Of all 13 publicly funded
committees in the 2000 presidential elections, five primary committees
had winding down expenses that would have exceeded the proposed amount
limitation. One of these committees had sufficient funds in its related
GELAC that could have paid the excessive winding down expenses. The
other four committees would have received fewer matching funds after
their DOIs.\1\
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\1\ Of course, this comparison is hypothetical because the
committees may have behaved differently had the proposed rules been
in effect.
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The proposal puts forth a lower percentage for general election
campaign committees than for primary campaigns for several reasons.
General election candidates may pay for winding down costs with funds
from the candidates' GELAC, an option not currently available for
primary election campaigns. General election campaigns are also shorter
in length than most primary campaigns and thus, may have fewer
transactions and vendors to deal with while terminating the campaign.
The Commission also notes that the total amount of public funds and
expenditure limitations are larger for major party candidates who
receive public funds; thus, a smaller percentage of their expenditures
would result in a larger dollar figure.
Under the proposed rules, the use of public funds to pay for
winding down expenses in excess of these restrictions would constitute
a non-qualified campaign expense that may be subject to repayment.
However, these restrictions would apply to the use of public funds or a
mixture of public and private funds for winding down costs. The
proposed rules would not limit the payment of winding down expenses
from a candidate's GELAC. The proposed rules would also allow a primary
candidate who is in a deficit position at the DOI to pay for winding
down costs in excess of the restrictions after the committee's accounts
no longer contain any matching funds. See 11 CFR 9038.2(b)(2)(iii)(B)
and (iv). Primary candidates who have a surplus at the DOI would be
required to make a surplus repayment to the United States Treasury
before they could use private funds for winding down costs in excess of
the restrictions. See 11 CFR 9038.3(c).
The proposal includes both temporal and amount restrictions rather
than just one or the other so that these restrictions would work
together to reinforce each other. The proposed rules would not permit
the use of public funds for winding down costs after either: (1) The
total amount of winding down expenses reach the winding down dollar
limitation or (2) the end of the winding down period, whichever event
occurs first. The proposed restrictions would prevent the pre-payment
of large amounts for speculative future winding down goods and services
prior to the end of the winding down period. They would also prevent a
prolonged winding down period from extending and complicating the audit
process. In addition, the proposed rules are intended to reflect
factors that could affect the amount of winding down costs needed to
terminate the campaign. The proposed winding down limitation is based
on a percentage of a campaign's expenses to reflect that larger
campaigns generally incur more expenses as they terminate their
activities. The calculation includes exempt expenses such as
fundraising and legal and accounting compliance costs to reflect the
actual size of the campaign that is winding down. In addition, the
proposed rule would restrict the expenses used to calculate the winding
down limitation to the period prior to a primary candidate's DOI or the
end of a general election candidate's expenditure report period to
prevent candidates from increasing their winding down limitation by
spending more for winding down expenses.
One factor under consideration, but not included in the proposed
rules that follow, is the number of complaints and other compliance
actions filed against a presidential candidate or campaign committee.
Winding down costs include, inter alia, the costs of ``complying with
the post-election requirements of the Act,'' such as the audit and
repayment process, reporting and recordkeeping. 11 CFR 9004.4(a)(4) and
9034.4(a)(3). The compliance process is separate from the required
audit and repayment process and its requirements are not election
dependent, which raises the issue of whether such compliance costs
should be considered ``post-election requirements of the Act.''
Compliance matters, unlike compulsory audits and repayment
determinations, are not unique to candidates who receive public funds.
Consequently, the proposed rule would allow a publicly funded candidate
to pay initial expenses for compliance matters arising from the
campaign with public funds as winding down costs, but the winding down
period would not be prolonged until enforcement matters related to the
campaign have closed, if the audit and repayment process has concluded.
Private funds would be available to general election candidates through
their GELAC and to primary candidates after their accounts no longer
contain public funds. As discussed below, however, the proposed rules
would also permit a GELAC to pay the primary committee's winding down
expenses under certain conditions. The Commission seeks comment on
whether the existence of compliance matters should be considered as a
factor in determining a candidate's winding down period or winding down
limitation.
The proposed new sections at 11 CFR 9004.11 (general election) and
9034.11 (primary election) governing winding down costs are intended to
simplify and clarify the rules governing winding down costs. Proposed
new 11 CFR 9004.11 and 9034.11 contain the definition of winding down
costs, moved from current sections 9004.4(a)(4) and 9034.4(a)(3)(i),
the proposed temporal and monetary restrictions, and proposed rules
governing the allocation of winding down costs between a candidate's
primary election and general election campaigns. In addition, the
Commission proposes revisions to 11 CFR 9004.4(a)(4) and
9034.4(a)(3)(i) and (ii) to move provisions from those sections to the
new sections and to otherwise conform these sections to the proposed
new rules. Proposed 11 CFR 9004.4(a)(4) would state that payments may
be used to defray winding down costs subject to the restrictions of new
11 CFR 9004.11. Current section 9004.4(a)(4)(ii) would be renumbered as
9004.4(a)(5). Proposed 11 CFR 9034.4(a)(3)(i) would state that winding
down costs subject to the restrictions in proposed 11 CFR 9034.11 are
qualified campaign expenses. Proposed 11 CFR 9034.4(a)(3)(ii) would
include a reference to proposed 11 CFR 9034.11.
The Commission seeks comment on the proposed winding down
restrictions. Are the restrictions fair to publicly funded committees?
Should winding down expenses be limited to a fixed dollar amount or a
combination of a dollar amount and a percentage rather than the
proposed percentage? If so, what dollar amount would be appropriate?
Would it be preferable to apply a percentage or dollar cap to specific
categories of winding down expenses rather than the total of winding
down costs? Would a shorter or longer winding down period be preferable
to the proposed time period? Should there be a minimum winding
[[Page 18488]]
down period, and if so, how long should the minimum winding down period
be?
Specifically, the Commission seeks comment on whether the winding
down period should include an additional time period or dollar
allowance for candidates who seek judicial review of a Commission
repayment determination and if so, how long that period should be.
Should candidates who accept public funds for both the primary and
general elections be allowed to combine their primary and general
election winding down limitations into a joint monetary limit for the
total winding down expenses of both committees, with the temporal limit
based on the last repayment determination received by either committee?
Would the proposed rule encourage candidates to attempt to extend the
audit process to lengthen the winding down period?
The Commission is also considering two alternatives to the proposed
temporal and monetary restrictions on winding down expenses. The first
alternative would, in effect, disallow the use of public funds to pay
for winding down costs. Under this alternative, a primary election
candidate would not be permitted to use public funds to pay for either:
(1) All expenses incurred after the candidate's DOI or (2) all expenses
for goods or services to be used after the DOI even if the expenses are
incurred prior to the DOI. A general election candidate would not be
permitted to use public funds to pay for either: (1) All expenses
incurred after the end of the expenditure report period or (2) all
expenses for goods or services to be used after the end of the
expenditure report period even if they are incurred during the
expenditure report period.
This alternative would end the Commission's treatment of winding
down costs as qualified campaign expenses. Winding down costs are a
category of qualified campaign expenses recognized by the Commission
that is not specifically identified in the Fund Act or the Matching
Payment Act. This category of qualified campaign expenses is an
exception to the rules requiring qualified campaign expenses to be
incurred during the expenditure report period, for general election
candidates, 26 U.S.C. 9002(11)(B), or prior to a primary candidate's
DOI, 11 CFR 9032.9(a)(1); see also 26 U.S.C. 9032(6) and 9033(c)(2).
Since winding down costs are incurred after the end of a candidate's
active campaign, the question arises whether they are incurred ``to
further'' a general election candidate's election to the office of
President or Vice President, 26 U.S.C. 9002(11), or ``in connection
with'' a primary candidate's campaign for the nomination, 26 U.S.C.
9032(9). Comments are sought on whether permitting public funds to be
used for winding down costs may be inconsistent with these provisions
or with 26 U.S.C. 9038(b)(3), which requires candidates to retain
matching funds ``for the liquidation of all obligations to pay
qualified campaign expenses for a period not exceeding 6 months after
the end of the matching payment period'' and to ``promptly'' repay a
ratio of any surplus funds.
Disallowing the use of public funds for winding down expenses would
ensure that public funds are used for expenses that further a
candidate's active campaign. Under this alternative, general election
candidates would be able to pay for their winding down expenses with
GELAC funds. Primary candidates would not pay for winding down costs
with matching funds, but could use contributions or other private funds
to pay these costs. Under this approach, a primary candidate's winding
down costs would not count as liabilities in determining the
candidate's net outstanding campaign obligations; thus, winding down
costs could not increase a primary candidate's entitlement to Federal
funds or decrease a surplus.
Please note that this alternative is not set forth in the draft
rules that follow. This alternative would require the deletion of the
rules governing winding down costs as well as changes to other rules to
delete references to winding down costs. Specifically, this alternative
would require deletion or revisions to: 11 CFR 9002.11(c) (expenses
after the last day of the candidate's eligibility may be qualified
campaign expenses if they meet the provisions of 11 CFR 9004.4(a));
9004.4(a)(4) (winding down costs as qualified campaign expenses);
9004.4(b)(3) (non-qualified campaign expenses do not include winding
down expenses permitted by 11 CFR 9004.4(a)(4)); 9004.9(a)(1) and (4)
(inclusion of estimated winding down expenses in the NOCQE statement);
9032.9(c) (expenses after the last day of candidate's eligibility may
be qualified campaign expenses if they meet the provisions of 11 CFR
9034.4(a)); 9034.4(a)(3) (winding down costs as qualified campaign
expenses); 9034.4(a)(5) (bonuses are permitted until 30 days after
DOI); 9034.4(b)(3) (non-qualified campaign expenses do not include
winding down expenses permitted by 11 CFR 9034.4(a)(3)); and
9034.5(b)(1) and (2) (inclusion of estimated winding down expenses in
the NOCO statement). Please also note that this alternative is
inconsistent with some of the other proposals in this rulemaking, such
as dividing winding down expenses between a candidate's primary and
general campaigns or treating certain convention expenses of ineligible
candidates as qualified campaign expenses, as discussed below. The
Commission seeks comment on this alternative approach. Would
disallowing the use of public funds for winding down costs hinder
candidates from responding adequately during the audit and repayment
process? Would this alternative serve as a disincentive for candidates
to seek public funds? Is this approach nonetheless required by the Fund
Act and the Matching Payment Act? Should primary candidates be
permitted to establish a separate account of solely private funds, with
separate contribution limits for contributors, to be used for winding
down expenses? If so, may the Commission permit contributors to make
more than one contribution of the amount specified in 2 U.S.C.
441a(a)(1)(A) or 2 U.S.C. 441a(a)(2)(A) to the same candidate or
authorized committee? May the Commission permit such candidates and
authorized committees to accept such contributions consistent with 2
U.S.C. 441a(f) and 441i(e)(1)(A)?
The Commission is also considering a second alternative approach to
winding down costs. This alternative, which is also not set forth in
the draft rules that follow, would not place restrictions on the amount
or timing of winding down costs but would more precisely delineate the
types of winding down costs that are permissible. The Commission is
considering various categories of permissible winding down costs
including staff salaries, legal and accounting services, office space
rental, utilities, computer services, other overhead expenses,
consultants, storage, insurance, office supplies and fundraising
expenses.
The Commission seeks comment on this alternative. Disputes over
winding down expenses often concern the appropriate amounts spent for
particular expenses, the appropriate length of time a campaign should
continue to need certain goods or services, and whether the campaign
committee has provided sufficient documentation of expenses. Should a
list of permissible winding down expenses provide guidance as to the
appropriate amounts, duration, or documentation required to support
such expenses? Should there be any dollar limits on any of the
expenses? Would this alternative reduce the amount of winding down
expenses? The Commission also seeks comment on any
[[Page 18489]]
other alternative proposals for limiting winding down expenses.
The Commission proposes another change to clarify the rules on
winding down costs at 11 CFR 9034.4(b)(3). Current paragraph (a) of 11
CFR 9034.4 lists qualified campaign expenses, while paragraph (b) sets
forth certain non-qualified campaign expenses. Paragraph (a)(1) states
that, except as provided in paragraph (b)(3), all contributions
received by an individual from the date he or she becomes a candidate
and all matching payments received by the candidate shall be used only
to defray qualified campaign expenses. Paragraph (b)(3) states that
general election and post-ineligibility expenditures are not qualified
campaign expenses, except to the extent permitted under paragraph
(a)(3), which concerns winding down and continuing-to-campaign
expenses. For clarity, the Commission is proposing to add a provision
to paragraph (b)(3) to specifically state that the winding down and
continuing-to-campaign costs addressed in paragraph (a)(3) and 11 CFR
9034.11 are considered qualified campaign expenses. Corresponding
changes would be made to the similar provision for the general
election, 11 CFR 9004.4(b)(3).
Please note that the Commission is not proposing any changes at
this time to 11 CFR 9008.10(g)(7), governing winding down costs of
convention committees. The Commission nonetheless welcomes comments as
to whether similar restrictions should apply to winding down expenses
for convention committees.
B. Candidates Who Run in Both Primary and General Elections
The Commission seeks comment on proposed revisions to its rules to
clarify which costs constitute primary winding down costs for
candidates who participate in both the primary and general elections.
The Commission's current regulations allow only candidates who do not
run in the general election to begin to incur winding down costs and to
treat winding down expenses for salary, overhead and computer costs as
100% compliance costs beginning immediately after their DOI. See 11 CFR
9034.4(a)(3)(i) and (iii). Candidates who run in the general election,
whether or not they receive public funds for that election, must wait
until the day following the date 30 days after the general election,
which is the end of the expenditure report period for publicly financed
general election candidates, 11 CFR 9002.12, before they may begin to
incur and pay winding down expenses or allocate them as 100% compliance
expenses. In 1999, the Commission revised 11 CFR 9034.4(a)(3)(iii) to
allow primary candidates who do not run in the general election to
begin to treat 100% of winding down expenses for salary, overhead and
computer costs as 100% compliance costs beginning immediately after
their DOI. Explanation and Justification for the Rules Governing Public
Financing of Presidential Primary and General Election Candidates, 64
FR 49355, 49358-59 (Sept. 13, 1999). The wording of 11 CFR
9034.4(a)(3)(iii), however, refers to ``candidates who receive public
funding for the general election'' but does not expressly address the
situation of a candidate who runs in both the primary and general
elections and does not receive public funding for the general election.
In the 2000 election, questions arose about how to treat administrative
expenses incurred during the general election expenditure report period
by a publicly funded primary election candidate who also ran in the
general election but did not receive public funds for the general
election.
The Commission's approach in 11 CFR 9034.4(a)(3)(iii) reflects its
belief that candidates who are actively campaigning in the general
election should not be considered to be terminating political activity
and winding down their primary campaigns. The proposal seeks to extend
this concept to apply without regard to whether their general election
campaigns are publicly funded. Expenses incurred by such candidates
during the expenditure report period, for publicly funded general
election candidates, or the equivalent time period ending 30 days after
the general election, for other general election candidates, should be
considered general election expenses, rather than primary winding down
costs. This approach prevents the use of primary matching funds for
non-qualified expenses related to the general election. See 11 CFR
9032.9(a) and 9034.4(b). Although this approach may result in general
election campaigns incurring some administrative costs related to
terminating the primary campaign during the general election period,
identifying those costs would consume resources of audited committees
and the Commission. This approach is also consistent with the
Commission's bright line rules for allocating expenses between primary
and general campaigns at 11 CFR 9034.4(e), which in effect allow some
primary related expenses to be paid by the general election committee
and vice versa.
The Commission proposes a new paragraph at 11 CFR 9034.11(e), which
is based on current 11 CFR 9034.4(a)(3)(i), with revisions to clarify
this rule and to prevent any future confusion. The proposed rule at 11
CFR 9034.11(e) would provide that a candidate who runs in the general
election must wait until the day following the date 30 days after the
general election before using matching funds for primary winding down
costs, regardless of whether the candidate receives public funds for
the general election. This rule would also clarify that no expenses
incurred prior to 31 days after the general election by candidates who
run in the general election may be considered primary winding down
costs or paid with matching funds.
The Commission also proposes revisions to 11 CFR 9035.1(c)(1) that
would include a revised version of current 11 CFR 9034.4(a)(3)(iii) to
provide that only candidates who do not run in the general election may
treat 100% of salary, overhead and computer expenses as compliance
expenses immediately after their date of ineligibility. Candidates who
run in the general election must wait until the day following the date
30 days after the general election to treat these expenses as exempt
compliance costs. The Commission proposes, for greater clarity, to move
this revised version of 11 CFR 9034.4(a)(3)(iii) into current 11 CFR
9035.1(c)(1), which concerns the legal and compliance exemption to the
expenditure limitations, because this paragraph concerns the treatment
of certain winding down expenses as 100% compliance costs.
The Commission seeks comment on these proposals. Should there be an
exception for expenses incurred during the time period prior to 31 days
after the general election that are solely related to winding down the
primary campaign, and if so, what requirements should there be to
ensure that such costs are solely related to winding down the primary
campaign? For example, should there be an exception for fundraising
expenses incurred during this period to retire a primary committee's
NOCO? Would primary-related fundraising activities during this period
also have the effect of promoting the candidate's general election
campaign? Would a fundraising exception encourage candidates to add a
solicitation to general election related events or communications
during this period in order to treat expenses for those activities as
primary winding down expenses?
In addition, the definition of ``winding down costs'' in new
section 9034.11(a) would include a revised
[[Page 18490]]
version of the first sentence of current 11 CFR 9034.4(a)(3)(i) to
clarify that winding down costs are limited to costs associated with
the termination of political activity related to seeking that
candidate's nomination for election. This would clarify that primary
election campaign winding down expenses are legally distinct from
general election campaign winding down expenses.
A related issue is how to allocate winding down expenses for
candidates who run in both the primary and general elections.
Allocating winding down expenses between the primary and general
election campaigns during the period following the date 30 days after
the general election, can be complicated because both campaigns are
winding down simultaneously, often using the same staff, offices,
equipment, vendors and legal representatives. The Commission proposes
new sections 11 CFR 9004.11(d) and 9034.11(d) allowing a candidate who
runs in both the primary and general election to divide winding down
costs between the primary and general campaigns using any allocation
method, including allowing either the primary or the general campaign
to pay 100% of winding down expenses.
This proposal would give candidates the flexibility to allocate
their winding down expenses based on the particular circumstances of
their campaigns. Winding down activity for some candidates may be
largely or entirely focused on one election. For example, candidates
who do not receive public funds for the general election might
concentrate winding down activity on their publicly funded primary
committee. In addition, candidates might concentrate winding down
efforts and expenses on the committee that must address more difficult
and complex issues in the audit and repayment process or that has a
larger potential repayment.
An alternative proposal for dividing winding down expenses between
the primary and general campaigns, which was used in some 2000 election
cycle audits, would be to divide expenses equally but allow committees
to use an alternative allocation method if they provide sufficient
documentation to support that allocation. Because the documentation of
the primary and general election committees' allocation must be
reviewed and disputes may arise about whether committees have provided
sufficient documentation to support their proposed allocation, this
alternative could prolong the audit process and use the resources of
the Commission and audited committees. The draft rules that follow do
not incorporate this alternative. The Commission seeks comment as to
what amount or type of documentation should be considered sufficient to
support allocations proposed by committees. What standard would be
appropriate for evaluating alternative allocations proposed by
committees?
The Commission seeks comment on any other method of allocating
winding down expenses between the primary and general election
committees. Specifically, would either of these alternative proposals
result in the primary or general election campaign using public funds
to pay for non-qualified expenses related to the other election? Should
campaigns be permitted to allocate their costs to effectually reduce
potential repayments? Would a default allocation of 50% for each
committee be equitable to differently situated candidates? Finally, are
these alternative approaches inconsistent with the Fund Act or the
Matching Payment Act?
C. Use of GELAC Funds To Pay Winding Down Costs
The Commission's rules at 11 CFR 9003.3(a) permit publicly funded
major party presidential candidates to establish and solicit private
contributions to GELAC funds, if certain conditions are met. Payments
from these accounts for exempt legal and accounting services are not
counted against the candidate's overall expenditure limits under 2
U.S.C. 441a(b) and 11 CFR 110.8. See 11 CFR 100.8(b)(15).
In 1995, the Commission adopted 11 CFR 9004.4(a)(4)(iii) to address
the use of the GELAC to pay certain winding down costs of general
election candidates. This paragraph states that 100% of salary,
overhead and computer expenses incurred by a campaign after the end of
the expenditure report period may be paid from a GELAC, and that such
expenditures will be presumed to be solely to ensure compliance with
the FECA and the Fund Act. 60 FR 31875 (June 16, 1995). This paragraph
was included in the 1996 through 1999 editions of the Code of Federal
Regulations, but was inadvertently omitted from the 2000, 2001 and 2002
editions. The Commission intends to reinstate this important provision,
with certain revisions discussed below, but move it to the regulation
that governs GELAC funds, proposed 11 CFR 9003.3(a)(2)(i)(I).
The Commission is also considering whether, and to what extent,
GELAC funds may be used to pay for primary winding down expenses
incurred after the end of the expenditure report period. As noted
above, the primary and general election campaigns are simultaneously
winding down during this period and often share salary, overhead and
computer expenses. The current regulations at 11 CFR 9034.4(a)(3)(iii)
recognize that a significant amount of winding down activity during
this period is related to compliance and allow primary campaigns to
treat 100% of salary, overhead and computer costs during this period as
legal and accounting compliance expenses exempt from the expenditure
limitations. Permitting the GELAC to pay salary, overhead, and computer
costs after the end of the expenditure report period for both the
primary and general campaigns would allow candidates who run in both
the primary and general elections to choose to pay these costs from the
GELAC without having to allocate them between the primary and general
campaign committees. In addition, the primary and general election
committees often share winding down expenses related to legal and
accounting compliance such as attorneys and accountants. Further,
primary campaign committees may lack sufficient funds to complete
winding down activity.
The Commission proposes to revise the language of former 11 CFR
9004.4(a)(4)(iii), at proposed 11 CFR 9003.3(a)(2)(i)(I), to allow
contributions to the GELAC to be used for winding down expenses for
legal and accounting compliance activities incurred after the end of
the expenditure report period by either the primary or general election
committee or by both committees. All salary, overhead, and computer
expenses after the end of the expenditure report period would be
considered winding down expenses for legal and accounting compliance
activities payable by the GELAC.
The Commission seeks comments on the proposed rule. Should the
GELAC be allowed to pay for the primary committee's legal and
accounting compliance expenses during the winding down period or must
the primary committee pay all primary winding down expenses? The
Commission also seeks comment on whether, and to what extent, GELAC
funds may be used to pay for primary winding down expenses other than
legal and accounting compliance expenses, salary, overhead and computer
costs. Should the rule list in more detail the types of primary winding
down expenses that may be paid with GELAC funds?
[[Page 18491]]
D. Convention Expenses of Ineligible Candidates
The Commission proposes to add a new provision to the rules to
reflect its decision in AO 2000-12 permitting certain convention
expenses incurred by presidential primary candidates after their dates
of ineligibility to be considered qualified campaign expenses. In AO
2000-12, the Commission determined that certain expenses related to
meetings and events at the national nominating conventions could be
treated as qualified campaign expenses by ineligible candidates. First,
the Commission determined that expenses for certain meetings and
receptions to thank delegates and supporters could be treated as
qualified campaign expenses under 11 CFR 9034.4(a)(5), which
specifically includes gifts to ``committee employees, consultants and
volunteers'' for ``campaign-related activities or services.'' The
current rule limits this to $150 per individual and $20,000 total for
all gifts. The Commission noted that such meetings should be restricted
to attendees who served the campaign in the capacity of a committee
employee, consultant or volunteer to be considered qualified campaign
expenses, and that the current regulation does not allow the payment of
travel expenses to attend or organize the events to be considered
qualified campaign expenses.
Second, the Commission permitted the ineligible candidates to incur
qualified campaign expenses related to fundraising events at the
conventions. The Commission stated that as long as the candidates'
primary committees had remaining net outstanding campaign obligations,
they may continue to receive matching funds, and may use matching funds
to pay for fundraising expenses to retire those campaign obligations as
qualified campaign expenses. See 11 CFR 9034.1(b). The Commission
concluded that the candidates may incur qualified campaign expenses for
expenses related to specific fundraising events held at the nominating
conventions. It stated that the candidates could also use matching
funds to pay the travel expenses for candidates to attend the
fundraising events and for campaign staff who participate in the
organizing and administration of the fundraising events. The Commission
emphasized that the fundraising expenses must be for specific
fundraising events at the convention. In addition, expenses allocable
to participation by the candidates or their staff members in any other
part of the conventions would constitute non-qualified campaign
expenses. Finally, such expenses would be qualified campaign expenses
only if, at the time of the convention, the candidates had net
outstanding campaign obligations. See 11 CFR 9034.1(b).
Consequently, the Commission proposes adding new 11 CFR
9034.4(a)(6) to reflect its decision in AO 2000-12. The proposed rules
at paragraph (a)(6)(i) provide that expenses directly related to a
specific fundraising event at a national nominating convention to
retire an ineligible candidate's debt owed by the candidate's primary
committee, including travel expenses for the candidate to attend the
fundraising event and for those campaign staff who organize and
administer the fundraising event, may be considered qualified campaign
expenses. This paragraph provides that covered travel expenses would
consist of transportation, hotel or other lodging, and per diem
subsistence for the candidates, their spouses, campaign staff, and
volunteers who organize or administer the event. The proposed rule
provides that expenses allocable to participation by the candidate or
staff in the national nominating convention itself, or in any
activities related to the convention, other than the fundraising event,
would constitute non-qualified campaign expenses. The proposed rule
also states that expenses for a fundraising event at the convention may
be considered qualified campaign expenses only to the extent that, on
the date of the fundraising event, the candidate has net outstanding
campaign obligations pursuant to 11 CFR 9034.1(b). Proposed paragraph
(a)(6)(ii) would also permit expenses for events to thank campaign
employees, consultants and volunteers to be considered qualified
campaign expenses, but would provide that travel expenses to such
events would not constitute qualified campaign expenses.
