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| !            | FEDERAL ELECTION COMMISSION                           |
| [](media/ima |                                                       |
| ge1.wmf){wid | Washington, DC 20463                                  |
| th="1.229861 |                                                       |
| 111111111in" |                                                       |
| heigh        |                                                       |
| t="1.2298611 |                                                       |
| 11111111in"} |                                                       |
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**[MEMORANDUM]{.underline}**

TO: The Commission

THROUGH: James A. Pehrkon

Staff Director

FROM: Lawrence H. Norton

General Counsel

Rosemary C. Smith

Acting Associate General Counsel

Anthony Buckley

Attorney

Mai T. Dinh

Attorney

Jonathan M. Levin

Senior Attorney

Dawn M. Odrowski

Attorney

Rita A. Reimer

Attorney

John C. Vergelli

Attorney

Anne Weissenborn

Senior Attorney

SUBJECT: Final Rule for Excessive and Prohibited Contributions:
Non-Federal Funds or Soft Money

On May 20, 2002, the Commission published a notice of proposed
rulemaking (NPRM) entitled "Excessive and Prohibited Contributions;
Non-Federal Funds or Soft Money." [See]{.underline} 67 [Fed.
Register]{.underline} 35654. The Commission held a hearing on the NPRM
on June 4-5, 2002. After reviewing the written comments as well as
comments expressed during the hearing, and discussion with the
Regulations Committee, the Office of General Counsel has prepared for
Commission consideration the attached final rules and the accompanying
Explanation and Justification regarding non-Federal funds.

**Recommendation**

The Office of General Counsel recommends that the Commission approve the
attached Final Rule for publication in the *Federal Register* and
transmittal to Congress.

The Office of General Counsel also recommends that the Commission direct
this Office to prepare a new notice of proposed rulemaking addressing
the definition of "promote or support, attack or oppose."

Attachment

**Federal election commission**

**11 CFR Parts 100, 102, 104, 106, 108, 110, 114, 300, and 9034**

**\[Notice 2002 - \]**

**Prohibited and Excessive Contributions: Non-Federal Funds or Soft
Money**

**AGENCY:** Federal Election Commission.

**ACTION:** Final Rules and Transmittal of Regulations to Congress.

**SUMMARY:** The Federal Election Commission is revising its rules
relating to funds raised, received, and spent by party committees under
the Federal Election Campaign Act of 1971, as amended (\"FECA\" or the
\"Act\"). The revisions are based on the Bipartisan Campaign Reform Act
of 2002 ("BCRA"), which adds to the Act new restrictions and
prohibitions on the receipt, solicitation, and use of certain types of
non-Federal funds, which are commonly referred to as "soft money." BCRA
and the revised rules prohibit national parties and Federal candidates
and officeholders from raising non-Federal funds. They also generally
require State, district, and local party committees to fund "Federal
election activity," including certain voter registration and
get-out-the-vote ("GOTV") drives, with money raised pursuant to the
limitations, prohibitions, and reporting requirements of the Act, or
with a combination of funds subject to various requirements of the Act
and BCRA. They also address fundraising by Federal and non-Federal
candidates and Federal officeholders on behalf of political party
committees, other candidates, and non-profit organizations. Further
information is contained in the Supplementary Information that follows.

**DATES:** The effective date is November 6, 2002. However, the
effective date for 11 CFR 106.7(a) is delayed until January 1, 2003.

**for further**

**information**

**contact**: Ms. Rosemary C. Smith, Acting Associate General Counsel, or
Attorneys Mr. Jonathan M. Levin (office buildings), Ms. Dawn Odrowski
(national parties and tax-exempt organizations), Ms. Rita A. Reimer
(Federal and State candidates), Mr. John C. Vergelli (definitions and
Levin funds), or Ms. Anne A. Weissenborn (State and local parties), 999
E Street N.W., Washington, DC 20463, (202) 694-1650 or (800) 424-9530.

**Supplementary**

**INFORMATION:** The Bipartisan Campaign Reform Act of 2002 ("BCRA"),
Pub. L. 107-155, 116 Stat. 81 (March 27, 2002), contains extensive and
detailed amendments to the Federal Election Campaign Act of 1971, as
amended ("FECA" or the "Act"), 2 U.S.C. 431 [et]{.underline}
[seq]{.underline}. This is the first of a series of rulemakings the
Commission is undertaking this year in order to meet the rulemaking
deadlines set out in BCRA. These

rules address BCRA\'s new limitations on party, candidate, and
officeholder solicitation

and use of non-Federal funds.[^1]

Section 402(c)(2) of BCRA establishes a 90-day deadline for the
Commission to promulgate these rules. Since BCRA was signed into law on
March 27, 2002, the 90-day deadline is June 25, 2002.[^2] The new rules
will take effect on November 6, 2002, the day following the November
2002 general election, except rules that take effect after the
transition period. 2 U.S.C. 431 note.

Because of the extremely tight deadline for promulgating these rules,
the Commission adhered to a shorter-than-usual timeline for receiving
and considering public comments. The Notice of Proposed Rulemaking
("NPRM") on which these rules are based was published in the [Federal
Register]{.underline} on May 20, 2002. 67 [Fed. Register]{.underline}
35654 (May 20, 2002). Comments were received from the Alliance for
Justice; the American Federation of Labor and Congress of Industrial
Organizations; the American Federation of State, County, and Municipal
Employees ("AFSCME"); the Association of State Democratic Chairs
("ASDC"); Dr. Peter Bearse; the California Republican Party; the

Campaign and Media Legal Center; the Center for Responsive Politics and
FEC Watch (joint comment); Common Cause and Democracy 21 (joint
comment); the Connecticut Republican State Central Committee; the
Democratic National Committee ("DNC"), the Democratic Senatorial
Campaign Committee ("DSCC") and the Democratic Congressional Campaign
Committee ("DCCC") (joint comment); Development Strategies Corporation;
Benjamin L. Ginsberg, Esq.; Janice P. Johnson; the Latino Coalition and
National Taxpayer Network (joint comment); the Michigan Democratic Party
("MDP"); Mindshare Internet Campaigns L.L.C.; the NAACP National Voter
Fund ("NAACP NVF"); the National Republican Congressional Committee
("NRCC"); OMB Watch; Senators John S. McCain and Russell D. Feingold,
and Representatives Christopher Shays and Marty Meehan (joint comment),
and a supplemental comment from Sen. McCain; Representative Bob Ney;
Norman D. Petrick; and the Republican National Committee ("RNC").

The Commission held a public hearing on the NPRM on June 4 and 5, 2002,
at which it heard testimony from representatives of the ASDC; the
AFL-CIO; the Campaign and Media Legal Center; Common Cause and Democracy
21; CRP and FEC Watch; the DNC, DSCC and DCCC; the Latino Coalition and
the Taxpayer Network, Inc.; NAACP NVF; the MDP; the RNC, the RNCC, and
the Republican State Chairmen; and Mr. Ginsberg. Please note that, for
purposes of this rulemaking, the terms "commenter" and "comment" cover
both written comments and oral testimony at the public hearing.

Under the Administrative Procedures Act, 5 U.S.C. 553(d), and the
Congressional Review of Agency Rulemaking Act, 5 U.S.C. 801(a)(1),
agencies must submit final rules to the Speaker of the House of
Representatives and the President of the Senate and publish them in the
[Federal Register]{.underline} at least 30 calendar days before they
take effect. The final rules on prohibited and excessive contributions:
non-Federal funds or Soft Money were transmitted to Congress on June \>,
2002.

#######  Explanation and Justification

####### I. Terminology

Because the term "soft money" is used by different people to refer to a
wide variety of funds under different circumstances, the Commission is
using the term "non-Federal funds" in the final rules rather than the
term "soft money." BCRA does not use the term "soft money" except in the
heading of Title I and the headings within Title IV. Moreover, some
donations that do not meet the Act's hard money requirements, for
example, those from foreign nationals, national banks, and Federal
corporations, may not be accepted at all. Nonetheless, the Commission
sought comment on whether use of the term "soft money" would in some
instances be preferable.

Not all commenters addressed this issue, and several of those who did
not used the term "soft money" throughout their comments. Most of those
who addressed this question, however, urged the Commission to use the
terms "Federal funds" and "non-Federal funds" in place of what they
characterized as the often-misunderstood term "soft money." One
commenter urged the Commission to use the terms "regulated" and
"unregulated" funds, arguing that the terms "Federal" and "non-Federal"
funds are also confusing. However, the terms "Federal" and "non-Federal"
have been used by the Commission for many years throughout the rules and
are thus familiar to those active in this area. [See]{.underline}, for
example, 11 CFR 102.5 ("Federal" and "non-Federal" accounts); 11 CFR
106.5 ("Federal" and "non-Federal" disbursements). The terms "regulated"
and "unregulated" could also be subject to different interpretations.
The Commission is, therefore, using the terms "Federal" and
"non-Federal" throughout the text of the regulations and the
accompanying Explanation and Justification.

# **II. The Statutory Framework**

The Act limits the amount that individuals can contribute to candidates,
political committees, and political parties for use in Federal
elections. 2 U.S.C. 441a. The Act also prohibits corporations and labor
organizations from contributing their general treasury funds for these
purposes. 2 U.S.C. 441b. Contributions from national banks, 2 U.S.C.
441b(a); government contractors, 2 U.S.C. 441c; foreign nationals,
2 U.S.C. 441e; and minors, new 2 U.S.C. 441k, as enacted by BCRA; as
well as contributions made in the name of another, 2 U.S.C. 441f; are
also prohibited. These strictures regulate what is often referred to as
"hard money," or Federal funds.

Some donations that do not meet the FECA hard money requirements, for
example, corporate and labor organization general treasury
contributions, may not be used for Federal elections, and are referred
to as non-Federal funds. Non-Federal funds may not be used for the
purpose of influencing any election for Federal office. Funds raised
that are used by State or local parties or State or local candidates
wholly on non-Federal elections may be governed by State or local law.
Prior to BCRA's revisions, the FECA permitted national party committees,
Federal candidates, and officeholders to raise money not subject to some
of the Act's source limitations and prohibitions. Beginning November 6,
2002, under BCRA, national party committees "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
this Act." 2 U.S.C. 441i(a).

BCRA also requires State, district, and local political party committees
to pay for "Federal election activities," which is a new term introduced
and defined by BCRA, 2 U.S.C. 431(20), with entirely Federal funds or,
in some cases, a mix of Federal funds and a new type of funds, which the
rules call "Levin funds." These two provisions are related in that the
latter is intended to prevent evasion of the former. A State, district,
or local political party committee may not evade the restrictions in
BCRA by receiving funds transferred from a national party committee and
spending those funds on Federal election activity. The State, district,
and local party committees must spend Federal funds it raises itself on
these activities. [See]{.underline} 148 Cong. Rec. H408-409 (daily ed.
Feb. 13, 2002) (statement of Rep. Shays).

As discussed below, these new and revised rules partially supersede the
following advisory opinions relating to party office buildings: Advisory
Opinions 2001-12, 2001-1, 1998-8, 1998-7, 1997-14, 1993-9, 1991-5, and
1986-40. Other advisory opinions may no longer be relied upon to the
extent they conflict with BCRA. Further guidance will be forthcoming in
future advisory opinions and rulemakings.

####### III. Part 100 -- Scope and Definition

# 11 CFR 100.14 Definition of "State committee, subordinate committee, district, or local committee"

Several provisions of BCRA refer to "State, district, and local
committees of a political party." [See, e.g.]{.underline}, the "Levin
Amendment," 2 U.S.C. 441i(b)(2). In the NPRM, the Commission pointed out
that the terms "State committee," "subordinate committee," and "party
committee," are already defined in the regulations, although "district
committee" and "local committee" are not. 11 CFR 100.14, 100.5(e)(4);
[see also]{.underline} 2 U.S.C. 431(15). The NPRM proposed to conform
section 100.14 with BCRA, and to harmonize sections 11 CFR 100.14 and
100.5(e)(4).

In paragraph (a) of section 100.14, the status as a State committee is
determined by reference to the party bylaws [or]{.underline} State law.
This provision, which did not draw comment, allows the regulation to
cover those States in which party committee status is a matter of State
law and those in which it is a matter of party bylaws. There is also a
grammatical correction in paragraph (a).

The proposed regulation published in the NPRM provided, in paragraphs
(a), (b), and (c), with regard to "State committees," "subordinate
committees," and "district or local committees," respectively, that an
organization must be "part of the official party structure"
[and]{.underline} be "responsible for the day-to-day operation of the
political party" to meet the definition. Three commenters, including the
principal Congressional sponsors of BCRA, objected to this conjunctive
requirement. These commenters collectively believe that limiting the
definition to organizations that are part of the "official party
structure" will open the door to purportedly "unofficial" party
organizations that would be able to avoid BCRA's requirement while
"manifestly engaged in party operations." Instead, they propose a
disjunctive definition, which would provide that a party organization
meets the respective definitions if it is part of the official party
structure [or]{.underline} responsible for the day-to-day operation of
the party. In paragraph (a), the Commission has determined not to add
the words, "is part of the official party structure," in the final rules
because they are redundant. If an organization is provided for in either
the party by-laws or in State, it is "official."

In paragraph (b), there is, in addition to a grammatical correction, the
addition of the phrase, "as determined by the Commission," to the end of
the paragraph. This added language standardizes the treatment of "State
committees" and "subordinate committees" in the section. Existing
paragraph (a) already includes this statutory requirement.

2 U.S.C. 431(15). The added language also gives the Commission the
necessary authority and flexibility to ensure that district and local
committees are treated consistently and fairly. The principal
Congressional sponsors of BCRA commented that proposed paragraph (b) did
not, but should, include within the definition an entity that is
directly or indirectly established, financed, maintained, or controlled
by the subordinate committee. The Commission has adopted this suggestion
in the final rules. Also, for the reasons explained above in the context
of paragraph (a), the words, "is part of the official party structure,"
have not been included in the final regulation.

Paragraph (c) is a new provision defining "district or local committee."
This definition parallels paragraph (a) but for political subdivisions
below the State level, and encompasses those political party committees
that do not necessarily operate formally under the "control or
direction" of the State party committee. The key criterion for
determining status as a district or local party committee is
responsibility for the day‑to‑day operation of the party, whether that
is a matter of State law or the party's bylaws. For the reasons
explained above in the context of paragraph (a), the words, "is part of
the official party structure," have not been included in the final
regulation.

The principal Congressional sponsors of BCRA commented that the words,
"under State law," are redundant given the preceding reference to
"operation of State law." The Commission agrees, and has deleted the
redundant words in the final rule.

Three commenters objected to adding language, "as determined by the
Commission," in paragraph (c) of section 100.14. An association of State
party officials stated, referring to paragraph (c), "there should be no
discretion left to the Commission to decide whether a particular
organization is a local party committee." A national party committee
described status as a local committee as a "quintessential State and
local" issue. The Commission notes, however, that many operative
provisions of BCRA apply expressly to "local committee of a political
party," including the so-called "soft-money ban" that lies at the heart
of BCRA's Title I. [See]{.underline} 2 U.S.C. 441i(b)(1). Therefore,
status as a committee of a political party, even at the local level, now
has implications under the FECA, as amended by BCRA.

[11 CFR 100.24 Definition of "Federal election activity"]{.underline}

Many of the operative provisions of Title I of BCRA use the term
"Federal election activity" ("FEA"). [See, e.g]{.underline}*.*, 2 U.S.C.
441i(b)(1), (2), which provides that a State, district, and local
political party committee that conducts FEA must pay for this activity
with either Federal funds or a combination of Federal funds and Levin
funds. [See also]{.underline} 2 U.S.C. 441i(d). Congress defined the
term at 2 U.S.C. 431(20). The Commission is adopting new regulation 11
CFR 100.24 to implement the statutory definition.

The definition of FEA proposed in the NPRM drew numerous comments urging
divergent interpretations of key statutory terminology. Many of these
comments focused on four important phrases that are used in the
statutory definition at 2 U.S.C. 431(20). In light of these comments,
the Commission has revised the regulation proposed in the NPRM by adding
a new first paragraph, 11 CFR 100.24(a), which defines these four terms
for the purposes of the rest of the regulation and for use in part 300
of chapter 1 of Title 11. These terms are "voter registration activity"
([see]{.underline} 2 U.S.C. 431(20)(A)(i)), "in connection with an
election in which a candidate for Federal office appears on the ballot,"
"get-out-the-vote activity" ("GOTV"), and "voter identification"
([see]{.underline} 2 U.S.C. 431(20)(A)(ii)).

[A. Elections in Which Federal Candidates "Appear on the
Ballot"]{.underline}

The statutory definition of FEA provides that certain activities are FEA
if they are "in connection with an election in which a candidate for
Federal office appears on the ballot." 2 U.S.C. 431(20)(A)(ii). The NPRM
requested comment as to how to interpret this statutory provision.
Several commenters, including the principal Congressional sponsors of
BCRA, urged the Commission to construe this phrase to mean "starting at
the beginning of a two-year Federal election cycle, except in states
holding regularly scheduled state elections in odd-numbered years."
These commenters argued that this approach is "consistent with the
Commission's current practice with respect to allocation of generic
voter drive and administrative expenses," and comports with the plain
meaning of the statute.

In contrast, two commenters, a national party committee and a labor
organization, urged the Commission to pick a date, January 1 of
even-numbered years, certain to identify the time-frame that is "in
connection with an election in which a candidate for Federal office
appears on the ballot." The commenters commended this approach as
"practical" and "reasonable." One of these commenters suggested that the
concept of even-numbered Federal election years is already familiar, and
that party activities are "more diverse" in odd-numbered years, in that
they are more focused on local and State activities. The Commission
notes that a large number of State and local elections take place in
odd-numbered years ([e.g.]{.underline}, mayoral elections in some large
cities). Activities in connection with such elections are presumably not
"conducted in connection with an election in which a candidate for
Federal office appears on the ballot," even under the most expansive
reading of the statute.

One commenter suggested that the Commission interpret the term, "in
connection with an election in which a candidate for Federal office
appears on the ballot," to mean that period of time beginning on the day
on which a Federal candidate is actually certified for the ballot in a
given jurisdiction. This commenter argues this interpretation is the
plainest possible reading of the statute. Another commenter suggested
that the Commission interpret the statutory term to mean the earliest
date on which a Federal candidate could qualify for the ballot in a
given jurisdiction. Both of these proposals share a common flaw: Each
would result in a more complex rule that varies considerably from
jurisdiction to jurisdiction, and possibly from one election to the next
within a jurisdiction, in contrast to a rule that would have uniform
application throughout the United States.

Paragraph (a)(1) of 11 CFR 100.24 defines "in connection with an
election in which a candidate for Federal office appears on the ballot"
to mean two specific periods of time. The first begins on January 1 of
even-numbered years, and ends on December 31 of such years. The
Commission chooses this time-frame for several reasons. First, it
respects the broad purposes of BCRA to regulate activities that most
directly affect Federal elections. Most Federal election activity will
take place in even-numbered years, in the "run-up" to the primary and
general elections themselves. Second, this time-frame recognizes that
political activity in odd-numbered years tends to be more heavily
focused on State and local races, and consequently has at best only an
attenuated effect on Federal elections that are often more than a year
away. Third, this rule is simple and may be consistently applied
throughout the United States, without local uncertainties due to the
varying dates of elections in varying jurisdictions. The Commission
chooses December 31 as the ending date of the period to allow consistent
application of the regulations ([e.g.]{.underline}, the reporting
regulations in part 104 and section 300.36) throughout a given calendar.
The consequence of this rule is that activities described in 2 U.S.C.
431(20)(A)(ii) will be Federal election activities in even-numbered
years, but not in odd-numbered years (except in the case of certain
odd-year special elections, see below).

The second time-frame that is "in connection with an election in which a
candidate for Federal office appears on the ballot" occurs in
odd-numbered years in which a special election for a Federal office
occurs. Paragraph (a)(1)(ii) prescribes that the period beginning on the
date the special election date is set and ending on the day of the
special election is considered to be "in connection with an election in
which a candidate for Federal office appears on the ballot."

[B. Voter Registration Activity]{.underline}

Under the statutory definition of FEA, "voter registration activity" is
a FEA if it is conducted 120 days or fewer before a regularly scheduled
Federal election. 2 U.S.C. 431(20)(A)(i). New section 100.24(a)(2)
defines voter registration activity to encompass direct contact with
individuals for the specific purpose of encouraging or assisting those
individuals with the process of registering to vote. The definition in
paragraph (a)(2) also includes the costs of printing and distributing
voter registration information, such as registration forms, and voting
information, for example, pamphlets of similar materials explaining the
voter-registration process.

[C. Get-Out-the-Vote]{.underline}

Based upon the comments and testimony on the proposed rules, and its own
analysis of BCRA, the Commission has concluded that it must define GOTV
in a manner that distinguishes the activity from ordinary or usual
campaigning that a party committee may conduct of behalf of its
candidates. The need for this line-drawing is illustrated by the fact
that new 2 U.S.C. 431(20)(B)(i) provides that, in connection with an
election in which a Federal candidate appears on the ballot, a public
communication that refers solely to a clearly identified candidate for
State or local office is not a FEA, [unless]{.underline} the
communication is also, among other things, a GOTV activity. Thus, the
Commission's regulation must provide a means for distinguishing a public
communication that is not GOTV from one that is. Stated another way, if
GOTV is defined too broadly, the effect of the regulations would be to
federalize a vast percentage of ordinary campaign activity.

The Commission received several comments on this topic. A national party
committee commented that if "a GOTV effort is designed to solely
encourage the election of state and local candidates, even though
occurring at a time when federal candidates are on the ballot, those
costs should be viewed as 100% non-federal . . . . Therefore, the
suggestion . . . that a public communication that urges the voter to
vote for a state or local candidate should be viewed as a federal
election activity, since it is by definition a GOTV message, should be
rejected." This comment seems to misapprehend 2 U.S.C. 431(20)(B)(i),
which does not provide that a public communication that refers solely to
a State or local candidate is "by definition" a GOTV activity --- the
statute does contemplate that it may (or may not) be so. A State
political party argued that the timing (i.e., relative to the election)
should not be relevant to determining whether an activity is GOTV.
Rather, the State party committee suggested that GOTV "should refer to
actual communications with voters for the purpose of encouraging them to
vote." A public interest group agreed that timing relative to the
election is not relevant to determining whether an activity is GOTV. The
group, however, does not suggest an actual definition of the term. A
labor organization suggested that timing is relevant, and urged that the
Commission's definition of GOTV be limited to activities that occur on
election day.

In 11 CFR 100.24(a)(3), the Commission adopts a definition of "GOTV
activity" as "contacting registered voters to encourage or assist them
with the act of voting." This definition is focused on activity that is
ultimately directed to [registered]{.underline} voters, even if the
efforts also incidentally reach the general public. Second, GOTV has a
very particular purpose: Encouraging or assisting registered voters to
take any and all necessary steps to get to the polls and cast their
ballots, or to vote by absentee ballot or other means provided by law.
The Commission understands this purpose to be narrower and more specific
than the broader purposes of generally increasing public support for a
candidate or decreasing public support for an opposing candidate.

Paragraph (a)(3) includes a non-exhaustive list of three factors
intended to assist in applying the regulation to particular factual
situations. The first factor, paragraph (a)(3)(i), is whether the
activity includes providing to voters information such as the date of
the election, the location of polling places, and the hours the polls
are open. The second factor, paragraph (a)(3)(ii), is whether the
activity facilitates voting by particular individuals. Providing
transportation to the polls and babysitting services are given as
examples of such facilitation, because both are long-recognized in the
Commission's regulations on voter registration and GOTV. [See,
e.g.,]{.underline} House Doc. No. 95-44 at p. 106 (January 12, 1977)
(Explanation and Justification for 1977 Amendments to 11 CFR 114.4). The
third factor, paragraph (a)(3)(iii), is the proximity of the activity to
the date of the election. The Commission stresses, however, that
proximity in time to the election is not necessarily dispositive with
regard to whether an activity is a GOTV activity.

In the NPRM, the Commission posed several questions as to how the term,
"get‑out‑the‑vote activity" ("GOTV"), should be interpreted in the
statute. Among the issues raised was whether there should be an
exception for "non-partisan" GOTV. In their comment, the principal
Congressional sponsors of BCRA strongly opposed a non‑partisan exception
as "flatly inconsistent with BCRA." They argued that the plain language
of the statute does not admit such an exception. Two other commenters,
both of which are public interest groups, make the same general
argument. These three commenters also opposed regulations that might
contemplate "non-partisan" voter-drive activities by party committees
and candidates, which one of the commenters labeled as "oxymoronic."

In contrast, one commenter, a non-profit corporation, urged the
Commission to adopt a "non-partisan exception" for non-profit
organizations that engage in non-partisan voter-drive activities such as
GOTV and voter registration. This group noted that the proposed
regulations would restrict fundraising on behalf of a non-profit by
political party committees and Federal candidates if the non-profit
spent money for FEA. They contended that, if the Commission fails to
distinguish between partisan and non-partisan voter-drive activities,
the efforts of legitimate, non-partisan groups to encourage voting will
be hampered, perhaps fatally in the case of some organizations. This
commenter also argued that the Commission should create a "safe harbor"
to allow political party committees and Federal candidates to raise
funds on behalf of section 501(c)(3) organizations that legally engage
in non-partisan voter-drive activities.

In Title I of BCRA, Congress expressly addressed party fundraising for
tax‑exempt organizations. Congress specifically provided that national,
State, district and local political party committees "shall not solicit
any funds for, or make or direct any donations to" section 501(c)
organizations that spend for the costs of FEA. 2 U.S.C. 441i(d)(1). The
Commission does not discern, from the plain language of section
441i(d)(1), any authority to craft a regulatory exception to the
definition of FEA that would modify the effect of section 441i(d)(1).
This conclusion is supported by the fact that Congress did provide a
limited exception for fundraising by Federal candidates on behalf of
501(c) organization that engage in FEA. [See]{.underline} 2 U.S.C.
441i(e)(4)(B) (which provides that a Federal candidate is permitted to
raise up to \$20,000 per calendar year from individuals for a section
501(c) organization even if the organization engages in certain FEA.)
Clearly, Congress could have crafted a non-partisan exception, but did
not do so with regard to party committees' GOTV drives. Therefore, the
Commission declines to adopt a "non-partisan" exception in 11 CFR 100.24
with regard to the definition of FEA.

In the NPRM, the Commission solicited comments as to whether there
should be a [de minimis]{.underline} exception allowing a certain,
nominal amount of GOTV related to a Federal election that would
nonetheless not render these activities as FEA. The principal
Congressional sponsors of BCRA and a public interest group commented
that there is no basis in the statute for a [de minimis]{.underline}
exception, and that such an exception "would be contrary to the plain
meaning of the statute." Two labor organizations and a State political
party committee support the inclusion of a [de minimis]{.underline}
exception. The State party committee suggests a \$5,000 exception, so
that "informal and occasional GOTV and grassroots activities do not
invoke the full force of federal regulations." One of the labor
organizations asserts the exception would prevent the regulation from
having a "strict liability" aspect.

The Commission declines to adopt a [de minimis]{.underline} exception in
11 CFR 100.24. The plain language of the 2 U.S.C. 431(20) does not
indicate that Congress contemplated such an exception.

[D. Slate Cards, Sample Ballots, and Other Exempt
Activities]{.underline}

In the NPRM, the Commission specifically sought comment as to the use of
printed slate cards, sample ballots, palm cards, and similar listings of
three or more candidates in the context of GOTV. The Commission also
sought comment about the larger issue of the relationship of "exempt
activities" to "Federal election activities." 67 [Fed.
Register]{.underline} at 35656.

The term "exempt activities" refers to three types of spending by State
and local party organizations, each of which is excluded from the
statutory definitions of contribution and expenditure in 2 U.S.C. 431(8)
and (9). That is, a payment by a State or local party organization for
an exempt activity is not a "contribution," within the meaning of the
Act, to a candidate benefited by the activity, nor an "expenditure,"
within the meaning of the Act, by the party organization.

Slate cards are one type of exempt activity. A payment for the "costs of
preparation, display, or mailing or other distribution . . . with
respect to a printed slate card or sample ballot, or other printed
listing, of 3 or more candidates for any public office," is not a
contribution or expenditure. The exclusion does not apply to spending
for displaying the slate card "on broadcast stations, or in newspapers,
magazines, or similar types of general public political advertising." 2
U.S.C. 431(8)(B)(v) (contribution); 2 U.S.C. 431(9)(B)(iv)
(expenditure). [See also]{.underline} 11 CFR 100.7(b)(9), 100.8(b)(10).
Note that the exemption extends to the costs of a mass mailing of the
slate card.

"The original intent of the slate card amendment was to allow parties to
print slate cards, sample ballots, etc., to educate voters and encourage
straight party voting without being subject to the disclosure provisions
and contribution and expenditure limitations in Federal law." H.R. Rep.
No. 93-1239, at 142 (1974) (House Committee on Administration Report on
the Federal Election Campaign Act Amendments of 1974) (Supp. View of
Rep. Frenzel). Other statements in the legislative history tend to
confirm this view of the intent behind the provision. [See,
e.g]{.underline}*.,* H.R. Rep. No. 93-1438, at 65 (1974) (Conference
Report on Federal Election Campaign Act Amendments of 1974) (intent of
provision "is to allow State and local parties to educate the general
public as to the identity of the candidates of the party".)

Several commenters have addressed the relationship between FEA and
exempt activities, including slate cards. One State party committee
commented that it understands BCRA to have "clearly redefined all such
... activities as Federal election activities that must be funded
entirely by hard money." The principal Congressional sponsors of BCRA
commented that slate cards, sample ballots, and palm cards should be
included in GOTV. With regard to the larger issue of the relationship
between all exempt activities and FEA, the principal sponsors urged that
if an activity constitutes FEA, then it must be treated as such. A
public interest group argues that "federal election activity subsumes
all previously allocable expenses," with certain exceptions not relevant
here.

In a joint comment, a national party committee and two Congressional
campaign committees advocated the opposite conclusion: "Congress did not
leave any suggestion in the legislative history that these important
exceptions were somehow overridden ... by BICRA." These commenters
argued that the Commission's current treatment of exempt activities is
consistent with BCRA because BCRA focuses on "soft money" spending for
"issue advertising," whereas exempt activities are, by definition, at
the grassroots level. Thus, they conclude, "exempt activities should not
be deemed to be 'Federal election activity,' and that the costs of
exempt activities should continue to be allocated between Federal and
non-Federal funds," by which they mean non-Federal funds other than
Levin funds. Another national party committee, a State party committee,
and a labor organization made essentially the same points, agreeing that
the definition of Federal election activity should exclude exempt
activities.

The Commission does not interpret the Act, as amended by BCRA, to permit
blanket conclusions about the relationship of exempt activities and FEA,
in the sense of asserting that all exempt activities are necessarily now
FEA, or [vice versa]{.underline}. It is clear that not all exempt
activities are FEA. For example, voter registration activities
undertaken by a State or local political party on behalf of the
Presidential ticket more than 120 days before a regularly scheduled
election is an exempt activity under 2 U.S.C. 431(8)(B)(xii) and
(9)(B)(ix), but not a Federal election activity. 11 CFR 100.24(b)(1). It
is also clear that some activities satisfy one of the definitions of
exempt activities and simultaneously satisfy one of the definitions of
FEA. For example, voter registration activities undertaken by a State or
local political party on behalf of the Presidential ticket fewer than
120 days before a regularly scheduled election satisfy both the
definition of exempt activity and of Federal election activity. 2 U.S.C.
431(8)(B)(xii), (9)(B)(ix), and 20(A)(i).

In cases where a given activity undertaken by a State, district, or
local political party committee is both an exempt activity and a Federal
election activity, the issue is how it may or must be paid for. On this
point, BCRA and the Commission's pre-BCRA regulations appear to be in
conflict. Under BCRA, if the activity is deemed a FEA, it must be paid
for with Federal funds, or with an allocated mix of Federal and Levin
funds. 2 U.S.C. 441i(b)(1), (2). Under the Commission's pre-BCRA
regulations, if the activity is deemed an exempt activity that is
combined with non-Federal activity it may be paid for with an allocated
mix of Federal and non-Federal funds. 11 CFR 100.7(b)(9), (15), (17),
100.8(b)(10), (16), (18), and 106.5(a)(2)(iii). [See Common Cause v.
Federal Election Com'n]{.underline}, 692 F.Supp. 1391, 1394-1396 (D.D.C.
1987). The [Common Cause]{.underline} case directly addressed two of the
three categories of exempt activities: campaign materials used by
volunteers ([see]{.underline} 11 CFR 100.7(b)(15) and 100.8(b)(16)) and
voter registration and GOTV activities on behalf of the Presidential
ticket ([see]{.underline} 11 CFR 100.7(b)(17) and 100.8(b)(18)),
establishing that allocation of payments for these activities between
Federal and non-Federal funds was properly a matter for the Commission
to address in its regulations. [Common Cause]{.underline}, 692 F.Supp.
at 1396. While not directly addressed in [Common Cause,]{.underline} the
allocation of the costs of slate cards is also addressed in the
Commission's regulations, but not in FECA. [Compare]{.underline} 2
U.S.C. 431(8)(B)(v) and (9)(B)(iv), which does not specifically provide
for allocation, with 11 CFR 100.7(b)(9) and 100.8(b)(10), which provides
for allocation.

Since the Commission's regulations may not override the Act, as amended
by BCRA, if an activity undertaken by a State, district, or local
political party committee simultaneously constitutes both exempt
activity and Federal election activity, that activity must now be paid
for as a Federal election activity, not as an exempt activity. This
means the activity must be paid for with entirely Federal funds, or an
allocated mix of Federal funds and Levin funds. 2 U.S.C. 441i(b)(1),
(2).