The Commission's decision in AO 2000-12 delineates a carefully
circumscribed exception to the Commission's general past practice that
convention expenses of ineligible candidates are non-qualified campaign
expenses. As AO 2000-12 states, the Commission has generally concluded
in its audits of presidential primary campaign committees that expenses
associated with attending national nominating conventions incurred by
losing primary candidates are non-qualified campaign expenses. The
opinion discusses a number of audits of presidential campaigns in which
the Commission determined that expenses of ineligible candidates
related to the national nominating convention such as preparatory staff
work, hotel, and airline tickets were non-qualified campaign expenses.
For example, the U.S. Court of Appeals for the District of Columbia
Circuit upheld the Commission's determination that convention-related
expenses incurred by an unsuccessful presidential campaign committee to
attend the convention and for activities to bolster the support and
enthusiasm of the candidate's delegates were non-qualified campaign
expenses where the committee claimed that the expenses were fundraising
activities because the video and audio record of the candidate's
attendance at the convention would be used for later fundraising
efforts. Robertson v. FEC, 45 F.3d 486, 492 (D.C. Cir. 1995). AO 2000-
12 explains that while the Commission's general practice is that
expenses for ineligible candidates, such as travel costs, related to
the convention are non-qualified campaign expenses, matching funds may
be used for such expenses in certain limited circumstances.
Prior to the 1996 election cycle, the Commission sought comment on
whether to expand the definition of ``qualified campaign expense'' in
11 CFR 9032.9 to include losing candidates' convention expenses. See
Explanation and Justification to the Rules Governing Public Financing
of Presidential Primary and General Election Candidates, 60 FR 31854,
31871 (June 16, 1995). In declining to do so, however, the Commission
noted that the statutory definition of qualified campaign expense is
limited to expenses ``incurred by a candidate, or by his authorized
committee, in connection with his campaign for nomination for
election.'' Id.; see 26 U.S.C. 9032(9)(A). This definition arguably
does not apply to those no longer seeking the presidential nomination.
However, the 1995 Explanation and Justification cited above noted that
candidates are permitted to count fundraising expenses incurred after
DOI, including those incurred at a national nominating convention, as
qualified campaign expenses as part of their winding down costs, but
only those expenses directly related to fundraising are qualified
campaign expenses. Id.
The Commission seeks comment on this proposed rule and on its
previous treatment of these expenses. Should the Commission incorporate
the exception described in AO 2000-12 into its regulations? Are there
any possible adverse consequences of allowing ineligible candidates to
treat these expenses as qualified campaign expenses? Should the
Commission
[[Page 18492]]
retain its general practice that convention expenses of ineligible
candidates are non-qualified campaign expenses? Should the definition
of ``qualified campaign expense'' in 11 CFR 9032.9 or the rules
governing the use of funds for qualified campaign expenses in 11 CFR
9034.4 be expanded to include as qualified campaign expenses the
convention expenses of ineligible primary candidates who speak, appear,
serve as a delegate or retain delegates, or who are nominated as the
party's vice presidential candidate, or who otherwise participate in
the party's national nominating convention? How would such a change be
reconciled with the requirement that qualified campaign expenses must
be made ``in connection with [a candidate's] campaign for nomination
for election?'' See 26 U.S.C. 9032(9). Should expenses of ineligible
presidential primary candidates at the national convention be
considered permissible winding down costs or some other type of
qualified campaign expense?
II. Primary Expenditure Limitations and Repayments
A. In-Kind Contributions Count Toward the Expenditure Limits (11 CFR
9035.1 and 9038.2)
The Commission proposes to clarify its rules at 11 CFR 9035.1 and
9038.2(b)(2)(ii)(A) concerning attribution of expenses to the
expenditure limitations for presidential primary candidates and
repayments based upon expenditures in excess of those limitations. The
Commission's recent rulemaking on coordinated and independent
expenditures implementing the requirements of BCRA delineates the rules
governing coordinated expenditures, coordinated communications, party
expenditures, coordinated party communications and the dissemination,
distribution or republication of campaign materials prepared by a
candidate. See Explanation and Justification for the Rules Governing
Coordinated and Independent Expenditures, 68 FR 421 (Jan. 3, 2002). In
that rulemaking, the Commission generally defined ``coordinated'' for
the purpose of coordinated expenditures. 11 CFR 109.20. The final rules
also establish particular criteria for a communication to be considered
a ``coordinated communication.'' See, e.g., 11 CFR 109.21(c) (content
standards) and (d) (conduct standards). In addition to these general
rules, the particular circumstances of political party committees are
addressed, and ``party coordinated communications'' are defined. See 11
CFR 109.37 and 11 CFR part 109, subpart D.
In establishing new rules governing coordinated expenditures, the
Commission recognized that some in-kind contributions arising from
coordinated communications made by party committees or other persons
may not necessarily be received or accepted by the candidate. See 11
CFR 109.21(b)(2) and 11 CFR 109.37(a)(3). The Commission believes
guidance would be helpful regarding the application of the coordinated
and independent expenditures final rules to situations involving the
expenditure limitations applicable to publicly funded presidential
candidates. Specifically, the Commission proposes to address the extent
to which in-kind contributions, coordinated expenditures, coordinated
communications, coordinated party expenditures, and coordinated party
communications will count against expenditure limitations and will be
included in the total amount of a publicly funded candidate's
expenditures subject to the limits for purposes of repayment
determinations.
The current rules at 11 CFR 9035.1(a) and 11 CFR 110.8(a) set forth
the state-by-state and overall expenditure limitations for candidates
receiving public funds for the primary election. See 2 U.S.C. 441a(b),
(c), and 26 U.S.C. 9035(a). The Commission has generally treated the
receipt of in-kind contributions by presidential primary candidates as
expenditures made by those candidates and has included in-kind
contributions in the amount of the candidate's expenditures subject to
the expenditure limitations and in the calculation of repayments based
on amounts in excess of the candidate's expenditure limitations. For
example, in a repayment determination arising from an audit of a 1988
candidate, the Commission concluded that in-kind contributions for
testing-the-waters expenses from a multicandidate political committee
``leadership PAC'' associated with a presidential candidate to that
candidate were subject to the candidate's state-by-state expenditure
limitation and part of the total of the candidate's expenditures
subject to pro rata repayment. In addition, the Commission concluded,
in making that repayment determination, that Federal matching funds and
private contributions were commingled in a committee's accounts. The
Commission considered in-kind contributions to be part of this
commingled pool of available funds, and thus, these expenditures were
included in calculating the amount in excess of the limitations subject
to pro rata repayment.
During certain audits from the 1996 and 2000 cycles, the Commission
considered whether some of the costs of producing and airing television
advertisements during the presidential primary and general election
campaigns, which were paid by the national party committees, should be
treated as coordinated in-kind contributions to presidential primary
candidates, and if so, whether such costs should count against
presidential candidates' expenditure limitations and be included in the
amount of expenditures in excess of the limitations that would be
subject to pro rata repayment. After considering this issue, the
Commission declined to make repayment determinations on this basis in
these audits.
A related issue is whether current 11 CFR 9038.2(b)(2)(ii)(A)
represents a permissible interpretation of the Matching Payment Act.
Section 9038.2(b)(2)(ii)(A) provides that one example of a Commission
repayment determination for the use of funds for non-qualified campaign
expenses is a determination that a candidate, a candidate's authorized
committee(s), or agents have made expenditures in excess of the
expenditure limitations set out at 11 CFR part 9035. The Commission
considered this issue in a rulemaking proceeding prior to the 2000
election cycle, but made no changes to the regulation at that time.
Notice of Disposition for the Rules Governing Public Funding of
Presidential Primary Candidates-Repayments, 65 FR 15273 (Mar. 22,
2000). The Notice of Disposition sets forth alternative arguments
concerning whether this rule has a statutory basis and states that the
Commission did not change the rule because there was no consensus in
favor of changing the regulation. Id. at 15275. Although the Commission
recommended that Congress revise 26 U.S.C. 9038(b) to specifically
state whether repayments must be made by publicly funded primary
candidates who have made expenditures that exceed the spending limits,
to date Congress has not acted to clarify this issue. See FEC,
Legislative Recommendations 2002 (May 14, 2002). At this point, the
Commission is considering whether to clarify that under section
9038.2(b)(2)(ii)(A), it will continue to seek repayments from primary
candidates who exceed the expenditure limitations, including candidates
who have received in-kind contributions.
[[Page 18493]]
1. Revisions to 11 CFR 9035.1
The Commission believes that additional guidance concerning the
attribution of in-kind contributions to the expenditure limitations
would be beneficial. The Commission proposes to revise its rules by
adding a new paragraph at 11 CFR 9035.1(a)(3) to provide that guidance
and to apply the Commission's recently promulgated final rules on
Coordinated and Independent Expenditures, 68 FR 421 (Jan. 3, 2003), to
publicly funded presidential candidates. The proposed rules that follow
are intended to clarify that certain in-kind contributions will count
against the presidential candidate's state-by-state and overall
expenditure limitations under certain conditions, as explained below.
Included are certain in-kind contributions received or accepted in the
form of coordinated expenditures pursuant to 11 CFR 109.20, coordinated
communications pursuant to 11 CFR 109.21, and coordinated party
expenditures in excess of the coordinated party expenditure limitations
at 2 U.S.C. 441a(d) and 11 CFR 109.32(a), which would include party
coordinated communications pursuant to 11 CFR 109.37.
The Commission notes that the rules treat some coordinated
expenditures as made by a person or party committee, but not as
received or accepted by a candidate. See 11 CFR 109.21(b)(2) and
109.37(a)(3). Specifically, expenditures that meet the conduct
standards for a common vendor at 11 CFR 109.21(d)(4) or a former
employee or independent contractor at 11 CFR 109.21(d)(5) are not
treated as received or accepted by a candidate unless the candidate,
authorized committee, or their agent engages in the conduct described
in 11 CFR 109.21(d)(1) (request or suggestion), (d)(2) (material
involvement), or (d)(3) (substantial discussion). Thus, only certain,
specific actions taken by the candidate or the candidate's authorized
committee or agents, as set forth in 11 CFR 109.21 and 109.37, result
in the receipt or acceptance of an in-kind contribution arising from
coordinated communication or a party coordinated communication. Only
these received or accepted in-kind contributions are treated as
expenditures made by the candidate. See 11 CFR 109.20(b) (requiring a
candidate to report coordinated expenditures as expenditures);
109.21(b)(1) (requiring a candidate to report received or accepted
coordinated communications as expenditures); 109.37(a)(3) (stating that
candidates are not required to report as expenditures party coordinated
communications that do not constitute received or accepted in-kind
contributions). Coordinated communications or party coordinated
communications that are not in-kind contributions received or accepted
by the candidate, the candidate's authorized committee, or agents under
11 CFR 109.21(b)(2) or 109.37(a)(3) would not be subject to the
candidate's expenditure limitation. The proposed rule also provides
that the value of in-kind contributions would be the usual and normal
charge for the goods and services provided.
Although coordinated party expenditures are made in connection with
the general election campaign of a presidential candidate, they may be
made prior to the date of the candidate's nomination, pursuant to 11
CFR 109.34. The Commission notes that to the extent coordinated
expenditures are in excess of the coordinated party expenditure
limitation at 11 CFR 109.32(a), they may be attributable to a
presidential primary candidate's expenditure limitations based on the
``bright line'' rules at 11 CFR 9034.4(e) for attributing expenditures
between the primary and general election spending limitations. For
example, party coordinated communications broadcast prior to the date
of the candidate's nomination may count against the presidential
candidate's primary expenditure limitations. See 11 CFR 9034.4(e)(6).
The Commission seeks comment on whether this is an appropriate
conclusion.
The Commission is not specifically listing in the proposed rule the
dissemination, distribution or republication of campaign material
prepared by a candidate, which is governed by 11 CFR 109.23. Section
109.23(a) provides that the candidate who prepared the campaign
materials does not receive or accept an in-kind contribution, and need
not report an expenditure, unless the dissemination, distribution, or
republication of campaign materials is a coordinated communication
under 11 CFR 109.21 or a party coordinated communication under 11 CFR
109.37. Thus, the cost of such campaign materials would not count
against the candidate's expenditure limitations unless the candidate
receives or accepts them as in-kind contributions in the form of
coordinated communications or party coordinated communications. Since
the proposed rules in 11 CFR 9035.1(a)(3) would specifically include
received or accepted coordinated communications and party coordinated
communications, a reference to the republication of campaign materials
is unnecessary.
The Commission also notes that 11 CFR 109.32(a)(4) provides that
any coordinated party expenditures made under section 109.32(a), which
specifies the limitations for coordinated party expenditures in
presidential elections, shall not count against the candidate's
expenditure limitations; however, any coordinated expenditures by a
political party in excess of the limitations at section 109.32(a) would
count against the candidate's expenditure limitations. Thus, the
proposed rule in 11 CFR 9035.1(a)(3) would not adversely affect the
coordinated party expenditure limitations at 2 U.S.C. 441a(d)(2)
because the proposed rule would only apply to amounts in excess of
those limitations. The Commission seeks comment on whether this is an
appropriate approach.
2. Revisions to 11 CFR 9038.2
The Commission also proposes to amend 11 CFR 9038.2(b)(2)(ii)(A) to
clarify that repayment determinations for candidates who exceed the
expenditure limitations will be based on expenditures made by a
candidate, the candidate's authorized committees, or agents, either
directly by disbursing campaign funds for expenditures, or indirectly
by receiving or accepting in-kind contributions that are subject to the
expenditure limitations pursuant to 11 CFR 9035.1(a)(3). The wording
``receive or accept'' in this section and in proposed section
9035.1(a)(3) is consistent with the terminology used in 11 CFR
109.21(b)(2), 11 CFR 109.23(a) and 11 CFR 109.37(a)(3) to ensure that
any coordinated expenditures or republished campaign materials that are
not considered ``received or accepted'' by a candidate would not count
against the expenditure limitations or be subject to repayment.
B. In-Kind Contributions in the Repayment Ratio (11 CFR
9038.2(b)(2)(iii))
A related issue is the calculation of the repayment ratio. The
current regulations at 11 CFR 9038.2(b)(2)(iii) provide for a ratio
repayment of amounts used for nonqualified campaign expenses, which
includes expenditures in excess of the spending limitations. See 11 CFR
9038.2(b)(2)(ii)(A). Paragraph (b)(2)(iii) currently states that the
amount of a repayment shall bear the same ratio to the total amount
determined to have been used for non-qualified campaign expenses as the
amount of matching funds certified to the candidate bears to the
candidate's total deposits, as of 90 days after the candidate's date of
ineligibility. ``Total deposits'' is defined
[[Page 18494]]
as all deposits to all candidate accounts minus transfers between
accounts, refunds, rebates, reimbursements, checks returned for
insufficient funds, proceeds of loans and other similar amounts. 11 CFR
9038.3(c)(2). However, the current rules do not specifically include
the value of in-kind contributions received or accepted in the
calculation of the repayment ratio. Including in-kind contributions
received or accepted in the calculation of the repayment ratio would
reduce the resulting ratio to more accurately reflect the amount of
public funds that are spent in excess of the expenditure limitations or
used for other non-qualified campaign expenses.
The Commission proposes to revise 11 CFR 9038.2(b)(2)(iii) to
include both total deposits and in-kind contributions received or
accepted by the candidate or the candidate's authorized committee or
agents in the calculation of the repayment ratio for non-qualified
campaign expenses. In-kind contributions would be valued at the usual
and normal charge for the goods and services provided to the candidate.
The Commission requests comment on this proposed change.
C. Parallel Changes to General Election Rules (11 CFR 9004.4(b)(2) and
9007.2(b)(2))
The Commission is considering certain parallel changes to the rules
governing the expenditure limitations and repayments for general
election committees at 11 CFR 9004.4(b)(2) and 9007.2(b)(2), but is not
including specific changes in the proposed rules at this time. The
Commission notes that expenditures in excess of the coordinated party
expenditure limitations at 2 U.S.C. 441a(d) and 11 CFR 109.32(a) may be
in connection with the general election and attributable to a
candidate's general election expenditure limitation under the ``bright
line'' rules at 11 CFR 9034.4(e). The Commission also notes that
general election candidates who receive the full public grant may not
accept any contributions, including in-kind contributions, and must
repay the entire amount of any in-kind contribution received. See 26
U.S.C. 9007(b)(3). The Commission seeks comment on whether changes
similar to those proposed for primary candidates would be appropriate
for general election candidates and on any other issues related to
including in-kind contributions in a general election candidate's total
expenditures.
III. GELAC Funds (11 CFR 9003.3(a))
A. Funds Remaining in the GELAC
The Commission proposes to revise its rules concerning the use of
GELAC funds to update the permissible uses of GELAC funds consistent
with BCRA. Currently, the rules at 11 CFR 9003.3(a)(2)(iv) state that
if there are ``excess campaign funds'' after payment of all expenses
set out in section 9003.3(a)(2)(i), such funds may be used for any
purpose permitted under 2 U.S.C. 439a and 11 CFR part 113, including
payment of primary election debts.
BCRA amended 2 U.S.C. 439a to eliminate its reference to ``excess
campaign funds.'' The Commission revised 11 CFR part 113 accordingly.
See Disclaimers, Fraudulent Solicitation, Civil Penalties, and Personal
Use of Campaign Funds, 67 FR 76962, 76978-79 (Dec. 13, 2002). The
Commission proposes to replace the reference to ``excess campaign
funds'' in 11 CFR 9003.3(a)(2)(iv) with ``funds remaining in the
GELAC'' in order to clarify that only funds that are not needed for
GELAC expenses may be used for the purposes permitted under 2 U.S.C.
439a and 11 CFR part 113.
The Commission also proposes revisions to 11 CFR 9003.3(a)(2)(iv)
to more clearly state that GELAC funds must be not be used for the
purposes permitted under 2 U.S.C. 439a and 11 CFR part 113 until the
completion of the audit and repayment process, which includes making
any repayments owed. The Commission requests comments on these proposed
changes.
B. Primary Repayments
The Commission is also considering whether candidates should be
required to use GELAC funds to make any repayments arising from their
primary campaigns, if the primary committee is unable to make the
repayment, before the remaining funds in the GELAC could be used for
the purposes permitted under 2 U.S.C. 439a and 11 CFR part 113.
Currently, GELAC funds may be used to make general election repayments.
11 CFR 9003.3(a)(2)(i)(D). Therefore, the Commission proposes revisions
to 11 CFR 9003.3(a)(2)(i)(D) to specify that the GELAC may make
repayments owed by the candidate's primary campaign committee pursuant
to 11 CFR 9038.2 and 9038.3. Under this proposal, if a candidate's
primary or general election committees do not have sufficient funds to
make a repayment, the GELAC funds must be used to make the repayment
before funds remaining in the GELAC may be used for the purposes
permitted under 2 U.S.C. 439a and 11 CFR part 113. However, the
proposed rule would not require that repayments must be made before
other permissible uses of GELAC funds under paragraphs (a)(2)(i)(A)
through (H). These proposed amendments to the GELAC rules are based on
the Commission's interpretation of 2 U.S.C. 439a(a)(1), which permits
contributions to be used ``for otherwise authorized expenditures in
connection with the campaign for Federal office of the candidate or
individual.'' This provision is sufficiently broad to encompass both
primary repayments and the other limited purposes specified in 11 CFR
9003.3(a)(2)(i).
C. Solicitation of GELAC Funds
The Commission is also considering whether to revisit its rules
regarding the solicitation and deposit of GELAC contributions prior to
June 1 of the calendar year in which a presidential general election is
held. The Commission is considering changing the June 1 date to an
earlier date or abolishing the June 1 restriction. Under current 11 CFR
9003.3(a)(1)(i), prior to June 1 of the presidential election year,
contributions may only be deposited in a GELAC if they are made for the
primary election, exceed the contributor's contribution limit for the
primary and are redesignated by the contributor for the GELAC pursuant
to 11 CFR 110.1. In addition, contributions shall not be solicited for
the GELAC before June 1 of the calendar year in which a presidential
general election is held. 11 CFR 9003.3(a)(1)(i)(A). As a result of
this regulation, although candidates are permitted to establish GELAC
accounts at any time, they are barred from soliciting or accepting any
direct contributions to the GELAC until five months before the general
election.
The Commission revised this section in 1999 to establish the June 1
time limit. See Explanation and Justification to the Rules Governing
Public Financing of Presidential Primary and General Election
Candidates, 64 FR 49355, 49356-57 (Sept. 13, 1999). In the 1999
rulemaking, the Commission considered changes to ``address problems
that have arisen when primary candidates established GELACs relatively
early in the primary campaign but subsequently failed to win their
party's nomination.'' Id. at 49356. One problem was that candidates who
do not receive their party's nomination must refund contributions
received by the GELAC, but difficulties arose if GELAC funds had been
used to defray overhead or GELAC fundraising expenses. Id. Another
problem was ensuring that the GELAC is not improperly used to make
[[Page 18495]]
primary election expenditures. Id. After considering several
alternative approaches, the Commission decided to continue to permit
GELACs to be established at any time but added the June 1 starting date
for deposits other than excessive primary contributions and
solicitations of contributions to the GELAC. Id. The Commission
explained that it selected the June 1 date because ``barring unforeseen
circumstances, this is the point when a party's prospective nominee can
be reasonably assured that he or she will need to raise funds for a
GELAC'' and the date gives prospective nominees ``sufficient time to
raise the funds that will be needed.'' Id. The effective date of these
regulatory amendments was June 1, 2000, which meant that the pre-June 1
solicitation prohibition was not operative for the 2000 election cycle.
The Commission seeks comment on whether it should delete this
restriction or continue to use June 1 of the presidential election year
as the starting date for GELAC solicitations and most deposits to a
GELAC. Would an earlier date in the election year such as May 1 or
April 1 be preferable, given that many presidential primaries have been
moved to earlier dates? Should an earlier date be used for presidential
candidates who run unopposed in the primaries or who have a reasonable
certainty prior to June 1 of the election year that they will become
their party's nominee? Should the starting date be eliminated? Are
these restrictions required by, or consistent with, the FECA and the
Fund Act?
D. Redesignation of Excessive Contributions and GELACs
In addition, the Commission proposes to revise the rules at 11 CFR
9003.3(a)(1) governing the sources of GELAC funds to reflect the
Commission's recent changes to its rules at 11 CFR 110.1(b)(5)(ii)(B)
concerning the redesignation of excessive contributions. See
Explanation and Justification for the Rules Governing Contribution
Limitations and Prohibitions, 67 FR 69928, 69930-32 (Nov. 19, 2002).
The Commission revised 11 CFR 110.1(a)(5)(ii)(B) to allow authorized
committees to redesignate primary contributions that would otherwise be
excessive to the general election without obtaining a signed written
document under certain circumstances. Id. at 69930. Specifically, the
Commission simplified the redesignation of certain excessive
contributions to a candidate's authorized committee made before a
primary election, but not designated in writing for a particular
election. Id. The Commission allowed the candidate's committee to
presume that the contributor of such excessive contributions intended
to contribute any excessive amount to that candidate's general
election, without obtaining written permission from the contributor for
the redesignation. Id. The Commission set forth several requirements
for a committee to designate contributions by this presumption,
including that the candidate's committee must be permitted to accept
general election contributions. Id. The Commission explained that ``if
a presidential candidate's authorized committee accepts public funding
in the general election, the presumption is available to any such
committees only to the extent they are permitted to accept
contributions to a general election legal and accounting compliance
fund.'' Id. at 69930-31.
Thus, 11 CFR 110.1(b)(5)(ii)(B) now allows the treasurer of the
recipient candidate committee to treat all or part of an excessive
primary contribution as made with respect to the general election, as
long as it meets the following requirements: (1) The contribution was
made before the primary election; (2) the contribution was not
designated for a particular election; (3) the contribution would exceed
the primary election contribution limitations if it were treated as a
primary contribution; (4) the redesignation would not cause the
contributor to exceed the contribution limitations; and (5) the
treasurer provides a written notification to the contributor within 60
days of receipt of the contribution of the amount that was redesignated
and that the contributor may request a refund.
Therefore, the Commission proposes to revise 11 CFR
9003.3(a)(1)(i), (a)(1)(i)(C) and (a)(1)(v) to permit publicly funded
presidential candidates to presume that excessive contributors to
primary campaigns would consent to the redesignation of their
contributions to the candidate's GELAC. The proposed changes provide
that excessive contributions may be placed in the GELAC if they are
lawfully redesignated for the GELAC pursuant to 11 CFR 110.1. The rule
at 11 CFR 9003.3(a)(1)(i)(C) would provide that a contribution that
meets the requirements of 11 CFR 110.1(b)(5)(ii)(B) would be considered
designated for the GELAC. The proposed reference to 11 CFR
110.1(b)(5)(ii)(B) would incorporate the requirements of that section.
The Commission notes that presumptively redesignated contributions to
the GELAC, like all other contributions accepted for the GELAC, must be
refunded within 60 days of a candidate's DOI if the candidate does not
become the nominee. See 11 CFR 9003.3(a)(1)(i)(A). The recordkeeping
requirements in 11 CFR 110.1(l) are separately addressed in section
9003.3(a)(1)(ii)(A)(4).
A related proposal, which is not included in the proposed rules
that follow, would be to revise 11 CFR 9003.3 to expressly allow
excessive contributions to a GELAC to be presumptively redesignated to
a presidential candidate's authorized committee for the primary
election, based on the conditions delineated at 11 CFR
110.1(b)(5)(ii)(C) for redesignation of excessive general contributions
to a candidate's primary election. The Commission's rules at 11 CFR
110.1(b)(5)(ii)(C), like the rule for presumptive redesignations for a
general election, allow authorized committees to redesignate general
election contributions that would otherwise be excessive for the
primary election without obtaining a signed written document under
certain circumstances. See 67 FR 69931. Such presumptively redesignated
contributions would be included in the calculation of a presidential
primary candidate's NOCO but could not be submitted for matching
because they are redesignated for a different election and the
contributor lacked the donative intent to influence the primary
election. See 11 CFR 9034.3(e) and (k).
The Commission seeks comment on these proposals. Should a different
rule apply for redesignation of excessive contributions to or from a
GELAC than for redesignations to or from the general election of
candidates who do not accept public funds? Should such presumptive
redesignations be subject to additional restrictions than those
delineated at 11 CFR 110.1(b)(5)(ii)?
IV. Other Presidential Candidate Issues
A. Quarterly and Monthly Reporting Requirements (11 CFR 104.5(b)(2))
The Commission made a number of changes to its rules governing
reporting when implementing BCRA's new reporting requirements.
Explanation and Justification for the Rules Governing Bipartisan
Campaign Reform Act of 2002 Reporting, 68 FR 404 (Jan. 3, 2003). One of
these changes was revising 11 CFR 104.5(a) to set forth a new reporting
schedule for principal campaign committees of House of Representatives
and Senate candidates following BCRA's requirements that such
candidates must file quarterly
[[Page 18496]]
reports in non-election years. Id. at 408 and 418. BCRA did not change
the reporting schedule for the principal campaign committees or other
authorized committees of presidential candidates; thus, 11 CFR
104.5(b)(2) was not changed. Id. Currently, principal campaign
committees of presidential candidates may file campaign reports in non-
election years on either a monthly or a quarterly basis. 2 U.S.C.
434(a)(3)(B); 11 CFR 104.5(b)(2) and 9006.2. However, the current rules
do not explain how presidential candidates may change their reporting
frequency during a non-election year from monthly to quarterly or vice
versa. The rules governing unauthorized committees at 11 CFR 104.5(c)
set forth requirements for such committees to change their reporting
frequency, such as notifying the Commission of the change. The
Commission is considering similar requirements for principal campaign
committees of presidential candidates.
The Commission proposes to revise the rules at section 104.5(b)(2)
to allow a principal campaign committee (``PCC'') of a presidential
candidate to change its filing schedule in a non-election year only
after notifying the Commission in writing of its intention at the time
it files a required report under its current filing frequency. The PCC
would then be required to file the next required report under its new
filing frequency. In addition, a PCC could change its filing frequency
no more than once in a calendar year. This approach is consistent with
the requirements for unauthorized committees at 11 CFR 104.5(c). The
Commission notes that presidential PCCs are not permitted to change
their filing frequency during election years under 2 U.S.C.
434(a)(3)(A), except that a PCC that files quarterly reports shall
begin filing monthly reports at the next reporting period after it
receives contributions or makes expenditures in excess of $100,000. The
Commission requests comments on this proposal.
B. Election Cycle Reporting--Matching Fund Submissions (11 CFR
9036.1(b)(1)(ii) and 9036.2(b)(1)(v))
In 2000, the Commission revised its rules at 11 CFR 104.3 to
require authorized committees to aggregate, itemize, and report all
receipts and disbursements on an election-cycle basis rather than on a
calendar-year-to-date basis. 65 FR 42619 (July 11, 2000). The new
rules, which reflect a 1999 amendment to 2 U.S.C. 434(b) (Pub. L. No.
106-58, 641, 113 Stat. 430, 477 (1999)), apply to reporting periods
beginning on or after January 1, 2001. 65 FR 70644 (Nov. 27, 2000).
Under these regulations, an election cycle begins on the first day
after the date of the previous general election for the office the
candidate seeks and ends on the date of the next general election for
that office. The election cycle is thus four years for presidential
candidates.
The Commission's rules regarding threshold submissions for matching
funds currently require candidates to submit a contributor list
including occupation and name of employer information for contributions
from individuals aggregating in excess of $200 per calendar year. 11
CFR 9036.1(b)(1)(ii). Similarly, the rules for subsequent submissions
at 11 CFR 9036.2(b)(1)(v) provide that the occupation and employer
information need not be disclosed on the contributor list for
contributions made by individuals aggregating in excess of $200 per
calendar year, but such information is subject to the recordkeeping and
reporting requirements. The Commission is proposing to revise 11 CFR
9036.1(b)(1)(ii) and 9036.2(b)(1)(v) to specify that the matching fund
submission and recordkeeping requirements include occupation and
employer information for those individuals who contribute more than
$200 in an election cycle, rather than in a calendar year, to reflect
the statutory change.
C. Billing the Press for the Costs of Reconfiguring an Aircraft (11 CFR
9004.6(a)(3) and 9034.6(a)(3))
The Commission's rules at 11 CFR 9004.6 and 9034.6 establish
procedures for authorized committees to obtain reimbursement for
transportation and other services that are provided to the media and
the Secret Service over the course of a campaign. The current rules
contain a non-exhaustive listing of such services, and state at 11 CFR
9004.6(a)(3) and 9034.6(a)(3) that presidential campaign committees may
seek reimbursement from the media only for the billable items specified
in the White House Press Corps Travel Policies and Procedures issued by
the White House Travel Office, in conjunction with the White House
Correspondents' Association [``White House Manual'']. The reference to
the White House Manual has been in the rule since 1999. See Explanation
and Justification for the Rules Governing Party Committee Coordinated
Expenditures; Costs of Media Travel with Publicly Financed Presidential
Candidates, 64 FR 42579, 42581-82 (Aug. 5, 1999). Expenses for which a
committee receives no reimbursement are considered qualified campaign
expenses, and, with the exception of those expenses relating to Secret
Service personnel and national security staff, are subject to the
overall expenditure limitation. 11 CFR 9004.6(a)(2) and 9034.6(a)(2).
In the 1996 campaign, some committees incurred significant expenses
to reconfigure campaign aircraft. The expenses included both interior
work, such as equipment installation, and exterior work such as
campaign logos. However, these expenses were not included in the White
House Manual for 1996, which was not changed in 2000. The Commission is
accordingly seeking comment on whether it is appropriate for campaign
committees to obtain reimbursement for all or part of aircraft
reconfiguration expenses from the media, and whether the rules should
be revised accordingly. If so, which of these expenditures should be
billed to the press? Are there other specific expenditures not included
in the White House Manual for which reimbursement might also be
appropriate? Given that the numbers of members of the press on each
flight, or segment of each flight, will likely vary, comments are
sought on the feasibility of determining the pro rata share for each
person, where the reconfigured plane will make numerous flights, and
that precise number is not known in advance. More broadly, the
Commission seeks comment on whether the ability of committees to seek
reimbursement from the media should be governed solely by what billable
items are specified in the White House Manual, as current 11 CFR
9004.6(a)(3) and 9034.4(a)(3) require, or whether the Commission should
consider other criteria, or enumerate the criteria in the regulations,
or both. Please note that the draft rules that follow do not contain
specific changes to 11 CFR 9004.6 or 9034.6.
D. Candidate Salary (11 CFR 9004.4(b)(6), 9034.4(b)(5))
The Commission recently revised its rules governing personal use of
campaign funds at 11 CFR part 113 to implement BCRA's changes to 2
U.S.C. 439a. In that rulemaking, the Commission addressed the use of
contributions to pay salaries to candidates and decided to allow
campaign funds to be used for candidate salaries, including privately
funded presidential candidates, under certain conditions delineated at
11 CFR 113.1(g)(1)(i)(I). See Explanation and Justification for the
Rules Governing Disclaimers, Fraudulent Solicitation, Civil Penalties,
and Personal Use of
[[Page 18497]]
Campaign Funds, 67 FR 76962, 76971-73 (Dec. 13, 2002). The Explanation
and Justification for 11 CFR 113.1(g) stated that a salary payment to a
candidate from campaign funds would be considered personal use if the
salary payment is ``in excess of the salary paid to a Federal
officeholder--U.S. House, U.S. Senate, or the Presidency.'' Id. The new
rules, however, do not specifically state whether or not publicly
funded presidential candidates may receive salaries from their
campaigns. The Commission noted that a candidate's salary is a non-
qualified campaign expense under 11 CFR 9004.4(b) and 9034.4(b), see
also 11 CFR 9002.11 and 9032.9. Id. at 76972.
Currently, the rules at 11 CFR 9004.4(b)(6) and 9034.4(b)(5) state
that payments made to a candidate by the candidate's committee, other
than to reimburse funds advanced by the candidate, are non-qualified
campaign expenses. In promulgating these rules in 1987, the Commission
explained that ``no payments may be made to the candidate from accounts
containing public funds'' except for reimbursements, and candidates
``may not receive a salary for services performed for the campaign nor
may a candidate receive compensation for lost income while
campaigning.'' See Explanation and Justification for the Rules on
Public Financing of Presidential Primary and General Election
Candidates, 52 FR 20864, 20866 and 20870 (June 3, 1987).
The Commission is considering whether to revise its rules to allow
publicly funded general election and primary presidential candidates to
receive salary payments paid for, in whole or part, with public funds.
Thus, salary payments to candidates would be considered qualified
campaign expenses. The Commission is considering allowing salary
payments to be paid to publicly funded candidates under similar
conditions to those for salary payments to other Federal candidates at
11 CFR 113.1(g)(1)(i)(I). Thus, the candidate's publicly funded
principal campaign committee would be permitted to make salary payments
to the candidate. Salary payments to publicly funded candidates would
be permissible beginning on January 1 of the calendar year prior to the
presidential election year or the filing of the candidate's statement
of candidacy, whichever is later. This earlier starting date than the
time restrictions for other Federal candidates would recognize that the
presidential primary campaign begins before the presidential election
year. Salary payments paid by the candidate's primary committee would
be permitted through the candidate's date of ineligibility and salary
payments from a candidate's general election committee would begin on
the date of nomination and end on the date of the general election.
Only non-incumbent presidential candidates who are not currently
Federal officeholders would be able to receive a salary paid with
public funds.
Candidates who hold office in a State would be able to receive
salary payments only to the extent they are permitted to do so under
the laws of that State. Salary payments would be limited to the lesser
of the annual salary paid to the President or the earned income that
the candidate received during the year prior to becoming a candidate.
Any earned income the candidate would receive from salaries or wages
from any other source would count against the salary limitation. In
addition, the candidate would be required to provide income tax records
for the relevant year and other evidence of earned income upon request
by the Commission. Finally, salary payments could be made only on a pro
rata basis.
The Commission seeks comment on this approach, but no specific
provision is proposed in the draft rules that follow. Should candidate
salary be considered a qualified campaign expense payable with public
funds or should candidate salaries for publicly funded candidates
continue to be considered non-qualified campaign expenses? Would
candidates avail themselves of a salary paid with public funds? Would
the proposed change encourage candidates of modest means who depend on
their earned income to run for the Presidency? Is this an appropriate
use for public funds, and is there a potential for abuse? Should any
additional restrictions on candidate salaries apply to publicly funded
candidates?
Should payments of salary to candidates who receive public funds be
prohibited so that in addition to the committee being required to repay
the public funds involved, the candidate would violate 2 U.S.C. 439a by
accepting the salary payments? Should the candidate and committee
agreements described in 11 CFR 9003.1 and 9033.1 contain a provision
agreeing that no salary would be paid to the candidate?
E. Gifts and Bonuses (11 CFR 9004.4(a)(5) and 9034.4(a)(5))
The Commission is considering revisiting its rules governing
payment of gifts and bonuses by primary and general election candidates
at current 11 CFR 9004.4(a)(5) and 9034.4(a)(5). The current rules
allow gifts and bonuses to be treated as qualified campaign expenses if
they meet certain restrictions. Gifts for committee employees,
consultants and volunteers in recognition of campaign-related
activities or services are limited to $150 per individual recipient and
a total of $20,000 for all gifts. 11 CFR 9004.4(a)(5) and 9034.4(a)(5).
Monetary bonuses for employees and consultants in recognition for
campaign-related activities or services must be provided for pursuant
to a written contract made prior to the general election for general
election candidates or the DOI for primary candidates and must be paid
no later than 30 days after the DOI for primary candidates or the end
of the expenditure report period for general election candidates. Id.
The Commission has not proposed any changes to these rules in the
draft rules that follow, but seeks comment on the current rules. Should
the Commission maintain its current rules on gifts and bonuses? Should
the current restrictions on gifts and bonuses be strengthened, reduced,
or eliminated? Should the permissible dollar amounts for gifts to
individuals or the total amounts of gifts be lowered, or raised? Should
the requirement of a written contract be clarified to delineate what
constitutes an acceptable written agreement? Is the requirement of a
written contract for monetary bonuses too restrictive, since written
contracts are not required for salary payments? Should additional
restrictions be added, such as limiting the amount of bonuses or
requiring committees to provide other documentation of the reasons for
the bonus such as the type and amount of work performed? What
additional, or different, controls should be used for gifts and
bonuses? Should candidates be required to sign any contracts that
include employment bonus provisions? This would ensure that high-level
campaign officials do not engage in self-dealing. If the current
restrictions are deleted from the rules, how should the Commission
ensure that gifts and bonuses comply with the restrictions on personal
use of campaign funds at 2 U.S.C. 439a and 11 CFR part 113?
In addition, should changes also be made to current 11 CFR
9008.7(a)(4)(xii) to make the rule for convention committees more
similar to the rules for candidates by including the same requirements
for bonuses? Currently 11 CFR 9008.7(a)(4)(xii) limits all gifts and
monetary bonuses to national committee or convention committee
employees, volunteers and convention officials to $150 per individual
or a total of $20,000 for all gifts.
[[Page 18498]]
F. Shortfall Exemption (11 CFR 9035.1(c))
During recent election cycles, the Presidential Primary Matching
Payment Account has occasionally experienced a shortfall in that it
contained insufficient funds to fully pay all of the matching funds to
which primary candidates were entitled on the dates payments were due.
See 26 U.S.C. 9037; 11 CFR 9036.4(c)(2), 9037.1, 9037.2. The delay or
deficiency in matching fund payments has resulted in inconvenience and
additional costs for candidates such as the costs of obtaining bridge
loans from banks to pay for their expenses until they received their
full entitlement of matching funds several months later. Such expenses
currently count against a candidate's overall expenditure limitation,
reducing the amount the candidate may spend on other campaign
activities.
In order to mitigate the effect of a potential shortfall on
candidates, the Commission proposes a new ``shortfall exemption'' from
a primary candidate's overall expenditure limitation at new paragraph
11 CFR 9035.1(c)(3). This new exemption would equal 5% of the amount of
any delayed or deficient payment of matching funds to which the
candidate is entitled.
The Commission seeks comment on this proposal. To what extent would
the proposed exemption ameliorate the negative impact of delayed or
deficient payments of matching funds on a primary candidate's campaign?
Should a different percentage be used? Would this exemption be workable
for candidates? Is this exemption a permissible interpretation of the
statutory spending limit?
G. Expenditures by a Multicandidate Political Committee for Qualified
Campaign Expenses of a Candidate (Proposed 11 CFR 110.2(l) and 9034.10)
In December 2002, the Commission published an NPRM entitled
``Leadership PACs'' seeking comment on its proposal to promulgate new
regulations addressing this specific type of multicandidate political
committee. The Commission conducted a public hearing on February 26,
2003, to discuss the NPRM. During the public hearing, the issue of
leadership PACs paying for qualified campaign expenses of potential
Presidential candidates during the ``testing the waters'' stage was
raised and discussed. Because this issue implicates the regulations
addressing Presidential campaigns and elections, the Commission has
decided to seek comment on the relationship, if any, between
multicandidate political committees and Presidential candidates in this
NPRM. The Commission is continuing to review the Leadership PACs NPRM
as it applies outside Presidential campaigns and elections, and the
comments received in connection with the NPRM, and the Commission
intends to conclude that rulemaking at a later date.
The proposed rules herein would create a new paragraph in 11 CFR
110.2 and a new section in 11 CFR part 9034 that would address the
payment by a multicandidate political committee of a qualified campaign
expense of a Presidential candidate. Proposed section 110.2(l) would
apply to candidates who are not accepting public funding from the
Presidential Election Campaign Fund for the primary or general
election. Proposed 11 CFR 9034.10 would apply to Presidential
candidates who are accepting public funding for the primary election.
Because Presidential candidates who accept public funding for the
general election may not accept contributions from multicandidate
political committees, the proposed rules would not include a parallel
provision in 11 CFR subchapter E.
1. Scope of the Proposed Rules
Proposed 11 CFR 110.2(l) and 9034.10 would be applicable to all
multicandidate political committees, not just those commonly known as
Leadership PACs. The rationale for this approach is that leadership
PACs are not defined or specifically addressed in FECA or in the
current Commission regulations. Rather, leadership PACs are formed as
multicandidate political committees that are defined and addressed in
FECA and current Commission regulations. In the Commission's
experience, other types of multicandidate political committees do not
make expenditures for qualified campaign expenses of potential
Presidential candidates. Thus, including all multicandidate political
committees within the proposed rules would not have unintended
consequences of encompassing other types of activity.
Nevertheless, the Commission seeks comment on whether the proposed
rules should be limited to leadership PACs. If the Commission were to
adopt such an approach, it would also become necessary for the
Commission to adopt a definition for ``leadership PACs.'' Consequently,
the Commission seeks comment as to what that definition should be.
2. Definition of ``Qualified Campaign Expense''
Proposed 11 CFR 9034.10(a) would include a definition of
``qualified campaign expense'' that would vary from the current
definition in 11 CFR 9032.9 but would limit the scope of the proposed
definition to proposed 11 CFR 9034.10. The definition in proposed
paragraph (a) would adopt language similar to that of 11 CFR 9032.9(a)
but would not include the timing element of section 9032.9(a)(1). The
timing element of current section 9032.9(a)(1), which limits qualified
campaign expenses to expenses incurred between the date a person
becomes a candidate and the last day of the candidate's eligibility,
should not be applied here because a major goal of the proposed rules
is to treat qualified campaign expenses that are paid by multi-
candidate committees as in-kind contributions to Presidential
candidates whenever such qualified campaign expenses are incurred, even
if they are incurred prior to the date a person becomes a candidate.
Additionally, the proposed definition would not include the
provisions in section 9032.9(a)(3) requiring that a qualified campaign
expense comply with all Federal, state, and local laws. The purpose of
this provision in section 9032.9(a)(3) is to prevent the authorized
committees from paying for items such as parking tickets. Because the
purpose of proposed section 9034.10 is to treat the payment of
qualified campaign expenses of a Presidential candidate by
multicandidate political committees as in-kind contributions, it would
be inconsistent with this purpose to exclude these items.
Proposed 11 CFR 9034.10(a)(1) and (2) would be the operative
definition of ``qualified campaign expense'' as it would be applied to
proposed 11 CFR 110.2(l) and 9034.10. Under the proposed definition,
``qualified campaign expense'' would mean purchase, payment, etc, that
is incurred by, on behalf of, or for the benefit of a candidate or the
candidate's authorized committee and is made in connection with that
candidate's campaign for nomination. Proposed paragraph (a)(3) would
provide a non-exhaustive list of examples of expenses that would be
considered as a qualified campaign expense, such as polling expenses,
staff salary, travel, and office space expenses. The Commission seeks
comment on whether polling expenses in proposed paragraph (a)(3)(i)
should be limited to polls that reference a Presidential candidate. The
Commission notes that none of the foregoing expenses would be qualified
campaign expenses under
[[Page 18499]]
the proposed rule unless they were made in connection with a
Presidential candidate's campaign for nomination. The Commission seeks
comment on whether more specific examples of qualified campaign
expenses should be provided and whether there are other expenses that
should be included in proposed paragraph (a)(3). The Commission also
seeks comments on whether it should use a terminology other than
``qualified campaign expenses'' in this proposed section to avoid
confusion with the current definition of ``qualified campaign
expenses.''
3. Qualified Campaign Expenses as In-Kind Contributions
The NPRM would set forth the consequences of a multicandidate
committee paying for qualified campaign expenses for a Presidential
candidate in proposed 11 CFR 9034.10(b)(1) through (4). The
introductory language of proposed paragraph (b) would limit the ``look
back'' period of the proposed rules to January 1 of the year
immediately following the last Presidential election year. Thus, if an
expenditure made by a multi-candidate committee for a qualified
campaign expense were made prior to that date, it would not be subject
to the provisions of proposed section 9034.10. The Commission seeks
comments on whether the ``look back'' period should start at a
different date, such as the day after the last Presidential election or
some other date. Additionally, the proposed rule would only apply to
qualified campaign expenses paid by multi-candidate committees for
individuals who actually become Presidential candidates.
Under the proposed rule, an expenditure by a multicandidate
political committee for a qualified campaign expense of a Presidential
candidate would have four effects. First, the expenditure would be
deemed as an in-kind contribution from the multicandidate political
committee to the Presidential candidate under proposed 11 CFR
9034.10(b)(1). Second, proposed paragraph (b)(2) would subject the
expenditure/contribution to the contribution limitations for
multicandidate political committees to Presidential candidates, i.e.
$5000 per election. Third, under proposed paragraph (b)(3), the
expenditure would count towards the expenditure limitations for
Presidential candidates accepting public funding under 11 CFR part
9035. Finally, proposed paragraph (b)(4) would subject the expenditure
to the audit provision of 11 CFR 9038.1. The proposed rules would also
amend current 11 CFR 9038.1(a)(2) to make clear that multicandidate
political committees that make expenditures for qualified campaign
expenses would be subject to examinations and audits as deemed
necessary. The Commission seeks comments on whether changes to the
audit provision of 11 CFR 9038.1 is appropriate or necessary to
effectuate any new rule it may promulgate in this area. It is important
to note that, under this proposed rule, coordination would not be
relevant in determining that a multicandidate political committee has
made an in-kind contribution when it pays for a qualified campaign
expense of a Presidential candidate.
As stated above, proposed 11 CFR 9034.10(b)(2) would subject a
multicandidate political committee's expenditure for qualified campaign
expenses to the contribution limitations that apply to Presidential
campaign committees. Under proposed paragraph (c), any amount of the
expenditure that exceeds the contribution limit for multicandidate
political committees to Presidential candidate committees would be
deemed an excessive contribution and liability would attach to both the
multicandidate political committee for making the excessive
contribution and the authorized committee of the Presidential candidate
for accepting an excessive contribution. The Commission seeks comment
on whether the proposed rules should include a provision that would
allow the authorized committee to ``cure'' the excessive contribution
and, therefore, avoid liability. For instance, if the authorized
committee of the Presidential candidate reimburses the multicandidate
political committee for any expenditure for qualified campaign expenses
that exceed the contribution limit within thirty days of the date of
the person becoming a candidate, should these expenditures not be
considered as excessive contributions? The Commission seeks comment on
this approach or suggestions on alternative ways excessive
contributions may be ``cured.''
While proposed 11 CFR 9034.10 would apply to Presidential
candidates who accept public funding for their primary election
campaigns, the proposed rules would add a new paragraph (l) to current
section 110.2 that would apply to Presidential candidates who do not
accept any public funds. Proposed 11 CFR 110.2(l)(1) would incorporate
by reference the definition of ``qualified campaign expense'' in
proposed section 9034.10(a) for purposes of proposed paragraph (l).
Proposed paragraph (l)(2) would include the same ``look back'' period
as proposed section 9034.10(b).
Similar to proposed section 9034.10(b)(1) and (2), an expenditure
by a multicandidate political committee for a qualified campaign
expense of a Presidential candidate who is not receiving public funds
would be deemed to be an in-kind contribution from the multicandidate
political committee to the Presidential candidate and that contribution
would be subject to the relevant contribution limitations. Proposed 11
CFR 110.2(l)(1) and (2). Proposed section 110.2(l) would not have
provisions that parallel proposed section 9034.10(b)(3) and (4) because
Presidential candidates who do not receive public funding for their
campaigns are not subject to the expenditure limitations in 11 CFR part
9035 or the audit provisions of 11 CFR 9038.1. Proposed 11 CFR
110.2(l)(3) would include similar language as proposed section
9034.10(c) stating that expenditures exceeding the contribution limits
for multicandidate political committees to Presidential candidates
would be deemed as excessive contributions.
The Commission seeks comment on this proposal to treat expenditures
by multicandidate committees for qualified campaign expenses of
Presidential candidates as in-kind contributions. The Commission also
welcomes comments on the ramifications of such treatment as well as on
the issues raised above.
H. Technical Amendments
1. Word Omitted From 11 CFR 9038.2(b)(4)
Under 11 CFR 9038.2(b)(4), the Commission may determine that the
net income derived from an investment or other use of surplus public
funds after a candidate's DOI, less Federal, State and local taxes paid
on that income, shall be paid to the Federal Treasury. However, the
word ``taxes'' was inadvertently dropped from that paragraph and needs
to be included.
2. Correcting Citations in 11 CFR 104.5(b)(1)
The Commission proposes to correct several citations in 11 CFR
104.5(b)(1) to reflect changes to 11 CFR 104.5(a) promulgated in the
implementation of BCRA. Specifically, the Commission proposes in 11 CFR
104.5(b)(1)(i)(C) to change the reference to 11 CFR 104.5(a)(1)(i) to
``paragraph (a)(2)(i) of this section'' and to change the reference to
11 CFR 104.5(a)(1)(ii) to ``paragraph (a)(2)(ii) of this section.'' In
11 CFR 104.5(b)(1)(ii), the Commission proposes to change the reference
to 11
[[Page 18500]]
CFR 104.5(a)(1) to ``paragraphs (a)(1) and (2) of this section''.