The Commission emphasizes, however, that payments by a State, district,
or local political party committee for an activity that is within one of
the exempt activity categories remains excluded from the definitions of
"contribution" and "expenditure." That is, the conclusion explained in
the preceding paragraph goes only to how the activity must be paid for,
not to characterizing the payment as a contribution or expenditure under
the Act.

With these considerations in mind, the Commission sees no valid reason
to handle slate cards differently from any other type of exempt activity
with regard to the definition of Federal election activity. If a State,
district, or local political party committee uses slate cards as part of
GOTV activity, or in a public communication that promotes or supports,
or attacks or opposes a Federal candidate, then the committee must pay
for the costs of these slate cards as a Federal election activity
([see]{.underline} 2 U.S.C. 431(20)(A)(ii), (iii)), although these
payments are excluded from the definition of "expenditure." On the other
hand, if a State, district, or local political party committee uses
slate cards mentioning Federal and non-Federal candidates in the course
of campaigning that does not constitute Federal election activity, then
it may allocate the costs of these slate cards between Federal and
non-Federal funds.

[E. Voter Identification]{.underline}

In BCRA, Congress included "voter identification" within the definition
of "Federal election activity." 2 U.S.C. 431(20)(A)(ii). In the NPRM,
the Commission sought comments about several aspects of defining "voter
identification" for purposes of implementing section 431(20)(A)(ii) in
the regulations. 67 [Fed. Register]{.underline} at 35656. The Commission
received numerous comments in response. A consortium of non-profit
groups expressed concern that the term "voter identification" could be
read too broadly by encompassing "efforts to identify the shared
interests of individuals for non-electoral purposes." They urged the
Commission to restrict the definition to "activities designed primarily
to identify the political preferences of individuals in order to
influence their voting." Similarly, a State political party commented
that the definition in the proposed regulation was "far too broad and
instead should be defined to include only activity that involved actual
contact of voters, by phone, in person or otherwise, to determine their
likelihood of voting generally or their likelihood of voting for a
specific Federal candidate." This State party committee specifically
urged that the final definition exclude the costs of "acquisition or
enhancement of a list of voters, or the acquisition of publicly
available demographic information regarding these voters," arguing that
such functions are properly treated as administrative expenses because
they are part of the party's "fundamental functions." Several national
party committees offered essentially similar views. A labor organization
commented that "voter identification" should be defined as telephone
calls or canvassing "to identify voters for other Federal election
activities," and agreed that gathering data about voters should be
excluded. Another labor organization commented that "voter
identification" should be limited to determining voter intent with
regard to specific Federal candidates only.

In contrast, the principal Congressional sponsors of BCRA commented that
"voter identification" should include all activities designed to
determine registered voters, likely voters, or voters indicating a
preference for a specific candidate or party." They also commented that
voter identification efforts should not be excluded simply because no
mention is made of a Federal candidate. With regard to the Commission's
question, posed in the NPRM, about distinguishing voter identification
from GOTV, the principal Congressional sponsors commented that the
distinction "makes no difference" because both types of activity are
covered under the same provision of BCRA ([see]{.underline} 2 U.S.C.
431(20)(A)(ii)). A public interest group commented that "voter
identification" includes "all efforts to identify voters, even if done
so in the name of state and local candidates." This same commenter
argued against limiting the definition according to proximity in time to
the election. Another public interest group urged the Commission not to
limit "voter identification" to efforts to identify voters for other
Federal election activities, arguing that only a "tortured reading" of
the statute allows "get-out-the-vote activity" to modify "voter
identification."

In paragraph (a)(4) of section 100.24, the Commission adopts a
definition of "voter identification" that includes the costs of
obtaining and enhancing voter lists, creating voter files, and
contacting voters to determine their likelihood of voting and voting
tendencies and preferences. The Commission notes that "voter
identification" is one of the types of Federal election activity that
will occur, by definition, only in even-numbered years under 11 CFR
100.24(a)(1) (with the exception of certain special elections in
odd-numbered years). The reason for limiting these types of Federal
election activity, including voter identification, to even-numbered
years is that voter-drive activity in such years is inherently more
directly connected to Federal elections. Thus, the argument made by some
commenters that the costs of acquiring a voter list are inherently
administrative in character loses force when the activity occurs in a
year in which a Federal election is to be held. Moreover, while enhanced
voter lists may indeed have additional uses apart from directly
affecting Federal elections, such as fundraising, it nonetheless remains
true that list enhancement is the first fundamental step in voter
identification and thus significantly affects Federal elections.
Moreover, parties regularly use voter lists to raise funds to help elect
their candidates, including Federal candidates.

[F. Definition of "Federal Election Activity"]{.underline}

Paragraph (b) of section 100.24 defines Federal election activity.
Paragraph (b)(1) implements 2 U.S.C. 431(20)(A)(i) by including voter
registration activity during the period that begins on the date that is
120 calendar days before the date of the election. "Special elections"
are, of course, not "regularly scheduled," and therefore excluded from
the definition. Paragraph (b)(2) of section 100.24 implements 2 U.S.C.
431(20)(A)(ii) by including with the definition of Federal election
activity voter identification, GOTV, and generic campaign activity.

11 CFR 100.24(b)(3) follows new 2 U.S.C. 431(20) by providing that a
public communication that refers to a clearly identified candidate for
Federal office would constitute "Federal election activity" that must be
paid for with entirely Federal funds if the communication promotes,
supports, attacks, or opposes any candidate for that Federal office.
This is true even if a candidate for State or local office is also
mentioned or identified. "Public communication" is defined in proposed
11 CFR 100.26, discussed below. Public communications falling within
this category of the definition of "Federal election activity" extend
beyond communications expressly advocating a vote for or against a
candidate.

11 CFR 100.24(b)(4) implements 2 U.S.C. 431(20)(A)(iv) by providing that
Federal election activity includes services provided during any month by
an employee of a State, district, or local committee of a political
party who spends over 25% of that individual's compensated time on
activities in connection with a Federal election. There were no comments
on this definition. A number of issues involving employees are discussed
below in the Explanation and Justification for section 300.33. The
Commission has concluded that the statute is clear on its face, and
therefore paragraph (b)(4) follows that statutory language without
additional interpretation.

[G. Activities Excluded from the Definition of "Federal Election
Activity"]{.underline}

In BCRA, Congress specifically excluded certain activities from the
definition of Federal election activity. 2 U.S.C. 431(20)(B). Activities
falling within one of the exceptions may be paid for with entirely
non-Federal funds. 11 CFR 100.24(c) implements these statutory
exceptions. Paragraphs (c)(1) through (c)(4) of section 100.24 parallel
the statutory exclusions at 2 U.S.C. 431(20)(B)(i) through (iv).

Paragraph (c)(1) excludes a public communication that refers solely to
one or more clearly identified State or local candidates, and does not
promote or support, or attack or oppose, a clearly identified candidate
for Federal office, provided that the public communication is not a
voter registration activity, or GOTV, or voter identification.

2 U.S.C. 431(20)(B)(i). As an example of the application of this
paragraph, this exception does not apply to a telephone bank on the day
before an election where there is a Federal candidate on the ballot and
where GOTV phone calls are made to over 500 voters, even if the calls
only refer to a State or local candidate. 2 U.S.C. 431(20)(B)(i);
[see]{.underline} 11 CFR 100.24(b)(2).

Paragraph (c)(2) excludes a contribution to a State or local candidate,
provided that the contribution is not designated to pay for voter
registration activity, voter identification, GOTV, generic campaign
activity, a public communication promoting or supporting, or attacking
or opposing, a clearly identified Federal candidate, or employee
services as set forth in paragraphs (b)(1) through (b)(4) of section
100.24. 2 U.S.C. 431(20)(B)(ii). In the final rules, the Commission has
added a reference to employee services as set forth in paragraph (b)(4)
for the sake of completeness.

The principal Congressional sponsors of BCRA commented that the version
of paragraph (c)(3) that appeared in the NPRM was too broad, in that it
included "a similar meeting or conference," whereas the statutory
provision it implemented, 2 U.S.C. 431(20)(B)(iii) refers only to
"conventions." The Commission agrees, and has deleted this language from
the final version of the rule. Paragraph (c)(3) excludes the costs of a
State, district, or local convention. 2 U.S.C. 431(20)(B)(iii). The
principal Congressional sponsors otherwise supported paragraphs (c)(1)
through (c)(4).

Paragraph (c)(4) excludes the costs of grassroots campaign materials
that name or depict only State and local candidates. 2 U.S.C.
431(20)(B)(iv). The list of examples of such materials in paragraph
(c)(4) includes certain items not mentioned in the statute. The
Commission received no comments objecting to the additional items.

In the version of the regulation published in the NPRM, the Commission
included two additional exceptions that it has subsequently determined
should not be listed as exceptions to the definition of Federal election
activity in paragraph (c). These provisions would have covered voter
registration activity at any time other than the period of time that is
within 120 days of a regularly scheduled Federal election, and GOTV and
voter identification in elections in which no Federal candidate appears
on the ballot. While these activities are not Federal election
activities, under certain circumstances payments for these activities
must be allocated between Federal funds and non-Federal funds.
[See]{.underline} 11 CFR 106.5. In this regard, these two types of
activities differ from the activities described in paragraphs (c)(1)
through (c)(4) of section 100.24, which always may be paid for with
entirely non-Federal funds. Therefore, the Commission has removed these
two provisions from the final regulation.

# 

# 11 CFR 100.25 Definition of "Generic campaign activity"

Section 100.25 implements the statutory definition of "generic campaign
activity," which has been added to the Act by BCRA. "Generic campaign
activity" is defined in BCRA as campaign activity "that promotes a
political party and does not promote a candidate or non-Federal
candidate." 2 U.S.C. 431(21).

Generic campaign activity is a form of Federal election activity when it
takes place in connection with an election in which a candidate for
Federal office appears on the ballot. 11 CFR 100.24(b)(2)(ii). The
Commission is defining "in connection with an election in which a
candidate for Federal office appears on the ballot" to include special
elections fitting that description. 11 CFR 100.24(a)(1). Therefore,
generic campaign activity may, in principle, occur in connection with a
special election in which a candidate for Federal office appears on the
ballot, provided, of course, that the elements of the definition are
otherwise satisfied. An association of state party officials commented
favorably on this approach. A public interest group pointed out that
Advisory Opinion 1998-9, which was issued to a State party committee,
addressed a special election in which only one Federal office was at
stake, and thus only one candidate of the party on the ballot. The
Commission opined that under such circumstances a candidate was clearly
identified, and allocable "generic activities" by the party under
pre-BCRA 11 CFR 106.5(a)(2)(iv) were thus not possible with regard to
that special election. The final regulations is consistent with the
reasoning of AO 1998-9 in defining "generic campaign activity."

The final regulation makes one elaboration on the statute by including
within the definition of "generic campaign activity" those activities
that oppose a political party without opposing a specific candidate. A
labor organization commented that the regulation impermissibly goes
beyond the statute by including activities in opposition to another
party. In the Commission's experience, however, such activities in
opposition to another party implicitly promote the party undertaking the
activities, and are thus properly included in the definition. A national
party committee also argued against the approach taken in the proposed
regulation, characterizing the approach as "confusing" because it is
framed in terms of promoting and opposing the party, which
"unnecessarily clouds the distinction of voter registration and GOTV
activities." This commenter would have the Commission define "generic
campaign activity" as an "activity that promotes or opposes the
particular party's ticket, without mentioning or referring to candidates
by name." The Commission believes most of these concerns are addressed
in the definitions of voter registration activity and GOTV at 11 CFR
100.24(a)(2) and (3), respectively. Also, the distinction drawn by the
commenter, that is, between the promoting the party and promoting the
party's ticket, is limited in practical application. Whether an activity
is characterized as voter registration, GOTV, or generic campaign
activity, it is treated as a Federal election activity when conducted in
certain relation to a Federal election, [see]{.underline} 100.24(b)(1),
(2), and is, in each case, a Federal election activity on which Levin
funds may be spent, [see]{.underline} 11 CFR 300.32(b)(1).

In the NPRM, the Commission sought comment on the extent, if any, to
which the exclusions for exempt activities in 11 CFR 100.7(b)(9), (15),
(17) and 100.8(b)(8), (10), and (16), should apply to the definition of
"generic campaign activity." A public interest group commented that
"exempt activities should not be excluded from the definition of
'generic campaign activity.'" An association of State party officials
commented that there appears to be no overlap between exempt activities
and generic campaign activities since the former, "by definition,
reference a clearly identified Federal candidate," while the latter, by
definition, may not.

The Commission understands two of the categories of exempt activities,
slate cards ([see]{.underline} 11 CFR 100.7(b)(9), 100.8(b)(8)) and
voter registration on behalf of the Presidential ticket
([see]{.underline} 11 CFR 100.7(b)(17), 100.8(b)(16)), to have no
applicability to payments for generic campaign activity. This is so
because these two types of exempt activities, by their nature, promote
one or more candidates, and activities that promote a candidate are
outside the scope of the definition of generic campaign activity. The
remaining category of exempt activity ‑‑ payments for certain campaign
materials used by party volunteers ([see]{.underline} 11 CFR
100.7(b)(15), 100.8(b)(10)) ‑‑ may in certain circumstances also qualify
as generic campaign activity under 11 CFR 100.25. If the campaign
materials used by the volunteers promote only the party, and do not
promote a candidate, then this activity would be both exempt and a
generic campaign activity. A public interest group included an
essentially similar analysis of this point in their comment.

##### [11 CFR 100.26 Definition of "Public communication"]{.underline}

BCRA amends 2 U.S.C. 431 by adding a new definition for the term "public
communication." BCRA defines "public communication" to include
communications by broadcast, cable, satellite, newspaper, magazine,
outdoor advertising facility, mass mailing or telephone bank to the
general public, or any other form of general public political
advertising.

The Commission did not include the Internet as a form of "general public
political advertising" in proposed 11 CFR 100.26, because this provision
of BCRA does not refer to the Internet. The Commission, however, sought
comment as to whether the definition of "public communication" in
proposed 11 CFR 100.26 should include or exclude communications provided
through the use of World Wide Web sites available to the public, widely
distributed electronic mail, or other uses of the Internet, such as
"Webcasts" or the transmission of high-quality voice, graphics, or video
advertisements.

By letter to Senator McConnell dated February 25, 2002, Chairman Mason
and Commissioner Smith suggested that Congress clarify whether the term
"public communication" was intended to encompass communications sent
over the Internet. The letter noted that the definition included "any
other form of general public political advertising," and stated: "The
Commission has treated Internet web pages available to the public and
widely-distributed e-mail as forms of 'general public political
communication.' Thus, the new definition combined with the Commission's
established interpretation of the FECA could command regulation of
Internet and e-mail communications." [See]{.underline} 148 Cong. Rec.
S2340 (daily ed. March 22, 2002). Prior to enactment of BCRA, Congress
did not express agreement or disagreement with this interpretation.

Some commenters who addressed this issue urged the Commission not to
include the Internet in the definition of "public communication." They
noted that Congress had had an opportunity to include the Internet in
this definition, but declined to do so. They argued that the Internet
provides a low cost way for parties and other interested persons to
disseminate their message widely, and the Commission should not attempt
to regulate their doing so. Moreover, these commenters note that
technology is advancing so rapidly in this area that any rules could
become outdated shortly after they are promulgated. Other commenters
argued that failure to include the Internet in this definition could
carve out an exception for a widespread and growing form of political
advertising.

The Commission is not including or specifically excluding the Internet
as a form of general public political advertising for purposes of this
rule at this time, both because neither BCRA nor the legislative record
addresses this issue and because of an ongoing rulemaking on the
Internet. The Commission published a Notice of Inquiry on use of the
Internet for campaign activity in 1999, 64 [Fed. Register]{.underline}
60360 (Nov. 5, 1999), and an NPRM seeking comment on specific issues
related to this topic in October 2001. 66 [Fed. Register]{.underline}
50358 (Oct. 3, 2001). The Commission is, therefore, leaving this
question open until it can more broadly consider the application of
campaign finance laws to Internet activity, including application of
laws that pre-existed the BCRA amendments.

[11 CFR 100.27 Definition of "Mass mailing"]{.underline}

BCRA amends 2 U.S.C. 431 by adding a new definition of the term "mass
mailing" at section 431(23). This definition, which is set out in new 11
CFR 100.27, includes any mailing by United States mail or facsimile of
more than 500 pieces of mail matter of an identical or substantially
similar nature within any 30-day period.

The term "substantially similar" is also used in the Commission's
disclaimer regulations at 11 CFR 110.11(a)(3). When the disclaimer rules
were adopted in 1995, the Commission explained that technological
advances now permit what is basically the same communication to be
personalized to include the recipient's name, occupation, geographic
location, and similar variables. Communications are considered
"substantially similar" for purposes of the disclaimer rules if they
would be the same but for such individualization. [See]{.underline}
[Explanation and Justification for Regulations on]{.underline}
[Communications Disclaimer Requirements]{.underline}, 60 [Fed.
Register]{.underline} 52069, 52070 (Oct. 5, 1995). The Commission
proposed in the NPRM that the term "substantially similar" in 11 CFR
100.27 have the identical meaning.

Several commenters expressed the view that this definition of
"substantially similar" is too narrow as applied to mass mailings. They
pointed out, for example, that the sponsoring group could change an
internal sentence every 490 letters and thereby escape coverage under
this definition. Also, many communications are largely identical but
contain a separate paragraph addressing a targeted group, such as
retired teachers or those with a particular hobby. The Commission has
therefore revised the final rules to state that communications are
considered [substantially similar]{.underline} for purposes of this
section if they include substantially the same template or language, but
vary in non-material respects such as communications customized by the
recipient's name, occupation, or geographic location.

[11 CFR 100.28 Definition of "Telephone bank"]{.underline}

BCRA amends 2 U.S.C. 431 by adding a new definition of the term
"telephone bank." This definition, which is set out in new 11 CFR
100.28, includes more than 500 telephone calls of an identical or
substantially similar nature within any 30-day period. The Commission
also proposed addressing the meaning of "substantially similar" in the
text of the rules. [See]{.underline} discussion of 11 CFR 100.27, above.

As with the definition of "mass mailing," discussed above, several
commenters urged the Commission to broaden the definition of
"substantially similar" contained in the proposed rules. They pointed
out that, even more so than with mass mailings, phone conversations,
even those where the caller is using a prepared script, are likely to
vary somewhat from call to call. The Commission accordingly has revised
the language of section 100.28 as proposed in the NPRM to provide that,
consistent with the definition of "mass mailing" contained in section
100.27, communications are considered [substantially
similar]{.underline} for purposes of section 100.28 if they include
substantially the same template or language, but vary in non-material
respects such as communications customized by the recipient's name,
occupation, or geographic location.

IV\. Part 102 \-- Registration, Organization, and Recordkeeping by
Political Committees

# 11 CFR 102.5 Organizations Financing Political Activity in Connection with Federal and Non-Federal Elections, Other than Through Transfers and Joint Fundraisers

This section continues to set out requirements for accounts or
accounting methods that must be established and maintained by
organizations, including political committees, that fund activities in
connection with Federal elections and non-Federal elections. The section
has, however, been revised in several respects. 2 USC 441i(a) expressly
prohibits national party committees from raising and spending
non-Federal funds. Paragraph 102.5(c) addresses the application of this
section to national party committees, while corresponding changes have
been made to other portions of 11 CFR 102.5 to clarify that various
provisions are now applicable to only State, district, and local party
committees and organizations. While this section will continue to apply
to these party committees between November 6, 2002 and December 31,
2002, after the latter date, national party committees will no longer be
covered by its provisions.

Paragraph (a)(1) and paragraph (a)(3) remain unchanged except for the
itemization of State, district and local party committees as the party
organizations covered in these provisions.

Paragraph (a)(2) is revised to require committees to meet at least one
of the three listed conditions for depositing contributions into their
Federal accounts. The purpose of this regulation is to assure that funds
placed in this account are from contributors who know the intended use
of their contributions, and the Commission believes that this purpose
can be fulfilled by means of either contributor designations,
solicitations for express purposes, or solicitations or notifications
that inform contributors that only contributions permissible under the
Act will be accepted.

New paragraph (a)(4) requires State, district, and local party
organizations qualifying as political committees to establish separate
Levin accounts pursuant to 11 CFR 300.30, if they intend to raise and
spend Levin funds pursuant to 11 CFR 300.31 and 300.32, and directs
attention to the conditions for depositing donations into a Levin
account at 11 CFR 300.30(b)(2). The reasons for the requirement of
separate Levin accounts are given in the Explanation and Justification
for the rules at 11 CFR 300.30 below.

New paragraph (a)(5) brings State, district, and local party committees
within the restrictions on solicitations by Federal candidates and
Federal officeholders in 11 CFR 300.31(e) and 11 CFR part 300, subpart
D. A comment submitted in response to the NPRM expressed concern that
paragraph (a)(3) could be construed as allowing Federal candidates and
officeholders to solicit funds that would be excessive or prohibited
under Federal law, if the solicitation being used stated that the funds
would be used for a non-Federal purpose. To address this concern,
paragraph (a)(5) is being added to emphasize that the restrictions on
solicitations by Federal candidates and Federal officeholders in 11 CFR
300.31(e) and 11 CFR part 300, subpart D, apply to solicitations for
State, district, and local party committees.

The final rules also include a new paragraph (a)(6) that clarifies the
permissibility of State, district, and local party committees and
organizations creating separate allocation accounts to be used for
funding Levin activities that are allocable between Federal and Levin
accounts and for funding other activities allocable between a
committee's Federal and non-Federal accounts. [See also]{.underline} the
Explanation and Justification below for amendments to 11 CFR 106.5 and
for new 11 CFR 300.33.

The principal sponsors of BCRA, in their comments on the NPRM, expressed
concern regarding the potential pooling of Federal funds and Levin
funds, should State, district, and local party organizations that are
not political committees not be required to maintain separate Levin
accounts. The Commission has determined, however, that, given the
relatively small sizes of these party organizations and of the amounts
of their receipts and disbursements, these organizations should be
required to establish separate Federal accounts, but be given a choice
between setting up separate Levin accounts in depositories and relying
upon a specific accounting system that will accurately and completely
segregate receipts and disbursements between and among Federal, Levin
and non-Federal funds.

With regard to organizations that are not political committees,
paragraph (b) of section 102.5 has been divided between State, district
and local party organizations that are not political committees and
other organizations that are neither party committees nor political
committees. The State, district and local party organizations addressed
at paragraph (b)(1) have three choices with regard to depository
accounts and accounting: (1) the establishment of at least three
separate accounts (Federal, Levin and non-Federal); (2) the
establishment of two separate account (Federal/Levin with general ledger
accounting, and non-Federal); and (3) the use of a general ledger
accounting system for all Federal, Levin and non-Federal funds. With
regard to the last of the three options, the rules at paragraph
(b)(1)(i)(C) emphasize that funds entered on a ledger as non-Federal
receipts may only be reclassified as Levin funds if donor intent can be
ascertained through relevant solicitation materials or donor
designation. In addition, those choosing a general ledger system are
required to back up any computer-based data at least once a month.

In light of the fact that organizations that are neither party
organizations nor political committees will not be faced with the
complexities of accounting for the raising and use of Levin funds, the
final rules retain for these organizations at paragraph (b)(2) the
option from the pre-BRCA regulations of setting up a Federal account or
of using a reasonable accounting method to track Federal, Levin and
non-Federal funds.

The NPRM sought comments as to whether a solicitation for Levin funds
could include a general reference to Federal elections and/or a
reference to a Federal candidate, so long as the solicitation is
otherwise clear that donations will be used for Levin activities. No
comments were received in this regard.

# 11 CFR 102.17 Joint Fundraising by Committees Other than Separate Segregated Accounts

The ban on national party non-Federal fundraising affects the
Commission's joint fundraising rules at 11 CFR 102.17. The Commission
is, therefore, adding introductory language to each of these sections,
advising readers that "\[n\]othing in this section shall supersede 11
CFR part 300, which prohibits any person from soliciting, receiving,
directing, transferring, or spending any non-Federal funds, or from
transferring Federal funds for Federal election activities." Part 300 is
discussed below.

####### 

####### V. Part 104 -- Reports by Political Committees

[11 CFR 104.8 and 104.9 Uniform reporting of receipts and
disbursements.]{.underline}

As of November 6, 2002, BCRA prohibits national committees of political
parties and entities directly or indirectly established, financed,
maintained, and controlled by them, including their subordinate
committees, from raising and spending non-Federal funds. BCRA further
requires that national party committees, including subordinate
committees thereof, dispose of all non-Federal funds by December 31,
2002 in accordance with Section 300.12, and report the disposition of
those funds pursuant to section 300.13. Since national parties will no
longer maintain non-Federal accounts, the national party non-Federal
account reporting rules at

11 CFR 104.8(e) and (f), and 11 CFR 104.9(c), (d) and (e) will no longer
be necessary. Therefore, sections 104.8(e), and (f) and 104.9(c), (d)
and (e) have been amended so that they only apply to reports covering
non-Federal account activity through December 31, 2002.

[11 CFR 104.10 Reporting by Separate Segregated Funds and Nonconnected
Committees of Expenses Allocated Among Candidates and
Activities]{.underline}

Section 104.10 of the pre-BCRA regulations addressed the reporting of
expenses that are allocated among more than one clearly identified
candidate (paragraph (a)) and expenses that are allocated among specific
types of mixed Federal/non-Federal activities by political party
committees and by separate segregated funds and nonconnected committees
(paragraph (b)). However, the allocation rules and categories of
allocable expenses with respect to mixed party activities have changed
as a result of BCRA. BCRA has created additional categories of allocable
expenses, including some of those areas falling within Federal election
activity. Some of the activity that was allocable under 11 CFR 106.5
(allocation of mixed Federal/non-Federal activities by party committees)
is now Federal election activity under certain circumstances (such as
particular activities conducted in years during which regularly
scheduled Federal elections are held). Moreover, the use of non-Federal
funds by national party committees has been eliminated.

In view of these new circumstances, the rules for reporting of allocable
expenses are being divided into three sections: 11 CFR 104.10 applies to
political committees that are separate segregated funds or nonconnected
committees; new 11 CFR 104.17 applies to payments allocated between the
Federal and non-Federal accounts of State, district, and local party
committees; and new 11 CFR 300.36 covers payments allocated by those
party committees between Federal funds and funds usable for some Federal
election activities pursuant to 11 CFR 300.32(b)(1) and 300.33.

BCRA has no impact on the allocation of expenses by separate segregated
funds and nonconnected committees on behalf of more than one clearly
identified Federal or non-Federal candidates, or such committees'
allocation of specific categories of mixed Federal/non-Federal
activities. Thus, pre-BCRA section 104.10(a), which addressed payments
entailing combined expenditures and disbursements on behalf of more than
one clearly identified Federal and non-Federal candidate, is being
changed very little at this point. Paragraph (a) is being amended to
specify that it applies only to separate segregated funds and
nonconnected committees, and to delete references to section 106.5(g)
(now section 106.7(f)), which addresses non-Federal to Federal transfers
made by party committees for the purpose of mixed payments.

Similar changes are being made to paragraph (b) of section 104.10. In
view of the removal of party committees from this section, other
adjustments are being made. In the discussion of itemization of
allocated disbursements for administrative and generic voter drive
expenses, the references to the Senate and House campaign committees of
a political party are being deleted from paragraph (b)(1)(i) and (ii).
In paragraph (b)(1)(ii), the specific reference to the types of
committees using the funds expended method is being deleted because all
committees addressed in this regulation would use the funds expended
method for those two allocation categories. References to exempt
activities are also deleted because those exemptions do not apply to the
activities of separate segregated funds and nonconnected committees.

The only specific comments received on section 104.10 were general
expressions of support from the principal Congressional sponsors of BCRA
and two commenters on behalf of State party committees. Consequently,
the final rules follow the proposed rules, except for two small
reversions back to the pre-BCRA regulation. Instead of citing to 11 CFR
106.1 specifically as the regulation providing instructions on
allocation for candidate support, the revised citation is to 11 CFR part
106 because 11 CFR 106.4 is applicable to the allocation of polling
costs.

# 11 CFR 104.17 Reporting of Allocable Expenses by Party Committees

As indicated in the Explanations and Justifications for 11 CFR 104.10
and 106.1, pre-BCRA section 104.10 has been divided into two sections
for the reporting of allocable payments. Section 104.10 now addresses
allocation reporting by separate segregated funds and non-connected
committees. Section 104.17, which had been a reserved section prior to
the enactment of BCRA, now addresses allocation reporting by party
committees.

Paragraph (a) of new section 104.17 addresses allocation of the support
of candidates, including Federal and non-Federal candidates, by national
party committees and by State, district, and local party committees. As
indicated below, national party committees must use all Federal funds,
while State, district, and local party committees may use a mixture of
Federal and non-Federal funds under certain circumstances. Paragraph (b)
of this section addresses the reporting of the allocation of
expenditures and disbursements for mixed Federal/non-Federal activities
that are not Federal election activities undertaken by State, district,
and local party committees. Reporting requirements with regard to
specific Federal election activities allocable between Federal and Levin
accounts pursuant to 11 CFR 300.33 are addressed separately in 11 CFR
300.36.

The NPRM included proposed 11 CFR 104.17(a) to address payments on
behalf of more than one clearly identified candidate, including payments
that entail an expenditure on behalf of one or more Federal candidates
and a disbursement on behalf of one or more non-Federal candidates. The
NPRM explained that all such payments must be made with Federal funds
and must be reported.

Proposed paragraphs (a)(1) and (a)(2) provided for the use of a unique
identifying title or code for each program or activity conducted on
behalf of more than one candidate and for the retention of records in
accordance with 11 CFR 104.14. These requirements were in pre-BCRA 11
CFR 104.10.

The Commission sought comments on the proposed requirement that a State,
district, or local party use only Federal funds for the combined
payments on behalf of clearly identified Federal and clearly identified
non-Federal candidates. As indicated in the Explanation and
Justification of 11 CFR 106.1, a number of commenters noted that
materials and communications that refer to both Federal and non-Federal
candidates, but are not public communications and do not otherwise meet
the definition of Federal election activity, should continue to be
subject to allocation based on the time or space devoted to each
candidate. Other commenters asserted that only Federal funds could be
used.

The final rule in 11 CFR 104.17 clarifies the issue as to the use of
Federal funds. Paragraph (a) makes clear that, where a national party
committee makes a payment that consists of both an expenditure on behalf
of a Federal candidate and a disbursement on behalf of a non-Federal
candidate, the amounts attributed to each candidate must be disclosed,
but only a Federal account may be used.

Paragraph (a) changes the approach taken in the NPRM with respect to
State, district, and local party committees, which, unlike national
party committees, may have non-Federal accounts under BCRA. The
application of the new Federal election activity provisions of BCRA
means that many disbursements by State, district, and local party
committees mentioning Federal candidates that in the past were allocable
between Federal and non-Federal accounts pre-BCRA must now be paid
solely with Federal funds. There will still be, however, other payments
entailing expenditures by State, district, and local party committees on
behalf of Federal candidates and disbursements by these committees on
behalf of non-Federal candidates that will not be Federal election
activities; these will continue to be allocable between Federal and
non-Federal accounts.

Accordingly, paragraph (a)(1) in the final rule generally follows
pre-BCRA 11 CFR 104.10(a)(1), including the retention of the requirement
of unique identifying titles or codes. All report entries that reflect
the same allocable program or activity will share the same title or code
to better track the particular program or activity. The use of unique
identifiers for other various categories of mixed party activities is
discussed below.

Paragraphs (a)(2) and (a)(3) of 11 CFR 104.17 follow pre-BCRA 11 CFR
104.10 with a minor citation change. Proposed paragraph (a)(2),
addressing recordkeeping, is re-numbered as (a)(4) in the final rules.

Section 104.17(b) in the NPRM addressed the reporting of all allocations
of disbursements for activities of State, district, and local party
committees, including disbursements for allocable Federal election
activities, i.e., certain activities eligible to be paid in part with
Levin funds pursuant to 11 CFR 300.33. For purposes of clarity, the
final rule covers only the reporting of disbursements for allocable
party activities that are not Federal election activities. The reporting
of allocable Federal election activities is subject to the rules in 11
CFR 300.36.

Section 104.17(b) establishes that State, district, and local party
committees that have set up Federal and non-Federal accounts, including
any allocation accounts being used to make disbursements for allocable
activities, must report all payments that are being allocated pursuant
to 11 CFR 106.7.

Paragraphs (b)(1)(i) and (ii) require statements by State, district, and
local party committees in their initial reports at the beginning of a
calendar year of the percentages the committee will use for payments to
be allocated between Federal and non-Federal accounts for specific
categories of party activity. This requirement is similar to the one
contained in the pre-BCRA regulations.

With regard to a requirement of unique identifiers in the reports of
allocable activities, the NPRM asked for comments as to whether such
identifying codes would be useful. The principal Congressional sponsors
of BCRA in their comments left this decision to the Commission, although
they stated that identifying codes would be of "significant utility in
greater specificity in reporting." Two of the responses from party
committees argued against such a requirement, arguing that the purpose
of the codes in the past had been to distinguish among activities that
had differing allocation ratios and that use of the same allocation
ratio made the codes unnecessary.

The final rule at paragraph (b)(1)(iii) of 11 CFR 104.17 requires party
committees to assign unique identifiers to allocable activities, other
than those involving payments of certain allocable salaries and other
compensation and payments of allocable administrative costs. This
requirement follows requirements in the pre-BCRA regulations at 11 CFR
104.10(b)(2) with regard to the reporting of exempt party costs.