3. Private Contributions Received After DOI (11 CFR 9034.4(a)(3)(ii))
The Commission proposes to revise 11 CFR 9034.4(a)(3)(ii) to
clarify the rules governing ineligible primary election presidential
candidates who continue to campaign after their dates of ineligibility.
Currently, paragraph (a)(3)(ii) provides that these candidates may use
contributions received after the DOI to campaign. However, current 11
CFR 9034.5(a)(2)(i) provides that a candidate's cash on hand on the
NOCO Statement should include ``all contributions dated on or before''
the DOI, whether or not submitted for matching. Thus, the current rules
do not make clear how contributions should be treated that are made or
dated before the DOI but received after the DOI by a candidate who
continues to campaign. The proposed rules would clarify that each
contribution made, dated, and received after a candidate's DOI may be
used to continue to campaign.
In addition, the Commission proposes to delete the next sentence in
section 9034.4(a)(3)(ii), which states: ``The candidate shall be
entitled to receive the same proportion of matching funds to defray net
outstanding campaign obligations as the candidate received before his
or her date of ineligibility.'' In practice, each submission for
matching funds is reviewed individually; thus, a candidate receives a
different proportion of matching funds for each submission. The
Commission proposes deleting the sentence to make clear that candidates
would continue to receive matching funds based on the Commission's
review of each matching fund submission, rather than on the proportion
of matching funds the candidate received for any previous submission.
4. Clarification of 11 CFR 9032.9(c)
Current 11 CFR 9032.9(c) states that expenditures incurred ``before
the beginning of the expenditure report period'' are qualified campaign
expenses if they meet the requirements of 11 CFR 9034.4(a), which
addresses, inter alia, testing the waters expenses prior to the date an
individual becomes a candidate. This wording is the same as the
equivalent rule for general election candidates at 11 CFR 9002.11(c),
and appears to be an error because the term ``expenditure report
period'' applies to general election candidates. See 11 CFR 9002.12. To
clarify this section, the Commission proposes changing this wording to
``prior to the date the individual becomes a candidate,'' the same
wording used in 11 CFR 9034.4(a)(2), governing testing the waters
expenses.
5. Documentation of Disbursements
The current rules describe the requirements for the documentation
of disbursements applicable to all committees in 11 CFR 102.9(b) and
provide additional documentation requirements for publicly funded
committees at 11 CFR 9003.5 (general election candidates), 9008.10
(convention committees) and 9033.11 (primary candidates). The
Commission proposes to revise 11 CFR 9003.5, 9008.10 and 9033.11 to
clarify that publicly funded candidates must comply with both the
general rules at section 102.9(b) and the particular rules applicable
to publicly funded primary or general election candidates governing the
documentation of disbursements. The proposed rules would add new
paragraphs 11 CFR 9003.5(b)(4) and 9033.11(b)(4) stating that the
requirements of section 102.9(b) also apply to disbursements, and would
revise the introductory language in section 9008.10 to state that the
requirements in that section are in addition to the requirements of 11
CFR 102.9(b). Adding these proposed references to 11 CFR 102.9(b) would
improve the ease of use of the rules for publicly funded committees.
National Nominating Conventions
The Commission is proposing a number of changes to its regulations
concerning national nominating conventions, 11 CFR part 9008. Some of
these proposed changes are necessary in order to give effect to BCRA's
ban on the use of non-Federal funds by national party committees. The
rest of the proposed changes are designed to clarify certain
requirements in light of the Commission's experience in administering
the public financing of national nominating conventions over the past
several presidential election cycles.
I. Current Legal Structure of Convention Financing
Under 26 U.S.C. 9008(b), the national committees of both major and
minor political parties are entitled to public funds to defray expenses
incurred in connection with a presidential nominating convention. Major
party committees receive an inflation-adjusted payment from the
Presidential Election Campaign Fund for their national nominating
conventions. 26 U.S.C. 9008(b)(1). Minor party committees receive a
proportional amount of that payment based on the number of votes the
party's candidate received in the last presidential election compared
to the average number of votes received by the major party candidates.
26 U.S.C. 9008(b)(2). For the 2004 conventions, the major party
committees will be entitled to receive $14,880,000 in July 2003 and an
additional payment in 2004 for an inflation adjustment, subject to all
applicable requirements.\2\ A national committee of a major or minor
party may not make expenditures related to the convention that exceed
the expenditure limitations, which are equal to the full amount of the
payment to major parties. 26 U.S.C. 9008(d). Thus, the major party
convention committees may not receive any contributions, as defined in
2 U.S.C. 431(8), that would count towards their expenditure limit if
they accepted the full payment. Any such contributions would combine
with the public funds to make total expenditures exceed the limit.
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\2\ In 2000, the Democratic and Republican National Committees
each received $13,512,000 for their national nominating convention,
while the Reform Party received $2,522,690. No candidate received a
sufficient number of votes in the 2000 presidential general election
to provide his or her party with minor party status in 2004.
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In addition to the public funds provided to the national committees
of both major and minor political parties in connection with a
presidential nominating convention, ``host committees'' and ``municipal
funds'' may defray certain expenses incurred in connection with hosting
these conventions. A host committee is defined as any local
organization, such as a local civic association, business league,
chamber of commerce, real estate board, board of trade, or convention
bureau (1) which is not organized for profit; (2) whose net earnings do
not inure to the benefit of any private shareholder or individual; and
(3) whose principal objective is the encouragement of commerce in the
convention city, as well as the projection of a favorable image of the
city to convention attendees. 11 CFR 9008.52(a). Host committees may
provide the convention committees with certain services and facilities,
as specified in 11 CFR 9008.52(c). Any host committee expenditures that
comply with 11 CFR 9008.52 do not constitute convention committee
expenditures and do not count toward the convention committee's
expenditure limit. 11 CFR 9008.8(b)(1).
``Municipal fund'' is the term that has come to apply to local
government agencies and the separate funds or accounts established by
them to receive and disburse funds in order to defray
[[Page 18501]]
certain expenses for a convention in that locality. Municipal funds may
make expenditures for the same purposes as host committees. 11 CFR
9008.53. As with host committees, expenditures by a municipal fund that
are in compliance with 11 CFR 9008.53 do not constitute convention
committee expenditures and do not count toward the convention
committee's expenditure limit. 11 CFR 9008.8(b)(2).
Under current regulations, host committees and municipal funds are
allowed to accept monetary and in-kind donations from the same sources:
local businesses, including corporations; local banks; local labor
organizations; and local individuals. 11 CFR 9008.52 and 9008.53.
Municipal funds, however, face more limitations on their fundraising
than host committees. See 11 CFR 9008.53(b)(1)(i) and (ii). Municipal
funds may not accept donations ``restricted'' for use in connection
with a particular convention; they may not engage in fundraising
restricted to a particular convention; and they may not themselves be
restricted to a particular convention. 11 CFR 9008.53(b)(1)(i) and
(ii). Host committees are not subject to any of these limitations. Once
raised, funds received by a host committee or municipal fund may be
used for the same purposes. See 11 CFR 9008.52(c)(1) and 9008.53. If
the funds are raised and spent in compliance with 11 CFR 9008.52 or
9008.53, then they are exempt from the definition of ``contribution and
expenditure'' in the Commission's regulations concerning corporate and
labor organization funds, 11 CFR part 114. See 11 CFR
114.1(a)(2)(viii). On this basis, host committees and municipal funds
accept and spend such funds, which constitute non-Federal funds.
II. Historical Basis for Current Legal Structure
In 1977, the Commission explained the basis for permitting in-kind
contributions to host committees from corporations and labor
organizations, stating: ``Such in-kind contributions are presumably not
politically motivated but are undertaken chiefly to promote economic
activity and good will of the host city.'' Explanation and
Justification for 1977 Amendments to the Federal Election Campaign Act
of 1971, H.R. Doc. No. 95-44, 136 (1977). Similarly, donations of money
were described as ``presumably commercially motivated rather than
politically, and thus will not be considered an unlawful
contribution.'' Id. at 137. Host committee funds were ``to be used for
purposes designed to promote a good image of the host city to the
convention attendees.'' Id. at 136-37.
The Commission acknowledged that the host committee exception to
the convention committee's expenditure limit could be considered a
means of avoiding the expenditure limit. Id. at 137. The Commission
explained that ``it appears from the testimony of the major parties
before the Commission that the Congress in deciding upon a dollar
figure for expenditure limitations, took into consideration only those
expenses actually paid by the national party for the 1972 convention
and ignored in its computation the value of services provided by host
cities and committees.'' Id. The Commission described its regulation on
the use of funds by host committees as ``represent[ing] an
interpretation of 26 U.S.C. 9008(1) that the [expenditure] limit
applies only to expenditures made by the national party, and that
expenditures made by private host committees under certain restrictions
will not be counted toward the ceiling.'' Id. (emphasis in original).
In 1979, the Commission recodified some of its regulations,
including those related to corporate donations to host committees. The
Commission described again the basis for this exception to the
prohibition on corporate and labor organization funds in 2 U.S.C. 441b,
stating: ``While incorporated businesses are prohibited by 2 U.S.C.
441b from making contributions or expenditures in connection with a
Federal election, donations by such corporations to a host committee in
accordance with restrictions set forth in [11 CFR 9008.7(d) (1979)] are
sufficiently akin to commercial transactions to fall outside the scope
of that prohibition.'' Explanation and Justification of Presidential
Election Campaign Fund and Federal Financing of Presidential Nominating
Conventions, 44 FR 63036, 63038 (Nov. 1, 1979).
The basis for the municipal fund exception to the expenditure limit
was also discussed, and the Commission explained that the expenditure
limit would be ``unrealistically low'' if the value of ``certain
facilities and services'' provided by the city ``as part of an overall
package to attract the convention to that city'' counted toward the
convention committee's expenditure limit. Id. at 63037. With regard to
host committees, the Commission justified the restriction on who may
donate funds as ``necessary to insure that such donations are
commercially, rather than politically motivated.'' Id. at 63038.\3\ The
Commission also observed that ``Defrayal of convention expenses by a
host committee is intended to be a very narrow exception to the
statutory limitation on convention expenses.'' See id. at 63038. The
1979 document made the same point about the apparent Congressional
intent as presented in the 1977 Explanation and Justification. Id. at
63037.
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\3\ At that time, the amount of donations to host committees was
also limited. See 11 CFR 9008.7(d)(3)(ii) (1980).
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In 1994, the Commission again revised its regulations governing
publicly financed presidential nominating conventions. Incorporating
the conclusions reached in Advisory Opinions 1982-27 and 1983-29, the
Commission promulgated its municipal fund regulation, 11 CFR 9008.53.
Explanation and Justification of Presidential Election Campaign Fund
and Federal Financing of Presidential Nominating Conventions, 59 FR
33606, 33614 (June 29, 1994). Like donations to host committees, the
Commission explained that ``the new rules recognize that local
businesses and organizations that donate to municipal funds are
motivated by commercial and civic reasons, rather than election-
influencing purposes.'' Id. at 33615.
Five years later, in 1999, the Commission reiterated the presumed
motivation of donors to host committees and municipal funds. In lifting
the prohibition on bank donations to host committees, the Commission
agreed with the observation that ``local branches of national banks
have the same interest in promoting the city and supporting commerce''
as local corporations. Explanation and Justification for Public
Financing of Presidential Primary and General Election Candidates, 64
FR 49355, 49357 (Sept. 13, 1999).
III. Petition for Rulemaking
A petition for rulemaking jointly filed by three organizations
seeks the repeal or revision of the Commission's regulations that
permit host committees to accept corporate and labor organization funds
and to use these funds for expenses incurred in conducting a nominating
convention. The petition argues that the host committee regulation, 11
CFR 9008.52, and the exemption from the part 114 definition of
``contribution and expenditure'' of activity permitted by the host
committee regulation, 11 CFR 114.1(a)(2)(viii), are contrary to FECA
and BCRA. According to the petition, 2 U.S.C. 441b of FECA is violated
by the
[[Page 18502]]
cited regulations because corporations and labor organizations are
permitted to contribute funds and in-kind contributions in connection
with a nominating convention. Similarly, according to the petition, 2
U.S.C. 441i of BCRA is violated by 11 CFR 9008.52(c) because it allows
national party committees to receive in-kind contributions paid for
with corporate and labor organization funds. In support of its
position, the petition puts forth a statutory and regulatory analysis,
and it cites and attaches many articles from various media outlets that
purport to describe convention financing practices. The petition is
available on the Commission's website.
The petition's conclusion that the cited host committee regulations
violate FECA and BCRA obviously contradicts the Commission's treatment
of host committees since 1977. The proposed rules that follow are
consistent with the Commission's historical treatment of host
committees and do not reflect the position advanced by the petitioners.
Nonetheless, the Commission seeks comment on whether corporate or labor
organization donations to host committees under the conditions
prescribed in current 11 CFR 9008.52(c) are contrary to FECA or BCRA.
If the approach sought by the petition were adopted, the Commission
also seeks comment on whether the exemption from the convention
committee expenditure limit for host committee expenses, 11 CFR
9008.8(b)(1), should also be repealed. Similarly, the Commission also
seeks comment on whether corresponding changes would be required for
the municipal fund regulations, 11 CFR 9008.8(b)(2) and 9008.53.
IV. Application of BCRA's Non-Federal Funds Provisions to Convention
Committees, Host Committees and Municipal Funds
Under BCRA, ``[a] national committee of a political party * * * may
not solicit, receive, or direct to another person a contribution,
donation, or transfer of funds or any other thing of value, or spend
any funds, that are not subject to the limitations, prohibitions, and
reporting requirements of [FECA].'' 2 U.S.C. 441i(a)(1). BCRA also
prohibits officers and agents of the national party committees and
entities that are ``directly or indirectly established, financed,
maintained, or controlled'' by national party committees from
soliciting, receiving, directing, or spending such non-Federal funds. 2
U.S.C. 441i(a)(2); see also 11 CFR 300.10(c)(1) and 300.10(c)(2). BCRA
also prohibits Federal candidates and officeholders, their agents, and
entities directly or indirectly established, financed, maintained, or
controlled by or acting on behalf of one or more Federal candidate or
officeholder from soliciting, receiving, directing, transferring, or
spending non-Federal funds in connection with an election for Federal
office. 2 U.S.C. 441i(e)(1)(A); see also 11 CFR 300.61.\4\
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\4\ In connection with any election other than an election for
Federal office, BCRA also prohibits the same persons from
soliciting, receiving, directing, transferring, spending, or
disbursing funds in excess of the amounts permitted under 2 U.S.C.
441a(a) or funds from sources prohibited by FECA. 2 U.S.C.
441i(e)(1)(B).
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The Commission has promulgated rules implementing BCRA's new
restrictions and prohibitions on the receipt, solicitation, direction,
and use of certain types of non-Federal funds by political party
committees, candidates, and officeholders. See Explanation and
Justification for Prohibited and Excessive Contributions: Non-Federal
Funds or Soft Money, 67 FR 49064 (July 29, 2002) (hereinafter ``Non-
Federal Funds Final Rules''). In this rulemaking, the Commission
considers the impact of these new restrictions and prohibitions in BCRA
and the Non-Federal Funds Final Rules on national nominating
conventions. Specifically, the Commission considers the roles filled by
national political party committees, their convention committees, host
committees, and municipal funds, as well as the involvement of Federal
candidates and officeholders.
A. Are Host Committees and Municipal Funds ``Agents'' of National Party
Committees Under 2 U.S.C. 441i(a) and (e) and 11 CFR 300.2(b)?
One issue that arises from BCRA's ban on national parties
soliciting, receiving, directing, and using non-Federal funds is
whether host committees and municipal funds are ``agents'' of national
party committees. In the Non-Federal Funds Final Rules, the Commission
defined an ``agent,'' for purposes of 11 CFR part 300, as ``any person
who has actual authority, either express or implied * * * to solicit,
direct, or receive any contribution, donation, or transfer of funds''
on behalf of a national committee of a political party. 11 CFR
300.2(b). The Commission seeks comment on whether host committees and
municipal funds satisfy the definition of ``agents'' in 11 CFR 300.2(b)
with respect to the national political party committees or their
convention committees. If host committees and municipal funds are
``agents'' of national party committees, then they, like the national
party committees themselves, would be prohibited from soliciting,
receiving, directing, or spending non-Federal funds by operation of 2
U.S.C. 441i(a)(1) and (2) and 11 CFR 300.10(a) and (c)(1).
The Commission does not propose regulatory text that would presume
that host committees or municipal funds would necessarily qualify as
``agents'' of the national political parties. This approach, if
adopted, would not preclude the Commission from determining that in a
particular case a host committee or municipal fund does, in fact, meet
the definition of ``agent'' in 11 CFR 300.2(b) with respect to the
pertinent national party committee. The Commission also seeks comment
on whether host committees and municipal funds should be treated per se
as not agents of national party committees and, therefore, as not
subject as a matter of law to 2 U.S.C. 441i(a)(2) or 11 CFR
300.10(c)(1) as agents acting on behalf of a national party committee,
no matter how such host committees and municipal funds operate or
interact with the national party committees.
The Commission is also considering an alternative approach, whereby
host committees and municipal funds would be treated as per se agents
of national party committees. Such an approach would limit permissible
funds for a host committee or municipal fund to funds subject to FECA's
limitations, prohibitions, and reporting requirements, regardless of
how the host committees and municipal funds functioned and related to
the national party committees. If the Commission were to consider host
committees and municipal funds as per se agents of convention
committees, how should it restructure the rules relating to national
nominating conventions in 11 CFR part 9008? Would host committees or
municipal funds be Federal political committees? Would all their
transactions with convention committees amount to in-kind
contributions? If host committees and municipal funds are limited to
funds subject to FECA's limitations, prohibitions, and reporting
requirements, should any uses of such funds be exempt from the
convention committee's expenditure limit? The Commission recognizes
that host committees and municipal funds supplement the funds that are
otherwise capped by the expenditure limit and therefore removing the
exemption from the expenditure limit for host committees and municipal
funds would have a profound impact on convention financing. The
Commission seeks comment on whether such a result is mandated by BCRA.
[[Page 18503]]
The legislative debates of BCRA suggest that BCRA would entail
significant changes in convention financing. During the Senate's
consideration of BCRA, Senator Mitch McConnell said the bill ``will end
national party conventions as we have known them.'' 148 CR S2122 (daily
ed. Mar. 20, 2002). Senator McConnell went on to state that ``[t]he
soft money ban covers the committees that are created to host these
grand events'' and to say that post-BCRA conventions would have to be
put on with ``80 percent less funding.'' Id. Senator McConnell's
conclusion that passage of BCRA would mean: ``All the soft money that
you used to put on the convention the last time is now gone.'' Id.
Senator Fred Thompson earlier that day described ``the nature of the
problem'' addressed by BCRA and noted in regard to what he called the
``big outfits'' that donate non-Federal funds ``the same entities pick
up our expenses for the convention.'' 148 CR S2110 (daily ed. Mar. 20,
2002). During Senate consideration of an earlier version of BCRA,
Senator Robert Bennett stated: ``One very practical example that we can
expect is the scaling down, if not the elimination, of party
conventions because party conventions now are financed entirely with
soft money which, under this bill, would become illegal. So we may see
party conventions disappear altogether, or we may see them become very
truncated affairs, which the media may decide is not worth covering.''
147 CR S3092 (daily ed. Mar. 29, 2001). Senator McConnell raised the
issue during this earlier consideration as well. He stated: ``Host
committees for national conventions are abolished. Last year it took
each party $80 million to put on their national conventions. They got
$15 million from the Treasury. All the rest of it was this odious soft
money which is going to be abolished. In order to continue to put on
the national conventions in hard dollars, the two committees will have
to come up with about $60 million each in hard dollars to put on the
national conventions.'' 147 CR S3234 (Apr. 2, 2001). The Commission
seeks comment on how these debates or any other legislative history on
this issue should be interpreted.
What effect does BCRA's non-Federal funds ban have on the rules
relating to convention financing? Can the Commission simply retain the
pre-BCRA rules? Is there legal justification for retaining the pre-BCRA
rules? Does BCRA have any impact on the convention committee
expenditure limit? Would limiting host committees and municipal funds
to Federal funds have as significant an impact on convention financing
as eliminating the expenditure limit exemption for host committees and
municipal funds? If so, is such a result required by BCRA?
B. Are Host Committees and Municipal Funds Entities ``Established,
Financed, Maintained, or Controlled'' by National Party Committees
Under 2 U.S.C. 441i(a) and 11 CFR 300.2(c)?
Another issue that arises under BCRA is whether host committees and
municipal funds are ``directly or indirectly established, financed,
maintained, or controlled'' by a national party committee. If host
committees and municipal funds are considered entities directly or
indirectly established, financed, maintained, or controlled by the
national party committees, then they, like the national party
committees themselves, are prohibited from soliciting, receiving,
directing, or spending non-Federal funds. 2 U.S.C. 441i(a)(2); 11 CFR
300.10(c)(2). In the Non-Federal Funds Final Rules, the Commission
provided a non-exhaustive list of factors that may be considered in
determining whether an entity is directly or indirectly established,
financed, maintained, or controlled by a national party committee. 11
CFR 300.2(c). See Non-Federal Funds Final Rules, 67 FR at 49084 (``The
Commission has concluded that the affiliation factors laid out in 11
CFR 100.5(g) properly define `directly or indirectly established,
financed, maintained, or controlled' for purposes of BCRA.'') The
Commission seeks comment on whether host committees and municipal funds
satisfy the factors listed in 11 CFR 300.2(c) and should, therefore, be
considered per se entities that are directly or indirectly established,
financed, maintained, or controlled by the national party committees
holding conventions in the relevant cities. Alternatively, the
Commission seeks comment on whether host committees and municipal funds
do not meet the criteria listed in 11 CFR 300.2(c) and, therefore,
should be considered per se as a matter of law as entities that are not
directly or indirectly established, financed, maintained, or controlled
by the national party committees. Or should this question be resolved
on a case-by-case basis by applying section 300.2(c)?
The Commission notes that the regulatory text relating to host
committees and municipal funds proposed in this NPRM does not presume
that host committees or municipal funds satisfy any of the criteria
listed in 11 CFR 300.2(c) for determining whether entities are directly
or indirectly established, financed, maintained, or controlled by
national party committees. This approach, if adopted, would not
preclude a Commission finding that a particular host committee or
municipal fund does, in fact, satisfy one or more of the specified
factors in 11 CFR 300.2(c) with respect to a particular national party
committee. If the Commission were to conclude that host committees or
municipal funds are, as a matter of law, ``directly or indirectly
established, financed, maintained, or controlled'' by national
political parties, many of the same questions raised in the context of
the discussion of ``agency,'' above, would need to be addressed.
Accordingly, the Commission seeks comments on the same issues raised
above in connection with the agency discussion.
C. Impact of BCRA on Convention Committees
In contrast to host committees and municipal funds, convention
committees are, as a matter of law, entities directly established,
financed, maintained, or controlled by national party committees. The
Commission's regulations require national party committees to
``establish a convention committee which shall be responsible for
conducting the day to day arrangements and operations of that party's
presidential nominating convention.'' 11 CFR 9008.3(a)(2). In addition,
under 11 CFR 9008.3(a)(2), convention committees are required to
receive the national party's entitlement to public funds and are
responsible for making ``[a]ll expenditures on behalf of the national
committee for convention expenses;'' as such, they clearly are
``agents'' of the national party committees as well as ``entities
directly or indirectly established, financed, maintained, or
controlled'' by the national party committees, as those terms are
defined in 11 CFR 300.2(b) and (c). Therefore, for purposes of this
NPRM, the Commission proposes that BCRA's ban in 2 U.S.C. 441i(a)(1) on
national parties soliciting, receiving, directing, and using non-
Federal funds shall apply to convention committees by operation of 2
U.S.C. 441i(a)(2) and 11 CFR 300.10(c). See also 11 CFR 300.2(b) and
(c).
The Commission seeks comment on whether this prohibition extends to
bar convention committees from accepting many of the in-kind donations
typically provided by host committees and municipal funds. Commission
regulations permit certain local businesses and organizations to donate
[[Page 18504]]
funds or make in-kind donations to a host committee to be used for the
purposes listed in 11 CFR 9008.52(c)(1). A review of this list reveals
that many of the contemplated transactions could not be characterized
as in-kind donations to the convention committee, but instead relate to
the provision of services primarily used by convention attendees. For
example, the permitted expenses' purposes include: Welcoming convention
attendees; facilitating commerce by distributing guides to attendees;
providing bus transportation; and providing law enforcement services.
See 11 CFR 9008.52(c)(1). In order to conclude that the convention
committee received ``a contribution, donation, or transfer of funds or
any other thing of value * * * that are not subject to the limitations,
prohibitions, and reporting requirements of [FECA],'' the Commission
would need to determine that the convention committee itself received
something of value. In many of the transactions contemplated by 11 CFR
9008.52(c)(1), host committees are providing something of value to
convention delegates, other attendees, press, local businesses, and the
local community; in these transactions the convention committee is a
bystander, not a recipient of something of value. When a host committee
provides, for example, a shopping/dining guide, to convention
attendees, it is difficult to conclude that the convention committee
received anything of value. The Commission seeks comment on whether
BCRA requires that permissible host committee and municipal fund
expenses must be limited to such activities.
Other permissible host committee and municipal fund expenses
certainly provide something of value to the convention committee. For
example, host committees and municipal funds are permitted to provide
an auditorium or convention center and construction services for that
location. 11 CFR 9008.52(c)(1)(v). The Commission seeks comment on
whether BCRA permits host committees and municipal funds to provide
things of value to convention committees. Assuming that it does, in
order to ensure that non-Federal funds raised by host committees and
municipal funds are not spent on behalf of convention expenses beyond
the ``very narrow'' host committee/municipal fund exception to the
convention committee's expenditure limit, however, the Commission is
also considering revising its regulations to more precisely
circumscribe the permitted purposes for host committee and municipal
fund expenses as discussed below. See Explanation and Justification for
Regulations on Federal Financing of Presidential Nominating Conventions
and the Presidential Election Campaign Fund, 44 FR 63036, 63038 (Nov.
1, 1979) (stating: ``Defrayal of convention expenses by a host
committee is intended to be a very narrow exception to the statutory
limitation on convention expenses.'').
D. Solicitation of Funds for Host Committees and Municipal Funds Under
BCRA
1. 2 U.S.C. 441i(a) and (e)(1)
As explained above, BCRA prohibits national party committees, as
well as their agents and entities they directly or indirectly
establish, finance, maintain, or control from soliciting or directing
non-Federal funds on behalf of, or to, others. 2 U.S.C. 441i(a). BCRA
also prohibits Federal candidates and individuals holding Federal
office from soliciting, receiving, directing, transferring, or spending
funds in connection with an election for Federal office unless the
funds are subject to the limitations, prohibitions, and reporting
requirements of FECA. 2 U.S.C. 441i(e)(1)(A). BCRA extends these
prohibitions to the agents of Federal candidates acting on their behalf
and individuals holding Federal office and entities directly or
indirectly established, financed, maintained, or controlled by either.
2 U.S.C. 441i(e)(1).
The foregoing restrictions on Federal candidates and officeholders
under 2 U.S.C. 441i(e)(1), in contrast to the restrictions on national
party committees under 2 U.S.C. 441i(a), only apply to funds ``in
connection with an election for Federal office'' or any other election.
2 U.S.C. 441i(e)(1)(A) and (B). The Commission seeks comment on what
impact this statutory distinction has on any of the issues addressed in
this rulemaking.
Are all host committee and municipal fund activities ``in
connection with an election for Federal office'' or any other election
within the meaning of 2 U.S.C. 441i(e)? If not, are any such activities
``in connection with an election for Federal office''? If none satisfy
that statutory phrase, do the prohibitions and limitations of section
441i(e) not apply as a matter of law to the funds solicited, raised,
and spent by host committees and municipal funds on that basis alone?
In the alternative, are host committee and municipal fund activities
subject to this provision of 2 U.S.C. 441i(e) only if they are not for
the purpose of promoting the convention city and its commerce? As
described above, the Commission's past treatment of host committee and
municipal fund expenses viewed those expenses as a permissible
exception to the prohibition on corporate or labor organization funds
because they lacked an election-influencing purpose. FECA's definitions
of ``contribution'' and ``expenditure'' both require that such be made
``for the purpose of influencing any election for Federal office.'' 2
U.S.C. 431(8)(A)(i) and 431(9)(A)(i). Does the Commission's
determination that certain permissible host committee and municipal
fund expenses are not ``contributions'' or ``expenditures'' also
require that the Commission determine those expenses are not ``in
connection with an election for Federal office'' under 2 U.S.C.
441i(e)(1)(A)?
Are any of the costs of conducting a convention ``in connection
with an election for Federal office''? FECA clearly defines
``election'' to include ``a convention or caucus of a political party
which has the authority to nominate a candidate.'' 2 U.S.C. 431(1)(B).
However, other election administering expenses, whether incurred by
States or privately funded in those States that require political
parties to pay the costs of certain primary elections, are not
considered FECA-regulated expenses. See, e.g., AO 1991-33 (noting that
the parties act as agents of the State in performing the ministerial
functions of administering the primaries). Are the costs of conducting
a convention, whether incurred by a convention committee, host
committee, or municipal fund, regulated by FECA, other than those
provisions that expressly mention convention activities? Although the
Fund Act provides for grants of public funds to pay these expenses and
imposes an expenditure limitation in exchange for accepting such a
grant, should the Commission conclude that some or all of the expenses
of conducting a nominating convention are not subject to FECA as
amended by BCRA? If the Commission determines that these expenses are
not in connection with a Federal election, what changes should it make
to its regulations?
The Commission carefully considered the scope of BCRA's prohibition
on solicitation and direction of non-Federal funds by national party
committees, Federal candidates, Federal officeholders, and their agents
in the Non-Federal Funds Final Rules. See 67 FR at 49087-93, 49106-09,
49122-23, and 49131-32. The Commission seeks comment on whether the new
rules implementing BCRA's ban on the solicitation of non-Federal funds
are sufficient to resolve the question of whether national party
committees,
[[Page 18505]]
Federal candidates, Federal officeholders, or their agents may solicit
funds for host committees and municipal funds. See 11 CFR part 300,
subparts A and D. Alternatively, should the Commission promulgate an
additional regulation in its Federal Financing of Presidential
Nominating Conventions regulations (11 CFR part 9008) that would
specifically apply BCRA and the Non-Federal Funds Final Rules to the
financing of national nominating conventions and explain how the
Commission's regulations in 11 CFR part 300 work in this context?
2. 2 U.S.C. 441i(d)
BCRA prohibits national party committees, their officers and agents
acting on their behalf, and entities directly or indirectly
established, financed, maintained, or controlled by them from
soliciting any funds for, or making or directing any donations to,
certain tax-exempt organizations. 2 U.S.C. 441i(d). BCRA's prohibition
on this type of donor and fundraising activity extends only to tax-
exempt organizations with a political purpose or that conduct
activities in connection with a Federal election. Specifically, this
prohibition extends to tax-exempt organizations described in 26 U.S.C.
501(c) that make ``expenditures or disbursements in connection with an
election for Federal office (including expenditures or disbursements
for Federal election activity)'' and organizations described in 26
U.S.C. 527. Id. In considering how to implement these BCRA provisions,
the Commission concluded that a safe harbor is an appropriate way to
help ensure that party committees, and others to whom 11 CFR 300.11 and
300.37 apply, comply with the Act.
Commission regulations at 11 CFR 300.11 and 300.50 implement this
safe harbor and set forth a process by which a section 501(c)
organization can certify that it does not make expenditures or
disbursements in connection with an election for Federal office. Under
11 CFR 300.11(c) and 300.50(c), national party committees, their
agents, and entities they directly or indirectly establish, finance,
maintain, or control may obtain and rely upon a certification that the
organization has not and does not intend to make expenditures or
disbursements in connection with an election for Federal office as
specified in 11 CFR 300.11(d).
The Commission seeks comment on whether, as a matter of law, host
committees and municipal funds make ``disbursements'' in connection
with an election for Federal office, even as they adhere to the
requirements in current 11 CFR 9008.52, which arguably would leave host
committees and municipal funds outside the certification safe harbor
set out in 11 CFR 300.11. A ``disbursement'' is defined, in 11 CFR
300.2(d), as ``any purchase or payment made by: (1) a political
committee; or (2) any other person, including an organization that is
not a political committee, that is subject to [FECA].'' The Commission
has historically treated host committees and municipal funds as
organizations that are subject to FECA that make purchases or payments
in connection with a Federal election because FECA defines presidential
nominating conventions as Federal elections. 2 U.S.C. 431(1)(B). As is
noted above, the Commission is seeking comment on whether this
historical treatment of host committees and municipal funds is
appropriate. The Commission's past treatment of permissible host
committee and municipal fund disbursements has been that they are not
expenditures for the purpose of influencing an election and, therefore,
are not subject to the corporate and labor organization prohibition in
2 U.S.C. 441b. However, BCRA reaches far beyond expenditures and
requires only ``disbursements in connection with an election'' to make
a 501(c) organization subject to the prohibition in 2 U.S.C.
441i(d)(1). The Commission seeks comment on what impact this BCRA
statutory provision has, if any, on the Commission's treatment of host
committees and municipal funds.
The Commission proposes a new regulation, 11 CFR 9008.55, in order
to apply 11 CFR part 300 to the solicitation of funds for those host
committees or municipal funds that have 26 U.S.C. 501(c) status.
Paragraph (a) would state the general proposition that all host
committee and municipal fund payments in compliance with 11 CFR part
9008 are disbursements in connection with a Federal election for
purposes of 11 CFR part 300. Paragraph (b) would state that host
committees and municipal funds would not be eligible to make the
certification pursuant to 11 CFR 300.11(d). The Commission seeks
comment on the proposed new regulation and the approach embodied in it.
In the alternative, the Commission seeks comment on whether host
committees and municipal funds should be eligible to make the
certification pursuant to 11 CFR 300.11(d) and, if so, under what
circumstances? The Commission also seeks comment on whether Congress,
in enacting BCRA, in any way intended to restrict convention financing
practices that were legal before BCRA became law, including the
activities of host committees and municipal funds (and any involvement
therein by national party committees, Federal candidates, Federal
officeholders, and their agents.) Specifically, comment is sought on
whether permissible host committee and municipal fund expenses do not
constitute disbursements in connection with an election.
3. 2 U.S.C. 441i(e)(4)
In 2 U.S.C. 441i(e)(1), BCRA prohibits Federal candidates and
officeholders \5\ from soliciting, receiving, directing, transferring,
or spending funds in connection with an election for Federal or non-
Federal office unless the funds meet the source and amount restrictions
of the Act. See also 11 CFR 300.61 and 11 CFR 300.62. BCRA creates two
exceptions from that general rule in 2 U.S.C. 441i(e)(4). First, BCRA
allows Federal candidates, individuals holding Federal office, and
individuals who are agents acting on behalf of either to make general
solicitations, without source or amount restrictions, for a 501(c)
organization, other than organizations whose ``principal purpose'' is
to conduct certain Federal election activity, specifically voter
registration, voter identification, GOTV activities, or generic
campaign activity, so long as the solicitation does not specify how the
funds will be spent. Second, BCRA permits Federal candidates and
Federal officeholders, and individuals who are agents acting on their
behalf, to make a solicitation explicitly to obtain funds for a 501(c)
organization whose principal purpose is to conduct Federal election
activity as described above or for a 501(c) organization to conduct
these activities, provided that only individuals are solicited for no
more than $20,000 per calendar year. The final rule at 11 CFR 300.65
implements these exceptions for Federal candidate and officeholder
solicitations for 501(c) organizations.
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\5\ An ``individual holding Federal office'' is defined as ``an
individual elected to or serving in the office of President or Vice
President of the United States; or a Senator or a Representative in,
or Delegate or Resident Commissioner to, the Congress of the United
States.'' 11 CFR 300.2(o). It does not include those ``who are
appointed to positions such as the secretaries of departments in the
executive branch, or other positions that are not filled by
election.'' Non-Federal Funds Final Rules, 67 FR at 49,087. This
definition is identical to the definition of ``Federal
officeholder'' in 11 CFR 113.2(c).
---------------------------------------------------------------------------
As noted above in connection with national party committee
solicitations of non-Federal funds, host committees and municipal funds
operating in compliance with 11 CFR part 9008
[[Page 18506]]
arguably make disbursements in connection with the national nominating
convention, which is an election under FECA. Under 11 CFR 300.52(a)(1)
and 300.65(a)(1), Federal candidates, individuals holding Federal
office, and agents acting on their behalf are prohibited from making
general solicitations of non-Federal funds for 501(c) organizations
that ``engage in activities in connection with an election.''
Accordingly, the exception permitting Federal candidates, Federal
officeholders, and their agents to make general solicitations on behalf
of 501(c) organizations would arguably not, as a matter of law, apply
to host committees and municipal funds. In addition, the exception
permitting Federal candidates, Federal officeholders, and their agents
to make specific solicitations for certain 501(c) organizations may
not, as a matter of law, apply to host committees and municipal funds
because it is not their principal purpose to engage in certain types of
Federal election activity described in 2 U.S.C. 431(20)(A)(i) and (ii).
To make clear that the above-described exceptions to the general
ban on solicitation do not apply to solicitation of non-Federal funds
by Federal candidates, Federal officeholders, and their agents on
behalf of host committees and municipal funds, the Commission is
considering adding a new provision to part 9008. See new 11 CFR
9008.55. Paragraph (c) of this section would state that host committees
and municipal funds are ineligible for the exceptions in 11 CFR 300.65.
The Commission seeks comment on this approach.
E. Effect of BCRA on Offsets
The Commission has permitted convention committees to ``offset''
in-kind contributions received from host committees that are deemed
impermissible in post-convention audits. Rather than require repayment
of 100% of these receipts, the convention committee may offset them
with convention committee expenditures that could have been paid by the
host committee. The Commission seeks comment on whether BCRA requires
any reevaluation of this practice.
F. Effect of BCRA on Commercial Vendor Activities Related to Nominating
Conventions
The current rules at 11 CFR 9008.9 permit convention committees to
receive goods and services from commercial vendors, including
corporations, at reduced or discounted rates, or at no charge, under
certain circumstances. The prohibition in BCRA against the receipt of
non-Federal funds, 2 U.S.C. 441a(a), may necessitate a change to this
regulation.
Current 11 CFR 9008.9(a) permits commercial vendors, including
businesses that are incorporated, to provide reductions or discounts in
the ordinary course of business; that is, if the vendor has an
established practice of providing the same reductions or discounts for
the same amount of goods or services to non-political clients, or if
the reduction or discount is consistent with established practice in
the commercial vendor's trade or industry. The Commission believes this
provision is consistent with BCRA and therefore proposes to retain it
in its current location. It would be revised to combine the
introductory text and to make other conforming changes based on the
other proposed changes to the rule described below.
Current provisions (b) and (c) of 11 CFR 9008.9, however, address
items provided for promotional consideration (which are something of
value), such as complimentary, temporary use of automobiles, and items
of de minimis value, such as tote bags for convention attendees. The
rationale for the promotional consideration exception was explained in
Advisory Opinion 1988-25, where the Commission considered whether it
was permissible, under FECA and the Fund Act, for General Motors to
provide complimentary use of automobiles to convention committees for
use during the 1988 Democratic and Republican conventions in exchange
for GM's ability to advertise the fact that its vehicles were the
``official'' vehicles of the respective conventions. The Commission
concluded that GM's provision of 500 automobiles to the Democratic and
Republican convention committees in exchange for advertising rights did
not violate the prohibition against corporate contributions in
connection with a Federal election, in 2 U.S.C. 441b(a). The Commission
based its conclusion primarily on evidence that GM had a practice of
providing complimentary use of automobiles to other, non-political
conventions of similar size and duration in exchange for such
advertising authority and on evidence that the value of GM's donation
was proportionate to the commercial return GM expected to receive
during the life of the convention.
The rationale for allowing commercial vendors to provide items of
de minimis value at little or no charge to convention attendees was
explained in Advisory Opinion 1980-53, where the Commission considered
whether it was permissible, under FECA and the Fund Act, for Kelly
Services, Inc., to provide, at no charge, tote bags to persons
attending the 1980 Democratic and Republican conventions. The
Commission concluded that Kelly Services' provision of 9,200 tote bags
to the Democratic convention and 7,600 tote bags to the Republican
convention did not violate the prohibition against corporate
contributions in connection with a Federal election, in 2 U.S.C. 441b,
and did not count toward the national parties' expenditure limits, in
11 CFR 9008.7(a). The Commission based its conclusion on three factors:
(1) The low cost of the tote bags ($2.12 each); (2) evidence that the
tote bags were being provided solely for bona fide advertising purposes
of a local business; and (3) evidence that the tote bags were provided
in the ordinary course of Kelly Services' business.
While the provision of items for promotional consideration and
items of de minimis value were permissible under FECA and the Fund Act,
these provisions may contravene BCRA's prohibition on national party
committee acceptance of non-Federal funds, 2 U.S.C. 441i(a)(1), by
authorizing national party committees to receive and accept something
of value not paid for with Federal funds. The Commission seeks comment
on whether these practices, which were legally permissible in the past,
are barred by BCRA. However, as explained above, the rules proposed in
this NPRM contemplate that it is still appropriate for host committees
and municipal funds to accept these corporate in-kind donations,
provided such donations are in accordance with 11 CFR 9008.52 and
9008.53. Accordingly, the Commission is proposing to move the
provisions of current 11 CFR 9008.9(b) and (c) (convention committees)
to 11 CFR 9008.52(a) (host committees), with a conforming amendment to
11 CFR 9008.53(a) (municipal funds). The introductory text would no
longer reference the provision of goods or services at no charge as
that reference pertained to paragraphs (b) and (c).
Under this reorganization, current paragraph (d) of 11 CFR 9008.9,
which states that the value of goods or services provided under this
section do not count towards the national party's expenditure limit,
would be retained as redesignated paragraph (b) of 11 CFR 9008.9, but
would be limited to standard industry reductions and discounts provided
pursuant to 11 CFR 9008.9(a). The definition of ``commercial vendor''
would continue to be that set out at 11 CFR 116.1(c):
[[Page 18507]]
Any person providing goods or services to a candidate or political
committee whose usual and normal business involves the sale, rental,
lease or provision of those goods or services.
G. Effect of BCRA on Private Events in the Convention City
Private events are often held in the city hosting a nominating
convention during the convention. Corporations, labor organizations,
and other groups can hold these events, which are frequently described
as hospitality events, and often invite convention attendees including
delegates, Federal candidates and officeholders, and party officials.
These events are typically held in locations outside the convention
venue, but often in close proximity to it. The temporal and geographic
proximity of these events to nominating conventions has not previously
subjected the events to regulation under FECA solely because of that
proximity. Of course, FECA regulation could be triggered by such events
if, for example, a Federal political committee holds a fundraising
event. The Commission seeks comment on whether BCRA requires that
private hospitality events held by corporations, labor unions, and
other organizations in the convention city during the convention are
subject to regulation and, if so, on what basis? Does it make any
difference whether Federal candidates or officeholders or party
officials or their agents (acting on their behalf) are invited to,
appear, are recognized, or speak at such events?
V. Definition of ``Municipal Fund''
Over time, host committees and municipal funds have come to play
increasingly similar roles in convention funding. The Commission
therefore seeks comment on whether these entities should be treated
similarly under the Commission's rules. Under this approach, which is
reflected in the proposed rules that follow, host committees and
municipal funds would continue to be permitted to spend money for
identical purposes. The rules would change, however, to make municipal
funds subject to the same disclosure requirements that apply to host
committees under 11 CFR 9008.51 and 9008.52. Current host committee
disclosure rules would also be revised as described below and would
apply to both host committees and municipal funds. More importantly,
the Commission's description of ``municipal funds'' would be revised to
remove provisions that operate as barriers to municipal funds raising
money in conjunction with host committees.
While the Commission's rules define ``host committee,'' see 11 CFR
9008.52(a), they do not currently define ``municipal fund.'' The
Commission is proposing to add the following definition, at new 11 CFR
9008.50(c): ``A municipal fund is any separate fund or account of a
government agency, municipality, or municipal corporation whose
principal purpose is the encouragement of commerce in the municipality
and whose receipt and use of funds is subject to control of officials
of the State or local government.'' Under this definition, any
organization operating under 11 CFR 9008.53 would be required to use a
separate account for receipts and payments related to convention
activities. Should the Commission adopt additional requirements for
municipal fund status? Should municipal funds be limited to accounts
subject to audit by State or local public agencies? Are there any other
arrangements that would assure the funds received and disbursed by a
municipal fund would be used for the promotion of the city and its
commerce?
The proposed definition would eliminate the current provision in 11
CFR 9008.53(b)(1)(i) and (ii), requiring municipal funds to comply with
two conditions: (1) The fund or account is not permitted to be
restricted to use in connection with any particular convention; and (2)
Donations to the fund or account must be unrestricted and shall not be
solicited or designated for use in connection with any particular
convention, event or activity. 11 CFR 9008.53(b)(1)(i) and (ii).
Host committees do not operate under similar limitations on
fundraising. See 11 CFR 9008.52. These limitations complicate joint
fundraising by a municipal fund and a host committee, and their utility
has diminished as municipal funds have become functionally similar to
host committees. Moreover, because hosting a national nominating
convention is a significant undertaking even for large communities,
organizations like municipal funds will necessarily devote substantial
efforts toward their roles in hosting a convention. In these
circumstances, little purpose is served by prohibiting municipal funds
from engaging in fundraising devoted to a particular nominating
convention or accepting donations accompanied by correspondence that
refers to such a convention.
In the advisory opinions that formed the basis for this current
rule, Advisory Opinions 1982-27 and 1983-29, the requesters assured the
Commission that the undesignated nature of the donations received
demonstrated the civic, not political, motives of the municipal funds
and their donors. Subsequently, the Commission promulgated the
regulation with these same restrictions on municipal funds in an effort
to ensure that both the donations and use of the donations arose from
civic, not political, motives. The Commission seeks comment on whether
this requirement is unnecessary. A municipal fund's references to the
political party that intends to hold its national nominating convention
in the host city may not necessarily betray a partisan political
motivation, and insisting on no such reference in the solicitation
materials and in the responses from donors may serve little or no
purpose.
Consequently, the Commission proposes deleting from its definition
of municipal funds the requirements that the fund itself, solicitations
for donations to the fund, and the donations to the fund not be
restricted to a particular convention. The Commission also proposes to
restructure the municipal fund regulation, 11 CFR 9008.53, to follow
the structure of the host committee regulation, 11 CFR 9008.52, and to
use the name by which these funds have come to be known, ``municipal
funds.'' Alternatively, the Commission also seeks comment on whether it
should retain the current distinction between municipal funds and host
committees. Under the alternative approach, should the Commission
clarify the prohibitions of 11 CFR 9008.53, namely that a municipal
fund may not be restricted or accept or solicit restricted donations?
What standard should the Commission adopt for when a municipal fund is
``restricted to use in connection with any particular convention''
contrary to 11 CFR 9008.53(b)(1)(i)? Under what circumstances is it
appropriate to conclude that donations or solicitations restricted or
designated for use in connection with a particular convention contrary
to 11 CFR 9008.53(b)(1)(ii)?
The Commission seeks comment on whether the examination and audit
authority of the Commission outlined in 11 CFR 9008.54, which mandates
audits of convention host committees without cause, has an adequate
statutory basis under FECA. In promulgating the predecessor to the
current 11 CFR 9008.54, the Commission explained that: ``This section
provides for an examination and audit of each host committee. Such
committees are permitted to receive donations to defray convention
expenses. It is hence necessary for the Commission to audit them in
order to insure that those donations were properly raised and
[[Page 18508]]
spent.'' Explanation and Justification for Presidential Election
Campaign Fund and Federal Financing of Presidential Nominating
Conventions, 44 FR 63036, 63038 (Nov. 1, 1979). The Fund Act
specifically authorizes the Commission ``to conduct such examinations
and audits (in addition to the examinations and audits required by
section 9007(a)), . . . as it deems necessary to carry out the
functions and duties imposed on it by this chapter.'' 26 U.S.C.
9009(b). In addition, as authority for this requirement, the Commission
currently cites 2 U.S.C. 437, which includes the statutory provisions
requiring host committee reporting; 2 U.S.C. 438(a)(8), the
Commission's general regulation authority; 26 U.S.C. 9008, which
provides for payments for presidential nominating conventions; and 26
U.S.C. 9009, which includes further regulation authority in addition to
the provision cited above concerning audits additional to those
required by 26 U.S.C. 9007.
Host committees are the only non-publicly funded committees that
are subject to an automatic audit by the Commission. Convention
committees are also subject to automatic audits under 11 CFR 9008.11 no
later than December 31 of the year the convention was held and may, at
any time, be subject to other examinations and audits as the Commission
deems necessary. However, convention committees receive millions of
dollars of public funds and the Commission's audit authority helps
insure that those public funds are lawfully spent. The audit authority
provided to the Commission under 11 CFR 9008.11 is also statutorily
based in 26 U.S.C. 9008 and 9009.
The Commission seeks comment on whether the host committees should
be subject to automatic audits under 11 CFR 9008.54.
While the Commission is proposing to treat host committees and
municipal funds the same in most respects (i.e., permitted expenses,
registration and reporting requirements), it does not propose to audit
municipal funds as it currently audits host committees. Under the
current rules, host committees are subject to a Commission audit
pursuant to 11 CFR 9008.54, while municipal funds are not routinely
subject to a Commission audit. The Commission, however, has conducted
financial transaction examinations of municipal fund accounts, and it
expects to continue to do so in the appropriate circumstances. The
Commission believes that the governmental controls over municipal funds
obviate the need to subject municipal funds to a routine audit like
host committees are subject to pursuant to 11 CFR 9008.54. Because
municipal funds necessarily are separate accounts of a government
agency or municipality, the municipal funds are subject to financial
controls by the local authorities. Under these circumstances, the
Commission does not believe routine audits are necessary. The
Commission seeks comment on this approach and specifically whether the
comity required between agencies of the Federal government and agencies
at the State or local level counsels against routine audits of
municipal funds.
The absence of routine audits should not be misconstrued to limit
the Commission's authority to examine municipal fund transactions
related to conventions. Because municipal funds provide substantial in-
kind donations to publicly funded convention committees, the
Commission's audit of convention committees under 11 CFR 9008.11 may
require a detailed and thorough review of municipal fund transactions.
Additionally, municipal funds are subject to Commission audit pursuant
to 11 CFR 111.10.