The Commission recognizes that, as noted by certain party committees in
their comments, the rules will now require use of the same set of
percentages in a given year for almost all allocable party activity
categories, thereby weakening one of the previous rationales for using
unique identifiers for some categories of activities. Such identifying
mechanisms are, however, still needed to enable reviewers of a party
committee\'s reports, including members of the public, to track
accurately the specific transactions involved in a particular allocable
activity. It is significant that party committees frequently make many
disbursements to the same vendor for differing purposes and that a
number of vendors may be paid for similar activities. Thus, the
Commission is requiring that certain allocable activities or programs
carry a unique identifying title or code. The Commission has also
concluded that, while unique identifiers for administrative or salary
and other compensation costs would be of some utility, it will continue
the practice of not requiring them in order to avoid imposing an
additional administrative burden on party committees. All entries of
disbursements to pay for an allocated program or activity must include a
reference to the unique identifier, if an identifier is required for
that allocation category. In addition, each reporting entry of a
transfer (from the non-Federal account to the Federal or allocation
account) for a program or activity must include a reference to the
unique identifier, if an identifier is required for that allocation
category.

Paragraph (b)(2) of 11 CFR 104.17 addresses the reporting of transfers
between State, district, and local party accounts and into allocation
accounts of funds to be used for allocable expenses. As did the pre-BCRA
rules, this paragraph requires memo entries on reports as to the
allocable expenses for which the transfer is being made and the date of
the transfer. If more than one activity is covered by a transfer, the
report must itemize the amounts designated for each expense as
categorized at 11 CFR 106.7. The Commission received no comments on this
provision.

Section 104.17(b)(3)(i) sets out the details required in the reporting
of disbursements for allocable activity by State, district, and local
committees of political parties.

Section 104.17(b)(3)(ii) addresses the reporting of State, district, and
local party disbursements for activity that is allocable between a
committee's Federal and Levin funds by referring the reader to the
requirements of 11 CFR 300.36.

Section 104.17(b)(4) requires the retention of all documents supporting
allocations of expenditures and other disbursements for three years,
consistent with FECA.

####### VI. Part 106 -- Allocations of Candidate and Committee Activities

# 11 CFR 106.1 Allocation of Expenses Between Candidates

[A. Allocation of Expenses Between Candidates]{.underline}

Pre-BCRA 11 CFR 106.1 addressed the allocation of expenditures and/or
disbursements among more than one candidate. Paragraph (a)(1) set out
the general rule for allocation of an expenditure made on behalf of more
than one clearly identified Federal candidate. It also addressed
allocation of a payment involving both an expenditure made on behalf of
one or more clearly identified Federal candidates and a disbursement on
behalf of one or more non-Federal candidates. The proposed regulation in
the NPRM added language indicating that a party committee must use only
Federal funds for both kinds of situations, not just the first one. This
was based on proposed 11 CFR 300.33(c)(1), which stated that only
Federal funds could be used for activities that referred to a Federal
candidate. It was also based on BCRA and proposed 11 CFR 100.24(a)(3),
which provided that only Federal funds may be used for a public
communication that refers to a clearly identified Federal candidate and
that promotes, attacks, supports, or opposes the candidate (regardless
of whether a non-Federal candidate is also mentioned).

The NPRM divided pre-BCRA section 104.10, which addressed reporting of
allocation by nonconnected committees and separate segregated funds, as
well as party committees, into two sections: 11 CFR 104.10 for
nonconnected committees and separate segregated funds, and 11 CFR 104.17
for party committees. In view of this rearrangement, the proposed rules
in paragraph (a)(2) of section 106.1 added a reference to 11 CFR
104.17(a) to cover party committee reporting. In addition, the pre-BCRA
rules addressing allocation among Federal and non-Federal candidates was
modified in the NPRM to delete the citation to party committee transfer
procedures; this was premised on the position that such payments had to
be made entirely with Federal funds.

The NPRM proposed no changes to pre-BCRA paragraphs (b), (c), and (d) of
11 CFR 106.1. Paragraph (e) is a signpost to the sections that address
allocation of specific types of mixed Federal/non-Federal activity,
other than expenditures and/or disbursements on behalf of clearly
identified candidates. The NPRM proposed to delete from this paragraph a
reference to 11 CFR 106.5, to add a reference to 11 CFR 300.33, and to
amend the list of allocation categories to conform to other proposed
regulations, including a deletion of exempt activities.

The NPRM narrative asked whether the proposed requirement that a State,
district, or local party committee use only Federal funds for all
payments made on behalf of both clearly identified Federal and clearly
identified non-Federal candidates is appropriate under BCRA. The NPRM
also asked for comments on, and discussed whether exempt party
activities[^3] for both Federal and non-Federal candidates (i.e.,
entailing disbursements for Federal candidates that were exempt from the
definition of contribution or expenditure) still exist as an allocable
category after passage of BCRA.

Three commenters on behalf of party committees stated that not every
activity that mentions a clearly identified Federal candidate must be
paid for exclusively with Federal funds. They argued that materials and
communications that refer to both Federal and non-Federal candidates but
are not public communications and do not otherwise meet the definition
of Federal election activity should continue to be subject to allocation
based on time or space devoted to the Federal and non-Federal candidates
as under the pre-BCRA regulations. One of these commenters also argued
that the costs of "non-communicative activities" that result in an
in-kind contribution and donation to Federal and non-Federal candidates
respectively should continue to be allocable between Federal and
non-Federal accounts.

The principal Congressional sponsors of BCRA stated that BCRA required
the proposed result for such payments by State, district, and local
party committees. Another commenter referred to several specific
provisions in BCRA to support the view that only Federal funds can be
used for the payment on behalf of both a Federal and non-Federal
candidate: (1) 2 U.S.C. 441i(b)(1), which provides that costs for
Federal election activity shall be paid for with Federal funds; and (2)
2 U.S.C. 441i(b)(2)(A) and (B), which allow for allocation of some
Federal election activities but not when the activity refers to a
clearly identified Federal candidate. A third commenter agreed that
national party committees must use only Federal funds for payments
involving both expenditures on behalf of a Federal candidate and
disbursements on behalf of a non-Federal candidate but did not comment
on State, district, or local party committees.

The comments on the relationship of Federal election activities to
exempt activities are summarized in the Explanation and Justification of
11 CFR 100.24 above. Some commenters conclude that many exempt
activities are not redefined as Federal election activity and thus there
are exempt activities that are not Federal election activity. Others
believe that exempt activities are nearly or completely subsumed by, or
redefined as, Federal election activity. Within both groups, there was a
variety of opinion as to the precise relationship.

The final rule at 11 CFR 106.1 has been changed from the proposed
regulation with respect to the use by a party committee of both Federal
and non-Federal funds for a payment that is an expenditure on behalf of
a clearly identified Federal candidate and a disbursement on behalf of a
clearly identified non-Federal candidate. Any such payment that is for a
Federal election activity requires the use of Federal funds only, as set
out in amended paragraph (a)(2). However, such payments that are not for
Federal election activities must be allocable between Federal and
non-Federal accounts. Hence, the last sentence of proposed paragraph
(a)(1), indicating that only Federal funds can be used, is deleted from
the final rules. In addition, the final rule does not include language
added in proposed paragraph (a)(2) to the effect that only separate
segregated funds and nonconnected committees could make a payment that
included an expenditure of Federal funds on behalf of a Federal
candidate and a disbursement on behalf of a non-Federal candidate.

Paragraph (a)(1) of the final rule includes also the appropriate method
for attributing expenditures and disbursements among candidates in the
case of a phone bank. This method is derived from pre-BCRA 11 CFR
106.5(e), which addressed Federal/non-Federal allocation in the
analogous situation of exempt activities. In view of the fact that this
method, which has provided guidance for allocation of expenditures and
disbursements for direct candidate support, is no longer in the new
regulations after December 31, 2002 for other mixed party activities
(renumbered 11 CFR 106.7), the regulations in 106.1 directly address
phone banks.

Federal election activity includes some of the activities that also meet
the definition of exempt activities. As indicated in the Explanation and
Justification of 11 CFR 100.24, a Federal election activity that,
pre-BCRA, would have been allocable as an exempt cost activity, is now a
Federal election activity covered by the allocation rules at 11 CFR
300.33. That explanation and 11 CFR 106.7 also indicate, however, that
exempt activities still exist as an allocable category in a number of
situations. Hence, a complete list of particular allocable activities
other than those addressed in 11 CFR 106.1 should include exempt
activities. The listing of allocable activities, however, concerns more
than just the re-inclusion of exempt activities; BCRA has necessitated a
re-labeling and addition of some allocable activities. Hence, the final
rule at paragraph (e) does not list individual allocation categories but
still serves as a signpost to sections addressing the allocation of
mixed Federal/non-Federal or mixed Federal/Levin activities.

Exempt party activities also relate to section 106.1 as follows. If an
activity supporting clearly identified Federal and non-Federal
candidates is a Federal election activity and is not also an exempt
activity, the portion of the payment attributable to each Federal
candidate is an expenditure for that candidate, including an in-kind
contribution, an independent expenditure, or a coordinated expenditure.
If the payment is for a Federal election activity that is also an exempt
activity, the amounts are exempted from the definition of "expenditure"
or "contribution." Although the expense must be paid for entirely with
Federal funds, only the amounts that are attributable to the Federal
candidates or Federal elections (but using the new percentages in 11 CFR
106.7) count toward the political committee registration threshold at 2
U.S.C. 431(4)(C) for local party committees, which is more than \$5,000
in exempt activity payments. [See]{.underline} Explanation and
Justification for 11 CFR 100.24(a).

[11 CFR 106.5 Allocation of Expenses Between Federal an d Non-Federal
Activities by National Party Committees]{.underline}

The NPRM proposed amending 11 CFR 106.5 to explain the allocation rules
for State, district, and local party committees. Proposed paragraph (a)
also stated that because national party committees would no longer be
able to raise and spend non-Federal funds, they would no longer be able
to allocate their expenses between their Federal and non-Federal
accounts. See 67 Fed. Register 35679. While this is true after December
31, 2002, national party committees will be able to spend non-Federal
funds for limited purposes during the transition period of November 6,
2002, through December 31, 2002. For discussion of the transition
period, see the Explanation and Justification for 11 CFR 300.12, below.
The Commission realizes that the regulations need to contain allocation
rules for national party committees during this transition period.
Therefore, the final rules include several technical amendments to
section 106.5 to make it applicable solely to national party committees
and only during the transition period. The current allocation rules
remains unchanged for national party committees. The final rules that
apply to State, district, and local party committees, set out in
proposed 11 CFR 106.5, are being designated as new 11 CFR 106.7 in the
final rules. See below.

Consistent with this reorganization, the word "national" is placed
before "party committees" in several places in 11 CFR 106.5, including
the title of the section, to clarify that this section only applies to
national party committees. A title is added to paragraph (a)(1) for
consistency because all other paragraphs under paragraph (a) have
titles. Paragraphs (a)(2)(iii), (d), and (e) are removed and reserved
because they apply to State, district, and local party committees.
Paragraph (h) is added to be a sunset provision. Paragraph (h) states
that section 106.5 only applies during the transition period and will no
longer be effective after December 31, 2002.

# 11 CFR 106.7 Allocation of Expenses Between Federal and Non-Federal Activities by Party Committees

Section 106.7 sets forth rules governing the allocation of certain
expenses between the Federal and non-Federal accounts of political
parties. Much of new section 106.7 covers many topics formerly addressed
in pre-BCRA 11 CFR 106.5. New section 106.7 is being revised and
reorganized in several respects. The final regulations addressing
allocation of expenditures and disbursements at 11 CFR 106.7 and 11 CFR
300.33 separate between the two sections respectively those activities
that are not "Federal election activity" and those that are. This
reorganization is based in large part upon the need to clarify in the
rules the relationship between "exempt activities" and "Federal election
activities," particularly given certain timing issues that became
apparent concerning the sub-set of Federal election activities that may
be paid in part with Levin funds. [See]{.underline} 11 CFR 300.32 and
300.33. Therefore, 11 CFR 106.7 now addresses allocation of expenses for
all State, district, and local party activity that falls outside the
definition of Federal election activity, while 11 CFR 300.33 addresses
only the allocation of the costs of those activities that come within
that definition. As a result, a number of provisions included at 11 CFR
300.33 in the version of the regulation proposed in the NPRM now appear
in 11 CFR 106.7. For example, proposed 11 CFR 300.33(a)(1) regarding
salaries is now, in somewhat expanded form, 11 CFR 106.7(c)(1).

The content of 11 CFR 106.7(a)(1) and (2) remains much the same as the
NPRM, although language has been added to emphasize that these
provisions address activities other than Federal election activities.
These paragraphs state the general principles that after December 31,
2002, (1) national party committees are no longer permitted to raise and
spend non-Federal funds, and thus are unable to allocate expenses
between Federal and non-Federal accounts; and (2) State, district, and
local party committees that make expenditures and disbursements for
activities other than Federal election activities in connection with
both Federal and non-Federal elections must either use only Federal
funds for these purposes or must establish separate Federal and
non-Federal accounts and allocate expenditures between or among those
accounts.

The prohibitions on national party committee use of non-Federal funds
has resulted in the complete elimination of pre-BCRA 11 CFR 106.5(b) and
(c).

Paragraph 106.7(c) sets out costs that must be either paid totally from
Federal accounts or allocated by State, district, and local party
committees between their Federal and non-Federal accounts. These costs
include salaries at paragraph (c)(1), a category which has been
broadened in the final regulation to include other compensation,
including benefits. This provision applies only to employees who spend
25% or less of their compensated time in connection with Federal
elections. The compensation of other employees who spend more time on
Federal elections is a "Federal election activity" pursuant to 11 CFR
100.24, and, therefore, the allocation of that compensation is addressed
in new 11 CFR 300.33.

The proposed regulations at 11 CFR 300.33(b)(1) would have required
State, district, and local party committees to keep time records for all
employees, the purpose being to provide documentation for allocation
purposes. The NPRM set out three possible alternative methods by which a
committee could collect such documentation. In response to the NPRM, a
State party committee asserted that time sheets would be "burdensome,"
that written certifications by employees would be "equally impractical,"
but that a tally sheet kept by the employer would be "more reasonable."
The same commenter nonetheless urged the Commission not to require any
particular method of documentation. For the reasons noted by the
commenters, the final rule at 11 CFR 106.7(d)(1) retains the requirement
that time records be kept, but leaves the choice of particular method to
the discretion of the party committee.

The comment submitted by the principal Congressional sponsors of BCRA
urged the Commission to clarify that funds from a Levin account,
established pursuant to 11 CFR 300.30(b), could be used to meet the
non-Federal portion of salaries. 11 CFR 300.30(b)(3) states that Levin
accounts may be used to pay for non-Federal activities to the extent
permitted by State law.

The second category of allocable expenses in 11 CFR 106.7 is
"administrative costs." Under paragraph (c)(2), these costs cover
administrative expenses except for employee salaries, compensation, and
other benefits. The final regulation requires allocation of these costs
between a party committee's Federal and non-Federal accounts, unless
they can be attributed to a clearly identified Federal candidate, in
which case they are totally Federal costs to be paid with Federal funds.

A number of the comments received in response to the NPRM argued that,
because BCRA does not address administrative costs, State, district, and
local party committees should be able to pay them totally out of their
non-Federal accounts. One commenter representing a State party
emphasized the many State and local elections and ballot initiatives
with which his party is involved as compared to the number of Federal
elections. Other commenters, however, including the principal
Congressional sponsors of BCRA, argued that BCRA was never intended to
change the allocations required by the pre-BCRA regulations, and that
administrative costs should continue to be allocable between Federal and
non-Federal accounts.

While the Commission recognizes that non-Federal activity consumes a
large portion of State party time and finances, there is no doubt that
Federal candidates benefit from such party committees' efforts to reach
and motivate potential voters. The Commission also agrees that nothing
in BCRA or the legislative history suggests that Congress intended the
Commission to abandon its longstanding allocation requirement for these
expenses. Therefore, the final rules continue to require allocation of
administrative costs under a simplified allocation method discussed
below.

Under the Act, as amended by BCRA, how the costs of voter registration,
voter identification, get-out-the-vote ("GOTV") and other campaign
activities that may promote or oppose a political party without
promoting or opposing a candidate are allocated depends on whether such
activities come within the definition of "Federal election activity" or
not. [See]{.underline} 11 CFR 100.24(a), (b). Numerous commenters
focused upon the relationship between the provisions in FECA and in the
Commission's regulations that exempt certain party activities from the
definitions of "contribution" and "expenditure" and the provisions in
BCRA establishing "Federal election activities" as a general category,
and activities for which Levin funds may be used. The positions taken by
the commenters and the Commission's determinations in this regard are
addressed in the Explanation and Justification for 11 CFR 100.24
defining "Federal election activity."

The final rules adopted in 11 CFR 106.7(c)(3) set out the permitted
allocations of costs for categories of party expenditures and
disbursements for activities that are exempt party activities but are
not Federal election activities, and that may, therefore, be allocated
between Federal and non-Federal accounts. For such exempt activities
that are not Federal election activities (e.g., voter registration
activities on behalf of the Presidential ticket more than 120 days
before an election or after that election), the party committee must
either pay the costs of this activity from its Federal account or
allocate the costs between its Federal and non-Federal account.

11 CFR 106.7(c)(4) addresses direct fundraising costs related to
activities that are undertaken in connection with Federal and
non-Federal elections that are not Federal election activities. The NPRM
indicated that all [direct]{.underline} fundraising costs for all
activities must be paid from a Federal account, while other
fundraising-related costs not directly related to particular fundraising
programs or events could be allocated between Federal and non-Federal
accounts as administrative costs. The rationale for this distinction is
the fact that all Federal funds raised are in fact available to meet the
costs of Federal election activities, while BCRA establishes a clear
requirement that [all]{.underline} fundraising costs related to Federal
and Levin funds that will be used in whole [or in part]{.underline} for
Federal election activities be paid with Federal funds. 2 U.S.C. 441i(c
). The principal Congressional sponsors of BCRA supported the proposed
rules that required entirely Federal funds to be used for these
purposes. A public interest group and a party committee urged the
Commission to continue to use the funds received method for allocating
these costs. Two party committees urged allocation of only those
fundraising costs that are directly associated with a particular
fundraising program or event.

While the fact remains that BCRA requires the use by State, district,
and local party committees of only Federal funds to raise funds for
Federal election activities, there are also other purposes for which the
direct costs of related fundraising may be appropriately allocated
between Federal and non-Federal accounts because the proceeds will not
be used for Federal election activity. The final rule at 11 CFR
106.7(c)(4) therefore permits such allocation of the direct costs of
raising funds to go only into Federal and non-Federal accounts, on the
condition that none of the proceeds so raised may ever be used for
Federal election activities. Thus, the rule requires the segregation of
the proceeds in either a separate bank account or a separate book
account. The rule also specifies that direct costs of fundraising entail
the solicitation costs and the costs of planning and administering a
particular event or program.

11 CFR 106.7(c)(5), which did not appear in the version of the
regulation published in the NPRM, covers certain voter-drive activities
and other party campaign activities that are not candidate-specific that
do not qualify as Federal election activities. These may include, for
example, certain voter identification, GOTV, and activity that does not
promote or oppose a candidate or non-Federal candidate that do not
qualify as Federal election activities because they are not in
connection with an election in which a Federal candidate appears on the
ballot. [See]{.underline} 11 CFR 100.24(a)(1), (b)(2). Paragraph (c)(5)
provides that the costs of such activities may be allocated between the
Federal and non-Federal accounts of the party committee.

One goal of the final regulation is to assure that activities deemed
allocable are not paid for with a disproportionate amount of non-Federal
funds. Another goal is to simplify the allocation process, in particular
by establishing formulas that do not vary from State to State and that
do not require measurements of time or space devoted to each of several
candidates. Therefore, in lieu of the State-by-State ballot composition
ratios for administrative costs and generic campaign activity and in
lieu of the time or space method applied to exempt State activities,
which were required by the pre-BCRA regulations, the rules at revised 11
CFR 106.7(d)(2) and (3) establish fixed percentages for all States for
certain activities. The percentages vary only in terms of whether or not
a Presidential campaign and/or a Senate campaign is to be held in a
particular election year.

In the NPRM, the Commission set out proposed required allocation
percentages for the Federal shares of salaries and other compensation
paid employees who spend 25% or less of their time on Federal elections,
for administrative expenses, and for exempt party activities that are
not Federal election activities. These Federal percentages are as
follows:

> \(i\) Presidential only election year -- 28% of costs
>
> \(ii\) Presidential and Senate election year -- 36% of costs
>
> \(iii\) Senate only election year -- 21% of costs
>
> \(iv\) Non-Presidential and Non-Senate election year -- 15% of costs.

These figures were derived by taking averages of the ballot
composition-based allocation percentages reported by State party
committees in four groupings of States selected for their diversities of
size and geographic location and for the particular elections held in
each State in 2000 and 2002. The groupings were: (1) six States
(Alabama, Colorado, Illinois, New Hampshire, Oklahoma, and Oregon) in
which there was a Presidential but no Senate campaign in 2000; (2) 10
States (California, Delaware, Georgia, Florida, Michigan, New York,
North Dakota, Texas, Vermont, and Wyoming) in which there were both a
Presidential campaign and a Senate campaign in 2000; (3) six States
(Delaware, Georgia, Michigan, Oklahoma, Texas, and Wyoming) in which
there will be a Senate campaign in 2002; and (4) six States (California,
Florida, New York, North Dakota, Vermont, and Washington) in which there
will be no Senate campaign in 2002.

In 2000, the Federal percentages for the two parties in six States with
only a Presidential campaign ranged from 20% to 33.33%, with an average
of 28%, while the Federal percentages for the two parties in ten States
which held both Presidential and Senate campaign that year ranged from
30% to 43%, with an average of 36%. In 2002, the Federal percentages for
the two parties in six States with a Senate campaign ranged from 20% to
25%, with an average of 21%, while the Federal percentages for the two
parties in six States with no Senate campaign ranged from 11.11% to
16.67, with an average of 15%. The rules apply the average percentages
in each of the four groupings of States to all 50 States.

One comment on the proposed rules from a public interest organization
addressed the Commission's proposed fixed percentages by providing two
alternatives to the Commission's figures. The first alternative would
have set a flat 33% requirement for Federal shares of what the response
termed "Levin expenditures" ([see]{.underline} 11 CFR 300.33) and for
allocable costs other than administrative costs in odd-numbered years or
in non-Presidential election years, and a flat 40% requirement for
Federal shares of these same categories of activities in Presidential
election years. This alternative would also have required a 25%
allocation for administrative costs in all years. The commenter based
these percentages on what were termed "the current assumption" as to
what State party committees spend in certain years.

The second alternative urged by this commenter adopted the Commission's
calculations, but called for the use of the higher percentages in the
sample States for what the response termed "Levin spending" and for
voter registration outside the 120 day period before an election, plus
the average percentages for non-Levin expenses such as administrative
costs. The commenter also urged the Commission to be clear that its
allocation percentages apply to a two-year election cycle, not just to
the year of a Federal election.

The comment submitted on behalf of the principal Congressional sponsors
of BCRA with regard to fixed allocation percentages was very similar to
that of the public interest organization's response cited above in that,
as one alternative approach, it called for at least a 33% Federal
allocation of what it termed "Levin activities" and of voter
registration activities outside the 120 period before an election, plus
25% Federal allocations for administrative expenses. It also called for
40% Federal allocations of Levin and of voter registration activities
that are not Federal election activities in Presidential election years.
This alternative assumed the application of the percentages to two-year
Federal election cycles. As a second alternative, this response also
agreed to use of the Commission's percentages for administrative costs
in a two year cycle, but urged the application over that cycle of the
highest, not the average, Federal percentages for what it termed "Levin
activities and voter registration activities that are not 'Federal
election activity'

. . . ." Another comment from a public interest organization also called
for use of the highest percentages in the identified States, not the
average percentages.

The comments received from party committees with regard to fixed
percentages for Federal allocations ranged from support for the
Commission's position to giving party committees a choice at the
beginning of each cycle between the proposed formula and ballot
composition ratios.

The final rules at 11 CFR 106.7(d) include the phrase, "and in the
preceding year," to clarify that the allocation formula in this section
apply to both years of a Federal election cycle.

With regard to the amounts of the fixed minimum Federal allocations, the
final rules adopt the percentages contained in the NPRM because they
represent averages of actual allocation ratios used in specific States
at specific times, not assumptions as to possible State, district, and
local party behavior in the future. These percentages represent a clear,
bright line test intended to be more easily understood and applied than
the previous regulations, consistent with statutory intent.

Section 106.7(e) sets out those activities that are not allocable
between Federal and non-Federal accounts. Proposed 11 CFR 300.33(c)(2)
has not been included in this listing because it has been replaced by
clearer statements in other provisions in this section and in 11 CFR
300.33. Paragraphs (e)(2) and (3) have been added regarding certain
employee compensation and to Federal election activities with cross
references in both instances to 11 CFR 300.33.

Section 106.7(f), which addresses transfers to pay for allocable
activities, is largely the same as the proposed rule, with the addition
of language providing for allocation accounts as an alternative to the
use of Federal accounts for initial payments of allocable expenditures
and disbursements. This provision tracks for the most part the language
and requirements of pre-BCRA 11 CFR 106.5(g). No comments addressed the
continuation of this requirement. Reimbursements from a non-Federal
account to a Federal account must take place within a specified number
of days, unless a vendor requires an advance payment and the payment is
based upon a reasonable estimate of the costs involved. The continuation
of these timing provisions will ensure that party committees need not
change this aspect of their operations.

Section 106.7(f)(2)(ii), like former 11 CFR 106.5(g)(2)(B)(iii),
explains that any payment outside this time frame, absent the need for
an advance payment of a reasonably estimated amount, would result in the
presumption of a loan of non-Federal funds to the Federal account and a
violation of the Act. No commenters addressed this provision.

####### VII. Part 108 -- Filing Copies of Reports and Statements with State Officers

# 11 CFR 108.7 Effect of State Law

Section 108.7 addresses Federal preemption of State law based on 2
U.S.C. 453(a) and its legislative history. Paragraph (c) lists the types
of State laws that are not preempted or superseded by the Act and the
regulations. BCRA amended the Act at 2 U.S.C. 453(b), providing for the
application of State law to the purchase or construction by a State or
local party of its office building. This amendment is implemented in new
section 300.35. Paragraph (c) of section 108.7 is therefore being
amended to include the application of State law to the purchase or
construction of a State or local party office building in accordance
with 11 CFR 300.35.

####### VIII. Part 110 -- Contribution and Expenditure Limitations and Prohibitions

# 11 CFR 110.1 Contributions by Persons Other than Multicandidate Political Committees

BCRA amended 2 U.S.C. 441a(a)(1) to raise the amount that individuals
may donate to State committees of political parties from \$5,000 to
\$10,000 in any calendar year. New 11 CFR 110.1(c)(5) incorporates this
increased contribution limitation, which is effective January 1, 2003.
The principal Congressional sponsors of BCRA included in their comment
an emphasis upon the fact that this is an increase in the limitation on
Federal funds. No other comments on this provision were received.

####### IX. Part 114 -- Corporate and Labor Organization Activity

# 11 CFR 114.1 Definitions

The pre-BCRA text of 11 CFR 114.1(a)(2)(ix), follows the repealed
statutory provision as to the purchase or construction by a national or
State party committee of an office facility. It is therefore being
deleted and replaced with an annotated cross-reference to new 11 CFR
300.35 which describes how the purchase or construction of an office
building by a State or local party committee may be funded. A national
committee's office building must be purchased or constructed only with
Federal funds. [See]{.underline} new section 300.10. The texts of the
regulations currently at 11 CFR 100.7(b)(12) and 100.8(b)(13), which are
similar to the pre-BCRA text of section 114.1(a)(2)(ix**),** will be
modified in a separate rulemaking that the Commission is publishing
shortly.

####### X. Part 300 -- Non-Federal Funds

####### [11 CFR 300.1 Scope, Effective Date, and Organization]{.underline} 

The bulk of the new rules that address non-Federal funds of political
party committees are contained in 11 CFR part 300. Section 300.1
addresses the scope of new part 300, sets forth the effective date of
the provisions contained in the new part, and outlines the organization
of the new part. Specifically, paragraph (a) of section 300.1 states
that new part 300 implements changes to the FECA enacted by Title I of
BCRA. It also notes that nothing in part 300 is intended to alter the
definitions, restrictions, liabilities, and obligations imposed by
sections 431 to 455 of Title 2 of the United States Code or in the
regulations prescribed thereunder in 11 CFR parts 100 to 116.

The effective date of BCRA, except where otherwise stated, is November
6, 2002. [See]{.underline} 2 U.S.C. 431 note, section 402(a). Consistent
with BCRA, paragraph (b) of section 300.1 states that part 300 takes
effect on November 6, 2002, except for the following: (1) where
otherwise stated in part 300; (2) subpart B of part 300 relating to
State, district, and local party committees does not apply with respect
to runoff elections, recounts, or election contests resulting from
elections held prior to November 6, 2002; (3) the increase in individual
contribution limits to State party committees as set forth in proposed

11 CFR 110.1(c)(5) applies to contributions made on or after January 1,
2003, and (4) national parties must spend any remaining non-Federal
funds received before November 6 and in their possession on that date
before January 1, 2003, subject to the transition rules set forth in
proposed 11 CFR 300.12.

Finally, paragraph (c) of section 300.1 explains that part 300 is
organized into five subparts, with each subpart addressing a specific
category of persons affected by BCRA. Subpart A of part 300 prescribes
rules pertaining to national party committees; subpart B prescribes
rules pertaining to State, district, and local party committees and
organizations; subpart C addresses rules affecting certain tax-exempt
organizations; subpart D prescribes rules pertaining to Federal
candidates and Federal officeholders; and subpart E prescribes rules
pertaining to State and local candidates. In addition, BCRA requires
changes in other parts of Title 11 of the [Code of Federal
Regulations]{.underline}, which are also addressed in this rulemaking.
One commenter supported the provisions of this section. The final rules
follow the proposed rules, with the exception of minor revisions to
clarify the scope of each subpart.

# 11 CFR 300.2 Definitions

[A. 11 CFR 300.2(a) Definition of "501(c) organization that makes
expenditures and disbursements in connection with a Federal
Election"]{.underline}

New 11 CFR 300.2(a) defines a 501(c) organization "that makes
expenditures and disbursements in connection with a Federal election."
BCRA prohibits national and State party committees, their officers and
agents, and certain entities associated with them, from soliciting any
funds for, or making or directing any donations to, 501(c) organizations
that fit this definition. The NPRM sought comments on whether the
regulations should contain a temporal requirement so that this
prohibition is not overbroad and does not encompass, for example, an
organization that made expenditures and disbursements in connection with
a Federal election many years ago but has not done so recently and does
not plan to do so in the future.

Commenters were in general agreement that a temporal requirement was a
good idea. Several commenters suggested that the prohibition should
encompass organizations that have made expenditures and disbursements in
connection with a Federal election during the past three election
cycles, or six years. The Commission believes that six years is
unnecessarily long and is not necessarily indicative of an
organization's current activities. Instead, paragraph (a) of the final
rule encompasses an organization "that within the last six years has, or
within the current election cycle plans to undertake" certain enumerated
activities in connection with a Federal election. This temporal
requirement ensures that the definition is not overly broad.

The definition in 11 CFR 300.2(a) also sets out specific examples as to
what constitutes activities "in connection with a Federal election." The
principal Congressional sponsors of BCRA support these examples. The
final rules follow the proposed rules as to these activities with the
addition of paragraph (a)(5). This new paragraph makes clear that in
addition to generic activities and get-out-the-vote activities covered
within Federal election activity in paragraph (a)(2), expenditures and
disbursements in connection with a Federal election also includes
get-out-the-vote communications that refer to one or more candidates for
Federal office. This addition covers organizations that, for example,
finance activities such as get-out-the-vote phone calls directed to
individual voters before an election, where the phone calls that provide
information regarding federal candidates and urge individuals to vote in
an upcoming election.

[B. 11 CFR 300.2(b) Definition of "agent"]{.underline}

Many of the prohibitions and restrictions of BCRA apply to a principal
entity, such as a political party committee or a candidate, and to the
"agents" of such principals. [See, e.g.]{.underline}, 2 U.S.C.
441i(a)(1), (2); 2 U.S.C. 441i(b)(1); 2 U.S.C. 441i(e)(1). Congress did
not define the term, "agent," in BCRA. In the NPRM, the Commission
proposed a regulatory definition framed in terms of "a person who has
actual express oral or written authority" to act on behalf of a
principal. This definition would have defined "actual authority" as
"instructions, either oral or written," from the principal. The
Commission solicited comments on several aspects of this proposed
definition, such as the potential applicability of the definition to
volunteers, whether the principal's actual knowledge of the putative
agent's activities is relevant, and the potential applicability of the
concept of apparent authority.

The Commission received many comments on the proposed definition of
agent. Several commenters found the proposed definition "too narrow."
One described the requirement that an agent's authority must be actual
and express to be a "loophole that would utterly swallow the rule,"
arguing that in the "real world" fundraising is accomplished largely
through agents without express authority in a "technical" or "legal"
sense. The principal Congressional sponsors of BCRA commented that the
proper definition of "agent" is critical to prevent evasion of the
"soft-money" prohibitions at the center of Title I of BCRA. The
definition, they believe, should encompass "anyone who has an agency
relationship under common law," including apparent authority. The
principal Congressional sponsors and a public interest group commented
that the new definition should not be narrower than the definition of
agent currently used by the Commission in regulating independent
expenditures. [See]{.underline} 11 CFR 109.1(b)(5). The sponsors also
commented that the Commission should not exclude volunteers and vendors
[per se]{.underline}. A public interest group also urged the Commission
to include apparent authority within the definition. This group argued
that "bestowing" a title or position on an individual implies that the
individual is working on behalf of the principal who bestowed the title
or position.