Current 11 CFR 9008.50, entitled ``Scope,'' sets out the scope of
subpart B of part 9008, ``Host Committees Representing a Convention
City; Convention Expenditures by Government Agencies and Municipal
Corporations.'' The Commission is proposing to change the title of this
Subpart to ``Host Committees and Municipal Funds Representing a
Convention City.'' The title of 11 CFR 9008.50 would be changed to
``Scope and Definitions,'' and the current provisions of this section
would be revised with conforming changes and placed in new paragraph
(a). The definition of ``host committee'' would be moved from 11 CFR
9008.52(a) to new 11 CFR 9008.50(b), and the new definition of
``municipal fund'' would appear at new 11 CFR 9008.50(c). Conforming
changes using the newly defined term ``municipal fund'' would be made
to 11 CFR 9008.8(b)(2) and 9008.12(b)(7).
VI. Permissible Expenditures by Convention Committees, Host Committees
and Municipal Funds
Permissible expenditures by convention committees are currently set
forth at 11 CFR 9008.7(a), while those by host committees and municipal
funds are found at current 11 CFR 9008.52(c). See also 11 CFR
9008.53(b). As described above, these rules are intended to require
convention committees to pay expenditures that are ``political'' in
nature, while permitting host committees and municipal funds to pay
commercially motivated expenses. The intent of the existing rules is
for the convention committee to pay expenses incurred in connection
with nominating its party's candidates, while the host committee and
the municipal fund pay expenses incurred to make the convention city
attractive to potential visitors and those seeking a site to hold
future conventions or similar events. Some expenditures fit into both
categories, which has caused confusion. Furthermore, the current rules
do not state the types of expenditures that a host committee or
municipal fund may not incur on behalf of a convention committee.
After the last several election cycles, some observers have raised
questions about whether host committees and municipal funds continue to
operate in the manner contemplated by the regulations. The Commission
has encountered host committees and municipal funds that paid for
expenses that the Commission determined were not for permissible host
committee or municipal fund purposes. In an effort to provide
additional guidance on the scope of expenses that may be paid by a host
committee or municipal fund, the Commission noted that its ``decisions
regarding the audits of the 1996 convention and host committees serve
to provide additional guidance for the 2000 election cycle.''
Explanation and Justification for Public Financing of Presidential
Primary and General Election Candidates, 64 FR 49355, 49358 (Sept. 13,
1999). The Commission therefore seeks comment on whether donations to
host committees and municipal funds should be considered to stem from
political motivations, at least in part. If so, what changes to the
Commission's rules should be made? Comment is also sought on whether
the Commission should seek to limit the exception for host committee
and municipal fund expenses to ensure that impermissible funds are not
used in connection with the national nominating convention. If so, what
measures should the Commission adopt? Is the total amount of expenses
the appropriate measure, or should the Commission continue to focus on
the purpose of the expenses?
Given the evolution in the operation of host committees and
municipal funds, as well as the need to ensure, in light of BCRA, that
a host committee or municipal fund's non-Federal funds are not used to
provide facilities or services that constitute an impermissible
contribution to convention committees, the Commission is proposing to
reorganize the types of permissible expenses listed in current 11 CFR
9008.7(a)(4) and 9008.52(c). The current
[[Page 18509]]
regulations provide a definition of ``convention expenses'' in 11 CFR
9008.7(a)(4), which explains that convention expenses ``include all
expenses incurred by or on behalf of a political party's national
committee or convention committee with respect to and for the purpose
of conducting a presidential nominating convention or convention-
related activities.'' 11 CFR 9008.7(a)(4). The current regulation
includes a non-exhaustive list of 13 examples of particular types of
convention expenses. See 11 CFR 9008.7(a)(4)(i) to (xiii).
A. Revisions to Convention Expenses, 11 CFR 9008.7(a)(4).
The Commission is considering two alternatives for revising 11 CFR
9008.7(a)(4), both of which are set out in the regulatory text portion
of this NPRM. The alternatives are intended to reach the same result as
to what expenses may be paid by convention committees, host committees,
and municipal funds. They differ as to the location of various
provisions regarding permissible and impermissible expenses.
Alternative A would involve removing the list of thirteen examples of
particular types of convention expenses in 11 CFR 9008.7(a)(4). The
Commission's experience with national nominating conventions indicates
that, generally speaking, the public funds provided for conventions are
carefully conserved, given the convention committees' limited
resources. Thus, the Commission is considering, under Alternative A,
whether the convention committees' use of funds can be adequately
addressed with the general and generic definition of ``convention
expenses'' in section 9008.7(a)(4). Additionally, using a broad and
generic definition is consistent with the approach in the Commission's
regulations concerning qualified campaign expenses for presidential
primary and general elections. See 11 CFR 9002.11 (general election
definition of qualified campaign expense); 11 CFR 9004.4 (general
election use of payments); 11 CFR 9032.9 (primary election definition
of qualified campaign expense); and 11 CFR 9034.4 (primary election use
of contributions and matching payments).
Moreover, a number of the examples qualify as ``convention
expenses'' in such an unambiguous way, the value of stating them as an
example is questionable. For example, one states that ``salaries and
expenses of convention committee employees * * * and similar personnel,
whose responsibilities involve planning, management or otherwise
conducting the convention.'' Could such expenses fail to meet the
general definition of ``convention expenses'' in section 9008.7(a)(4)
under any interpretation? A few of the examples impose some limitations
that may not otherwise be obvious. Entertainment activity expenses is
one such provision, 11 CFR 9008.7(a)(4)(viii). While provisions such as
this one focus on preventing the convention committee from subsidizing
other organizations, the Commission is considering whether the opposite
arrangement is more frequently encountered. The Commission also seeks
comment on two other particular provisions: 11 CFR 9008.7(a)(4)(iii)
and (iv), which permit convention committees to reimburse national
party committees for a portion of certain employees' compensation. Do
convention committees typically make the arrangements contemplated by
these provisions? Or do some employees temporarily leave the employ of
the national party committees and become employees of the convention
committees?
The Commission seeks comment on its proposed simplification of the
definition of convention expenses under Alternative A. Particularly,
are any of the thirteen examples necessary to include in the codified
regulation? Are there any drawbacks to deleting the thirteen examples?
Does the proposed definition of ``convention expense'' standing alone
provide sufficient guidance?
Alternatively, the Commission seeks comment on whether it should
refine the current list of examples. Under this alternative, the
Commission would retain the general definition of ``convention
expenses'' in 11 CFR 9008.7(a)(4). What changes should be made to the
list of examples? Should any be deleted? Should other examples be
added?
In contrast, Alternative B would retain the list of thirteen
permissible convention expenses currently located in section
9008.7(a)(4), but move them to a new section, 11 CFR 9008.17. Under
this alternative, new section 9008.17 would contain lists of
permissible expenses for convention committees (paragraphs (a) and
(b)), and host committees and municipal funds (paragraphs (b) and (c)).
See proposed 11 CFR 9008.17. Paragraph (a) of section 9008.17 would
define ``convention expenses'' generally in the same manner as it is
currently defined in section 9008.7(a)(4). See proposed 11 CFR
9008.17(a). The thirteen specific permissible convention expenses that
may be paid by convention committees currently listed in section
9008.7(a)(4) would be moved to new section 9008.17(a) and (b).
Please note that under Alternative B, section 9008.7(a)(4) would be
revised to cross reference 11 CFR 9008.17(a) and (b). Alternative B's
version of section 9008.7(a)(4) is not set out in the regulation text
that follows. Neither alternative would amend the prohibited uses of a
convention committee's public funds listed in 11 CFR 9008.7(b).
B. Substantive Changes to Permissible Host Committee and Municipal Fund
Expenses.
The Commission also proposes under both alternatives to revise the
list of permissible expense purposes for host committees and municipal
funds listed in current 11 CFR 9008.52(c)(1). The proposed revised
listed would appear in paragraph (b) of section 9008.52, and would be
based substantially on the current list in section 9008.52(c)(1).
However, the Commission proposes a number of changes intended to
clarify and add specificity as to the range of permissible expenses.
The Commission proposes to combine current 11 CFR 9008.52(c)(1)(i)
and (c)(1)(x) to state that host committees and municipal funds may pay
expenses incurred for the purpose of promoting the suitability of the
city as a convention site including those related to the selection
committee's accommodations. See 11 CFR 9008.52(b)(1). The Commission
seeks comment on this proposed revision, particularly whether the rule
should be limited to such costs incurred prior to signing the site
selection agreement.
The Commission proposes to narrow the focus of the provision
concerning the use of an auditorium or convention center and
construction-related services in current section 9008.52(c)(1)(v). See
proposed 11 CFR 9008.52(b)(5). To that end, the revised purpose would
contain a non-exhaustive list of permissible construction-related
services and would make it clear that only construction-related
services for the purpose of designing, creating, or installing the
physical or technological infrastructure for the conduct of the
convention are permissible. Id. It would also codify in the regulations
some of the Commission's decisions made in connection with the 1996
conventions. Specifically, the Commission considered a number of
television production expenses and determined that some were
permissible host committee expenses and others were not. Many of the
distinctions the Commission made were based on whether the particular
expense was related to the infrastructure of the
[[Page 18510]]
convention center. Another of the Commission's decisions related to
1996 reflected in the proposed section 9008.52(b)(5) was to permit host
committees to pay telephone charges incurred by the convention
committee.
The proposal would narrow the rule in current section
9008.52(c)(1)(vi) allowing for the provision of local transportation
services. Whereas the current section allows for the provision of local
transportation services without restriction, the Commission proposes to
narrow this purpose to the host committee to provide such services only
if they are made available to convention delegates and other
individuals attending the convention. See proposed 11 CFR
9008.52(b)(6).
The rule in current section 9008.52(c)(1)(vii) allowing for the
provision of law enforcement services would be expanded. In light of
heightened security concerns involving high-profile events attended by
large numbers of people, such as presidential conventions, the
Commission proposes to broaden this purpose to permit the provision of
``security services'' as well as law enforcement services. See proposed
11 CFR 9008.52(b)(7). The Commission also proposes to delete the
current requirement that only law enforcement services ``necessary to
assure orderly conventions'' may be provided, in recognition of the
fact that maintenance of orderly conventions is only one of many
legitimate security concerns. Id. To codify another of the Commission's
decisions in connection with the 1996 conventions, tickets, badges, and
passes would be specifically mentioned as part of permitted security.
The provision related to hotel rooms in current 11 CFR
9008.52(c)(1)(ix) would also be clarified. This would codify another of
the Commission's 1996 decisions. The provision would be clarified to
permit host committees and municipal funds to provide hotel rooms to
convention committees for whatever rate the host committee paid for the
rooms, including at no charge or at a reduced rate based on the number
of other rooms rented. See proposed 11 CFR 9008.52(c)(9).
The Commission proposes to eliminate the final purpose of ``other
similar convention related facilities and services,'' in current
section 9008.52(c)(1)(xi), which has created confusion and could be
improperly read to include a broad array of expenses that is
inconsistent with a specific list of permitted expenses. The Commission
seeks comment on this change.
The Commission seeks comment on the proposed changes to the list of
permissible host committee and municipal fund expense purposes.
Specifically, does the proposed regulation provide sufficient guidance
to inform convention committees, host committees, and municipal funds
of what is permitted? Are other restrictions necessary to ensure that
the permitted expenses are appropriate for host committees and
municipal funds? Should other expense purposes be added to list? Are
there any other aspects of the Commission's 1996 decisions that should
be incorporated into the rules?
The Commission also proposes to add a new provision defining
impermissible host committee and municipal fund expense purposes. This
provision is proposed as paragraph (c) of section 9008.52 under
Alternative A. It would include a general prohibition on providing
anything of value to a convention committee, national political party
committee, or any other political committee, except as expressly
permitted under 11 CFR 9008.52(b)(1) and (5) through (8). See proposed
11 CFR 9008.52(c)(1). These purposes listed in paragraph (b) of
proposed section 9008.52 are included in the exception because
appropriate host committee and municipal fund expenses under these
sections would involve the provision of something of value to the
convention committee. The purposes listed in section 9008.52(b)(2)
through (4) are not included in the exception because a host committee
or municipal fund must not provide anything of value to the convention
committee as it welcomes attendees to the convention city, facilitates
commerce, or pays its own administrative expenses, which are the
purposes listed in the cited provisions. The list of prohibited expense
purposes includes another provision to prohibit the use of donations to
host committee or municipal funds for expenses related to creating,
producing, or directing the convention proceedings. See proposed 11 CFR
9008.52(c)(2). The proposal is intended to limit any of the permissible
purposes so that if the expense would be prohibited by 11 CFR
9008.52(c)(2), then it would not be permitted even if it might also
satisfy one of the permissible expense purposes in 11 CFR 9008.52(b).
This proposal would codify one of the more significant of the
Commission's decisions in connection with the 1996 conventions that the
Commission cited as guidance in the 1999 rulemaking. See Explanation
and Justification for Public Financing of Presidential Primary and
General Election Candidates, 64 FR 49355, 49358 (Sept. 13, 1999). The
Commission seeks comment on whether this proposal is sufficient to
contain the non-Federal funds of host committees and municipal funds to
uses consistent with the prohibitions and limitations imposed on the
use of such funds by BCRA. Should additional expense purposes be added
to the prohibited list? Do the listed prohibitions provide adequate
guidance?
C. Regulatory Structure of Permissible Host Committee and Municipal
Fund Expenses.
Again, the Commission is considering two alternatives that differ
as to the location for the provisions regarding permissible host
committee and municipal fund expenses. Both reflect the proposed
substantive changes to the host committee and municipal fund permitted
expenses described above in the section entitled ``Substantive Changes
to Permissible Host Committee and Municipal Fund Expenses.''
Alternative A would involve providing a revised list of permissible
host committee/municipal fund expenses in paragraph (b) of section
9008.52. See proposed 11 CFR 9008.52. Alternative B would involve
providing substantially the same revised list of permissible host
committee and municipal fund expenses, but would locate them in
paragraphs (b) and (c) of new section 9008.17, rather than in 11 CFR
9008.52(b). Paragraph (b) of new section 9008.17 would list expenses
that may be paid by convention committees, host committees, or
municipal funds and paragraph (c) of 9008.17 would list expenses that
may be paid by host committees or municipal funds, but shall not be
paid by convention committees. Finally, the new provisions expressly
prohibiting certain expenses to host committees and municipal funds
would appear in 11 CFR 9008.52(c) under Alternative A and in 11 CFR
9008.17(d) under Alternative B.
Please note that under Alternative B, 11 CFR 9008.52 and 9008.53
would be revised to cross reference to the appropriate provisions of
the new section 9008.17; the Alternative B version of sections 9008.52
and 9008.53 is not set out in the proposed regulations that follow. The
Commission seeks comment on the two different organization schemes for
permissible host committee and municipal fund expenses.
VII. Definition of ``Local'' Businesses, Labor Organizations, Other
Organizations, and Individuals
Commission regulations currently permit host committees and
municipal
[[Page 18511]]
funds to receive donations from local businesses, local labor
organizations, and other local organizations or individuals who
maintain a local residence or who work for a local business, local
labor organization, or local organization. 11 CFR 9008.52(c)(1) and
9008.53(b)(1). Frequently, the Commission has been called upon to
determine whether a particular individual, corporation, labor
organization, or other organization qualifies as ``local'' within the
meaning of 11 CFR 9008.52(c)(1) and 9009.53(b). These often entail
difficult and seemingly arbitrary distinctions. For example, does the
presence of a single employee working from a home-based office
constitute a business's local office under section 9008.52 and section
9008.53?
Given the Commission's proposal to tighten the restrictions that
prohibit host committees and municipal funds from paying expenses that
have primarily a political, rather than commercial, purpose, the
Commission is considering whether it remains necessary to focus on the
source of host committee and municipal fund donations. Accordingly, the
Commission proposes to delete the requirements in 11 CFR 9008.52(c)(1)
(host committees) and 11 CFR 9008.53(b)(1) (municipal funds) that only
``local'' businesses, labor organizations, other organizations, and
individuals may make donations to host committees and municipal funds.
A conforming change would also be made to 11 CFR 9008.12(b)(7). Under
the Commission's proposal, any business, labor organization, other
organization, or individual, no matter where they are located, reside,
or do business, would be permitted to make donations or in-kind
contributions to host committees and municipal funds, provided those
donations and in-kind contributions comply with the restrictions
prescribed in the regulations. Regardless of what it does on the
categories of expenses that host committees and municipal funds may pay
for, should the Commission abolish the locality requirement with
respect to donations to host committees and municipal funds? If the
Commission adopted this proposal, would it make it more feasible for
smaller and mid-size cities, whose corporate and business presence may
not be as great as the nation's largest cities, to successfully stage a
national convention? The Commission seeks public comment on this
approach.
As an alternative to deleting these ``local'' requirements, the
Commission is considering an alternative approach that would retain the
requirement that only ``local'' businesses, labor organizations, and
other organizations may make donations and in-kind contributions to
host committees and municipal funds. Under this alternative, the
Commission would clarify its 1999 amendment to these regulations. The
accompanying Explanation and Justification explained that this language
was intended to cover ``individuals who work for a business's local
office, or a labor organization's local office, or another
organization's local office.'' Explanation and Justification of Rules
Governing Public Financing of Presidential Primary and General Election
Candidates, 64 FR 49355, 49358 (Sept. 13, 1999). However, the
regulatory text did not require that the individuals work in the local
office of the local organization; it only required that the individuals
work for an organization that had a local office, which suggested that
employees of a nationwide organization could donate to a host committee
for any area where the organization maintained a facility. Thus, under
this alternative, the Commission would revise the provision so that it
would read ``individuals * * * who work for the local office of a
business, labor organization, or other organization.'' A third
alternative approach the Commission is considering is to rely
exclusively on an individual's residence to determine whether the
individual is local, instead of looking to an individual's employment
as well. The Commission seeks comment on each of these alternatives.
VIII. Host Committee and Municipal Fund Registration and Reporting
Requirements
Under 11 CFR 9008.51(a)(1), host committees must register with the
Commission within 10 days of the date on which the party chooses the
convention city. Host committees must also report using FEC Form 4 to
disclose all receipts and disbursements, including in-kind
contributions, made with respect to a national nominating convention.
11 CFR 9008.51(b). The initial reports are not due until the earlier of
60 days after the convention or 20 days prior to the presidential
general election. Id. Subsequent reports are due quarterly, on the
fifteenth day after the end of the quarter. 11 CFR 9008.51(b)(2). A
final host committee report is due ten days after it ceases reportable
activity. 11 CFR 9008.51(b)(3). Municipal funds, in contrast, are
required to file only one report, which is due on the same day as the
initial host committee report. 11 CFR 9008.51(c). This report need list
only categories of facilities and services provided for the convention
for disbursements and the total amounts of general revenues and private
donations received to defray the expenses. Id. This municipal fund
reporting regime was intended to strike a balance between two competing
concerns: ensuring adequate public disclosure, on the one hand, and
avoiding the imposition of unduly burdensome requirements on
municipalities and other governmental entities, on the other. See
Explanation and Justification for Regulations on Presidential Election
Campaign Fund and Financing of Presidential Nominating Conventions, 59
FR 33606, 33614 (June 29, 1994).
The Commission seeks comment on several proposed revisions to these
registration and reporting requirements for host committees and
municipal funds, as described below. First, the Commission's experience
has been that not all host committees are established within the ten
days of the date on which the party chooses the convention, which is
the current registration deadline. Accordingly, the Commission is
proposing to revise the registration deadline in 11 CFR 9008.51(a) to
require registration within ten days of the date on which the party
chooses the convention city or ten days after the host committee is
formed, whichever occurs later. Revised paragraph (a) would require
that such registration be made by filing a Statement of Organization on
FEC Form 1. The Commission is proposing that municipal funds be
similarly treated as host committees, so they would be required to
register with the Commission within ten days of the date on which the
party chooses the convention city or ten days after the municipal fund
is formed, whichever occurs later. Alternatively, the Commission seeks
comment on whether either of the host committee or municipal fund
registration deadlines should be ten days after they first solicit or
accept donations for convention activities, or make disbursements for
this purpose.
Second, the Commission proposes to apply the same reporting
requirements that currently apply to host committees to municipal
funds. Currently, paragraph (b)(1) of 11 CFR 9008.51 requires host
committees to file a post convention report with the Commission on FEC
Form 4. This report must be filed either 60 days following the last day
that the convention is officially in session or 20 days prior to the
presidential general election, whichever date is earlier. Currently,
paragraph (b)(1) does not, however, provide a date for the close of
books for host
[[Page 18512]]
committees' post-convention reports. The Commission proposes to revise
paragraph (b)(1) to establish this date as of 15 days prior to the date
of filing. This timeframe is consistent with the timeframes employed
for post-convention reports filed by convention committees, see 11 CFR
9008.3(b)(2)(ii), and the Commission believes it should also provide
sufficient time for host committees and municipal funds to prepare
their reports. The Commission seeks comment on this approach.
Under current paragraph (b)(2) of 11 CFR 9008.51, host committees
are required to file quarterly reports if they continue to accept
receipts or make disbursements after the completion date of the post
convention report. Host committees must continue to file such reports
until they cease all activity. 11 CFR 9008.51(b)(2).
By contrast, under current paragraph (c) of 11 CFR 9008.51,
municipal funds are required to file a post convention letter only
rather than a post convention report on FEC Form 4. The timeframe
within which municipal funds have to file this letter is the same as
the timeframe applicable to host committees' post convention reports.
Unlike host committees, however, municipal funds are not required to
continue filing information with the Commission regarding their post
convention activities, even if they accept receipts or make
disbursements after the completion date of the post convention letter.
Given that the Commission is proposing to permit municipal funds to
accept donations and make disbursements on the same terms as host
committees, the Commission believes that it is necessary to apply the
same reporting requirements to municipal funds that currently apply to
host committees. Moreover, the Commission proposes to require
continuing reporting in order to ensure that the reported information
is ``complete'' as required by 2 U.S.C. 437(1). Accordingly, the
Commission proposes to change paragraph (b) of 11 CFR 9008.51 to make
the same reporting requirements apply to municipal funds as apply to
host committees. As a conforming amendment, the Commission proposes to
delete paragraph (c) of 11 CFR 9008.51, which sets forth the current
municipal fund reporting requirements. The Commission seeks public
comment on this approach, particularly on the issue of whether
continuing reports are required in FECA to ensure completeness or are
inconsistent with FECA's reference to a singular financial statement. 2
U.S.C. 437.
The Commission also proposes to revise paragraph (b)(1) of 11 CFR
5008.51 to clarify that reports filed pursuant to the requirements of 2
U.S.C. 437 contain the information specified in part 104,
notwithstanding part 104's references to 2 U.S.C. 434. Although host
committees and municipal funds are required to report by 2 U.S.C.
437(1), and 11 CFR part 104 refers to 2 U.S.C. 434, the Commission
believes that having the information presented in the same format as
that of other required reports would greatly aid the public disclosure
of this financial activity. The Commission also proposes to revise 11
CFR 107.2 to reflect the revisions made to the registration and
reporting requirements for host committees and municipal funds.
Finally, the Commission is proposing that convention committees,
host committees, and municipal funds be required to submit a copy of
all agreements that any one of those organizations makes with the city,
county or State hosting the convention or any of the other convention-
related organizations. See new 11 CFR 9008.3(b)(ii) (convention
committees) and new 11 CFR 9008.51(a)(3) (host committees/municipal
funds). Under the Commission's proposal, any such agreements would be
required to be submitted along with the first required report due after
the execution of the agreement. Id. This would include subsequent
agreements to a previous agreement. Host committees and municipal funds
would not be required to submit agreements made with convention
committees if such agreements were already submitted to the Commission
by the convention committee. See new 11 CFR 9008.51(a)(3).
The Commission is also seeking comment on which form convention
committees, host committees, and municipal funds should use to report
to the Commission. Current regulations require convention committees
and host committees to use FEC Form 4 when reporting to the Commission.
See 11 CFR 9008.3(b)(2)(i) and 9008.51(b)(1). The proposed rules that
follow would maintain this requirement, in addition to requiring that
municipal funds also use FEC Form 4 under new 11 CFR 9008.51(b)(1). The
Commission is also considering eliminating this form and requiring
convention committees, host committees, and municipal funds to file FEC
Form 3P instead. FEC Form 3P is for reports of receipts and
disbursements by authorized committees of candidates for the Office of
President or Vice President. Use of FEC Form 3P would require some
adaptation for the convention scenarios. The Commission seeks comment
on whether it should maintain its requirement of FEC Form 4, or if it
should adopt FEC Form 3P for convention committees, host committees,
and municipal funds.
IX. Convention Legal and Accounting Fund (``CLAF'')
The Commission is proposing that convention committees be permitted
to establish separate legal and accounting funds (``CLAF'') to pay for
the legal and accounting services related solely to compliance with the
Federal Election Campaign Act and the Presidential Election Campaign
Fund Act. See proposed 11 CFR 9008.8(b)(4)(ii)(B). Under this proposal,
the funds raised by the CLAF would be required to be deposited in a
separate account and would have to comply with the limitations and
prohibitions of 11 CFR parts 110, 114 and 115. Contributions to the
CLAF could not exceed $25,000 per person, and $15,000 per multi-
candidate political committee in any calendar year.
If proposed section 9008.8(b)(4)(ii)(B) were adopted, the payment
by the CLAF of compensation to any individual or entity for legal and
accounting services to ensure compliance with the FECA and the Fund Act
and rendered to or on behalf of the convention committee in connection
with the presidential nominating convention or convention-related
activities would not be considered an expenditure and would not count
against the expenditure limitations of this section. The convention
committee would report contributions received to pay for legal and
accounting services on a separate Schedule A, and would report payments
for legal and accounting services on a separate Schedule B.