In contrast, other commenters, comprised of national and State political
party committees and labor organizations, applauded the proposed rule's
conjunctive requirement that the agent's authority must be actual and
express. Three national party committees commented that the definition
should be further limited to individuals with "substantive
decision-making authority." Many of these commenters stressed that the
Commission should consider two issues in implementing the regulatory
definition of "agent." The first issue is the nature of an agent's
"individual liability" for his or her own actions. The second issue is
the perceived "vicarious liability" of the principal. With regard to the
first issue, several commenters, including a State party committee, an
association of State party officials, and several national party
committees, suggested the Commission use 11 CFR 109.1(b)(5) as a model
for the new definition, presumably modified to provide that authority
must be actual and express. Regarding the second issue, several
commenters urged the Commission to give full effect to a requirement
that the agent must be acting on behalf of the principal before the
principal incurs liability derived from the agent's actions. Two labor
organizations commented that the principal's derivative liability should
not extend beyond activities the agent has been specifically authorized
to conduct. Two national party committees commented that the final
definition must impose liability only when a principal exercises actual
control over the actions of the agent, arguing that it would be unfair
to impose liability for actions beyond the principal's control. Another
commenter, a State party committee, framed its suggestion in terms of
limiting a principal's liability to actions taken by an agent on the
principal's "explicit instructions."

Many of the commenters suggested that 11 CFR 109.1(b)(5), which defines
"agent" in the specific context of independent expenditures, could
provide a foundation for the definition of agent for purposes of Title I
of BCRA. In the Explanation and Justification accompanying the adoption
of the definition of "agent" for independent expenditure purposes, the
Commission stated, "\[t\]he definition of 'agency' imputes agency power
not only to persons actually authorized, but also to persons who appear
to have such power, in accordance with general principles of the law of
agency." House Doc. No. 95-44 at 55 (Explanation and Justification for
1977 Amendments to FECA) (January 12, 1977). Thus, the Commission, in
the absence of statutory guidance in FECA, relied on general principles
of the law of agency in crafting the 11 CFR 109.1 definition of agent.
In [Community for Creative Non-Violence v. Reid]{.underline}, 490 U.S.
730, 739 (1989), the U.S. Supreme Court stated, "\[i\]t is ... well
established that '\[w\]here Congress uses terms that have accumulated
settled meaning under ... the common law, a court must infer, unless the
statute otherwise dictates, that Congress means to incorporate the
established meaning of these terms."

Based upon the Commission's previous approach and the suggestions of the
commenters, the final rules defining "agent" for purposes of Title I of
BCRA provides that an agent is "any person who has actual authority,
either express or implied." The final regulation thus differs from the
regulation proposed in the NPRM in that the agent's actual authority may
be express [or]{.underline} implied. The Commission makes this change
for two reasons. First, it is in keeping with the Supreme Court's
admonition in [Community for Creative Non-Violence, supra,]{.underline}
that the Commission should be guided by "settled meaning under ... the
common law ... unless the statute otherwise dictates" in defining
statutory terms. In this regard, the Commission notes that under the
Federal common law of agency:

> An agent's authority may be actual or apparent, [see generally
> Restatement (Second) of Agency 7-8]{.underline}; if it is actual, it
> may be express or implied, [see id. 7 cmt c.]{.underline} Implied
> authority is that authority which is inherent in an agent's position
> and is, simply, actual authority proved through circumstantial
> evidence. Actual authority "to do an act can be created by written or
> spoken words or other conduct of the principal, which, reasonably
> interpreted, causes the agent to believe that the principal desires
> him so to act on the principal's account."

[Moriarty v. Glueckert Funeral Home, Ltd.]{.underline}, 155 F.3d 859,
865-866 (7th Cir. 1998) (quoting Restatement (Second) of Agency, 26).

The comments and testimony received by the Commission perhaps reveals
some confusion about the term "implied authority." As
[Moriarty]{.underline}, [supra]{.underline}, makes clear, implied
authority [is]{.underline} actual authority; in this regard, it should
not be confused with apparent authority, which is a distinct concept.
Restatement (Second) of Agency, 8, cmt a. It is well settled that
whether an agent has implied authority is [within the control of the
principal]{.underline}. Thus, the Commission emphasizes that a principal
may not be held liable, under an implied actual authority theory unless
the principal's own conduct reasonably causes the agent to believe that
he or she had authority. For example, a party committee cannot be held
liable for the actions of a rogue or misguided volunteer who purported
to act on behalf of the committee, unless the committee's own written or
spoken word, or other conduct, caused the volunteer to reasonably
believe that the committee desired him or her to so act. Once an agent
has actual authority, however, "\[u\]nless otherwise agreed, authority
to conduct a transaction includes authority to do acts which are
incidental to it, usually accompany it, or are reasonably necessary to
accomplish it." Restatement (Second) of Agency, 35; [see]{.underline}
[U.S. v. Flemmi]{.underline}, 225 F.3d 78, 85 (1st Cir. 2000). Also,
"for purposes of determining whether an agent\'s acts are within the
scope of his authority, the fact that the agent\'s act was not
specifically authorized is not dispositive, so long as it is of the
general kind he is authorized to perform, and is motivated, at least in
part, by a purpose to serve the principal." [Richman v.
Sheahan]{.underline}, 270 F.3d 430, 442 (7th Cir. 2001) (decided under
Illinois law). [See also Kolstad v. American Dental Ass'n]{.underline},
527 U.S. 526, 544 (1999) (general common law of agency, as codified in
section 228 of the Restatement (Second) of Agency, permits damages
against a principal even as to intentional, forbidden acts of an
employee, so long as the "'conduct is of the kind \[the employee\] is
employed to perform,' 'occurs within authorized time and space limits,'
and 'is actuated, at least in part, by a purpose to serve the
employer.'")

Second, it is necessary to define "agent" to include implied and express
authority in order to fully implement Title I of BCRA. Otherwise, agents
with [actual]{.underline} authority would be able to engage in
activities that would not be imputed to their principals so long as the
principal was careful enough to confer authority through conduct or a
mix of conduct and spoken words.

The definition of "agent" in the final regulation does not include
apparent authority. "\[A\]pparent authority to do an act is created as
to a third party by written or spoken words or any other conduct of the
principal which, reasonably interpreted, causes the third party to
believe that the principal consents to have the act done on his behalf
by the person purporting to act for him." Restatement (Second) of
Agency, 27. As has been noted by commenters, apparent authority is
largely a concept created to protect third parties in economic
relationships with a principal. The Commission does not interpret the
use of agency principles in Title I of BCRA to be focused upon
protecting third parties, such as contributors or donors, from unlawful
conduct by party committees or candidates. Rather, the Commission
interprets Title I of BCRA to use agency concepts to prevent evasion or
avoidance of certain prohibitions and restrictions by the use of agents.
In this light, apparent authority concepts are not necessary to give
effect to BCRA.

Title I of BCRA refers to "agents" in order to implement specific
prohibitions and limitations with regard to particular, enumerated
activities on behalf of specific principals. The final regulation limits
the scope of the definition accordingly in paragraphs (b)(1) through
(b)(4). Each provision in paragraphs (b)(1) through (b)(4) is tied to a
specific provision in Title I of BCRA that relies on agency concepts to
implement a specific prohibition or limitation. The Commission
emphasizes that a principal cannot be held liable for the actions of a
purported agent unless the agent has actual authority and is engaged in
one of the specific activities described in paragraphs (b)(1) through
(4).

Paragraph (b)(1) limits a national party committee's liability to an
agent's authorized actions with regard to two activities. The first is
soliciting, directing, or receiving any contribution, donation, or
transfer of funds. 2 U.S.C. 441i(a)(1), (2). The second is soliciting
funds, or making or directing donations to section 501(c) and 527
organizations. 2 U.S.C. 441i(d).

Paragraph (b)(2) limits the liability of State, district, or local
political party committees to the actions of an agent who has actual
authority in four particular areas. The first is to make expenditures or
disbursements of any funds for Federal election activity. 2 U.S.C.
441i(b)(1). The second is to transfer, or to accept a transfer of, funds
to make expenditures or disbursements for Federal election activity. 2
U.S.C. 441i(b)(2)(B)(iv). The third is to engage in joint fundraising
activities with any person if any part of the funds raised are used, in
whole or in part, to pay for Federal election activity. 2 U.S.C.
441i(b)(2)(C). The fourth is to solicit funds, or to make or direct
donations, to section 501(c) and 527 organizations. 2 U.S.C. 441i(d).

Paragraph (b)(3) limits the liability of Federal candidates to the
actions of an agent who has actual authority to solicit, receive,
direct, transfer, or spend funds in connection with any election. 2
U.S.C. 441i(e)(1). The Commission notes that the exception to 2 U.S.C.
441i(e)(1)'s general rule found in section (e)(2) of that section also
applies to agents of such Federal candidates who are or were State or
local candidates.

Paragraph (b)(4) applies to State candidates, and limits their liability
to actions taken by their agents who have actual authority to spend
funds for public communications. 2 U.S.C. 441i(f).

[C. 11 CFR 300.2(c) Definition of "Directly or indirectly established,
financed, maintained, or controlled."]{.underline}

11 CFR 300.2(c) defines "directly or indirectly establish, finance,
maintain, or control," a term that is used in several provisions of
BCRA. The term appears in BCRA in the context of national party
committees ([see]{.underline} 2 U.S.C. 441i(a)(2)), State, district, and
local political party committees ([see, e.g.,]{.underline} 2 U.S.C.
441i(b)(2)(B)(iii)), and of Federal candidates and Federal officeholders
([see, e.g.,]{.underline} 2 U.S.C. 441i(e)(1)). The phrase "established,
financed, maintained, or controlled," without the modifier "directly or
indirectly," was already used in the anti-proliferation provisions of
the FECA and in the Commission's "affiliation" regulation.
[See]{.underline} 2 U.S.C. 441a(a)(5); 11 CFR 100.5(g), and 110.3.

Paragraph (c)(1) of section 300.2 enumerates the persons to whom the
regulation applies, and employs the shorthand "sponsor" to refer
collectively to these persons. A public interest group supporting
campaign finance reform commented that the regulation should apply to
national, as well as State, district, and local political party
committees. Accordingly, given that the term, "directly or indirectly
established, financed, maintained, or controlled," is applied to
national party committees in 2 U.S.C. 441i(a)(2), the Commission is
incorporating this suggestion in the final regulation. Another commenter
suggested that agents should be included in the description of the term
"sponsor," rather than addressed in another part of the rule. The final
rules also adopt this suggestion. In paragraph (c)(1), the statutory
concept of "indirect" establishment, financing, maintenance, or control
is addressed by including actions taken by a sponsor's agents on behalf
of the sponsor.

In BCRA, "directly or indirectly establish, finance, maintain, or
control" is used in two contexts. The first is determining when
ostensibly separate entities share a contribution amount limit.
[See]{.underline} 2 U.S.C. 441i(b)(2)(B)(iii). This usage suggests that
the Commission's existing affiliation regulation is helpful in
understanding what is meant by "directly or indirectly establish,
finance, maintain, or control."

The term, "directly or indirectly establish, finance, maintain, or
control," is also used in BCRA in what seems to be a slightly different
manner. For example, a State, district, or local committee of a
political party must not use as "Levin funds" ([see]{.underline} 11 CFR
300.2(i)) any funds transferred to it from, among other persons, "any
other State, local, or district committee of any State party, . . . or .
. . any entity directly or indirectly established, financed, maintained,
or controlled \[by the State party committee\]."

2 U.S.C. 441i(b)(2)(B)(iv)(I), (IV); [see also]{.underline} 2 U.S.C.
441i(e)(1). This latter usage suggests a somewhat different purpose,
namely preventing the proliferation of committees or organizations as a
means of evading the Levin Amendment transfer prohibition, as well as
other BCRA prohibitions.

The version of 11 CFR 300.2(c) proposed in the NPRM addressed this
second usage of the term "directly or indirectly establish, finance,
maintain, or control" by including factors that extended beyond the
affiliation provisions of 11 CFR 100.5(g). Several commenters, including
an association of State party officials, several national party
committees, and two State party committees, objected to this portion of
the regulation proposed in the NPRM, and suggested uniformly that the
final regulation should be based solely upon the existing affiliation
regulation in 11 CFR 100.5(g), which one commenter described as
"relatively well-established and well-understood." On the other hand,
two public interest groups supported the Commission's proposed use of
factors extending beyond the reach of 11 CFR 100.5(g), one of whom
argued that Congress used the term, "directly or indirectly established,
financed, maintained, or controlled," in several contexts to "make it
clear that Congress wanted to move beyond the current affiliation
rules."

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. Therefore, in
paragraph (c)(2), the affiliation factors found at 11 CFR
100.5(g)(4)(ii) have been recast in the terminology demanded by the BCRA
context. Paragraphs (c)(2)(i) through (x) of section 300.2 generally
correspond to paragraphs (g)(4)(ii)(A) through (J) of section 100.5.
This change in terminology, for example, substituting "entity" for
"committee," and "sponsor" for "sponsoring organization," recognizes
that affiliation concepts are being applied in a different context, and
is not intended to introduce substantive changes in the application of
the factors. Besides the changes in terminology, the words "and
otherwise lawfully" have been added to the phrase about joint
fundraising in paragraphs (c)(2)(vii) and (viii) of section 300.2(c).
This addition is intended to preclude any confusion that might arise
between these provisions and the joint fundraising restrictions in
subpart B of part 300.

In the NPRM, the Commission sought comment on whether this regulation
should apply only to entities established by a sponsor after a given
date (perhaps November 6, 2002, which is the effective date of BCRA).
The Commission also asked, alternatively, whether there should be a
rebuttable presumption that entities organized before a given date are
not directly or indirectly established by a sponsor, provided that the
sponsor and the entity are not affiliated. 67 [Fed.
Register]{.underline} at 35658.

The principal Congressional sponsors of BCRA and two public interest
groups opposed these options. The principal Congressional sponsors
state, "There is nothing in the statutory language that permits the term
. . . to apply only to entities established after the effective date of
the Act . . . ." Such a rebuttable presumption, they continued, would
"create an obvious loophole for organizations established or controlled
by members of Congress that are currently raising soft money." One of
the public interest groups commented that "grandfathering" existing
entities would "effectively prop the \[soft-money\] loophole open." The
other public interest group opposing this idea said, "This would, as a
practical matter, allow the activity sought to be regulated by BCRA to
continue on an unregulated basis through the preexisting entity."

A non-profit organization commented that the Commission should not apply
the new regulation to existing entities that may have been directly or
indirectly established, financed, maintained, or controlled by a sponsor
because, "otherwise, the rule would go against any conceivable precept
of the BCRA having an effective date after the 2002 general elections."
This organization asserts, "the only relevant question . . . is whether
an entity is controlled by a sponsor after the effective date of BCRA."
This organization supported the idea of a rebuttable presumption.
Several party committees urged the Commission to apply the regulation if
there is affiliation "on or after the effective date of BCRA."

The Commission's regulation must take into account the fact that certain
actions that occur before the effective date of BCRA have as much of an
impact on whether an entity is "established, financed, maintained, or
controlled" by a sponsor as actions that occur immediately after BCRA's
effective date. For example, an entity that receives a large infusion of
funds from a sponsor before November 6, 2002, may spend those funds
after that date. Moreover, several of the factors set out in the final
regulation are inherently retrospective, that is, they require an
historical perspective. For example,

11 CFR 300.2(c)(2)(vi) looks to whether there are "successor entities"
indicating establishment, financing, maintenance, or control. To insist
that the relationship between a sponsor and an entity before November 6,
2002 has no legal effect would render portions of BCRA and the final
rules inapplicable to any number of entities that are established,
financed, maintained, or controlled by a sponsor within the plain
meaning of those terms and the affiliation rules. Therefore, the
Commission has not included a "grandfather clause" in the final
regulation. Nevertheless, the Commission notes that, when applying 11
CFR 300.2(c), events that occurred in the remote past must be
appropriately weighed in the context of the overall relationship between
the sponsor and the entity to determine if affiliation still exists.
Also, actions taken by a sponsor and an entity after November 6, 2002,
may cast the past actions in a new light. For example, an entity that
received large amounts of funds from a sponsor may return those funds or
decide not to accept future funding from that sponsor. The entity may
also decide to amend its by-laws or change its officers or directors in
a manner that affects the balancing required in applying 11 CFR
300.2(c). Finally, a sponsor and an entity will have recourse to the
advisory opinion process, under paragraph (c)(3), to establish that
post-effective date actions have altered the relationship between the
sponsor and the entity. [See, e.g]{.underline}., AO 2000-36 (Commission
approved disaffiliation of previously affiliated entities).

In the NPRM, the Commission sought comment as to whether there should be
an exception for a [de minimis]{.underline} level of funding by a
sponsor. 67 [Fed. Register]{.underline} at 35659. Only one commenter, a
State party committee, supported this idea and suggested \$5,000 for
this purpose. The Commission has not included a [de minimis]{.underline}
exception in the final regulation. Such an exception does not square
with the overall, situation-specific approach of the regulation, which
is to weigh factors such as "\[w\]hether a sponsor or its agent provides
funds or goods in a significant amount or on an ongoing basis to the
entity" "in the context of the overall relationship between sponsor and
the entity." [See]{.underline}

11 CFR 300.2(c)(2), (c)(2)(vi). Nor does a [de minimis]{.underline}
exception appear to be supported by the plain language of the statute.

Paragraph (c)(3) provides a mechanism for a sponsor or an entity to
request a determination by the Commission through the advisory opinion
process that the sponsor is no longer deemed to finance, maintain, or
control an entity, even if the sponsor established the entity. The
Commission notes that nothing in paragraph (c)(3) should be construed to
require any given entity that has not directly or indirectly
established, financed, maintained, or controlled another entity to
obtain a determination to that effect before the two entities may
operate independently of each other.

### D. 11 CFR 300.2(d) Definition of "Disbursement"

Both FECA and BCRA use the term "disbursement," but do not provide a
definition. The NPRM contained a proposed definition of "disbursement"
as "any purchase or payment made by a political committee or
organization that is not a political committee." One commenter pointed
out that this term should not be limited to payments by political
parties or organizations, since it covers spending by individuals or
entities that do not constitute political parties or organizations.
[See]{.underline}, for example, 2 U.S.C. 441i(b)(1), which refers to
disbursements by (among others) "an association or similar group of
candidates . . . or of individuals." The Commission, therefore, is
revising the proposed definition in the final rule to clarify that it
covers purchases and payments by a political party or other person,
including an organization that is not a political committee, that is
nevertheless subject to FECA or BCRA.

### E. 11 CFR 300.2(e) Definition of "Donation"

In BCRA, Congress uses but does not define the term "donation." The
Commission proposed in the NPRM to define a "donation," in 11 CFR
300.2(e), as a payment, gift, subscription, loan, advance, deposit, or
anything of value given to a non-Federal candidate, party committee,
501(c) organization, or 527 organization, but not including a
contribution or transfer.

Comments were sought on specifically excluding from "donation" some of
the exemptions to "contribution" set forth in existing 11 CFR 100.7(b).
The comments were split on this approach.

The Commission did not include these exemptions, or any others, in the
final rule, because donations in many cases will be essentially a matter
of State law, and thus the inclusion or exclusion of certain payments
should be left to State campaign finance law. For example, in the Levin
Amendment, donations of Levin funds must be in accordance with State
law, with one Federal limitation: a \$10,000 amount limitation per year
per donor. 2 U.S.C. 441i(b)(2)(B)(iii). The Commission believes States
should be free to craft their own exemptions to donations of Levin
funds, subject only to the \$10,000 overall limitation imposed by BCRA.

Several commenters asked the Commission to specifically incorporate
additional exemptions, such as money spent for redistricting, election
recounts, FECA civil penalties, and legal defense funds. The exemption
for recounts is addressed in the Commission's current rules at 11 CFR
100.7(b)(20); as are payments for civil penalties, [cf]{.underline}. 11
CFR 9034.4(b)(4). The Commission's interpretations on the raising and
spending of funds for the purposes of redistricting were done in the
context of Advisory Opinions that interpreted the terms "contribution"
and "expenditure." [See]{.underline} Advisory Opinions 1990-23, 1982-37.
The question of legal defense funds implicates not only the definition
of "contribution," but also the Commission's personal use regulations at
11 CFR 113.1(g) in the case of a [candidate]{.underline} legal defense
fund. With respect to legal defense funds or any other legal expenses
incurred by national party committees, the Commission does not interpret
the broad language of 2 U.S.C. 441i(a) to permit the receipt or use of
any non-Federal funds for such purposes.

As with the exemptions in 11 CFR 100.7(b), discussed above, State laws
may address each of these payments in a variety of different ways. In
addressing these issues, the Commission does not believe it is
appropriate to require States to follow the Commission's precedents,
which were established to implement the specific, detailed provisions of
the FECA regarding "contributions" and "expenditures" for the purpose of
influencing [Federal]{.underline} elections. Moreover, to do so could
present issues involving the preemption of State law.

Several commenters suggested that the definition of "donation" be
expanded to include anything of value given to a "person," to conform
with the use of this term in 11 CFR 300.10, 300.11, 300.37, 300.50, and
300.51. The Commission has made this change to 11 CFR 300.2(e), given
the broad statutory reach of the term "donation" in 2 U.S.C. 441i(a)(1).

### F. 11 CFR 300.2(f) Definition of "Federal account"

Paragraph (f) of section 300.2 defines "Federal account" as an account
at a campaign depository that contains funds to be used in connection
with a Federal election. The term "financial depository institution"
proposed in the NPRM has been changed to the more accurate term
"campaign depository." [See]{.underline} 2 U.S.C. 432(h) and 11 CFR
103.2.

Some commenters asked the Commission to include in this definition the
requirement that only Federal funds and funds transferred for the
purpose of paying the non-Federal share of allocated expenditures may be
deposited into these accounts. This topic is treated elsewhere in the
Commission's rules and in this rulemaking. [See]{.underline} 11 CFR
103.3, 106.5(g), 300.30, and 300.33.

### G. 11 CFR 300.2(g) Definition of "Federal funds"

Paragraph (g) of section 300.2 defines "Federal funds" to mean funds
that comply with the limitations, prohibitions, and reporting
requirements of the FECA. The Commission received no comments regarding
this definition.

### H. 11 CFR 300.2(h) Definition of "Levin account"

Section 300.2(h) defines "Levin account" as an account established by a
State, district, or local committee of a political party pursuant to 11
CFR 300.30 for purposes of making expenditures or disbursements for
Federal election activity or non-Federal activity (subject to State law)
under 11 CFR 300.32(b). The Commission revised the definition proposed
in the NPRM to clarify that these accounts must be established at a
campaign depository in accordance with 2 U.S.C. 432(h).

The NPRM raised substantive questions on the operation of these
accounts. The comments that addressed these questions are discussed in
connection with 11 CFR 300.30, below.

### I. 11 CFR 300.2(i) Definition of "Levin funds"

As explained above, BCRA's Levin Amendment provides that State,
district, and local political party committees may spend certain
essentially non-Federal funds for Federal election activities if those
funds comply with certain requirements. 2 U.S.C. 441i(b)(2)(A)(ii).
Thus, these funds are unlike Federal funds, which are fully subject to
the Act\'s requirements, and unlike ordinary non-Federal funds because
they are subject to certain additional requirements under BCRA. Section
300.2(i) defines these funds as \"Levin funds,\" with the intention that
\"Levin funds\" become a definite, unambiguous reference to such funds.

One commenter requested that the Commission use a "functionally
descriptive" term, such as "specially allocated," for these funds,
rather than the name of their legislative sponsor. It proved difficult,
however, to draft a term that clearly and unambiguously includes these
funds, while excluding all others. For that reason, the Commission has
retained the term "Levin funds" in the final rules.

Two commenters suggested that the definition should include the limits
on the use of the term "Levin funds" found at 2 U.S.C. 441i(b)(2)(A).
These restrictions go to the use of the funds, and are implemented in 11
CFR 300.32, to which the definition in 11 CFR 300.2(i) already expressly
refers. Therefore, these restrictions are not repeated in this
definitional paragraph.

[J. 11 CFR 300.2(j) Definition of "Non-Federal account]{.underline}"

Section 300.2(j) defines "non-Federal account" as an account that
contains funds to be used in connection with a State or local election.
The term "financial depository institution" proposed in the NPRM has
been deleted because non-Federal accounts are not required to comply
with 2 U.S.C. 432(h). No commenters addressed this paragraph.

[K. 11 CFR 300.2(k) Definition of "Non-Federal funds]{.underline}"

This section defines "non-Federal funds" as funds that are not subject
to the limitations and prohibitions of the Act. No commenters addressed
this definition.

L. 11 CFR 300.2(m) and (n) Definitions of "to solicit," and "to direct"

The NPRM proposed a definition of "to solicit or direct" a contribution
or donation, which would be located at 11 CFR 300.2(m). The proposed
definition included a request, suggestion, or recommendation to make a
contribution or donation, including those made through a conduit or
intermediary. However, the proposed definition did not construe advice
or guidance as to applicable laws to constitute a "solicitation." The
Commission sought comments as to how the concept of "solicitation"
should be applied to a series of conversations which, taken together,
constitute a request for contributions or donations, but which do not do
so individually. Comment was also sought as to whether the proposed
definition is too broad or narrow, as well as to whether the term
"direct" in BCRA should be interpreted to follow the earmarking rules
regarding contributions directed through a conduit or intermediary under
2 U.S.C. 441a(a)(8). Comment was also sought as to whether the passive
providing of information in response to an unsolicited request for
information should be specifically excluded from this definition.

Two commenters, a labor organization and a public interest organization,
expressed qualified support for the proposed rule. The labor
organization stated that it concurred with the proposed rule, and that
it particularly endorsed the express acknowledgment that the mere
provision of information or guidance as to applicable legal requirements
does not fall within the statutory language. The public interest
organization stated that the proposed rule was "generally consistent"
with the letter and spirit of BCRA. For purposes of clarity, it suggests
that the proposed rule be revised to read: "Merely providing information
or guidance as to the requirements of applicable law is not a
solicitation."

In contrast, five commenters argued that the proposed rule is too vague
or broad. A group representing certain State parties states that the
phrase "request, suggest and recommend" is an invitation for endless
Commission investigation. This commenter urged that "solicit" be limited
to an explicit request that a person make a contribution. This commenter
also supported including examples in the Explanation and Justification
of what is not soliciting or directing. Likewise, national party
political organizations asserted that the final rule should not contain
a reference to "suggestion" because that is too vague a term, and
compels inquiry into whether a communication conveys a sense, or creates
an impression, of a solicitation. These commenters believe BCRA\'s rules
should be concrete. This group further urged that clear exclusions
should be provided, such as for inquiries into positions or issues, as
well as political speech or commentary to an audience who may respond
with contributions, in the absence of an express request for them.

Another commenter, a public interest organization, stated that
"ambiguous standards" such as "suggest\[ion\]" or "series of
conversations" will merely lead to confusion. This commenter suggested
that the Commission look to past advisory opinions for guidance.
Similarly, a State and a national political party argued that "request,
suggest and recommend" is unconstitutionally vague and potentially
overbroad, as it would involve an investigation into what a person meant
in a series of conversations, and would thus chill political speech.
Several party committee commenters argued that solicitation should be
confined to an explicit request that an entity make a contribution.

Three commenters argued that the proposed rule is too lenient. One
public interest organization stated that the discussion should include
scenarios where a person suggests where a contributor who has already
decided to make a contribution should send their contribution. This
commenter read the proposed rule as confining itself to candidates,
committees and nonprofits, and suggested it should also apply to
solicitations from individuals, partnerships, labor organizations, and
corporations. Another public interest organization agrees with the first
point of the previous response. The sponsors of BCRA stated that the
proposed definition fails to capture the plain meaning of the words and
to effectuate the central goal of the law. They support the position
regarding suggestions to already-willing contributors. These commenters
read the proposed rule in the same manner as the public interest
organization, as if it only applies to candidates, committees and
nonprofits. They state that "certain provisions in the Act apply to
soliciting contributions from any 'person,' which would obviously
include individuals and corporations." They urge that the rule be
modified to reflect this.

The Commission has determined that the concepts of "to solicit" and "to
direct" embody very different activity, and they thus should be
separately defined. Accordingly, 11 CFR 300.2(m) defines "to solicit,"
and 11 CFR 300.2(n) contains the definition of "to direct." Both
definitions include "transfer of funds" in addition to "contribution"
and "donation," because the phrase "transfer of funds" appears several
times [in]{.underline} [seriatim]{.underline} with "contribution" and
"donation" in applicable rules. [See]{.underline}, [e.g.]{.underline},
11 CFR 300.2(b)(1)(i).

The Commission has issued a number of advisory opinions over the years
regarding the issue of what is and what is not a solicitation. These
advisory opinions have invariably involved situations where corporations
wished to make public to a limited audience the activities of their
separate segregated funds.[^4] [See,]{.underline} [e.g.,]{.underline}
Advisory Opinions 1991-3, 1988-2, 1982-65, 1979-13 and 1979-6.

In these advisory opinions, the Commission has generally held that the
publication of the activities of a separate segregated fund ("SSF") was
not considered a solicitation because the publication did not encourage
readers to support the SSF\'s activities or facilitate the making of
contributions. In one case, however, AO 1979-13, the Commission did
determine that the way the information was presented resulted in a
solicitation. In that case, as the Commission noted, "the article
state\[d\] the amount of money raised and spent by \[the SSF\] and the
methods used by \[the SSF\] in determining to whom it should contribute.
The article further point\[ed\] out the number of corporate employees
who 'participated in' \[the SSF's\] activities in 1978 and include\[d\]
a quotation from \[the SSF's\] chairman: 'I was glad to see that \[the
corporation\] has so many employees who realize that the welfare of us
all is tied very closely to government policies and attitudes toward
business. \[The SSF\] is one way we can make the voice of business
people and our industry heard in this county. I hope we continued
\[sic\] to have such an enthusiastic group.'" The Commission noted that,
"The legislative history of the Act indicates that informing persons of
a fundraising activity is considered a solicitation." The Commission
determined that the proposed article would be a solicitation within the
meaning of the Act since it "describe\[d the SSF's\] activities and
encourage\[d\] employee participation in the SSF by \[commending\] the
enthusiasm of employees whose participation in the SSF ha\[d\]
indicate\[d\] awareness of the connection between their welfare and
government policies toward business." In subsequent advisory opinions,
the Commission has favorably cited its holding in AO 1979-13.
[See,]{.underline} [e.g.,]{.underline} AO's 2000‑7, 1995‑14, 1992-9,
1991-3.

Further, in its Campaign Guide for Corporations and Labor Organizations
(June 2001), the Commission set out what constitutes a solicitation on
behalf of a corporation's separate segregated fund. The Commission noted
that, "In addition to a straightforward request for contributions," a
solicitation could exist if a statement in an in-house publication
publicizes the right of the SSF to accept unsolicited contributions from
any lawful contributor, provides information on how to contribute to the
SSF, or encourages support for the SSF.[^5]

Thus, the Commission has previously indicated that activity that does
not constitute a specific asking may nevertheless constitute a
solicitation, with the key element appearing to be an attempt to
persuade a person to make a contribution, where that person has not
otherwise indicated a specific willingness to do so. Given this
longstanding interpretation, which is consistent with the plain meaning
of a solicitation, the final rules indicate that "to solicit" means "to
request or suggest or recommend that another person make a contribution,
donation or transfer of funds, whether the contribution, donation or
transfer of funds is to be made directly, or through a conduit or
intermediary. A solicitation does not include merely providing
information or guidance as to the requirement of particular law."

Comments were sought as to whether the concept of soliciting should
apply to a series of conversations which, when taken together,
constitute a request for contributions or donations. BCRA's sponsors and
several public interest organizations supported applying the definition
to a series of conversations if, when taken as a whole, they are
consistent with a solicitation, stating that, otherwise, restrictions
will be easily circumvented. One group of national political party
organizations opposed applying the rule to a series of conversations,
stating that it would involve heavy government involvement in
deciphering political speech and that the Commission should look only at
express statements.

For the reasons set forth in the comments of the party committees, the
Commission is not defining "to solicit" in terms of a series of
conversations at this time. However, the Commission may revisit this
issue at some future time should events warrant.

Regarding the definition of the term "to direct," the Commission sought
comment as to whether it should be interpreted to follow earmarking
rules under 2 USC 441a(a)(8). A group of state party leaders supported
limiting "to direct" to the definition at 11 CFR 110.6(b)(2), as did one
of the national political parties. One of the public interest
organizations opposed this approach, stating that this was inconsistent
with BCRA and far too narrow an approach. None of the commenters
explained their criticisms in detail.

This issue of the meaning of "to direct" is also tied to another
question asked by the Commission: whether the passive providing of
information in response to an unsolicited request for information should
be specifically excluded in this definition. Two commenters, a public
interest organization and the sponsors, felt that the Commission should
not exclude providing information if that information includes the names
of organizations to which contributions can be made. One commenter, a
national political party, said that such information should be excluded,
because any other approach would be unworkable and lead to endless
accusations and investigations.

As several commenters have noted, the act of direction appears to
encompass situations where a person has indicated a willingness to make
a contribution, donation or transfer of funds that would advance a
particular cause, but lacks the identity of an appropriate organization
to which to make the contribution, donation or transfer of funds. Beyond
this limited activity, it is not clear what other activity might
constitute "direction." Accordingly, the final rule states that "to
direct" means to provide the name of a candidate, political committee or
organization to a person who has expressed an interest in making a
contribution, donation or transfer of funds to those who support the
beliefs or goals of the contributor or donor. The final rule in 11 CFR
300.2(n) also includes a statement indicating that merely providing
information or guidance as to the requirements of particular law is not
direction.