The Commission notes that its current regulations permit convention
committees some flexibility in this area. National party committees,
under 11 CFR 9008.8(b)(4), may raise contributions for convention
related legal and accounting costs subject to national party committee
limits for individuals and multi-candidate committees and otherwise in
compliance with 11 CFR parts 110, 114 and 115. Furthermore, the
regulations do not require that a separate account be established for
legal and accounting receipts and expenditures. The current regulations
also exempt payments made for legal and accounting expenditures from
the expenditure limitations of section 9008.8.
Nevertheless, the establishment of a separate convention legal and
[[Page 18513]]
accounting fund would provide several beneficial aspects for the
convention committee. The CLAF would have a separate contribution limit
from the National committee's limit but subject to the same limitations
and restrictions of the National committee. May the Commission permit
contributors to make one contribution of the amount specified in 2
U.S.C. 441a(a)(1)(B) or 2 U.S.C. 441a(a)(2)(B) to the political
committees established and maintained by the same national political
party and a second contribution up to that same amount to a CLAF? May
the Commission permit such committees to accept such contributions
consistent with 2 U.S.C. 441a(f) and 441i(a)(1) and (2)? Contributions
raised for the CLAF and spent for the convention related legal and
accounting costs would free up convention grant funds to cover
political activities rather than being used to pay lawyers and
accountants. And finally, funds raised for the CLAF would help ensure
that sufficient resources were available to the convention committee
for legal and compliance obligations. The Commission seeks comment on
all issues raised by this proposal.
X. Effective Date
The Commission invites comment on what the effective date should be
for any regulations it adopts relating to financing of the national
nominating conventions. Specifically, considering that efforts related
to the 2004 conventions are underway, should any or all changes to the
Commission's regulations not become effective until the 2008
conventions? If certain changes are required by BCRA, which became
effective on November 5, 2002, does the Commission have the legal
authority under the Administrative Procedures Act or otherwise to
postpone the effective date until after the 2004 conventions have been
held? Can the Commission have final regulations effective, but not
enforce them until the 2008 conventions? If the Commission took either
of these actions, would the Commission be essentially suspending BCRA
as it applies to convention financing until 2008 and, if so, does the
Commission have the power legally to do so? Alternatively, should any
arrangements that were memorialized in a written contract by a
convention committee, host committee or municipal fund prior to the
effective date of the regulatory changes be subject to the regulations
in effect at the contract's execution? For example, in September 1999,
the Commission declined to modify existing regulations regarding the
division of expenses between convention committees and host committees
and stated it was doing so ``given that the party committees have
already entered into contractual agreements with the sites selected.''
Explanation and Justification for Public Financing of Presidential
Primary and General Election Candidates, 64 FR 49355, 49358 (Sept. 13,
1999). If the Commission concludes that BCRA as a matter of law
requires certain regulatory changes, and that therefore its existing
regulations are no longer consistent with the statutory law, does the
Commission nevertheless have the legal authority to decline to modify
existing regulations or to postpone the effective date of new
regulations? The Commission also seeks comments on alternative
approaches to the effective date issue.
Certification of No Effect Pursuant to 5 U.S.C. 605(b) [Regulatory
Flexibility Act]
The attached proposed rules, if promulgated, would not have a
significant economic impact on a substantial number of small entities.
The basis for this certification is that few, if any, small entities
would be affected by these proposals, which apply only to presidential
candidates and their campaign committees. Presidential candidates,
their committees and national party committees are not small entities.
Most of these presidential campaigns receive full or partial funding
from the Federal Government, and are subsequently audited by the
Commission. The Commission reviews these rules every four years to
reflect its experience in the previous presidential campaign. These
rules propose no sweeping changes, and are largely intended to simplify
this process. Many expand committee options; several are technical; and
others codify past Commission practice. Those few proposals that might
increase the cost of compliance by small entities would not do so in
such an amount as to cause a significant economic impact.
List of Subjects
11 CFR Part 104
Campaign funds, Political committees and parties, Reporting and
recordkeeping requirements.
11 CFR Part 107
Campaign funds, Political committees and parties, Reporting and
recordkeeping requirements.
11 CFR Part 110
Campaign funds, Political committees and parties.
11 CFR Part 9003
Campaign funds, Reporting and recordkeeping requirements.
11 CFR Part 9004
Campaign funds.
11 CFR Part 9008
Campaign funds, Political committees and parties, Reporting and
recordkeeping requirements.
11 CFR Part 9032
Campaign funds.
11 CFR Part 9033
Campaign funds, Reporting and recordkeeping requirements.
11 CFR Part 9034
Campaign funds.
11 CFR Part 9035
Campaign funds.
11 CFR Part 9036
Administrative practice and procedure, Campaign funds, Reporting
and recordkeeping requirements.
11 CFR Part 9038
Administrative practice and procedure, Campaign funds.
For the reasons set out in the preamble, it is proposed to amend
Subchapters A, E and F of Chapter I of title 11 of the Code of Federal
Regulations as follows:
PART 104--REPORTS BY POLITICAL COMMITTEES (2 U.S.C. 434)
1. The authority citation for Part 104 would continue to read as
follows:
Authority: 2 U.S.C. 431(1), 431(8), 431(9), 432(i), 434,
438(a)(8) and (b), 439a, and 441a.
2. Section 104.5 would be amended by:
a. Revising paragraph (b)(1)(i)(C);
b. Revising paragraph (b)(1)(ii); and
c. Revising paragraph (b)(2).
Revisions are to read as follows:
Sec. 104.5 Filing dates (2 U.S.C. 434(a)(2)).
* * * * *
(b) * * *
(1) * * *
(i) * * *
(C) In lieu of the monthly reports due in November and December, a
pre-election report shall be filed as prescribed at paragraph (a)(2)(i)
of this section, a post-general election report shall be filed as
prescribed at paragraph (a)(2)(ii) of this section, and a year-end
report shall be filed no later than January 31 of the following
calendar year.
(ii) If on January 1 of the election year, the committee does not
anticipate
[[Page 18514]]
receiving and has not received contributions aggregating $100,000 and
does not anticipate making and has not made expenditures aggregating
$100,000, the committee shall file a preelection report or reports, a
post general election report and, quarterly reports, as prescribed in
paragraphs (a)(1) and (2) of this section.
* * * * *
(2) Non-election year reports. During a non-election year, the
treasurer shall file either monthly reports as prescribed by paragraph
(b)(1)(i) of this section; or quarterly reports as prescribed by
paragraph (a)(1) of this section. A principal campaign committee of a
presidential candidate reporting under paragraph (b)(2) of this section
may elect to change the frequency of its reporting from monthly to
quarterly or vice versa during a non-election year only after notifying
the Commission in writing of its intention at the time it files a
required report under its current filing frequency. The committee will
then be required to file the next required report under its new filing
frequency. The committee may change its filing frequency no more than
once per calendar year.
* * * * *
PART 107--PRESIDENTIAL NOMINATING CONVENTION, REGISTRATION AND
REPORTS
3. The authority citation for part 107 would continue to read as
follows:
Authority: 2 U.S.C. 437, 438(a)(8).
4. Section 107.2 would be revised to read as follows:
Sec. 107.2 Registration and reports by host committees and municipal
funds.
Each host committee and municipal fund shall register and report in
accordance with 11 CFR 9008.51. The reports shall contain the
information specified in 11 CFR part 104.
PART 110--CONTRIBUTION AND EXPENDITURE LIMITATIONS AND PROHIBITIONS
5. The authority citation for part 110 would continue to read as
follows:
Authority: 2 U.S.C. 431(8), 431(9), 432(c)(2), 437d, 438(a)(8),
441a, 441b, 441d, 441e, 441f, 441g, 441h, and 441k.
6. Section 110.2 would be amended by adding paragraph (l) to read
as follows:
Sec. 110.2 Contributions by multicandidate political committees (2
U.S.C. 441a(a)(2)).
* * * * *
(l) Expenditures for qualified campaign expenses of a Presidential
candidate. (1) For purposes of this paragraph (l), qualified campaign
expense has the same meaning as 11 CFR 9034.10(a).
(2) If a multicandidate political committee makes an expenditure
for any qualified campaign expense of a candidate for President, who is
not accepting public funding under 11 CFR subchapter E or F, on or
after January 1 of the year immediately following the last Presidential
election year, the expenditure shall be:
(i) Deemed to be an in-kind contribution by that multicandidate
political committee to the authorized committee of the candidate for
President; and
(ii) Subject to the contribution limitations set forth in paragraph
(b) of this section.
(3) Any expenditure described in paragraph (l)(2) of this section,
when aggregated with other contributions to the same candidate for
President, that exceed the contribution limitation in paragraph (b) of
this section shall be deemed to be an excessive contribution.
PART 9003--ELIGIBILITY FOR PAYMENTS
7. The authority for part 9003 would continue to read as follows:
Authority: 26 U.S.C. 9003 and 9009(b).
8. Section 9003.3 would be amended by:
a. Revising the introductory language in paragraph (a)(1)(i);
b. Revising paragraph (a)(1)(i)(C);
c. Revising paragraph (a)(1)(v);
d. Revising paragraph (a)(2)(i)(D);
e. Revising paragraph (a)(2)(i)(G);
f. Revising paragraph (a)(2)(i)(H);
g. Adding new paragraph (a)(2)(i)(I);
h. Revising paragraph (a)(2)(iii); and
i. Revising paragraph (a)(2)(iv).
Revisions and additions are to read as follows:
Sec. 9003.3 Allowable contributions; General election legal and
accounting compliance fund.
(a) * * *
(1) * * *
(i) A major party candidate, or an individual who is seeking the
nomination of a major party, may accept contributions to a legal and
accounting compliance fund if such contributions are received and
disbursed in accordance with this section. A general election legal and
accounting compliance fund (``GELAC'') may be established by such
individual prior to being nominated or selected as the candidate of a
political party for the office of President or Vice President of the
United States. Before June 1 of the calendar year in which a
Presidential general election is held, contributions may only be
deposited in the GELAC if they are made for the primary and exceed the
contributor's contribution limits for the primary and are lawfully
redesignated for the GELAC pursuant to 11 CFR 110.1.
* * * * *
(C) Contributions shall be deposited in the GELAC only if they are
designated in writing for the GELAC, or transferred pursuant to
paragraph (a)(1)(ii), (iii), (iv) or (v) of this section. Any
contribution which otherwise could be matched pursuant to 11 CFR 9034.2
shall not be considered designated in writing for the GELAC unless the
contributor specifically redesignates it for the GELAC , it is
accompanied by a proper designation for the GELAC, or it meets the
requirements of 11 CFR 110.1(b)(5)(ii)(B). Any contribution that is
designated in writing or redesignated for the GELAC shall not be
matched pursuant to 11 CFR 9034.2.
* * * * *
(v) Contributions made with respect to the primary election that
exceed the contributor's limit for the primary election may be
redesignated for the GELAC and transferred to the GELAC if the
candidate redesignates the contribution for the GELAC in accordance
with 11 CFR 110.1.
* * * * *
(2) * * *
(i) * * *
(D) To make repayments under 11 CFR 9007.2, 9038.2, or 9038.3;
* * * * *
(G) To make a loan to an account established pursuant to 11 CFR
9003.4 to defray qualified campaign expenses incurred prior to the
expenditure report period or prior to receipt of Federal funds,
provided that the amounts so loaned are restored to the GELAC;
(H) To defray unreimbursed costs incurred in providing
transportation and services for the Secret Service and national
security staff pursuant to 11 CFR 9004.6; and
(I) To defray winding down expenses for legal and accounting
compliance activities incurred after the end of the expenditure report
period by either the candidate's primary election committee, general
election committee, or both committees. For purposes of this section,
100% of salary, overhead and computer expenses incurred after the end
of the expenditure report period shall be considered winding down
expenses for legal and accounting compliance activities payable from
GELAC funds, and will be presumed to
[[Page 18515]]
be solely to ensure compliance with 2 U.S.C. 431 et seq. and 26 U.S.C.
9001 et seq.
* * * * *
(iii) Amounts paid from the GELAC for the purposes permitted by
paragraphs (a)(2)(i) (A) through (F), (H) and (I) of this section shall
not be subject to the expenditure limits of 2 U.S.C. 441a(b) and 11 CFR
110.8. (See also 11 CFR 100.146.) When the proceeds of loans made in
accordance with paragraph (a)(2)(i)(G) of this section are expended on
qualified campaign expenses, such expenditures shall count against the
candidate's expenditure limit.
(iv) Contributions to and funds deposited in the GELAC may not be
used to retire debts remaining from the presidential primaries, except
that, after payment of all expenses set out in paragraph (a)(2)(i) of
this section, and the completion of the audit and repayment process,
including the making of all repayments owed to the United States
Treasury by both the candidate's primary and general election
committees, funds remaining in the GELAC may be used for any purpose
permitted under 2 U.S.C. 439a and 11 CFR part 113, including payment of
primary election debts.
* * * * *
9. Section 9003.5 would be amended by adding new paragraph (b)(4),
to read as follows:
Sec. 9003.5 Documentation of disbursements.
* * * * *
(b) * * *
(4) The documentation requirements of 11 CFR 102.9(b) shall also
apply to disbursements.
* * * * *
PART 9004--ENTITLEMENT OF ELIGIBLE CANDIDATES TO PAYMENTS; USE OF
PAYMENTS
10. The authority citation for part 9004 would continue to read as
follows:
Authority: 26 U.S.C. 9004 and 9009(b).
11. Section 9004.4 would be amended by:
a. Revising the section heading;
b. Revising paragraph (a)(3);
c. Revising paragraph (a)(4) introductory text;
d. Removing paragraph (a)(4)(i);
e. Redesignating paragraph (a)(5) as paragraph (a)(6) and
redesignating paragraph (a)(4)(ii) as paragraph (a)(5) and revising
newly-designated (a)(5); and
f. Revising paragraph (b)(3).
Revisions, removals, and redesignations are to read as follows:
Sec. 9004.4 Use of payments; examples of qualified campaign expenses
and non-qualified campaign expenses.
(a) * * *
(3) To restore funds expended in accordance with 11 CFR 9003.4 for
qualified campaign expenses incurred by the candidate prior to the
beginning of the expenditure report period;
(4) To defray winding down costs pursuant to 11 CFR 9004.11; and
(5) To defray costs associated with the candidate's general
election campaign paid after the end of the expenditure report period,
but incurred by the candidate prior to the end of the expenditure
report period, for which written arrangement or commitment was made on
or before the close of the expenditure report period.
* * * * *
(b) * * *
(3) Expenditures incurred after the close of the expenditure report
period. Except for accounts payable costs pursuant to paragraph (a)(5)
of this section and winding down cost pursuant to 11 CFR 9004.11, any
expenditures incurred after the close of the expenditure report period,
as defined in 11 CFR 9002.12, are not qualified campaign expenses.
* * * * *
12. Section 9004.9 would be amended by revising paragraph (a)(4) to
read as follows:
Sec. 9004.9 Net outstanding qualified campaign expenses.
(a) * * *
(4) The amount submitted as an estimate of necessary winding down
costs under paragraph (a)(1)(iii) of this section shall be broken down
by expense category and quarterly or monthly time period. This
breakdown shall include estimated costs for office space rental, staff
salaries, legal expenses, accounting expenses, office supplies,
equipment rental, telephone expenses, postage and other mailing costs,
printing and storage. The breakdown shall estimate the costs that will
be incurred in each category from the time the statement is submitted
until the expected end of the winding down period.
* * * * *
13. New section 9004.11 would be added, to read as follows:
Sec. 9004.11 Winding down costs.
(a) Winding down costs. Winding down costs are costs associated
with the termination of the candidate's general election campaign such
as complying with the post-election requirements of the Act and other
necessary administrative costs associated with winding down the
campaign, including office space rental, staff salaries, and office
supplies. Winding down costs shall be considered qualified campaign
expenses.
(b) Winding down period. The candidate may use public funds to pay
for winding down costs only until the end of the winding down period.
The winding down period begins on the day following the last day of the
expenditure report period and continues until no earlier than:
(1) 30 days after the candidate's receipt of a Commission audit
report that does not contain a repayment determination;
(2) 60 days after service of notice to the candidate of a
Commission repayment determination if the candidate does not file a
request for an administrative review of the repayment determination; or
(3) 30 days after service of notice to the candidate of the
Commission's post-administrative review repayment determination or 30
days after service of notice of other final action concerning the
administrative review.
(c) Winding down limitation. The total amount of winding down costs
that may be paid for with public funds shall not exceed the lesser of:
(1) 2.5% of the expenditure limitation pursuant to 11 CFR
110.8(a)(2); or
(2) 2.5% of the total of:
(i) The candidate's expenditures subject to the expenditure
limitation as of the end of the expenditure report period; plus
(ii) The candidate's expenses exempt from the expenditure
limitation as of the end of the expenditure report period; except that
(iii) The winding down limitation shall be no less than $100,000.
(d) Allocation of primary and general election winding down costs.
A candidate who runs in both the primary and general election may
divide winding down expenses between his or her primary and general
election committees using any allocation method, including payment of
100% of these expenses by the primary or general election committee.
PART 9008--FEDERAL FINANCING OF PRESIDENTIAL NOMINATING CONVENTIONS
14. The authority citation for Part 9008 would be revised to read
as follows:
Authority: 2 U.S.C. 437, 438(a)(8), 441i; 26 U.S.C. 9008,
9009(b).
15. Section 9008.3 would be amended by redesignating paragraph
(b)(1)(ii) as paragraph (b)(1)(iii) and adding new paragraph
(b)(1)(ii), to read as follows:
[[Page 18516]]
Sec. 9008.3 Eligibility for payments; registration and reporting.
* * * * *
(b) * * *
(1) * * *
(ii) Each convention committee established by a national committee
under paragraph (a)(2) of this section shall submit to the Commission a
copy of any and all signed agreements that the convention committee has
entered into with the city, county, or State hosting the convention, a
host committee, or a municipal fund, including subsequent modifications
to previous agreements. Each such agreement or modification shall be
filed along with the first report due under paragraph (b)(2) of this
section after the agreement or modification is executed.
* * * * *
16. In section 9008.7, paragraph (a)(4) would be revised to read as
follows:
Sec. 9008.7 Use of funds.
(a) * * *
(4) ``Convention expenses'' include all expenses incurred by or on
behalf of a political party's national committee or convention
committee with respect to and for the purpose of conducting a
presidential nominating convention or convention-related activities.
* * * * *
17. Section 9008.8 would be amended by revising the paragraph
heading for paragraph (b)(2), revising paragraph (b)(2), and revising
paragraph (b)(4)(ii)(B) to read as follows:
Sec. 9008.8 Limitation of expenditures.
* * * * *
(b) * * *
(2) Expenditures by municipal funds. Expenditures made by municipal
funds shall not be considered expenditures by the national committee
and shall not count against the expenditure limitations of this section
if the funds are spent in accordance with the requirements of 11 CFR
9008.53.
* * * * *
(4) * * *
(ii) * * *
(B) The contributions raised by a Convention Legal and Accounting
Fund to pay for legal and accounting services must comply with the
limitations and prohibitions of 11 CFR parts 110, 114 and 115 and shall
be deposited in a separate account. These contributions shall not
exceed $25,000 per person, and $15,000 per multi-candidate political
committee in any calendar year.
* * * * *
18. Section 9008.9 would be revised to read as follows:
Sec. 9008.9 Receipt of goods and services from commercial vendors.
(a) Standard reductions or discounts. A commercial vendor may sell,
lease, rent or provide goods or services to the national committee with
respect to a Presidential nominating convention at reduced or
discounted rates, provided that it does so in the ordinary course of
business. A reduction or discount shall be considered in the ordinary
course of business if the commercial vendor has an established practice
of providing the same reductions or discounts for the same amount of
its goods or services to non-political clients, or if the reduction or
discount is consistent with established practice in the commercial
vendor's trade or industry. Examples of reductions or discounts made in
the ordinary course of business include standard volume discounts and
reduced rates for corporate, governmental or preferred customers.
Reductions or discounts provided under this section need not be
reported. For purposes of this section, commercial vendor has the same
meaning as provided in 11 CFR 116.1(c).
(b) Expenditure Limits. The value of goods or services provided
pursuant to this section will not count toward the national party's
expenditure limitation under 11 CFR 9008.8(a).
19. Section 9008.10 would be amended by revising the introductory
language to read as follows:
Sec. 9008.10 Documentation of disbursements; net outstanding
convention expenses.
In addition to the requirements set forth at 11 CFR 102.9(b), the
convention committee must include as part of the evidence of convention
expenses the following documentation:
* * * * *
20. Section 9008.12 would be amended by revising paragraph (b)(7)
to read as follows:
Sec. 9008.12 Repayments.
* * * * *
(b) * * *
(7) The Commission may seek repayment, or may initiate an
enforcement action, if the convention committee knowingly helps,
assists or participates in the making of a convention expenditure by
the host committee or municipal fund that is not in accordance with 11
CFR 9008.52 or 9008.53, or the acceptance of a contribution by the host
committee or municipal fund from an impermissible source.
* * * * *
21. Part 9008 would be amended by adding new Sec. 9008.17, to read
as follows:
Sec. 9008.17 Payment for Convention and Host Committee or Municipal
Fund Expenses.
(a) Convention expenses include all expenses incurred by or on
behalf of a political party's national committee or convention
committee with respect to and for the purpose of conducting a
presidential nominating convention or convention-related activities.
The following convention expenses may be paid by the convention
committee, but shall not be paid by the host committee or municipal
fund:
(1) Salaries and expenses of convention committee employees,
volunteers and similar personnel, whose responsibilities involve
planning, management or otherwise conducting the convention;
(2) Salary or portion of the salary of any national committee
employee for any period of time during which, as a major
responsibility, that employee performs services related to the
convention;
(3) Expenses of national committee employees, volunteers or other
similar personnel if those expenses were incurred in the performance of
services for the convention in addition to the services normally
rendered to the national committee by such personnel;
(4) Expenses for conducting meetings of or related to committees
dealing with the conduct and operation of the convention, such as
rules, credentials, platform, site, contests, call, arrangements and
permanent organization committees, including printing materials and
rental costs for meeting space;
(5) Expenses for entertainment activities which are part of the
official convention activity sponsored by the national committee,
including but not limited to dinners, concerts, and receptions; except
that expenses for the following activities are excluded:
(i) Entertainment activities sponsored by or on behalf of
candidates for nomination to the office of President or Vice President,
or State delegations;
(ii) Entertainment activities sponsored by the national committee
if the purpose of the activity is primarily for national committee
business, such as fund-raising events, or selection of new national
committee officers;
(iii) Entertainment activities sponsored by persons other than the
national committee; and
(iv) Entertainment activities prohibited by law;
[[Page 18517]]
(6) Expenses for printing convention programs, a journal of
proceedings, agendas, and other similar publications;
(7) Administrative and office expenses for conducting the
convention, including stationery, office supplies, office machines, and
telephone charges; but excluded from these expenses are the cost of any
services supplied by the national committee at its headquarters or
principal office if such services are incidental to the convention and
not utilized primarily for the convention;
(8) Payment of the principal and interest, at a commercially
reasonable rate, on loans the proceeds of which were used to defray
convention expenses;
(9) Expenses for gifts or monetary bonuses for national committee
or convention committee employees, volunteers and convention officials
in recognition for convention-related activities or services, provided
that the gifts and bonuses do not exceed $150 total per individual, and
the total for all gifts and bonuses does not exceed $20,000;
(10) Expenses for producing biographical films, or similar
materials, for use at the convention, about candidates for nomination
or election to the office of President or Vice President, but any other
political committee(s) that use part or all of the biographical films
or materials shall pay the convention committee for the reasonably
allocated cost of the biographical films or materials used; and
(11) To defray any expenses related to creating, producing, or
directing convention proceedings, such as directors, producers, and
writers.
(b) The following expenses may be paid by the convention committee,
host committee, or municipal fund. Convention committees, host
committees, and municipal funds may use donated funds and in-kind
donations they have received for the following purposes:
(1) To defray those expenses incurred for the purpose of promoting
or evaluating the suitability of the city as a convention site,
including accommodations and hospitality for officials and employees of
the convention and national party committees who are responsible for
choosing the sites of the conventions;
(2) To provide the convention committee use of an auditorium or
convention center and to provide construction and related services for
that location to design, create, or install the physical or
technological infrastructure for the conduct of the convention, such
as: construction of podiums; press facilities; seating; lighting
equipment; electrical systems; air conditioning systems; loudspeaker
and other communication systems; computer networks; office facilities;
office equipment; and other expenses for preparing, maintaining, or
dismantling the physical site of the convention, including convention
hall utilities;
(3) To defray the costs of various local transportation services
that are widely available to convention delegates and other individuals
attending the convention, including the provision of buses and
automobiles;
(4) To defray the costs of law enforcement and other security
services, facilities, and personnel, including tickets, badges, and
passes;
(5) To defray the cost of using convention bureau personnel to
provide central housing and reservation services; and
(6) To provide hotel rooms at no charge or a reduced rate on the
basis of the number of rooms actually booked for the convention.
(c) The following expenses may be paid by the host committee or
municipal fund, but shall not be paid by the convention committee.
Convention committees are also prohibited from using public funds as
specified in 11 CFR 9008.7(b). Host committees and municipal funds may
use donated funds and in-kind donations they have received for the
following purposes:
(1) To defray those expenses incurred in facilitating commerce,
such as providing the convention attendees with shopping and
entertainment guides and distributing the samples and promotional
material specified in 11 CFR 9008.52(a);
(2) To defray those expenses incurred for welcoming the convention
attendees to the city, such as expenses for information booths,
receptions, and tours; and
(3) To defray the host committee's administrative expenses incurred
by the host committee, such as host committee employee compensation and
expense reimbursement, host committee office rent, and host committee
liability insurance.
(d) Prohibited uses of donations received by host committees and
municipal funds. Host committees and municipal funds shall not use
donated funds or in-kind donations in connection with a national
nominating convention for the following purposes:
(1) To provide anything of value to a convention committee, a
national political party committee, or any other political committee,
except as expressly permitted by paragraphs (b) and (c) of this
section; or
(2) To defray any expenses related to creating, producing, or
directing convention proceedings, such as directors, producers, and
writers.
22. The title of Subpart B of Part 9008 would be revised to read as
follows:
Subpart B--Host Committees and Municipal Funds Representing a
Convention City
23. Section 9008.50 would be revised to read as follows:
Sec. 9008.50 Scope and definitions.
(a) Scope. This subpart B governs registration and reporting by
host committees and municipal funds representing convention cities.
Unsuccessful efforts to attract a convention need not be reported by
any city, committee or other organization. Subpart B also describes
permissible sources of funds and other permissible donations to host
committees and municipal funds. In addition, subpart B describes
permissible disbursements by host committees and municipal funds to
defray convention expenses and to promote the convention city and its
commerce.
(b) Definition of host committee. A host committee includes any
local organization, such as a local civil association, business league,
chamber of commerce, real estate board, board of trade, or convention
bureau that satisfies all of the following conditions:
(1) It is not organized for profit;
(2) Its net earnings do not inure to the benefit of any private
shareholder or individual; and
(3) Its principal purpose is the encouragement of commerce in the
convention city, as well as the projection of a favorable image of the
city to convention attendees.
(c) Definition of municipal fund. A municipal fund is any separate
fund or account of a government agency, municipality, or municipal
corporation whose principal purpose is the encouragement of commerce in
the municipality and whose receipt and use of funds is subject to
control of officials of the State or local government.
24. Section 9008.51 would be amended by:
a. Revising the paragraph heading for paragraph (a);
b. Revising paragraph (a)(1);
c. Adding paragraph (a)(3);
d. Revising paragraph (b); and
e. Deleting paragraph (c).
The revisions, additions, and deletions are to read as follows:
Sec. 9008.51 Registration and reports.
(a) Registration by host committees and municipal funds.
[[Page 18518]]
(1) Each host committee and municipal fund shall register with the
Commission by filing a Statement of Organization on FEC Form 1 within
10 days of the date on which such party chooses the convention city, or
within 10 days after the formation of the host committee or municipal
fund, whichever is later. In addition to the information already
required to be provided on FEC Form 1, the following information shall
be disclosed by the registering entity on FEC Form 1: The name and
address; the name and address of its officers; and a list of the
activities that the registering entity plans to undertake in connection
with the convention.
* * * * *
(3) Each host committee and municipal fund required to register
with the Commission under paragraph (a) of this section, shall submit
to the Commission a copy of any and all signed agreements that they
have entered into with the city, county, or State hosting the
convention, a host committee, a municipal fund, or a convention
committee, including subsequent modifications to previous agreements,
unless such agreements or modifications have already been submitted to
the Commission by the convention committee. Each such agreement or
modification shall be filed along with the first report due under
paragraph (b) of this section after the agreement or modification is
executed.
(b) Post-convention and quarterly reports by host committees and
municipal funds; content and time of filing. (1) Each host committee or
municipal fund required to register with the Commission pursuant to
paragraph (a) of this section shall file a post convention report on
FEC Form 4. The report shall be filed on the earlier of: 60 days
following the last day the convention is officially in session; or 20
days prior to the presidential general election. This report shall be
complete as of 15 days prior to the date on which the report must be
filed and shall disclose all the information required by 11 CFR part
104 with respect to all activities related to a presidential nominating
convention.
(2) If such host committee or municipal fund has receipts or makes
disbursements after the completion date of the post convention report,
it shall begin to file quarterly reports no later than 15 days after
the end of the following calendar quarter. This report shall disclose
all transactions completed as of the close of that calendar quarter.
Quarterly reports shall be filed thereafter until the host committee or
municipal fund ceases all activity that must be reported under this
section.
(3) Such host committee or municipal fund shall file a final report
with the Commission not later than 10 days after it ceases activity
that must be reported under this section, unless such status is
reflected in either the post-convention report or a quarterly report.
Alternative to Sec. 9008.17
25. Section 9008.52 would be revised to read as follows:
Sec. 9008.52 Receipts and disbursements of host committees.
(a) Receipt of goods or services from commercial vendors. (1)
Definition of ``commercial vendor.'' For purposes of this section,
commercial vendor has the same meaning as provided in 11 CFR 116.1(c).
(2) Standard reductions or discounts. Commercial vendors may sell,
lease, rent or provide their goods or services to the host committee at
reduced or discounted rates, or at no charge, provided that they do so
in the ordinary course of business. A reduction or discount shall be
considered in the ordinary course of business if the commercial vendor
has an established practice of providing the same reductions of
discounts for the same amount of its goods or services to non-political
clients, or if the reduction or discount is consistent with established
practice in the commercial vendor's trade or industry. Examples of
reductions or discounts made in the ordinary course of business include
standard volume discounts and reduced rates for corporate, governmental
or preferred customers. Reductions or discounts provided under this
section need not be reported.
(3) Items provided for promotional consideration. (i) A commercial
vendor may provide goods or services to a host committee in exchange
for promotional consideration provided that doing so is in the ordinary
course of business.
(ii) The provision of goods or services shall be considered in the
ordinary course of business under this paragraph:
(A) If the commercial vendor has an established practice of
providing goods or services on a similar scale and on similar terms to
non-political clients, or
(B) If the terms and conditions under which the goods or services
are provided are consistent with established practice in the commercial
vendor's trade or industry in similar circumstances.
(iii) In all cases, the value of the goods or services provided
shall not exceed the commercial benefit reasonably expected to be
derived from the unique promotional opportunity presented by the
national nominating convention.
(iv) The host committee shall maintain documentation showing: the
goods or services provided; the date(s) on which the goods or services
were provided; the terms and conditions of the arrangement; and what
promotional consideration was provided. In addition, the host committee
shall disclose in its report covering the period the goods or services
are received in a memo entry, a description of the goods or services
provided for promotional consideration, the name and address of the
commercial vendor, and the dates on which the goods or services was
provided (e.g., ``Generic Motor Co., Detroit, Michigan--ten automobiles
for use 7/15-7/20, received on 7/14'', or ``Workers Inc., New York, New
York--five temporary secretarial assistants to work 8/1-8/30, received
on 8/1'').
(4) Items of de minimis value. Commercial vendors (including banks)
may sell at nominal cost, or provide at no charge, items of de minimis
value, such as samples, discount coupons, maps, pens, pencils, or other
items included in tote bags for those attending the convention. The
items of de minimis value may be distributed by or with the help of
persons employed by the commercial vendor, or employed by or
volunteering for a host committee. The value of the items of de minimis
value provided under this paragraph need not be reported.
(b) Receipt of donations from businesses, organizations, and
individuals. Businesses (including banks), labor organizations, and
other organizations or individuals may donate funds or make in-kind
donations to a host committee to be used only for the following
purposes:
(1) To defray those expenses incurred for the purpose of promoting
the suitability of the city as a convention site, including
accommodations and hospitality for officials and employees of the
convention and national party committees who are responsible for
choosing the sites of the conventions;
(2) To defray those expenses incurred in facilitating commerce,
such as providing the convention attendees with shopping and
entertainment guides and distributing the samples and promotional
material specified in paragraph (a) of this section;
(3) To defray those expenses incurred for welcoming the convention
attendees to the city, such as expenses for information booths,
receptions, and tours;
(4) To defray the host committee's administrative expenses incurred
by the host committee, such as host committee
[[Page 18519]]
employee compensation and expense reimbursement, host committee office
rent, and host committee liability insurance;
(5) To provide the convention committee use of an auditorium or
convention center and to provide construction and related services for
that location to design, create, or install the physical or
technological infrastructure for the conduct of the convention, such
as: construction of podiums; press facilities; seating; lighting
equipment; electrical systems; air conditioning systems; loudspeaker
and other communication systems; computer networks; office facilities;
office equipment; and other expenses for preparing, maintaining, or
dismantling the physical site of the convention, including convention
hall utilities;
(6) To defray the costs of various local transportation services
that are widely available to convention delegates and other individuals
attending the convention, including the provision of buses and
automobiles;
(7) To defray the costs of law enforcement and other security
services, facilities, and personnel, including tickets, badges, and
passes;
(8) To defray the cost of using convention bureau personnel to
provide central housing and reservation services; and
(9) To provide hotel rooms for the rate paid by the host committee,
including either at no charge or at a reduced rate on the basis of the
number of rooms actually booked for the convention.
(c) Prohibited uses of donations received by host committees. Host
committees shall not use donated funds or in-kind donations in
connection with a national nominating convention for the following
purposes:
(1) To provide anything of value to a convention committee, a
national political party committee, or any other political committee,
except as expressly permitted by paragraphs (b)(1) and (b)(5) through
(8) of this section; or
(2) To defray any expenses related to creating, producing, or
directing convention proceedings, such as directors, producers, and
writers.
26. Section 9008.53 would be revised to read as follows:
Sec. 9008.53 Receipts and disbursements of municipal funds.
(a) Receipt of goods and services provided by commercial vendors.
Municipal funds may accept goods or services from commercial vendors
for convention uses under the same terms and conditions (including
reporting requirements) set forth at 11 CFR 9008.52 for host
committees.
(b) Receipt and use of donations to a municipal fund. Businesses
(including banks), labor organizations, and other organizations or
individuals may donate funds or make in-kind donations to a municipal
fund to pay for expenses listed in 11 CFR 9008.52(b), provided that
such funds or in-kind donations shall not be used for the expenses
listed in 11 CFR 9008.52(c).
27. Section 9008.55 would be added to read as follows:
Sec. 9008.55 Solicitation of non-Federal funds for host committees
and municipal funds.
(a) Host committee and municipal fund payments made in compliance
with this part shall be deemed disbursements in connection with a
Federal election for purposes of 11 CFR part 300.
(b) Host committees and municipal funds shall not be eligible to
make the certification pursuant to 11 CFR 300.11(d).
(c) Host committees and municipal funds shall not be eligible for
the exception in 11 CFR 300.65.
PART 9032--DEFINITIONS
28. The authority for part 9032 would continue to read as follows:
Authority: 26 U.S.C. 9032 and 9039(b).
29. Section 9032.9 would be amended by revising paragraph (c) to
read as follows:
Sec. 9032.9 Qualified campaign expense.
* * * * *
(c) Except as provided in 11 CFR 9034.4(e), expenditures incurred
either prior to the date the individual becomes a candidate or after
the last day of a candidate's eligibility will be considered qualified
campaign expenses if they meet the provisions of 11 CFR 9034.4(a).
Expenditures described under 11 CFR 9034.4(b) will not be considered
qualified campaign expenses.
PART 9033--ELIGIBILITY FOR PAYMENTS
30. The authority citation for part 9033 would continue to read as
follows:
Authority: 26 U.S.C. 9003(e), 9033 and 9039(b).
31. Section 9033.11 would be amended by adding new paragraph
(b)(4), to read as follows:
Sec. 9033.11 Documentation of disbursements.
* * * * *
(b) * * *
(4) The documentation requirements of 11 CFR 102.9(b) shall also
apply to disbursements.
* * * * *
PART 9034--ENTITLEMENTS
32. The authority citation for Part 9034 would continue to read as
follows:
Authority: 26 U.S.C. 9034 and 9039(b).
33. Section 9034.4 would be amended by:
a. Revising the section heading;
b. Revising paragraph (a)(3)(i);
c. Revising paragraph (a)(3)(ii);
d. Removing paragraph (a)(3)(iii);
e. Adding paragraph (a)(6); and
f. Revising paragraph (b)(3).
Revisions and additions are to read as follows:
Sec. 9034.4 Use of contributions and matching payments; examples of
qualified campaign expenses and non-qualified campaign expenses.
(a) * * *
(3) * * *
(i) Winding down costs subject to the restrictions in 11 CFR
9034.11 shall be considered qualified campaign expenses.
(ii) If the candidate continues to campaign after becoming
ineligible due to the operation of 11 CFR 9033.5(b), the candidate may
only receive matching funds based on net outstanding campaign
obligations as of the candidate's date of ineligibility. The statement
of net outstanding campaign obligations shall only include costs
incurred before the candidate's date of ineligibility for goods and
services to be received before the date of ineligibility and for which
written arrangement or commitment was made on or before the candidate's
date of ineligibility, and shall not include winding down costs until
the date on which the candidate qualifies to receive winding down costs
under 11 CFR 9034.11. Each contribution made, dated and received after
the candidate's date of ineligibility may be used to continue to
campaign, and may be submitted for matching fund payments. Payments
from the matching payment account that are received after the
candidate's date of ineligibility may be used to defray the candidate's
net outstanding campaign obligations, but shall not be used to defray
any costs associated with continuing to campaign unless the candidate
reestablishes eligibility under 11 CFR 9033.8.
* * * * *
(6) Certain expenses incurred by ineligible candidates attending
national nominating conventions.
[[Page 18520]]
(i) Expenses incurred by a candidate after the candidate's date of
ineligibility to conduct a specific fundraising event at a national
nominating convention needed to retire the candidate's net outstanding
campaign obligations may be treated as qualified campaign expenses. The
costs of the candidate's travel to attend such fundraising events, as
well as the travel expenses of campaign staff who participate in the
organization and administration of such events, may be treated as
qualified campaign expenses. Travel costs consist of transportation,
hotel or other lodging, and per diem subsistence for the candidate, the
candidate's spouse, and campaign staff and volunteers who organize or
administer the fundraising event. Expenses allocable to participation
by the candidate or campaign staff in the national nominating
convention, any other activities related to the convention, or any
other activities conducted by the political party, other than such
candidate fundraising events, are non-qualified campaign expenses.
Expenses related to such a fundraising event may be treated as
qualified campaign expenses only to the extent that, on the date of the
fundraising event, the candidate has net outstanding campaign
obligations pursuant to 11 CFR 9034.1(b).
(ii) Expenses incurred by a candidate after the candidate's date of
ineligibility attributable to a meeting, reception, or other event at a
national nominating convention to thank campaign employees, consultants
and volunteers pursuant to paragraph (a)(5) of this section, may be
treated as qualified campaign expenses so long as such a meeting,
reception or event is restricted to attendees who served the
candidate's primary campaign as employees, consultants, or volunteers.
Travel expenses for the candidate to attend such events or for campaign
staff who organize such events at the national nominating convention
are not qualified campaign expenses.
(b) * * *
(3) General election and post-ineligibility expenditures. Except
for continuing to campaign costs and winding down costs pursuant to
paragraph (a)(3) of this section and certain convention expenses
described in paragraph (a)(6) of this section, any expenses incurred
after a candidate's date of ineligibility, as determined under 11 CFR
9033.5, are not qualified campaign expenses. In addition, any expenses
incurred before the candidate's date of ineligibility for goods and
services to be received after the candidate's date of ineligibility, or
for property, services, or facilities used to benefit the candidate's
general election campaign, are not qualified campaign expenses.
* * * * *
34. Section 9034.5 would be amended by revising paragraph (b)(2) to
read as follows:
Sec. 9034.5 Net outstanding campaign obligations.
* * * * *
(b) * * *
(2) The amount submitted as estimated necessary winding down costs
under paragraph (a)(1) of this section shall be broken down by expense
category and quarterly or monthly time period. This breakdown shall
include estimated costs for office space rental, staff salaries, legal
expenses, accounting expenses, office supplies, equipment rental,
telephone expenses, postage and other mailing costs, printing and
storage. The breakdown shall estimate the costs that will be incurred
in each category from the time the statement is submitted until the
expected end of the winding down period.
* * * * *
35. Section 9034.10 would be added to read as follows:
Sec. 9034.10 Expenditures for qualified campaign expenses by
multicandidate political committees.
(a) Definition. For purposes of this section, qualified campaign
expense means a purchase, payment, distribution, loan, advance,
deposit, or gift of money or anything of value--
(1) Incurred by, on behalf of, or for the benefit of a candidate or
the candidate's authorized committee; and
(2) Made in connection with a candidate's campaign for nomination.
(3) Examples of a qualified campaign expense include, but are not
limited to:
(i) Polling expenses;
(ii) Travel expenses;
(iii) Staff salaries; and
(iv) Office space expenses.
(b) If a multicandidate political committee makes an expenditure
for any qualified campaign expense of a candidate on or after January 1
of the year immediately following the last Presidential election year,
the expenditure shall be:
(1) Deemed to be an in-kind contribution by that multicandidate
political committee to the authorized committee of the candidate and
subject to the provision of 11 CFR 9035.1(a)(3)(iv);
(2) Subject to the contribution limitations set forth in 11 CFR
110.2(b);
(3) Included in the expenditures subject to the expenditure
limitations in 11 CFR part 9035; and
(4) Subject to the provisions of 11 CFR 9038.1.
(c) Any expenditure described in paragraph (b) of this section,
when aggregated with other contributions to the same candidate, that
exceed the contribution limitation in 11 CFR 110.2(b) shall be deemed
to be an excessive contribution.
36. New section 9034.11 would be added, to read as follows:
Sec. 9034.11 Winding down costs.
(a) Winding down costs. Winding down costs are costs associated
with the termination of political activity related to a candidate's
seeking his or her nomination for election, such as the costs of
complying with the post election requirements of the Act and other
necessary administrative costs associated with winding down the
campaign, including office space rental, staff salaries, and office
supplies. Winding down costs shall be considered qualified campaign
expenses.
(b) Winding down period. The candidate may use matching funds to
pay for winding down costs only until the end of the winding down
period. The winding down period begins on the day following the
candidate's date of ineligibility for candidates who do not run in the
general election, or on the day following the date 30 days after the
general election for candidates who run in the general election, and
continues until no earlier than:
(1) 30 days after the candidate's receipt of a Commission audit
report that does not contain a repayment determination;
(2) 60 days after service of notice to the candidate of a
Commission repayment determination if the candidate does not file a
request for an administrative review of the repayment determination; or
(3) 30 days after service of notice to the candidate of the
Commission's post-administrative review repayment determination or 30
days after service of notice of the Commission's determination that no
repayment is owed.
(c) Winding down limitation. The total amount of winding down costs
that may be paid for, in whole or part, with matching funds shall not
exceed the lesser of:
(1) 5% of the overall expenditure limitation pursuant to 11 CFR
9035.1; or
(2) 5% of the total of:
(i) The candidate's expenditures subject to the overall expenditure
[[Page 18521]]
limitation as of the candidate's date of ineligibility; plus
(ii) The candidate's expenses exempt from the expenditure
limitations as of the candidate's date of ineligibility; except that
(iii) The winding down limitation shall be no less than $100,000.
(d) Allocation of primary and general election winding down costs.
A candidate who runs in both the primary and general election may
divide winding down expenses between his or her primary and general
election committees using any allocation method, including payment of
100% of these expenses by the primary or general election committee.
(e) Primary winding down costs during the general election period.
A primary election candidate who does not run in the general election
may receive and use matching funds for these purposes either after he
or she has notified the Commission in writing of his or her withdrawal
from the campaign for nomination or after the date of the party's
nominating convention, if he or she has not withdrawn before the
convention. A primary election candidate who runs in the general
election, regardless of whether the candidate receives public funds for
the general election, must wait until 31 days after the general
election before using any matching funds for winding down costs related
to the primary election. No expenses incurred by a primary election
candidate who runs in the general election prior to 31 days after the
general election shall be considered primary winding down costs.
PART 9035--EXPENDITURE LIMITATIONS
37. The authority citation for Part 9035 would continue to read as
follows:
Authority: 26 U.S.C. 9035 and 9039(b).
38. Section 9035.1 would be amended by:
a. Adding new paragraph (a)(3);
b. Adding new paragraph (a)(4);
c. Revising the paragraph heading in paragraph (c);
d. Revising paragraph (c)(1); and
e. Adding new paragraph (c)(3).
Additions and revisions are to read as follows:
Sec. 9035.1 Campaign expenditure limitation; compliance and
fundraising exemptions.
(a) * * *
(3) In addition to expenditures made by a candidate or the
candidate's authorized committee(s) using campaign funds, the
Commission will attribute to the candidate's overall expenditure
limitation and to the expenditure limitations of particular states
under 11 CFR 110.8 the total amount of all:
(i) Coordinated expenditures under 11 CFR 109.20;
(ii) Coordinated communications under 11 CFR 109.21 that are in-
kind contributions received or accepted by the candidate, the
candidate's authorized committee(s), or agents, under 11 CFR 109.21(b);
(iii) Coordinated party expenditures, including party coordinated
communications pursuant to 11 CFR 109.37 that are in-kind contributions
received or accepted by the candidate, the candidate's authorized
committee(s), or agents under 11 CFR 109.37(a)(3), and that exceed the
coordinated party expenditure limitation for the presidential general
election at 11 CFR 109.32(a); and
(iv) Other in-kind contributions received or accepted by the
candidate or the candidate's authorized committee(s) or agents.
(4) The amount of each in-kind contribution attributed to the
expenditure limitations under this section is the usual and normal
charge for the goods or services provided to the candidate or the
candidate's authorized committee(s) as an in-kind contribution.
* * * * *
(c) Compliance, fundraising and shortfall exemptions.
(1) A candidate may exclude from the overall expenditure limitation
set forth in paragraph (a) of this section an amount equal to 15% of
the overall expenditure limitation as exempt legal and accounting
compliance costs under 11 CFR 100.146. In the case of a candidate who
does not run in the general election, for purposes of the expenditure
limitations set forth in this section, 100% of salary, overhead and
computer expenses incurred after a candidate's date of ineligibility
may be treated as exempt legal and accounting compliance expenses
beginning with the first full reporting period after the candidate's
date of ineligibility. Candidates who continue to campaign or re-
establish eligibility may not treat 100% of salary, overhead and
computer expenses incurred during the period between the date of
ineligibility and the date on which the candidate either re-establishes
eligibility or ceases to continue to campaign as exempt legal and
accounting compliance expenses. For purposes of the expenditure
limitations set forth in this section, candidates who run in the
general election, regardless of whether they receive public funds, must
wait until the day following the date 30 days after the general
election before they may treat 100% of salary, overhead and computer
expenses as exempt legal and accounting compliance expenses.
* * * * *
(3) A candidate may exclude from the overall expenditure limitation
of this section 5% of the amount of any matching funds to which the
candidate was entitled that were not paid to the candidate, or were
paid on a date subsequent to the date on which payment of such matching
funds was due to the candidate, because of a shortfall in the matching
payment account.
* * * * *
PART 9036--REVIEW OF MATCHING FUND SUBMISSIONS AND CERTIFICATION OF
PAYMENTS BY COMMISSION
39. The authority citation for Part 9036 would continue to read as
follows:
Authority: 26 U.S.C. 9036 and 9039(b).
40. Section 9036.1 would be amended by revising paragraph
(b)(1)(ii) to read as follows:
Sec. 9036.1 Threshold submission.
* * * * *
(b) * * *
(1) * * *
(ii) The occupation and name of employer for individuals whose
aggregate contributions exceed $200 in an election cycle;
* * * * *
41. Section 9036.2 would be amended revising paragraph (b)(1)(v) to
read as follows:
Sec. 9036.2 Additional submissions for matching fund payments.
* * * * *
(b) * * *
(1) * * *
(v) The occupation and employer's name need not be disclosed on the
contributor list for individuals whose aggregate contributions exceed
$200 in the election cycle, but such information is subject to the
recordkeeping and reporting requirements of 2 U.S.C. 432(c)(3),
434(b)(3)(A) and 11 CFR 102.9(a)(2), 104.3(a)(4)(i); and
* * * * *
PART 9038--EXAMINATIONS AND AUDITS
42. The authority citation for Part 9038 would continue to read as
follows:
Authority: 26 U.S.C. 9038 and 9039(b).
43. Section 9038.1 would be amended by revising paragraph (a)(2) to
read as follows:
[[Page 18522]]
Sec. 9038.1 Audit.
(a) * * *
(2) In addition, the Commission may conduct other examinations and
audits from time to time as it deems necessary to carry out the
provisions of this subchapter, including examinations and audits of
multicandidate political committees operating under 11 CFR 9034.10.
* * * * *
44. Section 9038.2 would be amended by:
a. Revising paragraph (b)(2)(ii)(A);
b. Revising the introductory text of paragraph (b)(2)(iii); and
c. Revising paragraph (b)(4).
Revisions are to read as follows:
Sec. 9038.2 Repayments.
* * * * *
(b) * * *
(2) * * *
(ii) * * *
(A) Determinations that a candidate, a candidate's authorized
committee(s) or agents have made expenditures in excess of the
limitations set forth in 11 CFR part 9035, by either making
disbursements that are expenditures or by receiving or accepting in-
kind contributions that are subject to the expenditure limitations
pursuant to 11 CFR 9035.1(a)(3);
* * * * *
(iii) The amount of any repayment sought under this section shall
bear the same ratio to the total amount determined to have been used
for non-qualified campaign expenses as the amount of matching funds
certified to the candidate bears to: the candidate's total deposits, as
of 90 days after the candidate's date of ineligibility plus the usual
and normal charge for all goods or services provided as in-kind
contributions. For the purposes of this paragraph (b)(2)(iii)--
* * * * *
(4) The Commission may determine that the candidate's net
outstanding campaign obligations, as defined in 11 CFR 9034.5, reflect
a surplus. The Commission may determine that the net income derived
from an investment or other use of surplus public funds after the
candidate's date of ineligibility, less Federal, State and local taxes
paid on such income, shall be paid to the Treasury.
* * * * *
Dated: April 7, 2003.
Ellen L. Weintraub,
Chair, Federal Election Commission.
[FR Doc. 03-8761 Filed 4-14-03; 8:45 am]
BILLING CODE 6715-01-P