### M. 11 CFR 300.2(o) Definition of "Individual holding Federal office"

New section 300.2(o), which parallels 11 CFR 100.4 (definition of
"Federal office") and 11 CFR 113.1(c) (definition of "Federal
officeholder"), has been added for the reader's convenience. Consistent
with those sections and 2 U.S.C. 431(3), it states that "individual
holding Federal office" means 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.

[N. Definition of "Promote or support, or attack or oppose"]{.underline}

In BCRA, Congress defined "Federal election activity" (FEA) as, among
other things, a public communication that refers to a clearly identified
Federal candidate, and "that promotes or supports ... or attacks or
opposes" the candidate or his or her opponent. 2 U.S.C. 431(20)(A)(iii).
The term "promotes or supports, or attacks or opposes" is not, however,
defined in BCRA. In the NPRM, the Commission proposed a definition that
incorporated the concept of "unmistakably and unambiguously" encouraging
actions to elect or defeat a clearly identified candidate.
[Cf]{.underline}. [Buckley v. Valeo]{.underline}, 424 U.S. 1, 43-44
(1976) (restricting the reach of some provisions of the Act to
"communications that include\[d\] an explicit and unambiguous reference
to a candidate.") The Commission also included language in proposed
section 300.2(l) from its existing express advocacy regulations, 11 CFR
100.22(a) and (b), but attempted to broaden the scope of these
provisions in order to effectuate BCRA's intention of enlarging the
scope of regulated communications. The NPRM sought comments as to
whether its proposed definition was too broad or too narrow, and why.
Comments were also sought as to what definition is most likely to
survive Constitutional scrutiny.

Several commenters believed that the definition proposed in the NPRM
construed the statutory term too narrowly, and criticized the use of the
"express advocacy" test as a foundation for the proposed regulation. The
principal Congressional sponsors of BCRA stated, "\[b\]ecause the
meaning of these statutory terms is clear, it is not necessary for an
extensive additional regulatory definition to be developed." A public
interest group stated a similar view, that the words of the statutory
term, "speak for themselves and do not need to be defined by the
regulations." One public interest group commented that "in order to give
proper effect to the State party soft money ban . . ., this phrase must
be given the sweep intended by Congress." Several other commenters made
similar statements about the "sweep" that should be given to the term by
the definition.

The principal Congressional sponsors stated that the "Commission should
apply the statutory language . . . using a broad nexus test that
captures public communications that tend to increase support for or
opposition to Federal candidates." They referred to the Commission's
former "electioneering message" standard as a good approximation of the
intent behind the term, "promote or support, or attack or oppose."
[See]{.underline} Advisory Opinions 1984-15, and 1985-14. [But
see]{.underline} Statement of Reasons of Vice Chairman Wold and
Commissioners Elliott, Mason, and Sandstrom on, and [see
also]{.underline} Statement for the Record of Commissioners McDonald and
Thomas on, the Audits of \"Dole For President Committee, Inc.,\" the
\"Clinton/Gore '96 Primary Committee, Inc.,\" \"Dole/Kemp '96, Inc.,\"
the \"Dole/Kemp '96 Compliance Committee, Inc.,\" the \"Clinton/Gore '96
General Committee, Inc.\" and the \"Clinton/Gore '96 General Election
Legal And Compliance Fund.\" (The Statement of Reasons rejected the
"electioneering message" standard). Two other commenters also suggested
that the "electioneering message" standard provided guidance in
construing the term, "promote or support, or attack or oppose."

Three commenters specifically argued that a broad construction of the
term is constitutional. The principal Congressional sponsors commented,
"the U.S. Supreme Court noted that spending by political
committees---such as the political parties---is 'by definition, campaign
related," citing [Buckley v. Valeo]{.underline}, 424 U.S. 1, 79 (1976).
They argue that the "express advocacy" test applies "only with respect
to certain [non-party]{.underline} entities whose spending is
[not]{.underline} by definition campaign-related." (Emphasis in
original.) The other two commenters made similar points.

A national party committee and two labor organizations, conversely,
commented that any attempt to define this term that goes beyond express
advocacy is unconstitutional. One of these commenters cited
[Buckley]{.underline}, 424 U.S. at 44, n. 52. A State party committee
and an association of State party officials identically characterized
the regulation proposed in the NPRM as "unconstitutionally vague and
overbroad."

The Commission has decided to defer attempting to define the term
"promotes or supports, or attacks or opposes." The Commission notes that
this term is also a potentially important component of Title II of BCRA,
where it appears as the alternative definition of "electioneering
communication" should the primary definition be held to be
constitutionally insufficient. [See]{.underline} 2 U.S.C.
434(f)(3)(A)(ii). Because this key term appears in another portion of
BCRA and the Commission has not elicited comment on the impact of
defining the term in the context of Title II, the Commission intends to
issue shortly a separate Notice of Proposed Rulemaking that specifically
seeks comment on whether and how this term should be defined, with a
view toward both relevant contexts.

**Subpart A -- National Party Committees**

# 

[11 CFR 300.10 General Prohibitions]{.underline}

BCRA prohibits national party committees from raising and spending
non-Federal funds, that is, funds that are not subject to the
prohibitions, limitations, and reporting requirements of the Act.
[See]{.underline} 2 U.S.C. 441i(a). The Commission is placing the
regulations that address this prohibition in a new part of the Code of
Federal Regulations, 11 CFR part 300, subpart A. In addition to this new
subpart, the Commission is amending several sections of its current
rules to conform with BCRA's prohibition on national party committees
and Federal candidates and officeholders raising and spending
non-Federal funds.

Section 300.10(a) tracks the language of BCRA, which prohibits national
party committees from soliciting, receiving, or directing to another
person "a contribution, donation, or transfer of funds or any other
thing of value," or spending funds that are not subject to the Act's
prohibitions, limitations, and reporting requirements. Accordingly, as
of November 6, 2002, BCRA's effective date, national party committees
must not receive or solicit or direct to another person contributions or
donations from corporations, labor organizations or other prohibited
sources, and must not receive or solicit or direct to another person
contributions or donations from individuals and others that exceed the
limitations of the Act. Additionally, after a brief transition period
set forth in 11 CFR 300.12, discussed below, all expenditures and
disbursements made by a national party committee, including donations to
State and local candidates and donations and transfers to State party
committees must be made with funds that comply with the limitations,
prohibitions, and reporting requirements of the Act.

BCRA's ban on raising and spending non-Federal funds by national party
committees has widespread application. Tracking the language in 2 U.S.C.
441i(a)(2), 11 CFR 300.10(c) provides that the ban on raising and
spending non-Federal funds also applies to the national congressional
campaign committees (currently, the Democratic Senatorial Campaign
Committee, the National Republican Senatorial Committee, the Democratic
Congressional Campaign Committee, and the National Republican
Congressional Committee), to officers and agents acting on behalf of a
national party committee or a national congressional campaign committee,
and to any entities directly or indirectly established, financed,
maintained, or controlled by either. 2 U.S.C. 441i(a)(1) and (2). As
noted by one of BCRA's congressional co-sponsors during the
congressional debate, "\[t\]he provision is intended to be comprehensive
at the national party level. Simply put, the national parties and anyone
operating on behalf of them are not to raise or spend nor to direct or
control soft money." 148 Cong. Rec. H408-409 (daily ed. February 13,
2002)(statement of Rep. Shays).

Thus, under BCRA and 11 CFR 300.10, a Federal candidate or a Federal
officeholder acting on behalf of a national congressional campaign
committee must not solicit or direct to any person funds from
corporations or labor organizations, or funds from individuals or
entities in amounts that exceed the Act's contribution limits.

Section 300.10(b) tracks the statutory language at 2 U.S.C. 441i(c). It
provides that national parties and others covered by section 300.10(a)
must use only Federal funds to finance Federal election activity.

Section 300.10(a)(3) makes clear that national parties cannot raise,
spend, or direct to another person Levin funds. [See]{.underline} 2
U.S.C. 441i(b)(2)(A) and (B) and 11 CFR 300.31 and 300.32, which are
discussed below.

The NPRM noted that the Commission would address in a subsequent
rulemaking whether BCRA bans national party committees, and their
officers and agents, from directing non-Federal funds to a host
committee for a national party convention in light of the statutory
language that they are not permitted to direct non-Federal funds to
other persons. [See]{.underline} 2 U.S.C. 441i(a)(1). In comments
submitted to the NPRM, BCRA's sponsors stated that since BCRA prohibits
national parties and their agents from soliciting or directing
non-Federal funds to any person, they could not raise or direct
non-Federal funds to host committees. 2 U.S.C. 431(11) of FECA defines
person to include "a committee . . . or any other organization or group
of

persons . . . ." The Commission has decided that the sponsor's
interpretation of BCRA and additional issues concerning BCRA's effect on
conventions will be addressed in a future rulemaking on national party
conventions.

Virtually all of the commenters opined that the definition of "agent"
was critically important to many of BCRA's provisions, including 11 CFR
300.10. As discussed in the Explanation and Justification for 11 CFR
300.2, the comments submitted by party committees urged that the
Commission adopt a narrow definition of "agent" to encompass only
persons given express oral or written authority to engage in specific
conduct because of the many volunteers and others involved in political
campaigns over whom parties have little or no control and because
national party officials often serve in more than one capacity. For
example, persons who serve on executive committees of a national party
may also serve as a chair of a party. Comments submitted by BCRA's
congressional co-sponsors and certain public interest groups, however,
emphasized that the definition of "agent" must be broad enough to make
BCRA's prohibitions on raising non-Federal funds complete and effective,
so that the prohibition cannot be easily circumvented by using a staff
person or intermediary to raise non-federal funds as long as the
national party or its officials do not expressly authorize, orally or in
writing, the staff person or intermediary to raise non- funds on their
behalf.

The Commission shares the concerns expressed by these commenters. It
notes that the breadth of the national party non- funds prohibition is
already limited in 2 U.S.C. 441i(a)(2) and in 11 CFR 300.11(c) to the
extent that the prohibition applies to officers and agents "acting on
behalf" of national parties. This limiting construction appears in other
Federal statutes and indeed, in some campaign finance laws. The
Commission has also attempted to address the concerns of all of the
commenters in the definition of "agent" in Section 300.2(b).
[See]{.underline} discussion above.

Several party committee commenters expressed the view that, despite
BCRA's broad prohibition on national parties' raising and spending non-
funds, the Commission should consider a rule that would permit national
parties to continue to maintain non-Federal accounts devoted
specifically to support and local candidates as long as funds raised for
such an account meet the source and contribution limits of the Act. This
position is based on the NPRM's discussion of "leadership PACs"
maintained by candidates and particularly on comments made by Senator
McCain, a principal BCRA sponsor, during the Senate debate, a part of
which was referenced in the NPRM. In Senator McCain's floor remarks, he
interpreted 2 U.S.C. 441i(e)(1)(B) (11 CFR 300.62) to permit a Federal
candidate or officeholder to raise funds for both a Federal and
non-Federal account of a leadership PAC provided that the funds raised
for the non-Federal account met the source and contribution limits of
the Act. The party committees' comments specifically referenced another
statement made by Senator McCain suggesting that an officeholder could
solicit a donation up to the Act's contribution limits for the non-
account of a leadership PAC even if the donor already contributed to the
PAC's Federal account. The application of 11 CFR 300.62 to leadership
and candidate PACs is discussed below. Regardless of the application of
BCRA to leadership and candidate PACs under 2 U.S.C. 441i(e)(1),
however, the plain language of the ban on national party non-Federal
fundraising at 2 U.S.C. 441i(a) cannot be plausibly construed to allow
party committees to continue to raise non-Federal funds for any purpose.
The language is broad in prohibiting a national party committee from
soliciting, receiving, or directing to another person "a contribution,
donation, or transfer of funds or any other thing of value" or spending
funds that are not subject to the Act's limitation, prohibitions and
reporting requirements. A separate "non-federal" account, even if it
contained funds that complied with the prohibitions of the Act, would
not contain funds complying with the amount limitations of the Act, if
for example, individuals gave \$20,000 per year to a national party's
account and also gave another \$20,000 to the party's "non-federal"
account as suggested by the party commenters.

The legislative history supports this statutory interpretation. The
primary sponsor of BCRA in the House specifically explained the national
party non-Federal funds ban as follows: "The soft money provisions of
the Shays-Meehan bill regarding the national political parties operate
in a straight-forward way. The national parties are prohibited entirely
from raising or spending any soft money . . . The purpose of these
provisions is simple: to put the national parties entirely out of the
soft money business." 148 Cong. Rec. H408 (daily ed. February 13, 2002)
(statement of Rep. Shays). According to Congressman Shays, the
corrupting dangers of funds raised outside the Act's prohibitions,
limitations, and reporting requirements are present in the funding of
national parties given that they operate at the national level and "are
inextricably intertwined with Federal officeholders and candidates, who
raise money for them . . ." [Id]{.underline}. at H409.

In addition, Senator McCain, whose comments on the Senate floor were
used by the parties to support their position, filed a supplemental
comment responding to the parties' comment. Senator McCain stated that
Congress' intent was clear that BCRA prohibits national party committees
from raising spending or directing non- funds. He further pointed out
that that an amendment that would have allowed party committees to
continue to raise "soft money" subject to limits on the amounts and
purpose failed. The Commission notes that a House amendment would have
continued to permit national parties to raise "soft money" for certain
activities subject to the Act's prohibitions, limitations and reporting
requirements that do not exceed \$20,000 per year per person. That
amendment was defeated. [See]{.underline} 148 Cong. Rec. H459-H465
(daily ed. February 13, 2002).

The party committees also maintain that the Commission should define the
term "donation," which is not defined in BCRA, to exclude funds received
by national party committees for certain purposes such as funds provided
for redistricting, legal expense funds, and the payment of civil
penalties for violations of the Act. The parties argue that the
Commission has, over time, recognized these activities as wholly exempt
from the reach of FECA.

As discussed in the Explanation and Justification for the definition of
"donation," the plain language of BCRA, supported by the legislative
history, indicates that the ban on national party raising and spending
non-Federal funds was intended to be broad, prohibiting a party from
raising, receiving, or directing to another person " a contribution,
donation or transfer of funds, or [any other thing of
value]{.underline}" or spending "[any]{.underline} funds" that are not
subject to the Act's limitations, prohibitions, and reporting
requirements. Moreover, the Commission's interpretations on the receipt
and spending of funds for such purposes as redistricting and the
establishment of legal expense funds involve fact-specific inquiries,
which are best addressed in the context of Advisory Opinions.
[See]{.underline}, e.g., Advisory Opinion 1990-23. Indeed, in some
instances, funds raised and accepted by a political committee to pay for
legal expenses may constitute a contribution subject to the Act's
prohibitions, limitations and reporting requirements. [See]{.underline}
e.g., Advisory Opinion 1980-57. Consequently, neither 11 CFR 300.10 nor
the definition of "donation" in 11 CFR 300.2(e) contains a sweeping
exclusion of donations that would permit national parties to raise funds
for these purposes under any and all circumstances. In addition, the
payment by a national party committee of legal fees incurred by a
candidate would involve a determination as to whether the payment
constitutes a contribution to that candidate.

[11 CFR 300.11 Prohibition on National Party Fundraising for Certain
Tax-Exempt Organizations]{.underline}.

BCRA prohibits national party committees, their officers and agents, and
entities directly or indirectly established, financed, maintained, or
controlled by them from raising any funds for, or making or directing
any donations to, certain tax-exempt organizations. 2 U.S.C. 441i(d)(1).
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 organizations exempt from
taxation under 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)." [Id]{.underline}. (Organizations formed under 26 U.S.C.
501(c) are referred to as "501(c) organizations" below.) The ban also
extends to political organizations exempt from taxation under 26 U.S.C.
527 (referred to as "Section 527 organizations" below). These entities
are defined in the Internal Revenue Code as parties, committees,
associations, funds, or other organizations organized and operated
primarily to directly or indirectly accept contributions and make
expenditures for the "exempt function" of influencing or attempting to
influence the selection, nomination, election or appointment of an
individual to a Federal, State, or local public office, political
organization office, or election of Presidential and Vice Presidential
electors. 26 U.S.C. 527(e)(1) and (2). BCRA excludes certain section 527
organizations as discussed below.

The regulations implementing this provision are set forth in new 11 CFR
300.11. A parallel provision of this regulation, 11 CFR 300.50, and
others affecting tax exempt organizations that also appear elsewhere in
Part 300, have been placed together in subpart C for the convenience of
those interested in locating rules pertaining to fundraising and
donations to tax exempt organizations.

Section 300.11 as proposed closely tracked the language of BCRA. The
final rule has taken into account comments received on questions posed
in the NPRM, as discussed below.

#  A. General Prohibition

Section 300.11(a)(1) and (2) of the final rules remain unchanged from
the proposed rule except for minor language changes to the description
of national congressional campaign committees to conform with other
formulations of the phrase.

Paragraph (a)(3) implements BCRA's prohibition on national party
committee fundraising for and donating to a section 527 organization
unless the organization is a "political committee," a and local party
committee, or an authorized committee of a or local candidate. In the
context of a parallel provision in 11 CFR 300.37 applicable to and local
party committees, the NPRM asked whether "political committee" should
mirror the definition of that term in 2 U.S.C. 431(4), which would
encompass only organizations that make contributions to and expenditures
on behalf of elections or whether it should be interpreted to encompass
-registered political committees that support only and local candidates.

BCRA's cosponsors stated that "it would be in keeping with the intent of
BCRA to carve out from the definition of 'political committee' a
distinction that would permit district and local party committees to
make a non-federal donation" to a section 527 organization registered as
a State political committee as long as the committee does not make
expenditures and disbursements in connection with a Federal election,
including expenditures and disbursements for Federal election activity.
Several party committee commenters and at least one public interest
group agreed with this approach. Only one public interest commenter
disagreed, stating that permitting and local party committees to
fundraise for, or donate to, political committees "would be contrary to
the letter and spirit of BCRA." None of the commenters addressed this
provision in the context of the national party prohibition, perhaps
because it was not specifically asked.

Although the construction of "political committee" addressed by the
commenters may be permissible as applied to , district and local party
committees in 11 CFR 300.37, the Commission concludes that the broad
prohibition applicable to national party fundraising and spending in 2
U.S.C. 441i(a) prevents a similar construction in 11 CFR 300.11. Thus,
Section 441i(a) prohibits national party committees from soliciting or
directing to another person "a contribution, donation or transfer or
funds or any other thing of value" or spending any funds that are not
subject to the limitations, prohibitions and reporting requirements of
the Act. Funds solicited or directed by a national party committee to a
-registered Section 527 organization are not be subject to the reporting
requirements of the Act. Accordingly, in the final rules, paragraph
(a)(3)(i) of 11 CFR 300.11 prohibits national party committees from
soliciting funds for, or making donations to a Section 527 "political
committee" unless the organization is a "political committee" as defined
in 11 CFR 100.5.

Paragraph (b) of Section 300.11, describing the other persons and
entities to whom the prohibition applies, remains unchanged from the
proposed rule. The NRPM asked whether the final rule should provide
examples of the types of persons and entities covered by this provision,
and sought specific examples that might illuminate the scope of this
provision. Although many commenters expressed approval for including
examples as to who is covered by the provision, none provided specific
examples. The final rule does not include specific examples.

The NPRM also sought comments on whether the regulations should contain
a temporal requirement so that the prohibition on national and party
fundraising and donations to non-profits is appropriately circumscribed
and does not encompass, for example, an organization that made
expenditures and disbursements in connection with a Federal election
many years ago but has not done so recently and does not plan to do so
in the future. The final rules contain a temporal requirement, which has
been incorporated into the definition of a 501(c) organization "that
makes expenditures and disbursements in connection with a Federal
election." [See]{.underline} 11 CFR 300.2(a). [See]{.underline} the
discussion above relating to 11 CFR 300.2(a).

One nonprofit organization urged the Commission to exclude 501(c)(3)
organizations from the party committee fundraising/donation prohibition.
This commenter argued that because 501(c)(3) organizations are required
by tax law to undertake only election-related activity that cannot
benefit any particular candidate or party, they should not be subject to
the prohibition. However, the plain language of BCRA applies to all
501(c) organizations that make disbursements or expenditures in
connection with Federal elections, including expenditures and
disbursements and for election activity. Financing certain voter
registration and GOTV activities are considered election activities
under BCRA and new 11 CFR 100.24. Moreover, all voter registration and
GOTV activities, even nonpartisan activities, are capable of having an
impact on elections. Indeed, BCRA's co-sponsors specifically indicated
in their comments that nonpartisan voter registration drives or GOTV
activities were not intended to be excluded from the definition of
Federal election activity. The Commission notes that this provision does
not prohibit nonprofit organizations from undertaking any type of voter
registration or GOTV activities. Because Congress clearly could have
excluded 501(c)(3) organizations from this provision but chose not to do
so, the final rules do not include any such exclusion or exemption.

#  B. Safe Harbor Provisions

The NPRM asked whether a safe harbor provision should be provided so
that a national or party committee and others affected by the
prohibition can safely fundraise or make a donation to a Section 501(c)
or a Section 527 organization if they take certain steps to ensure that
the organization is not one that falls within the prohibition. The NPRM
gave examples of such safe harbors such as 1) obtaining and examining a
501(c) organization's application for tax exempt status or annual Form
990 tax return to determine whether the organization has reported
making, or indicates plans to make expenditures or disbursements in
connection with a Federal election, or 2) with respect to current or
planned activity, obtaining and examining a certification from the
organization that indicates it does not make, or plan to make such
expenditures.

The commenters agreed that the regulations should provide a safe harbor
for national and party committees. The commenters split, however, on
what the safe harbor should be. The primary co-sponsors of BCRA and one
public interest group suggested that Section 501(c) and Section 527
organizations be required to file sworn certifications with the
Commission, enforceable under 18 U.S.C. 1001, upon which a party could
rely in determining whether it could solicit funds for, or make or
direct donations to such organizations. The co-sponsors urged that party
committees be held strictly liable for any violations of the Act if, in
the absence of such a certification, an organization misrepresents
itself.

Without addressing the concept of a safe harbor, another public interest
group commented that a party committee should be required to obtain a
sworn certification from a Section 501(c) or a Section 527 organization
for whom it wishes to solicit or to whom it wishes to donate or direct
funds.

Several party committee commenters expressed approval for a safe harbor
that would permit a party committee to obtain and rely on applications
for tax exempt status or Form 990 tax returns to determine whether it
could permissibly fundraise for, or donate to, a tax exempt
organization. One commenter suggested that party committees be given a
choice between obtaining certifications or relying upon publicly
available tax documents. A labor organization argued that the
regulations should not require party committees to investigate
non-profits it wishes to donate to or assist. Rather, this commenter
urged that the Commission adopt specific language that a party committee
could use, presumably in a cover letter, when it makes a donation to a
501(c) to serve as a save harbor "from prosecution." The commenter
suggested that the party committee merely be required to to the Section
501(c) organization that any funds it donated cannot be used for
activities that would "constitute an expenditure in a federal election."

In considering how best to implement these BCRA provisions, the
Commission has 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. The Commission believes that
requiring a 501(c) organization to file a certification with the
Commission would be burdensome. However, requiring party committees and
others covered by this provision to obtain a sworn certification from an
official with knowledge of the activities of an organization's
activities is the best way to ensure the party committee or other person
has reliable information as to whether a particular organization engages
in certain election-related activities. Form 990s tax return forms may
not clearly show whether an organization has undertaken specific
election-related activities. Moreover, these forms do not provide
information on current activities. Accordingly, new paragraph (c) of the
final rule provides that a party committee may obtain and rely upon a
certification from a Section 501(c) organization to determine whether it
may permissibly raise funds for, or make or direct donations to, the
organization. New paragraph (d) of the final rule sets forth specific
criteria a certification must include, including: 1) the certification
is signed and sworn to by an officer or other authorized representative
with knowledge of the organization's activities, and 2) the
certification specifically states that, within the current election
cycle and within the two years preceding the current cycle, the
organization has not, and does not intend to, engage in specific types
of activity that constitute making expenditures or disbursements in
connection with a Federal election. Paragraph (d)(2)(i) also requires
that a Section 501(c) organization that is exempt from taxation must
provide with the certification, its Form 990 tax returns for the current
election cycle and the last two fiscal years preceding the cycle as well
as its application for tax exempt status. Although these forms by
themselves may not necessarily provide sufficient information to
determine whether an organization has made disbursements and
expenditures in connection with a Federal election, the provision of
these publicly-available forms to a party committee with a certification
will enable a committee to ask any necessary questions to ensure that an
organization is not one the committee is prohibited from assisting. In
the case of an organization that has submitted an application for
determination of tax exempt status under section 501(c) but has not yet
been granted or denied such status, paragraph (d)(2)(ii) requires the
organization to provide to the party committee its Form 990 tax return
and its application for tax exempt status once these documents are
available. The Commission believes that requiring an organization to
file a certification with the Commission would be too burdensome.

# 

# 11 CFR 300.12 Transition Rule

One of the BCRA amendments to the FECA is the prohibition on national
party committees raising and spending non-Federal funds after November
5, 2002, the effective date of BCRA.[^6] 2 U.S.C. 431 note. BCRA,
however, created a transition period between November 6, 2002 and
December 31, 2002, that permits national party committees to spend
non-Federal funds in their accounts as of November 5, 2002, for certain
expenses and debts. The rules governing the use of non-Federal funds by
national party committees, including national congressional campaign
committees, during this transition period are set forth in 11 CFR
300.12.

[A. Permissible Uses of Excess Non-Federal Funds During the Transition
Period]{.underline}

Paragraph (a) of section 300.12 describes the two permissible uses of
non-Federal funds in a national committee's account, other than an
office building or facility account, as of November 5, 2002. They are:
(1) to retire outstanding non-Federal debts or non-Federal obligations
incurred solely in connection with an election held before November 6,
2002; or (2) to pay non-Federal expenses or retire outstanding
non-Federal debts or obligations incurred solely in connection with any
run-off election, recount, or election contest resulting from an
election held prior to November 6, 2002. BCRA expressly provides that
these non-Federal funds must be used [solely]{.underline} for these two
purposes and must be spent before January 1, 2003. 2 U.S.C. 431 note.

The NPRM sought comments on whether the use of the word "solely" in the
enumeration of the permissible uses of non-Federal funds in paragraph
(a) during the transition period precluded permitting any funds
remaining thereafter to be disgorged to the United States Treasury or
donated to a charitable organization. The Commission received several
comments on this issue as well as suggestions for other permissible uses
under paragraph (a).

The commenters split on whether the Commission should permit remaining
non-Federal funds in any non-Federal account to be donated to charity.
BCRA's sponsors and one public interest group stated that BCRA provides
no statutory basis for transferring any non-Federal funds as of November
6, 2002, to non-profit organizations and doing so could undermine a
central purpose of the law which is to prohibit national party
non-Federal funds from being used in the 2004 elections. Since
charitable organizations under section 170 include section 501(c)(3)
organizations, the sponsors point out that there is a potential that any
donated funds could be used for Federal election purposes in the next
election. Section 501(c)(3) organizations are permitted to engage in
voter registration, get-out-the-vote activities, and other activities
defined as "Federal election activities" in BCRA.

The sponsors suggested that any funds remaining in national parties'
non-Federal accounts be disgorged to the United States Treasury or
refunded to donors on a [pro rata]{.underline} basis. Another commenter
concurred with this suggestion, pointing out that because the statutory
language only permitted specific uses during the transition period, any
funds remaining thereafter must be disgorged or refunded. One public
interest group commented that the Commission could require disgorgement
or permit donations to charitable organizations as long as the
charitable organization is not one that the national parties would be
prohibited from donating to under 11 CFR 300.10(b).

A commenter from a non-profit organization stated that BCRA should be
construed to permit national parties to use any soft money remaining
after payment of non-Federal election-related debts for any purpose
currently permitted under FECA. According to this commenter this
construction is warranted because BCRA is silent as to the disposition
of funds during the transition period after permissible debts are paid
under paragraph (a) of section 300.12, and only specific uses are
prohibited in paragraph (b). The commenter further stated that the rules
should permit national parties to transfer non-Federal funds remaining
after non-Federal debt is paid to 501(c) organizations because these
organizations are required to engage in non-partisan charitable or
social welfare activity under tax law. None of the party committee
commenters addressed this issue.

To give effect both to the use of the word "solely" in 2 U.S.C. 431
note, and to the legislative intent to prohibit national party
non-Federal money from being used in future Federal elections, 11 CFR
300.12(a) limits the use of non-Federal funding remaining in national
party committees' accounts as of November 5, 2002 to those specifically
enumerated in paragraphs (a)(1) and (2). Additionally, "solely" has been
added to the last sentence in paragraph (a) to emphasize that the debts,
obligations, and expenses described in paragraphs (a)(1) and (2) are the
only two permissible uses of the national party committees' non-Federal
funds during the transition period. Therefore, national party committees
are not permitted to donate non-Federal funds to charitable
organizations or to refund non-Federal contributions to contributors
after November 5, 2002. Disgorgement of remaining non-Federal funds is
discussed below.

[B. Prohibited Uses of Non-Federal Funds After November 5,
2002]{.underline}

Under 11 CFR 300.12(b), national party committees will no longer be able
to use non-Federal funds for any of the following activities after
November 5, 2002: (1) to pay any expenditure as defined in 2 U.S.C.
431(9); (2) to retire outstanding debts or obligations that were
incurred for any expenditure; or (3) to defray the costs of the
construction or purchase of any office building or facility. The final
rules track the language in the proposed rules. The Commission did not
receive any comments concerning this paragraph, other than those
pertaining to building funds which are discussed below.

### C. Disposal of Remaining Non-Federal Funds

New section 300.12(c) requires any non-Federal funds remaining after
non-Federal debts and obligations are paid pursuant to paragraph (a),
must be disgorged to the United States Treasury. Although some commenter
suggested that national party committees be permitted to donate the
remaining non-Federal funds to a charitable organization or to refund
them, disgorgement to the United States Treasury is consistent with the
Commission's practice when a contributor has made, and a political
committee has accepted, funds prohibited under the Act to ensure that
such funds are not used for the purpose of influencing Federal
elections. Permitting refunds to donors on a [pro rata]{.underline}
basis presents problems in the event that some donors do not cash refund
checks, which some donors might willingly do to allow the party
committee to make use of the funds. Disgorgement ensures that excess
national party non-Federal funds will not be used in future Federal
elections, and that all impermissible funds are purged from the national
parties' accounts by the dates required by BCRA.

[D. National Party Committee Office Building or Facility
Accounts]{.underline}

BCRA treats non-Federal funds contained in national party building fund
accounts more stringently than non-Federal funds in the national party
committees' other non-Federal accounts. Under current law, funds in a
national party building fund account may be used only for the purchase
or construction of the national party committees' office building or
facility. Beginning November 6, 2002, however, any funds remaining in a
national party building fund account must not be used for the purchase
or construction of any office building or facility. [See]{.underline} 2
U.S.C. 431 note.

In their comments, the sponsors pointed out that while proposed
paragraph (e) only prohibited excess building funds from being used to
construct or purchase a national party office building, the statutory
language prohibits the use of such funds to defray construction or
purchase costs for "any" office building or facility. [See]{.underline}
2 U.S.C. 431 note. Paragraph (d) of the final rules at 11 CFR 300.12
incorporates this change.

[E. Application]{.underline}

Section 11 CFR 300.12(e) clarifies that these transition rules apply to
officers and agents acting on behalf of a national party committee or a
national congressional campaign committee, and to entities that are
directly or indirectly established, financed, maintained, or controlled
by a national party committee or a national congressional campaign
committee. The Commission did not receive any comments relating to this
provision, which follows proposed paragraph (with one minor change
redesignating it as paragraph (c)) with one minor change.

## [F. Allocation and Payment of Expenses During the Transition Period]{.underline}

Section 300.12(f) clarifies that the pre-BCRA allocation rules
applicable to national party non-Federal and Federal accounts in 11 CFR
106.5 remain in effect during the transition period. No comments
addressed this provision. The final rules in paragraph (f) are identical
to proposed paragraph (d). Following the transition period, the revised
and renumbered rules at 11 CFR 106.5, discussed above, will become
effective since national parties will no longer have non-Federal
accounts.

# 11 CFR 300.13 Reporting

BCRA requires national party committees, including national
congressional campaign committees, and any subordinate committee of
either, to report all receipts and disbursements during regular
reporting periods. 2 U.S.C. 434(e). New 11 CFR 300.13(a) tracks the
statutory language. Minor changes have been made to the final rule so
that it more closely conforms to the statutory language.

The NPRM sought comment on whether this provision of BCRA was intended
to require reporting by existing entities that currently are not
required to report and sought the identity of any such entities. The
primary sponsors of BCRA commented that the term "subordinate committee"
was intended to ensure that any new committees created by the national
party committees would file required reports for all receipts and
disbursements. The sponsors further stated that this provision requires
existing entities that are subordinate to the national parties to report
all of their receipts and disbursements whether or not they are required
to do so under current law. The sponsors and several other public
interest group commenters identified the College Democrats and College
Republicans as subordinate committees of the national parties. None of
the party committee commenters addressed this point.

Although neither BCRA nor FECA contains a definition of a "subordinate
committee" of a national political party, the phrase is used in 2 U.S.C.
441a(a)(4). That provision states that limitations on contributions do
not apply to transfers between and among political committees that are
national, State, district or local committees of the same political
party "including any subordinate committee thereof." In Advisory Opinion
1976-112, the Commission concluded that Democrats Abroad was a
subordinate committee of the Democratic National Committee for purposes
of 2 U.S.C. 441a(a)(4). The advisory opinion noted that the group was
"an organization of American citizens living overseas who support the
basic principles of the National Democratic Party," had a central office
in London, and local clubs in several countries that anticipated
reaching political committee status. The Commission concluded that
Democrats Abroad functioned as a part of the official structure of the
Democratic Party and represented the Democratic Party to Americans
living in foreign countries. Factors relied upon in this conclusion
included: the group held fundraisers, the proceed of which were donated
to the DNC; the Democratic Party charter authorized a voting delegating
from the group to participate at the 1976 party convention; the Call to
Convention gave the group three votes to be cast by six delegates
elected by group members in accordance with the rules of the party's
Compliance Review Commission; the group was allowed representation on
the Standing Committee of the Democratic Party; and the group functioned
as a party committee by participation in voter registration and GOTV
drives for the Democratic Party in 1976. The Commission specifically
rejected the conclusion that Democrats Abroad was the equivalent of a
State party committee based on the statutory definitions of "State
committee" and "State."

Based on the prior construction of the term in AO 1976-112, the
Commission concludes that a "subordinate committee" of a national party
committee is one that is affiliated with, and participates in, the
official party structure of the national party committee. As applied to
a particular group, whether an organization is a subordinate committee
of a national party is a factual determination. Based on the broad
legislative intent to prohibit national parties from raising and
spending non- funds, however, the Commission further concludes that a
subordinate committee for the purpose of 11 CFR 300.10(a) qualifies as
an entity directly or indirectly established, financed, maintained and
controlled by a national committee of a political party.

Since national party committees and entities directly or indirectly
established, financed, maintained and controlled by them cannot solicit,
receive, direct, or spend non- funds as of November 6, 2002, and must
dispose of all funds in their non- accounts as of

December 31, 2003, section 300.13(b) requires national party committees
and their subordinate committees to file termination reports for all
non- accounts, whether or not a subordinate committee was required to
file disclosure reports under FECA prior to BCRA. Section 300.13(c)
makes clear that the reporting regulations at 11 CFR 104.8 and 104.9
applicable to non-Federal accounts, including building funds, will
remain in effect to accomplish this.

**Subpart B -- State, District, and Local Party Committees and
Organizations**

# 11 CFR 300.30 Accounts

Under new 11 CFR 300.30, State, district, and local party organizations
that are political committees must maintain certain separate accounts in
depositories if they pay for the costs of voter registration within a
fixed time period or for certain voter identification, GOTV, and generic
campaign activity pursuant to 11 CFR 100.24 and 300.32(b)(1). These
separate accounts include a Federal account that is to be used
exclusively for Federal as well as mixed Federal and non-Federal
purposes; a second account, known as a Levin account, that is to be used
for Federal election activities under 11 CFR 300.32(b)(1); and a third,
optional account to be used only for strictly non-Federal purposes
pursuant to State law. The need for separate accounts has been
heightened by BCRA's separation of State, district, and local party
campaign activity into three distinct categories for which there are
three distinct sets of conditions as to the funds that may be accepted
and used to pay for each type of activity. [See]{.underline} 2 U.S.C.
441i(b). For party organizations that are not political committees, the
final rules set out choices rather than requirements regarding separate
accounts, including Levin accounts.

Several of the comments received in response to the NPRM agreed with the
proposed requirement that all State, district, and local party
committees and organizations be required to maintain separate Levin
accounts, no matter the organization's size, level of activity and
political committee status, if they desired to undertake certain Federal
election activities pursuant to 11 CFR 300.32(b). Other comments raised
directly or indirectly the issue of whether the Commission should or
even could require such accounts, particularly in light of laws in
certain States either limiting the number of non-Federal accounts that a
State party organization may hold or, more often, requiring numerous
such accounts for varying purposes. It was also argued that the number
of non-Federal accounts held by a party committee or party organization
is a State, not a Federal issue.

In order to assure that the purposes of BCRA are fulfilled, the final
rules retain the requirement that State, district, and local party
organizations that are political committees and that decide to undertake
activities pursuant to 11 CFR 300.32(b) must maintain separate Levin
accounts for this purpose. In deciding to require such accounts for
these larger committees, the Commission recognizes that within this
grouping there are differences of size, experience with Federal campaign
finance regulations, and funding. In addition, the Commission recognizes
that some States already require multiple accounts, while a few may
prohibit more than one account for all activity. It has also been noted,
however, that some State party committees already have as many as 20 to
30 accounts for various purposes, placing in doubt the burdensomeness of
multiple accounts.

Most importantly, the Commission is very aware of, and concerned about,
the complexities of FECA as amended by BCRA, including the many
conditions and restrictions arising from the Levin Amendment, and about
the resulting record-keeping and reporting requirements to be imposed
upon State, district, and local party committees. The Commission
believes that several important goals of the FECA as amended by BCRA,
including full public disclosure, accurate record-keeping and reporting,
and the reduction in the use of impermissible funds in Federal
elections, are furthered significantly by requiring all but those party
organizations with the least activities in connection with Federal
elections to separate party funds into at least three distinct accounts
to be used for different purposes. In fact, more than one Federal
account and more than one Levin account may be deemed necessary by a
single party committee or organization in order to meet particular
Federal or State requirements, a multiplicity that will be appropriate
so long as complete records are kept and the activity of each account is
properly reported pursuant to 11 CFR part 104 and 11 CFR 300.36.

With regard to the legal basis for requiring Levin accounts, the
Commission notes that, in the NPRM, it referred to Levin funds as a
"subset of non-Federal" funds; however, the accounts into which such
funds are to be placed are a separate issue. Levin accounts themselves
are creatures of Federal law. The rules governing the sources and
limitations of funds going into such accounts, and the rules governing
the uses of such funds, are based on BCRA, even though the statute looks
in part to State law with regard to the permissibility of certain
sources of funds. Therefore, Levin accounts are special accounts set up
pursuant to Federal law that potentially contain what would otherwise be
non-Federal funds except for BCRA and 11 CFR part 300, subpart B. They
are not non-Federal accounts subject to State law.

Paragraph (b) of 11 CFR 300.30 addresses State, district, and local
party organizations that are not political committees. As discussed in
the Explanation and Justification for the rules at 11 CFR 102.5, the
principal sponsors of BCRA, in their response to the NPRM, expressed
particular concern about the potential pooling of Federal funds and
Levin funds if State, district, and local party committees that are not
political committees are not also required to maintain separate Levin
accounts. Consistent with the requirements set out for these
organizations at 11 CFR 102.5(b), the rules in this section provide
party organizations that are not political committees with three choices
regarding depository accounts and accounting: (1) the establishment of
at least three separate accounts (Federal, Levin, and non-Federal); (2)
the establishment of two separate accounts (Federal/Levin with general
ledger accounting, and non-Federal); and (3) the use of a general ledger
accounting system for all Federal, Levin, and non-Federal funds. With
regard to the last of the three options, the rules emphasize that funds
entered on a ledger as non-Federal receipts may only be reclassified as
Levin funds if donor intent can be ascertained through relevant
solicitation materials or donor designations. In addition, those
choosing a general ledger system are required to back up any
computer-based data at least once a month.

Paragraph (c) requires all party organizations to keep records and to
make them available to the Commission upon request.

The structure of this section has been changed since the NPRM. It is now
organized based upon types of organization instead of types of accounts.
Paragraph 300.30(a) now addresses the accounts required of party
organizations that are political committees, while paragraph 300.30(b)
addresses those accounts that may be established by those party
organizations that are not political committees. The rules pertaining to
allocation accounts have been moved to a new section (d).

Paragraph (a)(1)(i) requires State, district, and local party
organizations that qualify as political committees either to maintain
Federal accounts or to register a separate Federal political committee
for purposes of undertaking activities in connection with Federal
elections. This paragraph tracks the alternatives set out in 11 CFR
102.5(a) in this regard. Paragraph (a)(1)(ii) requires that only
contributions permissible under the Act be deposited into a State,
district, or local party committee's Federal account, even when such
funds may be used in connection with both Federal and non-Federal
elections. Paragraph (a)(1)(iii) sets out requirements for deposits into
Federal accounts that are the same as the requirements at 11 CFR
102.5(a)(2) applicable to all political committees that make
expenditures in connection with Federal and non-Federal elections.
Paragraph (a)(1)(iv) requires that only Federal accounts or allocation
accounts be used to make disbursements, contributions, or expenditures
in connection with Federal elections. This procedure tracks the
longstanding requirements at 11 CFR 106.5 for transfers to Federal
accounts or to allocation accounts for shared Federal and non-Federal
activity. Paragraph (a)(1)(v) provides that, when a Federal rather than
an allocation account is to be used to make allocable expenditures, the
initial payment must be made from the Federal account with timely
reimbursements from other accounts involved in a transaction.

Paragraph (a)(1)(vi) prohibits transfers into a party committee's
Federal account from other accounts of the same party committee or from
other party committees or party organizations to pay for Federal
election activity, except as permitted by 11 CFR 300.30(a)(6), 300.33,
and 330.34. The language of this paragraph in the NPRM has been changed
to better track the requirements of BCRA.

Paragraph (a)(1)(vii) states that Federal funds may be used in
non-Federal elections, provided that the contributors of the Federal
funds have been informed that their contributions will be subject to the
limitations and prohibitions of the Act and provided that the
disbursements are reported pursuant to section 300.36**.** ([See,
e.g.,]{.underline} Advisory Opinion 2000-24 in which the Commission
found the use of a non-Federal account to be permissive, not mandatory;
[see also]{.underline} the Explanation and Justification for revisions
of the Commission's allocation regulations at

55 [Fed. Register]{.underline} 26058 (June 26, 1990) and at 57 [Fed.
Register]{.underline} 8990, 8991 (March 13, 1992).) The phrase "subject
to State law" has been added in response to a comment on the NPRM.

Paragraph (a)(2)(i) requires State, district, and local party
organizations that are political committees to establish one or more
Levin accounts for purposes of making expenditures and disbursements for
the activities permitted under 11 CFR 300.32(b)(1). Pursuant to
paragraphs (b)(2)(ii) and (iii), a State, district, and local party
committee is permitted to deposit into its Levin account only those
donations solicited and received for that account pursuant to new 11 CFR
300.31, and must use this account to make disbursements and expenditures
only for the activities permitted by new 11 CFR 300.32 or for other,
non-Federal activity as permitted by State law.

Paragraphs (b)(2)(ii) also requires that, in order for donations to be
placed in a Levin account, either the solicitations for the donations
must have expressly stated that donations will be subject to the special
limitations and prohibitions of section 300.31, or there must have been
an express designation to the Levin account by the donors. Several
commenters objected to these requirements, arguing that they are not in
BCRA and would be unnecessary and/or inappropriate. The Commission has,
however, virtually since its inception, required similar notification of
donors and/or expressions of donor intent in the context of Federal
accounts in order to prevent arbitrary decisions on the parts of party
committees as to the uses of monies received, decisions that could in
some cases cause contributors to exceed their individual contribution
limits. The appropriateness of requiring such donor notification or
proof of donor intent is augmented by the fact that Levin accounts are
to be created for very specific and limited purposes pursuant to Federal
law. Transparency necessitates some level of proof of donor awareness of
the uses to which donations deposited into Levin accounts will be put,
while the limitations upon, and the need to report, donations received
for Federal election activities under 11 CFR 300.32(b)(1) and 300.36
require an ability to track which donations have been made for those
purposes. Paragraph (a)(2)(iv) sets out the limitations on the use of
funds in a Levin account.

Several commenters on the NPRM, including the principal sponsors of
BCRA, expressly approved the use of Levin funds for non-Federal
activities if consistent with State law. No contrary opinions were
received. Paragraph (a)(2)(iii) sets out the permitted uses of funds in
a Levin account.

Paragraph (a)(3) provides for the use of non-Federal accounts by State,
district, and local party committees, to the extent permitted by State
law.

The NPRM requested comments on whether the Commission should continue to
permit the use of allocation accounts for purposes of making allocable
expenditures. The consensus of those responding to this question was in
the affirmative. Therefore, a new paragraph (a)(4) is being added
expressly permitting the establishment of such allocation accounts in
lieu of making all allocated expenditures from a Federal account and
setting out the requirements for the use of such allocation accounts.
Paragraphs (a)(4)(i) and (ii) state that only certain funds may be
deposited in each allocation account, depending upon whether the purpose
of the account is to make expenditures and disbursements that have been
allocated between a party committee's Federal and non-Federal accounts
or to make expenditures and disbursements that have been allocated
between its Federal and Levin accounts. This requirement of a separate
allocation account for activities undertaken pursuant to 11 CFR
300.32(b) is necessitated by the requirements in BCRA that define the
specific funds that can and cannot be used for such activities.
Paragraph (a)(4)(iii) requires that, once allocation accounts are
established, they must be used for all allocable expenses so long as the
accounts are maintained. Pursuant to paragraph (a)(4)(iv) and (v), only
the amount needed to meet the allocable share of expenses may be
transferred into these allocation accounts and no funds from these
accounts may be transferred out to other accounts.

Paragraph (c) requires all party organizations to keep records and to
make them available to the Commission upon request.

[11 CFR 300.31 Receipt of Levin Funds]{.underline}

In BCRA, Congress placed several restrictions on how State, district,
and local political party committees raise Levin funds. New 11 CFR
300.31 implements these statutory restrictions. Paragraph (a) states as
a general proposition a key point in the statute: a State, district, or
local political party committee that spends Levin funds must raise those
funds solely by itself. 2 U.S.C. 441i(b)(2)(B)(iv).

Paragraphs (b) and (c) of section 300.31 elaborate on the statutory
requirement that Levin funds must be raised from donations that comply
with the laws of the State in which the State, district, or local party
committee is organized. 2 U.S.C. 441i(b)(2)(B)(iii). Paragraph (b)
states this as a general requirement. More specifically, paragraph (c)
clarifies the status of donations from sources that are permitted under
State law, but prohibited by the Act. A prime example is donations from
corporations and labor organizations. Under 2 U.S.C. 441b of the Act,
"\[i\]t is unlawful . . . for any corporation whatever, or any labor
organization, to make a contribution or expenditure in connection with
any election" for Federal office. 2 U.S.C. 441b(a). Under the campaign
finance laws of several States, however, donations by corporations or
labor organizations to political party committees are legal. Section
300.31(c) clarifies that in such States a political party committee may
solicit and accept donations of Levin funds from corporations and labor
organizations, subject to the other conditions of the Act. (Of course,
if donations from corporations or labor organizations to a political
party committee are illegal in a State, political party committees in
that State would not be able to accept Levin fund donations from those
sources.)

Three commenters expressed concern that section 300.31(c), as published
in the NPRM, could be misinterpreted to allow donations from foreign
nationals. One of these commenters suggested adding the phrase, "other
than 2 U.S.C. 441e," after the word "chapter." Although the sweeping
nature of the 2 U.S.C. 441e as amended by BCRA seems to preclude the
possibility that a donation by a foreign national to a party committee
could be lawful under any State law, the Commission has revised
paragraph (c) of section 300.31 as suggested.

The principal Congressional sponsors commented that paragraph (c) should
not be misinterpreted to allow a donation of Levin funds to a State,
district, or local political party committee from a person established,
financed, maintained, or controlled by a person forbidden from providing
Levin funds to the committee. The Commission has addressed this concern
in paragraphs (e) and (f) of section 300.31. ([See]{.underline}
discussion below.)

Paragraph (d), in general, addresses amount limitations on donations of
Levin funds to a State, district, or local party committee. In the Levin
Amendment, Congress placed a \$10,000 per calendar year per donor
limitation on donations to a State, district, and local political party
committee to be used as Levin funds. This statutory amount limitation
applies to a person, including "any person established, financed,
maintained, or controlled by such person." 2 U.S.C. 441i(b)(2)(B)(iii).
Paragraph (d)(1) clarifies that this is an aggregate limit per recipient
committee (i.e., the aggregate limit applies separately to each party
committee). [See]{.underline} discussion of 11 CFR 300.31(d)(3), below.
Paragraph (d)(1) did not draw comment. In the NPRM, the Commission
sought comment on whether its current "affiliation" regulation (11 CFR
100.5(g)) would appropriately determine whether a person is
"established, financed, maintained, or controlled," within the meaning
of this paragraph. The Commission received no comments on this point.
The Commission, in this rulemaking, is adopting 11 CFR 300.2(c), which
is based on

11 CFR 100.5(g), and which should be applied to determine whether
certain persons share a \$10,000 per year per committee contribution
amount limitation under paragraph (d)(1).

Paragraph (d)(2) addresses those cases in which State law imposes an
amount limitation on donations to a State, district, or local party
committee that differs from the amount limitation in 2 U.S.C.
441i(b)(2)(B)(iii) and paragraph (d)(1). Paragraph (d)(2) strikes a
balance between respect for State law and protecting the integrity of
the Levin Amendment amount limitation. It makes clear that lower State
law amount limitations prevail over the \$10,000 limitation in the Levin
Amendment, but that the Levin Amendment \$10,000 limit controls where
State law amount limitations exceed \$10,000. There were no public
comments on paragraph (d)(2).

Paragraph (d)(3) of section 300.31 addresses the question of whether
State, district, and local committees of the same political party are
affiliated for purposes of applying the donation amount limitation as
set forth in paragraphs (d)(1) and (d)(2) of section 300.31. [See
generally]{.underline} 11 CFR 110.3. The paragraph clarifies that such
committees are not considered affiliated [only]{.underline} for the
purpose of determining compliance with paragraph (d)(1).
[See]{.underline} 148 Cong. Rec. H410 (daily ed. Feb. 13, 2002)
(statement of Rep. Shays).

Three commenters discussed paragraph (d)(3). A national party committee
supported the provision. Another commenter suggested that there should
be a "rebuttable presumption" of affiliation of party organizations "at
the same political or geographic unit" in order to prevent a possible
proliferation of party organizations each with its own \$10,000 per
donor limit. The legislative history indicates, however, that Congress
contemplated the possibility of such a proliferation of party committees
and chose to address it by imposing a ban on transfers of Levin funds
between party committees rather than by affiliating the committees under
a single contribution limit. 148 Cong. Rec. H410 (daily ed. Feb. 13,
2002) (statement of Rep. Shays); [see]{.underline} 2 U.S.C.
441i(b)(2)(B)(iv). Therefore, the Commission has not adopted this
suggestion.

As mentioned above in the discussion of paragraph (a) of section 300.31,
a key point made in the statute is that expenditures and disbursements
of Levin funds by a State, district, or local political party committees
must be "made solely from funds raised by the ... committee which makes
such expenditure or disbursement...." 2 U.S.C. 441i(b)(2)(B)(iv).
Congress elaborated on this fundamental requirement by specifically
providing that Levin funds must not be "solicited, received, directed,
transferred, or spent by or in the name of" a national committee of a
political party, including a national Congressional campaign committee,
or a Federal candidate or individual holding Federal office. 2 U.S.C.
441i(b)(2)(C)(i). This statutory prohibition extends to an agent acting
on behalf of a national party committee or a candidate or Federal
officeholder, and to any entity that is directly or indirectly
established, financed, maintained, or controlled by a national party
committee or a candidate or Federal officeholder. 2 U.S.C. 441i(a)(2),
and (e)(1); [see]{.underline} 2 U.S.C. 441i(b)(2)(C).

Paragraph (e) of section 300.31 implements these specific statutory
restrictions. Paragraph (e)(1) provides that a State, district, or local
political party committee must not "accept or use" as Levin funds any
funds "solicited, received, directed, transferred or spent" by a
national committee of a political party, including a national
Congressional campaign committee. Paragraph (e)(2) extends the same
prohibition to funds "solicited, received, directed, transferred or
spent" by a Federal candidate or officeholder. Two commenters pointed
out that paragraphs (e)(1) and (e)(2), as published in the NPRM, did not
consistently or expressly refer to agents of, or to entities directly or
indirectly established, financed, maintained, or controlled by, national
party committees, and Federal candidates and officeholders. The
prohibition in paragraph (e)(1) has been revised in the final regulation
to extend explicitly to agents of, and to entities directly or
indirectly established, financed, maintained, or controlled by, national
party committees and by Federal candidates and officeholders. Similarly,
paragraph (e)(2) has been revised to refer expressly to agents of
Federal candidates and officeholders.

Confusion could arise about the relationship of the Commission's long
standing joint-fundraising regulation, 11 CFR 102.17, and the
restrictions imposed in paragraphs (e)(1) and (e)(2) of section 300.31.
Therefore, both paragraphs (e)(1) and (e)(2) explicitly provide that 11
CFR 102.17 does not permit joint fundraising of Levin funds by a State,
district, or local political party committee, and a national party
committee or a Federal candidate or officeholder. Paragraph (e)(1) also
clarifies that a State, district, or local political party committee may
jointly raise, under 11 CFR 102.17, Federal funds not to be used for
Federal election activity.

Congress specifically addressed other joint fundraising of Levin funds
by providing that a State, district, or local political party committee
must not use as Levin funds any amounts "solicited, received, or
directed through fundraising activities conducted jointly by two or more
State, local, or district committees of any political party or their
agents." 2 U.S.C. 441i(b)(2)(C)(ii). This prohibition extends across
State lines. [Ibid]{.underline}*.* New paragraph (f) implements this
statutory prohibition against joint fundraising of Levin funds by more
than one State, district, or local committee of a political party,
including such parties from more than one State. Paragraph (f) also
clarifies that nothing in BCRA forbids two or more State, district, or
local political party committees from jointly raising Federal funds that
are not to be used for Federal election activity.

The provisions of paragraphs (e)(1), (e)(2), and (f) of section 300.31
regarding joint fundraising drew several comments. A national party
committee suggested that the Commission clarify that these joint
fundraising prohibitions extend only to Levin funds. In response, the
Commission emphasizes that the section heading and the language in the
introduction to paragraph (e) explicitly limit the scope of these
provisions to "Levin funds." Similarly, the Commission emphasizes that
paragraph (f) explicitly refers to "Levin funds."

One commenter approved of the scope of joint-fundraising provisions of
paragraphs (e)(1), (e)(2), and (f), stating that the joint-fundraising
prohibition should extend beyond particular "events" to all fundraising
activities for Levin funds that are conducted jointly. Conversely, three
commenters, a national party committee, a State party committee, and an
association of State party officials, urged the Commission to limit the
reach of the joint fundraising prohibition in paragraphs (e)(1), (e)(2),
and (f) to "specific joint fundraising events," in contrast to joint
fundraising "activities." They urge that such joint fundraising
"activities" for Levin funds should be permitted. In support, they quote
Rep. Shays, who said, "joint fundraisers between state committees or
state and local committees are not permitted . . . The joint fundraising
prohibition will prevent a single fundraiser for multiple state and
local party committees." 148 Cong. Rec. H410 (daily ed. Feb. 13, 2002).
These commenters apparently have focused upon Rep. Shays' use of the
term "single fundraiser," which they seem to interpret to mean a dinner,
a speech, or similar "event." Presumably, a fundraising "activity," such
as a direct mail campaign, would be permitted under the commenters'
suggested interpretation. In response, the Commission notes that
statements by any member of Congress during the floor debate should not
be used to contradict the plain language of the statute. BCRA itself
broadly refers to "fundraising [activities]{.underline} conducted
jointly" by State, district, or local political party committees. 2
U.S.C. 441i(b)(2)(C)(ii) (emphasis added). In addition, the specific
statement made by Rep. Shays, referring to a "single fundraiser," could
easily encompass either a dinner or a specific direct mail campaign.

Paragraph (g) clarifies that the mere use of common vendors by two or
more State, district, or local political party committees would not in
and of itself constitute joint fundraising within the meaning of the
proposed paragraph. The principal Congressional sponsors of BCRA agreed
with this provision in principle, but noted that use of a common vendor
may, in some circumstances, be a means of carrying out actual 'joint
fundraising' schemes. The sponsors urged the Commission to be "highly
attentive" to this practice.

[11 CFR 300.32 Expenditures and Disbursements]{.underline}

11 CFR part 300, subpart B, generally addresses expenditures of Federal
funds for Federal election activities and disbursements of Levin funds
for Federal election activities. 11 CFR 300.32 specifically addresses
both kinds of spending by a State, district, or local political party
committee, and clarifies that BCRA does not affect spending of
non-Federal funds for purely State or local activity.

Paragraph (a)(1) clarifies that spending by a State, district, or local
political party committee \"for the purpose of influencing\" a Federal
election ([see]{.underline} 11 CFR 100.8) must use Federal funds; that
is, nothing in BCRA changes the existing requirements for that type of
spending. [See]{.underline} 148 Cong. Rec. H409 (daily ed. February 13,
2002) (statement of Rep. Shays).

In the NPRM, the Commission solicited comments about the term,
"association or similar group of candidates for State or local office,
or an association of State or local officeholders," specifically asking
whether it should be further defined in the regulations, and if so,
about examples of such associations or groups to include in the final
regulations. The Commission received no comments on this point, nor did
the Commission receive any other comments about paragraph (a)(1).

Paragraph (a)(2) makes clear that the general rule in BCRA is that a
State, district, or local political party committee spending on Federal
election activity must use Federal funds for that spending, except as
provided in the Levin Amendment. 2 U.S.C. 441i(b)(1). The Commission
received no comments regarding this provision. In addition, this
paragraph requires that an association or similar group of candidates
for State or local office, or an association of State or local
officeholders, must make expenditures for Federal election activity
solely with Federal funds. This latter provision appeared in paragraph
(a)(1) in the regulation proposed in the NPRM; it has been moved to
paragraph (a)(2) in the final rules purely for organizational purposes.

Paragraphs (a)(3) and (a)(4) address how State, district, or local party
committees must pay the costs of raising funds used to pay for Federal
election activities. In BCRA, Congress required that spending by a
State, district, or local committee of a political party "to raise funds
that are used, in whole or in part, for expenditures and disbursements
for a Federal election activity shall be made from funds subject to the
limitations, prohibitions, and reporting requirements of this Act." 2
U.S.C. 441i(c). As published in the NPRM, paragraphs (a)(3) and (a)(4)
sought to implement section 441i(c) as it applied to Federal funds
raised for Federal election activity and Levin funds raised for Federal
election activity, respectively.

In the NPRM, the Commission sought comment about section 441i(c) with
regard to Levin funds. In particular, the Commission sought comment on
(1) whether proposed paragraph (a)(4) could be limited to the direct
costs ([see]{.underline} pre-BCRA 11 CFR 106.5(a)(2)(ii)) of raising
Levin funds; and (2) whether the costs of fundraising for Levin funds
could be allocated between a party committee's Federal and non-Federal
accounts under the "funds received" method. [See]{.underline} pre-BCRA
11 CFR 106.5(f). Comments were also sought as to whether, generally,
greater specificity should be provided in proposed section 300.32 as to
the nature of fundraising costs in this section. 67 [Fed.
Register]{.underline} at 35664.

The Commission received several comments about paragraphs (a)(3) and
(a)(4). The principal Congressional sponsors of BCRA and a public
interest group suggested that both paragraphs (a)(3) and (a)(4) should
be clarified by including the statutory language, "in whole or in part."
The Commission has included this suggestion in the final regulation. The
added language better conforms the scope of the regulation to the scope
of the statute.

Another commenter suggested that both paragraphs (a)(3) and (a)(4)
should be limited to the direct costs of raising funds to be spent for
Federal election activity, in contrast to the regulation proposed in the
NPRM, which would have covered all costs of fundraising. The Commission
has included this suggestion in the final rules. The purposes of 2
U.S.C. 441i(c) are adequately served by regulating only the direct costs
of raising funds for Federal election activity. This limitation also
avoids unnecessary confusion about allocation of administrative costs in
the fundraising context in that covering the direct costs of fundraising
is consistent with the Commission's longstanding regulation of
fundraising costs. Given this change in the final regulation, the
Commission has imported language from its pre-BCRA allocation regulation
describing what constitutes direct costs.

A public interest group supported paragraph (a)(4), while a State party
committee objected to paragraph (a)(4) to the extent that it forbids a
State, district, or local political party committee from spending Levin
funds to raise Levin funds. This commenter suggests that Levin funds are
subject to the limitations, prohibition, and reporting requirements of
the Act, as specified in 2 U.S.C. 441i(c). The Commission disagrees with
this interpretation of 2 U.S.C. 441i(c). Levin funds are subject to only
some of the Act's provisions (i.e., those in 2 U.S.C. 441i(b)), but by
no means all of its limitations, prohibitions, and reporting
requirements.

Paragraph (b) of section 300.32 lists the types of activities for which
a State, district, or local political party committee may spend Levin
funds. Paragraph (b)(1) spells out the two kinds of Federal election
activity for which Levin funds may be spent, [see]{.underline} 2 U.S.C.
441i(b)(2)(A), and provides that such spending must be made subject to
the conditions set out in paragraph (c) of section 300.32. The principal
Congressional sponsors of BCRA suggested that the word "only" be
included to preclude any possible misinterpretation of the provision.
The Commission has adopted this suggestion in the final regulation.

Paragraph (b)(2) of section 300.32, as proposed in the NPRM, drew
several comments. A national party committee and a State party committee
supported the provision. The principal Congressional sponsors of BCRA
and a public interest group expressed concern that paragraph (b)(2)
could be misinterpreted to allow spending of Levin funds for the Federal
election activities described in 2 U.S.C. 431(20)(A)(iii) and (iv). In
response to this concern, the Commission has added the language, "other
than the Federal election activities defined in 11 CFR 100.24(b)(3) and
(4)," which implement section 431(20)(A)(iii) and (iv).

As published in the NPRM, paragraph (b)(2) of section 300.32 would have
allowed a State, district, or local political party committee to spend
Levin funds for any purposes allowed by State law, and would have also
provided that such spending was not subject to paragraph (c)
([see]{.underline} below). The principal Congressional sponsors of BCRA
expressed concern that the latter provision could be misinterpreted to
allow fundraising and unallocated spending of Levin funds otherwise
forbidden in other regulations. The Commission agrees. Therefore, the
final rule, paragraph (b)(2), exempts spending of Levin funds for
purposes permissible under State law from only paragraphs (c)(1) and
(c)(2) of section 300.32 because those two paragraphs are specifically
focused on spending for Federal election activities. As revised, the
final rule subjects all spending of Levin funds to paragraphs (c)(3) and
(c)(4). The heading for paragraph (c) has been changed slightly in the
final rule to conform with this change.

While the Levin Amendment permits the spending of Levin funds for the
purposes set out in paragraphs (b)(1) and (2), it places restrictions
and conditions on that spending when it is for Federal election
activity. Paragraph (c) sets out in one place important restrictions and
conditions that are stated in different sections of BCRA. Paragraph
(c)(1) implements the restriction that the Federal election activity
paid for partly with Levin funds must not refer to a clearly identified
Federal candidate. [See]{.underline}

2 U.S.C. 441i(b)(2)(B)(i). Paragraph (c)(2) implements the restriction
that the Federal election activity paid for partly with Levin funds must
not be for any broadcasting, cable, or satellite communications, other
than a communication that refers solely to a clearly identified
candidate for State or local office. [See]{.underline} 2 U.S.C.
441i(b)(2)(B)(ii). Paragraph (c)(3) ties together the provisions of this
regulation with 11 CFR 300.31, which covers the raising of Levin funds.
Paragraph (c)(4) implements the Levin Amendment\'s requirement that
spending under its authority must be allocated between Federal funds and
Levin funds pursuant to 11 CFR 300.33. [See]{.underline} 2 U.S.C.
441i(b)(2)(A)(i), (ii). The principal Congressional sponsors of BCRA
commented that this paragraph should expressly refer to spending under
paragraph (b)(1), since it does not apply to spending of Levin funds for
non-Federal election activities under State law. The Commission has
adopted this clarification in the final rules. The Commission emphasizes
that paragraph (c)(4) must not be interpreted to permit unallocated
spending of Levin funds on non-Federal election activities if other
provisions of chapter I of Title 11 require allocation of the
expenditure or disbursement.

Paragraph (d) serves as a clarifying reminder that spending of
non-Federal funds by a State, district, or local political party
committee for State or local political activity**,** including the
raising of non-Federal funds, remains a matter of State law. In response
to several comments, the Commission is making two minor clarifications
to this paragraph in the final rules. First, the paragraph heading has
been changed to refer to "activities," rather than "funds," as it read
in the NPRM, to be more descriptive of the actual subject of the
paragraph. Second, the first sentence of the paragraph now refers to
spending "Federal, [Levin,]{.underline} or non-Federal" funds to conform
this paragraph with paragraph (b)(2) of section 300.32.

[11 CFR 300.33 Allocation of Costs of Federal Election
Activity]{.underline}

The final regulations in this section address the allocation of
expenditures and disbursements by State, district, and local party
committees for Federal election activity, pursuant to the requirements
of BCRA. The requirements for allocations by these committees for other
categories of expenditures and disbursements that are not Federal
election activity are to be found at 11 CFR 106.7. As discussed in the
Explanation and Justification for 11 CFR 106.7, this division of rules
represents an attempt to clarify how different categories of activities
are addressed with regard to allocation, depending upon their nature,
timing and, in certain instances, the presence or absence of a Federal
candidate on the ballot, i.e., whether they come within the definition
of "Federal election activity" at 11 CFR 100.24. Provisions at proposed

11 CFR 300.33 that addressed activities not within the definition of
Federal election activity are being moved to new 11 CFR 106.7.

Section 441i(b)(1) of Title 2, United States Code, states that State,
district, and local party committees must make all disbursements and
expenditures for Federal election activity from their Federal accounts.
This requirement holds even when the expenses involved are also related
to activities in connection with non-Federal elections. The only
exception to the rule against the use of funds that are not Federal
funds in connection with Federal election activity involves activities
to be paid in part with Levin funds, pursuant to 2 U.S.C. 441i(b)(2).

Section 441i(b)(2)(A) permits State, district, and local party
committees, under certain conditions, to use funds from a Levin account
for particular categories of activity, including voter registration,
voter identification, get-out-the-vote ("GOTV"), and generic campaign
activities during certain time periods in connection with Federal and
non-Federal elections. These funds must have been received by a party
committee pursuant to specific requirements, and are to be used to meet
expenses related to voter registration activity that takes place within
120 days of a Federal election and/or expenses related to voter
identification, GOTV activities, and generic campaign activities that
are conducted when a Federal candidate appears on the ballot.
Disbursements and expenditures for the permitted activities must be
allocated between a committee's Federal and Levin funds. Such activities
must not refer to a clearly identified candidate for Federal office.
Section 441i(b)(2)(A) permits the use of Levin funds for these purposes
"to the extent that" the costs of the activities are allocated. Thus, if
a committee wishes to use other than Federal funds for such costs, it
must allocate a portion to its Federal account. Levin funds may also be
used for non-Federal purposes permissible under State law.
[See]{.underline} 11 CFR 300.30(b)(3).

Sections 300.33(a)(1) and (2) of the proposed regulations, which
addressed allocation of the costs of salaries and other compensation
paid employees who spend less than 25% of their time in connection with
Federal elections and of other administrative costs, have been moved to
11 CFR 106.7 because they are not costs of Federal election activities.

In the final rules, section 300.33(a) addresses costs than may be
allocated between Federal and Levin funds. Sections (a)(1) and (a)(2)
represent a division of the proposed rule into two parts, the first
addressing voter registration within 120 days of the date of an election
and the second the costs of voter identification, GOTV, and generic
campaign activities occurring within certain time periods. The relevant
time periods for the latter categories of activity are set out at 11 CFR
100.24(a)(1). All of these expenditures and disbursements for the
activities addressed in these sections must be allocated only between
Federal funds and Levin funds if not paid entirely with Federal funds.

Section 300.33(b) sets out fixed minimum amounts of Federal funds to be
required for the Federal portions of costs of the specified activities
for which the use of Levin funds is also permitted. One goal of the
allocation regulations is to assure that activities deemed allocable are
not paid for with a disproportionate amount of Levin funds. Another goal
is to simplify the allocation process, in particular by establishing
formulas that do not vary from State to State and that do not require
measurements of time or space. Therefore, in lieu of the State-by-State
ballot composition ratios for generic campaign activity and in lieu of
the time or space method applied to exempt State party activities in the
pre-BCRA regulations, the new rules establish a fixed formula for all
States that would vary only in terms of whether or not a Presidential
campaign and/or a Senate campaign is to be held in a particular election
year.

In the NPRM, at proposed 11 CFR 300.33(b)(3), the Commission set out
allocation percentages for the Federal shares of activities allocable in
part to Levin funds. The Federal percentages were as follows:

> \(i\) Presidential only election year -- 28% of costs
>
> \(ii\) Presidential and Senate election year -- 36% of costs
>
> \(iii\) Senate only election year -- 21% of costs
>
> \(iv\) Non-Presidential and Non-Senate election year -- 15% of costs.

As with the percentages used in 11 CFR 106.7 for the allocation of
activities that are not Federal election activities, the percentages for
those Federal election activities that may be paid for in part with
Levin funds were derived by taking averages of the ballot
composition-based allocation percentages reported by State party
committees in four groupings of States selected for their diversities of
size and geographic location and for the particular elections held in
each State in 2000 and 2002. The groupings were: (1) six States
(Alabama, Colorado, Illinois, New Hampshire, Oklahoma, and Oregon) in
which there was a Presidential but no Senate campaign in 2000; (2) ten
States (California, Delaware, Georgia, Florida, Michigan, New York,
North Dakota, Texas, Vermont, and Wyoming) in which there were both a
Presidential campaign and a Senate campaign in 2000; (3) six States
(Delaware, Georgia, Michigan, Oklahoma, Texas, and Wyoming) in which
there will be a Senate campaign in 2002; and (4) six States (California,
Florida, New York, North Dakota, Vermont, and Washington) in which there
will be no Senate campaign in 2002.

In 2000, the Federal percentages for the two parties in six States with
only a Presidential campaign ranged from 20% to 33.33%, with an average
of 28%, while the Federal percentages for the two parties in ten States
which held both Presidential and Senate campaign that year ranged from
30% to 43%, with an average of 36%. In 2002, the Federal percentages for
the two parties in six States with a Senate campaign ranged from 20% to
25%, with an average of 21%, while the Federal percentages for the two
parties in six States with no Senate campaign ranged from 11.11% to
16.67, with an average of 15%. The rules apply the average percentages
in each of the four groupings of States to all 50 States.

As discussed in the Explanation and Justification for 11 CFR 106.5 (now
11 CFR 106.7), one comment to the NPRM from a public interest
organization addressed the Commission's proposed fixed percentages by
providing two alternatives to the Commission's figures. The first
alternative would have set a flat 33% requirement for Federal shares of
what the response termed "Levin expenditures" and for allocable costs
other than administrative costs in odd-numbered years or in
non-Presidential election years, and a flat 40% requirement for Federal
shares of these same categories of activities in Presidential election
years. The commenter based these percentages on what was termed "the
current assumption" as to what State party committees spend in certain
years.

The second alternative in this same comment adopted the Commission's
calculations, but called for the use of the higher percentages in the
sample States for what the response termed "Levin spending" and for
voter registration outside the 120 day period before an election, plus
the average percentages for certain non-Levin expenses. The comment also
urged the Commission to apply the allocation percentages apply to a
two-year election cycle, not just to the year of a Federal election.

The comment submitted on behalf of the sponsors of BCRA with regard to
fixed allocation percentages was very similar to that of the public
interest organization's response cited above in that, as one alternative
approach, it called for at least a 33% Federal allocation of what it
termed "Levin activities" and of voter registration activities outside
the 120 period before an election. It also called for 40% Federal
allocations of Levin and of voter registration activities that are not
Federal election activities in Presidential election years. This
alternative urged the application of the percentages to two-year Federal
election cycles. As a second alternative, this commenter also agreed to
use of the Commission's percentages for administrative costs in a two
year cycle, but urged the application over that cycle of the highest,
not the average, Federal percentages for what it termed "Levin
activities" and voter registration activities that are not 'Federal
election activity'. . . ." Another comment from a public interest
organization also called for use of the highest percentages in the
identified States, not the average percentages.

Comments on the NPRM received from party committees with regard to fixed
percentages for Federal allocations ranged from support for the
Commission's position to giving party committees a choice at the
beginning of each cycle between the proposed formula and ballot
composition ratios.

The final rules at 11 CFR 300.33(b) contain additional language to
clarify that these allocation percentages must be used for activities
that occur within the time periods described in 11 CFR 100.24 which set
time parameters as to when specific activities are treated as "Federal
election activity" under BCRA. This revision conforms to the reference
in 11 CFR 300.33(a)(2) to 11 CFR 100.24. These times differ between
voter registration on the one hand and voter identification, GOTV, and
generic campaign activities on the other, with the latter being deemed
"Federal election activities" between January 1 and December 31 of an
even numbered year. Thus, the flat two-year cycle approach urged by some
commenters has not been applied to activities that may be paid in part
with Levin funds.

With regard to the amounts of the fixed minimum Federal allocations, the
Commission has retained the percentages contained in the NPRM because
they represent averages of actual allocation ratios used in specific
States at specific times, not assumptions of State, district, and local
party behavior. The Explanation and Justification for 11 CFR 106.7
explains the reasoning for this approach in greater detail.

Section 300.33(c)(1) and (2) sets out the categories of Federal election
activity costs that must not be allocated between Federal funds and
Levin funds. These include the costs of public communications as defined
at 11 CFR 100.26 and the costs of salaries and other compensation,
including benefits, for employees that spend more than 25% of their
compensated time in a month on activities in connection with a Federal
election. The approach taken here is explained more fully in the
Explanation and Justification for 11 CFR 106.7.

Section 300.33(c)(3) requires that the [direct]{.underline} costs of
raising funds for Federal election activities be paid solely from the
party committee's Federal funds, pursuant to 2 U.S.C. 441i(e). The
limitation to direct costs tracks the same limitation in 11 CFR 106.7.
([See]{.underline} the accompanying Explanation and Justification for 11
CFR 106.7 for a discussion of comments received in this regard.) The
proposed rules had indicated that non-Federal funds could be used in
certain limited fundraising situations involving non-Federal activity.
This language has been deleted from the final rules for the reasons
explained in the accompanying Explanation and Justification for 11 CFR
106.7. This deletion from section 300.33(c)(3) is consistent with the
revisions to 11 CFR 106.7.

Section 300.33(d) addresses transfers from a party committee's Levin
account to its Federal account, or to an allocation account, to meet the
Levin fund portion of the costs of allocable expenditures made pursuant
to 2 U.S.C. 441i(b)(2). The final rule largely tracks pre-BCRA 11 CFR
106.5(g), by requiring that reimbursements from a Levin account to a
Federal account take place within a specified number of days, unless a
vendor requires an advance payment and the payment is based upon a
reasonable estimate of the costs involved. The regulation also continues
the pre-BCRA rules' statement at former 11 CFR 106.5(g)(2)(B)(iii) that
any payment outside this time frame, absent the need for a advance
payment of a reasonably estimated amount, results in the presumption of
a loan to the Federal account and a violation of the Act. No commenters
addressed this provision.

[11 CFR 300.34. Transfers]{.underline}

As explained above, the Levin Amendment permits spending on certain
Federal election activities subject to restrictions and conditions, one
of which is that the spending must be allocated between Levin funds and
Federal funds. 2 U.S.C. 441i(b)(2)(A)(i), (ii). A State, district, or
local committee must raise by itself all money spent under the Levin
Amendment. 2 U.S.C. 441i(b)(2)(B)(iv). Congress expressly stated that a
State, district, or local committee must not use as Levin funds "any
funds provided to such committee" by certain enumerated entities. These
entities are: Any other State, district, or local committee; any
national political party committee; any agent of a political party
committee; and any entity directly or indirectly established, financed,
maintained, or controlled by a political party committee. 2 U.S.C.
441i(b)(2)(B)(iv)(I) through (IV). By the plain language of these
provisions, these restrictions extend to the Federal funds component of
the expenditure or disbursement allocated between Levin funds and
Federal funds. [See]{.underline} 148 Cong. Rec. H410 (daily ed. February
13, 2002) (Rep. Shays).

This provision of the Levin Amendment could cause confusion given the
pre-existing rule that party committees of the same political party may
transfer Federal funds among themselves without limit on amount.
[See]{.underline} 11 CFR 102.6(a)(1)(ii).[^7] Paragraph (a) of section
300.34 makes clear that 11 CFR 102.6(a)(1)(ii) does not override the
Levin Amendment as to transfers of Federal funds. Specifically, the
committee must not use such transferred Federal funds to pay the Federal
portion of Federal election activity. A State party committee and an
association of State party officials commented that this provision about
transferred Federal funds should apply only to transferred Federal funds
"earmarked" for spending under the Levin Amendment by the transferring
committee. The Commission has not adopted this suggestion in the final
rules. Congress, at 2 U.S.C. 441i(b)(2)(B)(iv), specifically bars a
State, district, or local committee spending Federal funds (and Levin
funds) for Federal election activity from using transferred funds. How a
transferring committee may or may not characterize the transfer is
irrelevant to this prohibition.

In response to the NPRM, a public interest group noted that a State,
district, or local political party committee's Federal account may
commingle Federal funds raised by the committee itself, which are
eligible for spending for Federal election activities, and transferred
Federal funds, which are not so eligible. This commenter suggested that
the Commission should require party committees to use "a reasonable and
industry-accepted accounting method" to ensure that they have sufficient
self-raised, non-transferred Federal funds to cover expenditures for
Federal election activities as the expenditures are made. The Commission
has adopted this suggestion in the final rules. Paragraph (a) of section
300.34 is organized into two paragraphs. Paragraph (a)(1) contains the
language published in the NPRM, without change. Paragraph (a)(2)
provides that a State, district, or local political party committee must
demonstrate that its Federal account has sufficient Federal funds raised
by the committee itself to make a given expenditure of Federal funds for
Federal election activity. Paragraph (a)(2) prescribes that the
accounting method must use general ledger accounts, and that it must be
able to segregate Federal funds eligible for expenditure for Federal
election activity. Paragraph (a)(2) alternatively permits, but does not
require, a State, district, or local political party committee to
established a separate Federal account to use for spending on Federal
election activities, and into which it deposits only Federal funds it
has raised by itself.

The principal Congressional sponsors of BCRA commented that 11 CFR
300.34 should not be interpreted to forbid a State, district, or local
political party committee from using Federal funds raised lawfully on
its behalf by a Federal or State candidate or officeholder as long as
the funds are contributed directly to the party committee. The
Commission agrees with the sponsors' interpretation, and emphasizes that
11 CFR 300.34 applies to transfers of funds from the persons described
in paragraphs (b)(1) and (b)(2).

The final sentence of paragraph (a)(1) states as a positive requirement
that a State, district, or local political party committee that spends
Levin funds must raise the Federal funds component of those funds by
itself. As already mentioned above, the Levin Amendment imposes this
fundraising requirement. 2 U.S.C. 441i(b)(2)(B)(iv).

The Levin Amendment specifically forbids particular transfers of Levin
funds; that is, a State, district, or local party committee may not use
as Levin funds any funds transferred to it by certain persons. 2 U.S.C.
441i(b)(2)(B)(iv)(I) through (IV). 11 CFR 300.34(b)(1) and (b)(2)
implement these transfer prohibitions by expressly identifying these
persons to, and from, which transfers must not be made.

Paragraph (c) of section 300.34 cross-refers to 11 CFR 300.33, in which
are the rules for allocation transfers between the accounts of a given
State, district, or local political party committee.

[11 CFR 300.35 Office Buildings]{.underline}

BCRA repealed 2 U.S.C. 431(8)(B)(viii), which had exempted from the
definition of contribution any donation of money or anything of value,
or loan, to a national or State party committee that is specifically
designated to "defray any cost for construction or purchase of any
office facility not acquired for the purpose of influencing the election
of any candidate in any particular election for Federal office." In
subsequent technical amendments, however, Congress enacted 2 U.S.C.
453(b), which states: "Notwithstanding any other provision of this Act,
a State or local committee of a political party may, subject to State
law, use exclusively funds that are not subject to the prohibitions,
limitations, and reporting requirements of the Act for the purchase or
construction of an office building for such State or local committee." 2
U.S.C. 453(b).

New section 300.35 addresses five areas in implementing 2 U.S.C. 453(b).
Paragraphs (a) and (b) provide for the application of State law to the
source and use of funds, and provide that generally Federal law will not
preempt the application of State law. Paragraph (c) explains the meaning
of "purchase or construction of a party office building." Paragraph (d)
provides that, if the funds are not used for the purpose as defined in
paragraph (c), they are to be treated as disbursements for other
purposes and Federal law applies. Paragraph (e) specifically allows a
party committee to lease space in its office building to others and
places conditions on the revenues. Finally, paragraph (f) addresses the
transitional requirements for the current State party office facility
funds established under the repealed statutory section.

## [A. Application of State Law]{.underline}

A principal sponsor of the technical amendments described the party
office building provision as "\[r\]especting the primacy of State law in
financing State and local party buildings." 148 Cong. Rec. S2339 (daily
ed. March 22, 2002) (statement of Sen. McConnell). A principal sponsor
of BCRA described the proposal as providing that Federal law would no
longer allow a State or local party committee to receive non-Federal
donations to purchase or construct an office building where such
donations violated State law, that State law governs the receipt and
disbursement of non-Federal donations used by State or local parties for
such purposes, and that there is no "required match consisting of
Federal contributions." 148 Cong. Rec. S2143-2144 (daily ed. March 20,
2002) (statement of Sen. Feingold).

Paragraph (a) of the proposed section 300.35 in the NPRM set out the
basic provision that funds raised outside the limits and prohibitions of
the Act may be used, and that State law would govern whether they may be
raised and used for the purchase or construction of a State or local
party office building. Proposed paragraph (a) also incorporated language
from the repealed statute and deleted regulations to the effect that the
exemptions from Federal limits and prohibitions are premised on the idea
that the building is not purchased or constructed for the purpose of any
particular Federal candidacy. The building is being purchased or
constructed for the functioning of the party, which entails the support
of most or all of the party's candidates over a number of years; this
concept did not change with the repeal of 2 U.S.C. 431(8)(B)(viii) and
the enactment of 2 U.S.C. 453(b). The purchase or construction of the
building to assist the campaign of a particular Federal candidate would
entail the use of impermissible funds in a manner contrary to the basic
purpose of the Federal law.

Proposed paragraph (b) in the NPRM explained the coverage of State law.
Proposed paragraph (b)(1) provided that, with respect to a non-Federal
account, Federal law will not preempt State law as to the source of
funds used, the permissibility of the disbursements, or the reporting of
the receipt and disbursement of such funds, except where the funding
does not fit the definition of the purchase or construction of an office
building and would be another type of disbursement. Commission advisory
opinions have addressed the question of whether the repealed
contribution exemption, which permitted donations to a building fund
from such Federally impermissible sources as corporations, preempted
State law prohibitions on the use of such funds for campaign purposes.
Advisory Opinions 2001-12, 1998-8, 1998-7, 1997-14, 1993-9, 1991-5, and
1986-40. The Commission stated in these opinions that Congress decided
not to place restrictions on the subject even though it could have
determined that the purchase of the facility was for the purpose of
influencing a Federal election, that Congress took the affirmative step
of deleting the receipt and disbursement of funds for such activity from
the proscriptions of the Act, and that there was no indication that
Congress intended to limit the preemptive effect to some allocable
portion of the purchase costs. New section 300.35 supersedes these
Commission advisory opinions to the extent that they pertain to Federal
preemption with respect to the purchase or construction of an office
building. For example, corporate donations and donations that are
excessive under Federal law may be used for the purchase or construction
of a State party office building where State law permits (and this has
been expanded to local party office buildings), but if State law forbids
corporate donations and donations in excess of a particular amount,
Federal law does not preempt that law and such donations must not be
made or used for that purpose.

Proposed paragraph (b)(2) provided that funds contributed to a Federal
account that are then used to purchase or construct a State or local
party office building must still comply with the limits and prohibitions
of the Act. The committee's reports filed with the Commission would
disclose the Federal account's receipts and disbursements that were used
for the building purchase or construction as contributions received and
disbursements made. Although proposed paragraph (b)(2) addressed the use
of Federal account funds, State law is the primary determinant as to the
financing of these buildings and still controls whether such funds may
be used. Thus, the Federal law does not preempt a State's attempt to
determine, using a reasonable accounting method, whether the Federal
account funds used for the purchase or construction originated from
contributions that are impermissible or excessive under State law.
Consistent with this State coverage, a State may require the committees
to file reports disclosing the Federal account's receipts and
disbursements of funds used for the building purchase or construction.
This does not entail a replication of the Federal reports; it merely
entails the disbursements for the activity covered by this section and
the contributions that, under a reasonable accounting method, are the
source of such disbursements.

Although receipts and disbursements from the non-Federal accounts must
be in compliance with State law, and both Federal and State law apply to
the permissibility of receipts and disbursements from the Federal
account, section 300.35 does not contemplate that the Commission could
file an enforcement action against a party committee for violating State
law. Such an action, which would interpret and apply State law, is the
State's responsibility. Moreover, although section 300.35 does not
require the establishment of a separate bank account or book account for
the receipt and disbursement of funds for purchase or construction of
the office building, Federal law does not preempt a State law
requirement to establish such an account.

Under proposed paragraph (b)(3), the NPRM provided that Levin funds
could be used for the purchase or construction of an office building
provided that State law permits the use of such funds.

Several commenters remarked on the provisions in paragraphs (a) and (b)
relating to the application of State law. Two commenters representing
party committees expressed concern about the provision that, with
respect to the use of Federal account funds, Federal law would not
supersede a State law that would further limit or prohibit
contributions. They stated that this could conceivably prevent a party
committee from using 100 percent Federal funds to pay for a building.
They asserted that there is no support in the BCRA legislative history
for this proposition, and that BCRA's intent was simply to allow State
and local parties to pay for their buildings entirely with non-Federal
funds and would not require them to use non-Federal funds.

The new regulation, however, draws upon the intent of new 2 U.S.C.
453(b), which Senator McConnell characterized as "respecting the primacy
of State law in financing State and local party buildings." 148 Cong.
Rec. S2339 (daily ed. March 22, 2002) (statement of Sen. McConnell). If
State law is to have primacy (other than funds from foreign nationals
which are discussed below and cannot be donated for Federal or
non-Federal election purposes), then a State agency enforcing State law
must be able to determine whether funds are permissable under State law
to pay for the building.

Three comments, including one from the four principal sponsors of BCRA,
stated that the provisions regarding application of State law should not
be read to allow for the use of contributions or donations by foreign
nationals to pay for the purchase or construction of the party office
buildings. They stated that BCRA was not intended to allow for such
funds to be used. Two of those commenters recommended that these rules
should make this prohibition clear.

The final rules in paragraphs (a) and (b) incorporate a prohibition
against the use of contributions or donations from foreign nationals for
the purchase or construction of an office building. The prohibition at 2
U.S.C. 441e, is so sweeping and explicit (including an explicit
prohibition of donations "to a committee of a political party") that it
would be difficult to read the intent of BCRA as allowing for the use of
such funds by a party committee for those activities. One of BCRA's
principal sponsors stated that BCRA "prohibits foreign nationals from
making any contribution to a committee of a political party or any
contribution in connection with federal, state or local elections . . .
This clarifies that the ban on contributions \[by\] foreign nationals
applies to soft money donations." 148 Cong. Rec. S1994 (daily ed. March
18, 2002) (statement of Senator Feingold). [See]{.underline}
[also]{.underline} [United States v. Kanachanalak]{.underline}, 192 F.3d
1037 (D.C. Cir. 1999). This ban also applies to any in-kind contribution
or donation by a foreign national such as a direct payment to a seller,
builder, or other vendor for purchase or construction.

[B. Technical Changes]{.underline}

Paragraphs (a) and (b) of the final rules state more clearly that the
pertinent funds include funds that are in the accounts but were not
received specifically for the purchase or construction, as well as funds
specifically received for that purpose.

In addition, the sentence in paragraph (a) discussing the application of
State law is changed to conform to other parts of the regulation
emphasizing that this exemption is meant to apply only to a State or
local committee paying for its own building. In paragraph (b), the
reference to the paragraphs on State law is corrected to refer to
paragraphs (b)(1), (2), and (3).

Another technical change occurs in paragraph (b)(3). The proposed rule
stated that Federal law does not preempt any State law "that purports to
prohibit or limit the source of funds..." This is meant to apply to
State laws that contain additional prohibitions or lower limits on
contributions and is not meant to allow the use of contributions not in
compliance with the Act. Hence, the phrase is being changed to "that
establishes additional prohibitions or limitations as to the source of
funds."

[C. Definition of "purchase or construction of an office
building"]{.underline}

Paragraph (c) of section 300.35 defines three terms: office building,
purchase, and construction.

[1. Office Building]{.underline}

Section 453(b) of the FECA refers to the purchase or construction of an
"office building" rather than an "office facility" as found in repealed
2 U.S.C. 431(8)(b)(viii). The term "building" is a narrower term that
indicates a more restricted range of covered expenses. In recent
advisory opinions applying the repealed section, the Commission has
stated that expenses that would be considered capital expenditures under
the Internal Revenue Code would be payable from the building fund.
[See]{.underline} Advisory Opinions 2001-12, 2001-01, and 1998-7; [see
also]{.underline} 26 CFR 1.263(a)-(1) and 1.263(a)-(2). This has been
interpreted by some to mean that the building fund may pay for the
purchase of office machinery, equipment, and furniture.
[See]{.underline} Advisory Opinion 2001-12. (In addition, others may
have interpreted the exemption to be this broad regardless of any
Commission interpretation.) The new rule at section 300.35(c) construes
the use of the term "building" instead of "facility" as a basis for
ensuring that this proposed section would not include what are more
appropriately administrative expenses for the operation of the party,
rather than the purchase or construction of an office building.

Specifically, proposed paragraph (c)(1) stated that items such as office
equipment, machinery, and furniture would not be considered a part of
the building and that the exemption afforded by this section would not
extend to such payments. As indicated in paragraph (d) (discussed
below), such payments are instead allocable administrative expenses. The
definition of "building" extends only to the building itself and
accompanying land, but this definition is not meant to exclude a portion
of the building, such as an office suite or one or more floors of a
building, that a committee may purchase instead of an entire building.
Although structural components and certain other fixtures, as described
in proposed paragraph (c)(1), do not by themselves constitute a
building, they are addressed by the new rules to provide guidance as to
what is part of the building's structure, as distinguished from office
equipment and machinery and similar items. The term "structural
component" is derived from the tax regulations, at 26 CFR 1.48-1; it
applies to such features as interior walls, floors, ceilings, windows,
doors, stairwells and elevators, central air conditioning or heating
systems, sprinkler systems, plumbing and plumbing fixtures, and
electrical and data transmission wiring and lighting fixtures. There may
be other fixtures that are not strictly "structural components" that are
essential to the operation or appearance of the building.
([See]{.underline} the discussion below as to when the installation of a
significant number of structural components as part of a major
restoration or renovation will qualify as construction of an office
building.)

One particularly relevant illustration of the distinction between a
structural component and an item that would not be part of the building
pertains to audio-visual production facilities. Although a studio with
special lighting, acoustical paneling, and special wiring in the walls
may be built during the general construction of the building and would
be considered part of the building, equipment such as recording
equipment and cameras that are placed in the studio would not be part of
the building's structure for the purposes of the new rules.

The Commission sought comment on whether the proposed definition of
"building" should include, rather than explicitly exclude, items such as
office equipment, machinery, or furniture. More generally, the
Commission sought comment on whether BCRA's use of the term "building"
instead of "facility" contemplated a narrowing of the range of expenses
falling within the exemption.

Three commenters representing party committees asserted that BCRA did
not intend the change in terminology from "facility" to "building" to
represent a change in the expenses covered by the exemption. One
commenter noted that the McCain-Feingold bill as passed by the Senate in
2001 eliminated the building fund exemption for national and State
parties and also provided that "Federal election activity" would
specifically not include "the cost of constructing or purchasing an
office facility or equipment for a State, district, or local committee."
An amendment adopted by the House eliminated a transition provision
allowing national party committees to spend building fund donations
raised prior to the effective date of the new law, and that amendment
also eliminated the language as to the purchase of an office facility or
equipment. The commenter characterized the technical amendment now in
effect as merely a restoration of the deleted provision on the State and
local office facility or equipment, noting that one of BCRA's principal
sponsors characterized this as a non-substantive amendment.

One of the party committee commenters urged the Commission to continue
to use principles from the Internal Revenue Code "such that capital
expenditures would be allowed from the building fund (subject to state
law) and ongoing expenses would not." Two of the party committee
commenters maintained that the question of narrowing the definition is a
moot point because they believe that if certain costs were not deemed to
be within the definition, they would be classified as administrative
costs and payable with 100% non-Federal funds.

In contrast, three comments, including one from the principal sponsors,
maintained that the change from "facility" to "building" indicated a
Congressional intent to narrow the scope of the exemption and that items
such as office equipment, machinery, or furniture should not be included
within the exemption. They agreed with proposed paragraph (c)(1). The
sponsors also stated that it was their intent that administrative
expenses related to office buildings should be allocable between Federal
and non-Federal accounts or Federal and Levin accounts.

The final rule retains the definition of "office building" set out in
the NPRM at paragraph (c)(1). The Commission notes that, even though a
provision excluding "purchasing or constructing an office facility or
equipment" from the definition of "Federal election activity" was
deleted, the addition, via the technical amendments of the language in 2
U.S.C. 453(b), was not a mere restoration of the deleted language. It is
difficult to consider the use of the phrase "office building," instead
of "office facility or equipment" as merely inadvertent in view of the
then extant, and still ongoing, controversy as to the definitional issue
resulting from previous Commission interpretations. Moreover, the
transition provision in section 402(b)(2)(B)(iii) of BCRA makes a
distinction as to the extent of the exemption under the pre-BCRA office
facility provision as opposed to the new BCRA office building provision.
Specifically, in the transition provision introduced along with section
453(b) as part of the technical amendments, Congress provided that a
national party committee may not use non-Federal funds "for activities
to defray the costs of the construction or purchase of any office
building or facility." The use of the term "office building or facility"
reflected the perceived current state of the law as to the exemption,
which ceases to exist for national parties on November 6, 2002. In the
same set of amendments, Congress created a prospective exemption for
district and local parties, as well as the State parties (which had had
the benefit of the pre-November 6 exemption), but used different and
decidedly narrower terminology to do so when it employed the term
"office building."

[2. Use of the Office Building]{.underline}

Proposed paragraph (c)(1) also referred to the purpose of the party's
use of the building, which is solely for its own party administration
and election campaign support purposes. A party office building does not
include floors or offices within the building or portions of the
underlying land that are not used, or set aside for use, for party
committee purposes. A party would, however, be able to purchase a
portion of a building such as a floor or suite to be its office
building. The final rule at paragraph (c)(1) remains unchanged with
respect to the use of the building, although this point is modified as
it pertains to the leasing of space in the building to others, as
described below.

[3. Purchase or Construction]{.underline}

"Purchase" was defined in the NPRM at paragraph (c)(2) as any payment to
acquire sole legal title to the building, including fees directly
related to the acquisition of the building, such as sales commissions
and real estate closing or settlement fees. The NPRM also made clear
that the payment to acquire the sole legal title also includes down
payments and mortgage payments. The proposed paragraph also drew from
advisory opinions that limited the kinds of payments that would fall
within the repealed exception. These opinions excluded payments for
ongoing "operating expenses" such as property taxes and assessments
(Advisory Opinion 1983-8) or administrative expenses such as rent,
building maintenance, utilities, and "office equipment expenses."
Advisory Opinions 2001-12, 2001-01 and 1988-12.

In proposed paragraph (c)(3), "construction" is defined as including the
design and erection of the structure of the building. The proposed
paragraph distinguished between expenses that constitute the erection of
the building or the extensive renovation of a building on one hand, and
costs for the upkeep, repair, or more piecemeal replacement of
structural components. This distinction is derived from Advisory Opinion
1998-7 where the Commission, drawing from the tax code, distinguished
the cost of incidental repairs that do not materially add to the
property's value nor appreciably prolong its life, but "keep it in an
ordinary efficient operating condition" from "repair work \[that\]
reaches a level to constitute wholesale restoration or renovation of a
structure." The distinction may be illustrated by the following
examples:

[Example A]{.underline} \-- Expansion of the size of the building (i.e.,
changing the size or position of the outer perimeter of the structure)
would constitute "construction."

[Example B]{.underline} \-- A single large scale project (with a
specific time deadline) entailing the replacement of a number of various
structural components throughout the building to improve the building's
habitability and function; for example, expanding, contracting, or
altering the configuration of a significant number of rooms within the
building coupled with replacements of a significant number of other
structural components throughout the building such as installation of
new electrical wiring throughout the building, and new climate control
and plumbing systems would also constitute "construction."

[Example C]{.underline} \-- The replacement on a periodic basis of
structural components where such replacement is not part of a single
large scale renovation project with a specific time deadline would not
constitute "construction" under this section.

The NPRM asked whether more examples should be included in the
particular sub-definitions, such as purchase or construction, or whether
the advisory opinion process would best suit that purpose. The
Commission also inquired as to what constitutes the purchase or
construction of an office building. Specifically, it asked whether
payments for a long-term lease with an option to purchase the rented
building should be included within the definition of purchase. One
commenter stated that, to avoid abuses, the Commission should establish
a bright line rule that treats purchases as falling within the exemption
and leases as administrative expenses.

The Commission believes that it is preferable to rely on the plain
language of BCRA, which uses the term "purchase." In past
interpretations, the Commission has distinguished between the purchase
and leasing of an office facility, concluding that the exemption did not
apply to leasing. [See]{.underline} Advisory Opinions 2001-12 and
1988-12. The Commission understands that there may be a variety of
purchase arrangements; however, in view of the distinction between
purchase and rental established in the opinions and in the absence of
further details as to any particular purchase arrangements, paragraph
(c)(2) of the final rules follows the proposed rules. In addition,
paragraph (c)(3) of the final rules, defining "construction," also
remains unchanged from the proposed rules.

[D. Office Building-Related Expenses Not Qualifying Under
Proposed]{.underline}

> [Paragraph (c)]{.underline}

In the NPRM, proposed paragraph (d) stated that if funds raised by a
State or local party committee are used for office building expenses and
the expense does not fall within the definitions in paragraph (c) for
the purchase or construction of an office building, the expense would be
an allocable administrative expense under section 300.33, unless it
falls within another category, such as support for a Federal or
non-Federal candidate. If allocable, a sufficient amount of Federal
account funds would have to be used for the expense.

The NPRM asked whether the proposed section on allocable party expenses
(now at 11 CFR 106.7) should require the allocation of administrative
costs. As indicated above, several party committees asserted, with
respect to the office buildings, that the administrative costs should be
payable entirely with non-Federal funds. For the reasons stated above in
the Explanation and Justification for section 106.7, the final rule at
paragraph (d) treats such costs as allocable.

[E. Leasing a Portion of the Office Building to Others]{.underline}

The Commission requested comments on whether a party would also be able
to purchase an entire building and lease space in the building to others
at fair market rates in order to generate income. The Commission also
sought comments on whether the sources of the funds used to purchase or
construct the office building should govern or guide the Commission in
the determination of the lawful uses of such income.

One commenter, speaking on behalf of party committees, stated that party
committees should be permitted to rent space in their office buildings
to State and local candidates regardless of the source of funds used to
purchase the buildings. The comment from the principal sponsors of BCRA
stated that BCRA permits the party committee to generate income by
leasing parts of its building and describes how to determine whether the
funds may be deposited in a Federal or non-Federal account.
Specifically, a purchase in whole or on part with non-Federal funds
would require the deposit of rental income into the non-Federal account
to be used only for non-Federal purposes. Rental income generated from a
building purchased solely with Federal funds may be deposited in the
committee's Federal account only if all the revenues collected comply
with the limitations, prohibitions, and reporting requirements of the
Act.

The Commission has incorporated the approach of the sponsors in the
final rule at paragraph (e). Consistent with the jurisdiction of State
law over non-Federal accounts, the rule provides that the revenue
received by the non-Federal account must comply with State law. The
Commission also notes its treatment of the rental income if it is
deposited in the Federal account. Unless excepted through the advisory
opinion process with respect to specific types of assets or particular
circumstances, the purchase or rental of a committee asset has been
determined to be a contribution in accordance with 11 CFR 100.7(a)(2).
In this circumstance, the Commission will normally consider the rental
income to be an "other receipt," and reportable as such, and not a
contribution. If, however, the office space is rented at a rate in
excess of the usual and normal charge, the amount in excess will be a
contribution to the committee and reportable as such.

[F. Transitional Provisions for State Party Building or Facility
Account]{.underline}

Proposed paragraph (f) (which was (e) in the NPRM) provided that, up to
and including November 5, 2002, the funds in a State party office
facility account may be used only for the purchase or construction of a
State party office facility. Starting on November 6, those funds, if
used for the purchase or construction of the office building, would be
subject to the provisions of paragraphs (a) through (c) of section
300.35 (including a State law determination that they may not be used
for such purpose). The proposed rule also stated that the funds may not
be used for Federal account or Levin account purposes but may be used
for any non-Federal purposes permitted by State law.

Two commenters from the party committees criticized the transitional
provisions, stating that unlike the national party building and facility
fund transition provisions in BCRA, there is no BCRA provision covering
the spending of funds by the already existing State party office
facility fund. One of those commenters criticized the State law
limitation on the use of the funds in the pre-existing office facility
account for non-Federal purposes. The regulation was written to conform
the treatment of those funds with BCRA and still allow their use for
election purposes. As unlimited non-Federal funds, they could not be
used for Federal account or Levin account purposes. As such, however,
they may be used for non-Federal purposes, and the Commission also
acknowledges the control by State law over such uses. Thus, paragraph
(f) remains unchanged from the proposed rule.

[11 CFR 300.36 Reporting Federal Election Activity;
Recordkeeping]{.underline}

BCRA establishes certain reporting requirements for State, district, and
local committees that finance Federal election activities.
[See]{.underline} 2 U.S.C. 434(e)(2). This requirement extends generally
to all receipts and disbursements for Federal election activities if the
aggregate amount of receipts and disbursements for such activity is
\$5,000 or more per calendar year, 2 U.S.C. 434(e)(2)(A), and
specifically extends to receipts and disbursements of Levin funds. 2
U.S.C. 434(e)(2)(B). These requirements added by BCRA are in addition to
the existing FECA requirements to report expenditures of Federal funds
under 2 U.S.C. 434. [See also]{.underline} 11 CFR part 104. Because
spending under the Levin Amendment may be allocated between Federal
funds and non-Federal funds not otherwise subject to the Act\'s
prohibitions, limitation, and reporting requirements (i.e., Levin
funds), Congress has specifically required Federal disclosure of certain
non-Federal receipts and disbursements of State, district, and local
committees (i.e., the Levin funds).

Paragraph (a) of new section 300.36 applies to two types of entities.
The first is a State, district, and local political party committee that
has not qualified as political committees under 11 CFR 100.5. The second
is an association or similar group of candidate for State or local
office or of individuals holding State or local office
([see]{.underline}

2 U.S.C. 441i(b)(1)) that has not qualified as a political committee
under 11 CFR 100.5. In the NPRM, the Commission sought comments as to
what, if any, reporting requirements an association or similar group of
candidates for, or holders of, State and local office may have under 2
U.S.C. 434(e)(2) if it is not a political committee. The Commission
received one comment, from a public interest group, which suggested that
the result should depend on whether the association or similar group has
attained political committee status under 11 CFR 100.5. The Commission
has concluded that such an association or similar group that has not
qualified as a political committee has no reporting requirements under 2
U.S.C. 434(e)(2) because that section, by its own terms, applies to
"political committees." The Commission further concludes such an
association or similar group is in a position analogous to a political
party organization that is not a political committee under 11 CFR 100.5
to the extent both engage in Federal election activity. Therefore, in
the final rules, such an association or similar group that has not
qualified as a political committee under 11 CFR 100.5 must comply with
paragraph (a) of section 300.36.

Paragraph (a) recognizes that neither type of organization has reporting
requirements under BCRA because it is not a political committee.
[See]{.underline} 2 U.S.C. 434(e)(2). Under paragraph (a)(1), both types
of organizations must demonstrate that they have sufficient Federal
funds on hand to pay the required Federal portion of the costs of
Federal election activity under 11 CFR 300.32 and 300.33. Paragraph
(a)(1) describes the type of accounting methodology required to make
this demonstration. Paragraph (a)(1) also requires each type of
organization to keep records of Federal receipts and disbursements and
to make those records available to the Commission upon request. A State
party committee and an association of State party officials commented in
support of paragraph (a)(1), to the extent that it applies to political
party committees.

Paragraph (a)(2) clarifies that a payment of Federal funds for the costs
of Federal election activity, or for the Federally allocated portion of
the costs of Federal election activity, constitutes an expenditure,
within the meaning of 11 CFR 100.8, unless an exclusion from the
definition of expenditure in 11 CFR 100.8(b) applies. Thus, such
payments constitute expenditures for purposes of determining whether or
not a State, district, or local political party committee, or an
association or similar group of candidate for State or local office or
of individuals holding State or local office, becomes a political
committee, under 11 CFR 100.5. Paragraph (a)(2) also states that a
payment of Federal funds for the costs of Federal election activity, or
for the Federally allocated portion of the costs of Federal election
activity, that meets the definition of "exempt activities"
([see]{.underline} 11 CFR 100.8(b)(10), (16), and (18)) is to be treated
as a payment for exempt activities.

A national party committee commented in opposition to paragraph (a)(2).
This commenter objected to characterizing a payment of Federal funds for
Federal election activity as an expenditure "even if such activity does
not reference any Federal candidate." A State party committee and an
association of State party officials made very similar comments, citing
Advisory Opinion 1999-4. The State party committee characterizes this
advisory opinion as "rul\[ing\] that only disbursements that influence a
specific Federal election count towards the dollar thresholds in \[11
CFR 100.5(c)\]." The State party committee's primary concern is that
"thousands" of local and district committees not currently required to
register and file reports with the Commission will be required to do so.
One of the commenters stated that the Commission has "effectively
acknowledged" in paragraph (a)(1) of section 300.36 that "Congress did
not intend first-dollar disclosure of" Federal election activity
spending. Conversely, a public interest group commented in support of
this paragraph.

Congress has defined Federal election activity to include activities
that may or may not refer to a Federal candidate, [see,
e.g.,]{.underline} 2 U.S.C. 431(20)(A)(ii) and (20)(B)(i), and Congress
has required the expenditure of Federal funds to pay for these
activities.

2 U.S.C. 441i(b)(1), (2). With regard to Advisory Opinion 1999-4, the
Commission has concluded that the payments of Federal funds for Federal
election activities do influence "specific Federal elections" because
the definitions of Federal election activity are tied to particular
Federal elections. Each of the four categories of Federal election
activity is framed in terms of a specific Federal election, 2 U.S.C.
431(20)(A)(i), (ii), and (iv), or a clearly identified Federal
candidate, 2 U.S.C. 431(20)(A)(iii). Therefore, paragraph (a)(2) does
not conflict with Advisory Opinion 1999-4. As to the comment that
paragraph (a)(1) of this section "effectively acknowledges" that
Congress did not intend "first-dollar" disclosure of Federal election
activity spending, the Commission points out that paragraph (a)(1)
applies to organizations that are [not]{.underline} political committees
under the Act, and thus have no reporting requirements under the Act.
The Commission may not require "first-dollar" reporting from such
organizations because it may not require reporting from them at all.
Paragraph (b), on the other hand, applies to party committees that are
political committees under the Act. As political committees, these
entities covered by paragraph (b) must report all Federal receipts and
disbursements from the "first dollar." 2 U.S.C. 434.

Paragraph (b) of section 300.36 applies to State, district, and local
political party committees, and to an association or similar group of
State and local candidates and officeholders, that disburse Federal
funds for Federal election activities and that have qualified as
political committees under 11 CFR 100.5. The heading of paragraph (b)(1)
is revised from the version of the regulation published in the NPRM. The
new heading makes clear that paragraph (b)(1) applies to State,
district, and local political party committees that have qualified as
political committees and that have less than \$5,000 in total receipts
and disbursements for Federal election activity ([see]{.underline} 2
U.S.C. 434(e)(2)(A)), and to an association or similar group of
candidate for State or local office or of individuals holding State or
local office at all times. Paragraph (b)(1) provides that such
committees must report all receipts and disbursements of Federal funds
for all or part of the costs of Federal election activity. Paragraph
(b)(1) goes on to state that this requirement applies even if the
committee has less than \$5,000 of aggregate receipts and disbursements
for Federal election activity. [See]{.underline} 2 U.S.C. 434(e)(2)(A).
A national party committee and a State party committee commented in
opposition to the requirement of itemization of Federal receipts for
Levin activity, because "Federal receipts will be used fungibly for
multiple purposes." The Commission points out that Federal receipts are
not fungible, as far as spending for Federal election activity goes, to
the extent that receipts include transfers from other party committees.
A State, district, or local committee must not use transferred funds for
Federal election activity spending. 2 U.S.C. 441i(b)(2)(B)(iv).
Moreover, Congress has specifically required itemization of these
receipts. 2 U.S.C. 434(e)(3). Consequently, the final sentence of 11 CFR
300.36 (b)(1) provides that a disbursement of Federal funds for the
costs of, or for the Federally allocated portion of the costs of,
Federal election activity is reportable as an expenditure, unless an
exclusion in 11 CFR 100.8(b) applies.

In the final rules, the Commission has corrected an inadvertent omission
that appeared in the version of paragraph (b)(1) of section 300.36
published in the NPRM. The words "receipts and" have been inserted
before the word "disbursement" in the second sentence. The preamble of
11 CFR 300.36(b)(1) correctly discussed the paragraph, referring to
"receipts and disbursements." 67 [Fed. Register]{.underline} at 35671.
The Commission has also deleted an unnecessary and potentially confusing
introductory clause in one of the sentences in this paragraph.

Paragraph (b)(2) implements the broader reporting provisions of

2 U.S.C. 434(e)(2)(A) and (B) with regard to State, district, and local
political party committees. The heading of this paragraph has been
revised from the version of the regulation published in the NPRM. The
change is intended to make clear that this paragraph applies to State,
district, and local political party committees that are political
committees and that have \$5,000 or more of total receipts and
disbursements for Federal election activity. 2 U.S.C. 434(e)(2)(A), (B).
Paragraph (b)(2) does not apply to an association or similar group of
State and local candidates and officeholders that disburses Federal
funds for Federal election activities because such groups are not
authorized to raise and spend Levin funds, and thus may not allocate
disbursements for Federal election activity between Federal funds and
Levin funds. [See]{.underline} 2 U.S.C. 441i(b)(2), which applies only
to party committees. These committees always report under part 104 of
Title 11 because they may have no Levin funds to report pursuant to
paragraph (a), discussed above.

The first sentence of paragraph (b)(2) states the basic rule that all
receipts and disbursements for Federal election activity must be
reported if the political committee has an aggregate of \$5,000 or more
of such receipts and disbursements in a calendar year. The second
sentence makes it clear that this basic reporting rule extends to the
otherwise non-Federal funds spent for Federal election activity under
the Levin Amendment (that is, to the Levin funds).

Paragraphs (b)(2)(i) through (iv) have been revised, or added, since the
version of the regulation published in the NPRM. As published in the
NPRM, the regulation would have referred the reader to 11 CFR 104.17(b)
to identify important elements of information that must be reported
under this section 300.36. Instead, paragraphs (b)(2)(i) through (iv),
as adopted in the final rules, state these requirements expressly, for
the convenience of the reader. These requirements generally parallel the
requirements adopted in 11 CFR 104.17(b) with certain modifications
appropriate to the context of expenses allocated among Federal election
activities.

Paragraph (b)(2)(i) pertains to disclosure of the methods State,
district, or local committees use to report allocating expenses for
Federal election activity between Federal funds and Levin funds.
Paragraph (b)(2)(i)(A) of section 300.36 specifies that a committee must
state the allocation percentages for Federal election activity
disbursements that are used in its reports. This paragraph includes a
specific cross-reference to 11 CFR 300.33(b), where these allocation
percentages for Federal election activity are set out.

Paragraph (b)(2)(i)(B) of section 300.36 requires the committee to
report which allocable category of Federal election activity a given
allocated disbursement falls into. In paragraph (b)(2)(i)(B), the
reference to allocable category of Federal election activity means the
type of Federal election activity as defined in 11 CFR 100.24 (e.g.,
voter registration activity as defined in section 100.24(b)(1), or voter
identification as defined in section 100.24(b)(2)(i)). Note that
expenses for certain categories of Federal election activity are not
allocable between Federal funds and Levin funds (e.g., public
communications that promote or support, or attack or oppose, a clearly
identified Federal candidate under 11 CFR 100.24(b)(3)).
[See]{.underline} 11 CFR 300.33(a).

Paragraph (b)(2)(ii) pertains to reporting of allocation transfers
between a Levin account and Federal account, or among a Levin account, a
Federal account and a designated allocation account for allocated
Federal election activity. All transfers related to a category of
Federal election activity must identify that category. Paragraph
(b)(2)(iii) specifies the elements of information that must be reported
for an allocated disbursement for Federal election activity, including
the name and address of the payee, the date of the payment, and the
purpose of the payment. This paragraph also sets out itemization
requirements for disbursements covering more than one program or
activity. Paragraph (b)(2)(iv) covers itemization of disbursements of
more than \$200. 2 U.S.C. 434(e)(3).

Paragraph (b)(3) alerts the reader to the rules for reporting payments
allocated between Federal funds and non-Federal funds that are not
covered in paragraph (b)(2). As explained above, paragraph (b)(2)
applies only to payments for Federal election activity allocated between
Federal funds and Levin funds under 11 CFR 300.33. The reporting
regulation for payments allocated between Federal funds and non-Federal
funds are contained in 11 CFR 104.17. For example, section 104.17
addresses reporting of administrative expenses and salaries of employees
who spend 25% of their time, or less, on Federal elections.

Paragraph (c)(1) implements BCRA\'s new requirement for monthly filing
by party committees that come under new section 434(e) of the Act. 2
U.S.C. 434(e)(4). This is accomplished by referring to the Commission\'s
existing regulation specifying monthly reporting, i.e., 11 CFR
104.5(c)(3).

In the NPRM, the Commission sought comments on the applicability of the
\$50,000 annual threshold for electronic filing to receipts and
disbursements for Federal election activities. [See]{.underline} 11 CFR
104.18. The Commission received two comments. An association of State
party officials opposed applying receipts and disbursements for Federal
election activities toward the electronic filing threshold because these
"will also be disclosed on the party committee's regularly filed
reports." The Commission notes that this comment, while true, could be
applied to any committee with regard to electronic filing. A public
interest group commented that receipts and disbursements for Federal
election activity should apply to the electronic filing threshold.

Consistent with 2 U.S.C. 434(a)(11), paragraph (c)(2) of section 300.36
provides that [contributions]{.underline} and [expenditures]{.underline}
of Federal funds for Federal election activity apply to the \$50,000
threshold for mandatory electronic filing. When determining whether a
receipt of Federal funds for Federal election activities is a
contribution, the Commission's regulation at 11 CFR 100.7, including the
exclusions in paragraph (b) of that section, must be applied. Similarly,
when determining whether a disbursement of Federal funds for Federal
election activity is an expenditure, the Commission's regulation at 11
CFR 100.8, including the exclusions in paragraph (b) of that section,
must be applied. The Commission discerns no reason why a contribution or
expenditure should be treated differently for this purpose simply
because it is related to a Federal election activity. The Commission
emphasizes that this provision does not apply to receipts and
disbursements of Levin funds for Federal election activity, and does not
apply to receipts and disbursements that are not "contributions" or
"expenditures" as defined by the FECA.

Finally, paragraph (d) of section 300.36 supports the disclosure
provisions outlined above by adding a recordkeeping requirement.
Paragraph (d) refers to the Commission\'s existing regulation on
recordkeeping, 11 CFR 104.14. This requirement is necessary to ensure
that sufficient documentation exists to ensure compliance with the
disclosure provisions of BCRA.

[11 CFR 300.37 Prohibitions on Fundraising for and Donating to Certain
Tax Exempt Organizations]{.underline}

BCRA prohibits State, district, and local party committees, their
officers and agents acting on their behalf, and entities directly or
indirectly established, maintained, financed, or controlled by them,
from soliciting any funds for, or making or directing any donations to
certain tax exempt organizations engaged in certain election-related
activity. 2 U.S.C. 441i(d). Except as discussed below, the State party
ban on fundraising for tax-exempt organizations at new 11 CFR 300.37
mirrors to the provision applicable to the prohibition on national party
committee fundraising for these organizations at new 11 CFR 300.11.
[See]{.underline} Explanation and Justification for 11 CFR section
300.11 above for a discussion of comments received in response to
specific questions raised in the NPRM.

Paragraph (a)(3) implements BCRA's prohibition on State party committee
fundraising for, and donating to, a section 527 organization unless the
organization is a "political committee," a State and local party
committee, or an authorized committee of a State or local candidate. The
NPRM asked whether the term "political committee" in 11 CFR 300.37
should mirror the definition of that term in 2 U.S.C. 431(4), which
would encompass only organizations that make contributions to and
expenditures on behalf of federal elections or whether it should be
interpreted to encompass State-registered political committees that
support only State and local candidates.

BCRA's cosponsors stated that "it would be in keeping with the intent of
BCRA to carve out from the definition of 'political committee' a
distinction that would permit State, district, and local party
committees to make a non-federal donation" to a section 527 organization
registered as a State political committee as long as the State committee
does not make expenditures and disbursements in connection with a
Federal election, including expenditures and disbursements for Federal
election activity. Several party committee commenters and at least one
public interest group agreed with this approach. Only one public
interest commenter disagreed, stating that permitting State and local
party committees to fundraise for, or donate to, State political
committees "would be contrary to the letter and spirit of BCRA." None of
the commenters addressed this provision in the context of the national
party prohibition, perhaps because it was not specifically asked.

Accordingly, in the final rules, paragraph (a)(3) of section 300.11 has
been amended so that it provides that, for the purposes of this
paragraph only, "political committee" includes a State-registered
political committee that supports only non-federal candidates and does
not make expenditures or disbursements in connection with an election
for Federal office, including expenditures and disbursements for Federal
election activity. The Commission agrees with the sponsors and other
commenters that with this change, 11 CFR 300.11(a)(3) does not
contravene the major purpose of BCRA \-- to prohibit non-federal funds
from being used in connection with Federal elections. As long as the
section 527 organization for which funds are being raised exclusively
supports non-federal candidates and does not finance activities that
could benefit federal candidates, such as get-out-the-vote activities in
connection with an election in which a Federal candidate appears on the
ballot, BCRA's intent is preserved.

Because 11 CFR 300.37(a) permits state parties to solicit funds for, or
donate funds to, Section 527 organizations that are state-registered
political committees and that meet certain other requirements, paragraph
(c) includes a safe harbor provision applicable to those organizations
similar to the provision applicable to Section 501(c) organizations.
Paragraph (e) contains the requirements of the certification required to
satisfy the safe harbor.

**Subpart C -- Tax-exempt Organizations**

For the convenience of readers interested in locating rules pertaining
to fundraising and donations to tax-exempt organizations, subpart C of
new part 300 combines in a single place the prohibitions on national,
State, district, and local party committee donations to, and fundraising
for, certain 501(c) and 527 tax-exempt organizations and the rules
governing fundraising by Federal candidates and officeholders for 501(c)
organizations.

The proposed rules for 11 CFR 300.50 (national party prohibition) and
11CFR 300.51 ( party prohibition) were identical to proposed 11 CFR
300.11 (national party prohibition) and proposed 11 CFR 300.37 ( party
prohibition).

The final rules at 11 CFR 300.50 (national party prohibition) is
identical to the final rule at 11 CFR 300.11; the final rules at 11 CFR
300.51 ( party prohibition) is identical to the final rule at 11 CFR
300.37; and the final rule at 11 CFR 300.52 (regulations governing
candidate and officeholder solicitations for 501(c) organizations) is
identical to the final rule at 11 CFR 300.65. The Explanation and
Justification for 11 CFR 300.11, 300.37 and 300.65 apply to 11 CFR
300.50, 300.51 and 300.52, respectively.

####### Subpart D -- Federal Candidates and Officeholders

[11 CFR 300.60 Scope]{.underline}

BCRA places limits on the amounts and types of funds that can be raised
by Federal candidates and officeholders for both Federal and State
candidates. [See]{.underline} 2 U.S.C. 441i(e). The Commission is
placing the regulations that address these limitations in 11 CFR part
300, subpart D.

Section 300.60 explains that these restrictions apply to Federal
candidates and officeholders, their agents, and entities directly or
indirectly established, maintained, or controlled by, or acting on
behalf of, any such candidate(s) or officeholder(s). As defined in 2
U.S.C. 431(3) and existing 11 CFR 100.4, "Federal office" means the
office of President or Vice President of the United States, Senator or
Representative in, or Delegate or Resident Commissioner to, the Congress
of the United States. There is a similar definition of "Federal
officeholder" in 11 CFR 113.1(c). As noted above, the Commission is
adding a comparable definition at 11 CFR 300.2(o). Persons covered by
the restrictions in this subpart may not "solicit, receive, direct,
transfer or spend" non-Federal funds unless certain requirements are
satisfied, and subject to certain exceptions explained below.

No comments were received on this section.

[11 CFR 300.61 Federal elections]{.underline}

Section 300.61 as proposed in the NPRM prohibited any Federal candidate
or officeholder, his or her agent, or any person described in section
300.60, above, from soliciting, receiving, directing, transferring, or
spending non-Federal funds in connection with an election for Federal
office, including funds for any Federal election activity described in
11 CF 100.24, discussed above. 2 U.S.C. 441i(e)(1)(A). One commenter
urged the Commission to construe this language to prohibit a candidate
only from raising non-Federal funds that would eventually benefit the
candidate's own campaign. Because the Commission does not find support
in the statutory language for this approach, it is not incorporating
this recommendation.

The principal sponsors of BCRA asked the Commission to include
"disburse" in the list of specified actions, so as to clarify that a
person described in 11 CFR 300.60 must use Federal funds when disbursing
funds in connection with an election for Federal office. The Commission
appreciates the desire for uniformity between sections 300.61 and
300.62, discussed below; and also notes that drawing a distinction
between funds that are "spent" and funds that are "disbursed" for
certain purposes could prove problematic. Accordingly, it is adding
"disburse" to the list of covered activities in section 300.61.

[11 CFR 300.62 Non-Federal Elections]{.underline}

BCRA also prohibits any Federal candidate or officeholder, his or her
agent, or any other person described in section 300.60, from raising,
receiving, directing, transferring, or spending or disbursing funds in
connection with any non-Federal election, unless the funds are not in
excess of the amounts permitted with respect to contributions to
candidates and political committees and are not from sources prohibited
by the Act from making contributions in connection with Federal
elections. 2 U.S.C. 441i(e)(1)(B).

The NPRM limited this restriction to Federal funds subject to the
limitations and prohibitions of the Act. One comment requested the
Commission to remove the term "Federal" from this definition, to make it
cover all funds that are subject to the limitations and prohibitions of
the Act. The Commission is making this change, which is consistent with
the statutory language; and is making additional changes to further
parallel the statutory language.

In discussing proposed 11 C.F.R. 300.61 and 300.62, the NPRM stated that
these prohibitions encompassed "leadership PACs" and "candidate PACs"
because they are entities "directly or indirectly established, financed,
maintained, or controlled by" Federal candidates and/or officeholders as
defined in 11 C.F.R. 300.2(c). Generally, "leadership PACs" and
"candidate PACs" are political organizations set up by congressional
leaders and other Federal candidates and officeholders, in part, as a
way to support other candidates' campaigns. Although candidate PACs and
leadership PACs are not specifically mentioned, the legislative history
indicates that 2 U.S.C. 441i(e)(1) is intended to prohibit Federal
officeholders and candidates from soliciting any funds for these
committees that do not comply with FECA's source and amount limitations.
[See]{.underline} 148 Cong. Rec. S2140 (Daily ed. March 20, 2002)
(statement of Sen. McCain). Consequently, the NRPM stated that Federal
candidates and officeholders and their leadership and candidate PACs
must not solicit, receive, direct, transfer, or spend funds for such a
PAC's Federal or non-Federal account unless the funds complied with the
Act's source and limitations requirements.

The comments of the national party committees construed the NPRM
statements, in light of statements made in the Senate debates, to mean
that a person could contribute \$5,000 to the Federal account of a
"leadership" PAC and could donate an additional \$5,000 to the
non-Federal account of the same committee. These commenters expressed
support for such an interpretation of the proposed rules and further
argued that the national party ban on raising and spending non-Federal
funds found at 2 U.S.C. 441i(a) should be construed similarly. As noted
elsewhere, the Commission believes that the plain language of 2 U.S.C.
441i(a) prevents such an interpretation as to the national party
committees. No other commenters addressed this point in their written
comments, although some commenters testified that the statutory language
could be interpreted either to permit solicitations of \$5,000 each for
a Federal and non-Federal account of a leadership PAC in light of the
floor statements, or not to permit such PACs to have non-Federal
accounts at all. Another commenter argued that the statutory language
did not include the term "non-Federal accounts" but instead permitted a
Federal officeholder to solicit, receive, direct and spend funds "in
connection with non-Federal elections."

The Commission notes first that the definition of an entity "directly or
indirectly established, financed, maintained, or controlled" is being
modified in the final rules from the definition contained in the
proposed rule at section 300.2(c). The final rule defines this phrase by
incorporating the affiliation factors set forth at 11 CFR
100.5(g)(4)(ii). Consequently, 11 C.F.R. 300.62, permitting
solicitations and spending for funds "in connection with" a non-Federal
election applies to a candidate PAC or leadership PAC to the extent that
the PAC comes within the new definition of 11 C.F.R. 300.2(c). Secondly,
in discussing BCRA's restrictions on the solicitation and spending of
non-Federal funds by Federal candidates and officeholders, the
co-sponsors stated that these provisions were part of a "system of
prohibitions and limitations on the ability of Federal officeholders and
candidates, to raise, spend and control soft money" in order "to stop
the use of soft money as a means of buying influence and access with
Federal officeholders and candidates." [See]{.underline} 148 Cong. Rec.
S2139 (Daily ed. March 20, 2002) (statement of Sen. McCain). In light of
this purpose, the Commission notes that new 11 C.F.R. 300.62 permits
Federal candidates and officeholders to solicit, receive, direct,
transfer, spend or disburse funds in connection with Federal and
non-Federal elections only from sources permitted under the Act and only
when the combined amounts solicited and received from any particular
person or entity do not exceed the amounts permitted under the Act's
contribution limits and are not from prohibited sources. In other words,
a Leadership PAC that comes within the definition of 11 CFR 300.2(c) can
raise up to a [total]{.underline} of \$5,000 from any particular person
or entity, regardless of whether the funds are contributed to the PAC's
Federal account, donated to its non-Federal account, or allocated
between the two. In addition, the Commission agrees with commenters who
pointed out that 11 C.F.R. 300.62 does not permit Federal candidates and
officeholders, their agents and entities established, financed,
maintained, or controlled by them to solicit, receive, direct, transfer,
spend or disburse non-Federal funds for Federal elections.

[11 CFR 300.63 Exception for Party Candidates]{.underline}

An exception to the fundraising prohibition applies when a Federal
candidate or Federal officeholder is a candidate for State or local
office. 2 U.S.C. 441i(e)(2). Such candidates may raise and spend
non-Federal funds for their State campaign, as long as their activities
are consistent with State law and refer only to their status as a State
or local candidate, to other candidates for that same office, or both.
This exception is reflected in new 11 CFR 300.63. Please note that if a
State or local candidate is simultaneously a candidate for Federal
office, he or she must raise and spend only Federal funds in connection
with the Federal campaign. No comments addressed this provision.

[11 CFR 300.64 Exemption for Attending or Speaking at Fundraising
Events]{.underline}

BCRA contains an exemption from the fundraising prohibition for Federal
candidates and officeholders who attend, speak, or appear as a featured
guest at a State, district, or local party committee fundraising event.
2 U.S.C. 441i(e)(3). The NPRM sought comment on how to construe and
implement this provision, particularly in light of the separate general
prohibition on Federal candidates and officeholders from soliciting
non-Federal funds in connection with an election for Federal, State, or
local office.

The NPRM cited Sen. McCain's explanation in the Senate debate that
"\[t\]he rule here is simple: Federal candidates and officeholders
cannot solicit soft money funds, funds that do not comply with Federal
contribution limits and source prohibitions, for any party
committee---national, State, or local." 148 Cong. Rec. S2139 (daily ed.
March 20,2002) (statement of Sen. McCain). Consistent with this
statement, the Commission proposed that, while such individuals could
attend, speak, or be a featured guest at a State or local party
fundraising event, they must not solicit funds at any such event.

However, the NPRM sought comment on whether the fundraising event
provision was a total exemption from the general solicitation ban,
whereby Federal candidates and officeholders and their agents may attend
and speak freely at such events without restriction or regulation. The
Commission also sought comment on how to construe BCRA's phrase
permitting Federal candidates and officeholders to "attend, speak, or be
a featured guest" at a fundraising event. It noted that the phrase
"featured guest" strongly suggests that State, district, or local party
committees may publicize in advance that a Federal candidate or
officeholder will be attending and speaking at an event, and asked
whether this means that Federal candidates and officeholders may be
referred to in invitation materials for the event, or appear as members
of a host committee, or be honored at the event.

####### The Commission received a range of comments on this issue. Some advocated a strict approach, consistent with the statutory language. They argued that any other approach would substantially undercut the fundraising prohibition. Others noted that it could be almost impossible for a Federal candidate or officeholder not to become involved in at least indirect fundraising, such as thanking people in a rope line for their support. Some claimed that monitoring every word the speaker said could turn the Commission into "speech police," raising First Amendment concerns. Also, the fact that a candidate or officeholder is to be honored at an event seemingly implies that his or her name or picture may appear on invitations, flyers, and other material distributed in connection with the event.

####### The Commission is adopting a middle approach in new section 300.64. Most commenters who favored an expansive interpretation agreed that Federal candidates and officeholders could not actively fundraise (specifically solicit contributions) at a covered event. The Commission believes the statutory prohibition is also broad enough to bar a Federal candidate or officeholder from serving on a host committee for or signing a solicitation in connection with the event. However, the rules do not prohibit a sponsor from publicizing a Federal candidate's or officeholder's appearance at an event, or incidental conversations in connection with the event in which the candidate or officeholder does not directly solicit funds. 

[11 CFR 300.65 Exceptions for certain tax-exempt
organizations]{.underline}

In 2 U.S.C. 441i(e)(1), BCRA prohibits candidates and officeholders from
soliciting, receiving or spending funds unless the funds meet the source
and limitations restrictions of the Act. [See]{.underline} 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): 1) it allows candidates, officeholders, and
individuals who are agents acting on behalf of either to make general
solicitations, without source or amount restrictions for a 501(c)
organization unless the "principal purpose" of the organization is to
conduct certain Federal election activity, specifically voter
registration, voter identification, GOTV activities, or generic campaign
activity, so long as the solicitation is not to obtain funds in
connection with a Federal election; and 2) it permits Federal candidates
and officeholders, and individuals who are agents acting on their
behalf, to make specific solicitations for 501(c) organizations where
the organization's principal purpose is to conduct Federal election
activity as described above or to make specific solicitations 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. It
mirrors the final rule at 11 CFR 300.52 contained in subpart C.

In response to the NPRM, BCRA's principal sponsors and a public interest
group stated that the proposed rule at 11 CFR 300.52(a)(1)(mirrored in
300.65(a)(1)) could be interpreted to prohibit candidate/officeholder
solicitations that were not meant to be prohibited. The proposed rules
stated that a Federal candidate or officeholder may make a general
solicitation on behalf of a 501(c) organization without regard to source
or amount restrictions "only if the solicitation does not specify how
the funds will or should be spent," the solicitation is not for a 501(c)
organization whose principal purpose is to conduct certain enumerated
Federal election activity, and if the solicitation is not for that
enumerated Federal election activity. The commenters interpreted this
provision as prohibiting Federal candidates or officeholders from making
a general or specific solicitation, without source or amount
limitations, for an organization such as the Red Cross, which engages in
no "electoral activities" whatsoever. BCRA's principal sponsors also
argued that this provision could be interpreted to prohibit specific
solicitations, without source or amount limitations, for a 501(c)
organization whose principal purpose is not to engage in Federal
election activity, but who nonetheless engages in some election
activity, provided that the solicitation is not for activity in
connection with an election. The sponsors argued that the final rules
should permit such specific solicitations. The examples given by the
sponsors to illustrate this point included a specific solicitation for
the NAACP College Fund or the NRA firearms training program, even though
the NAACP and the NRA engage in certain election activity.

As noted in the NPRM, the Commission agrees that 11 CFR 300.65 should
not be interpreted to prohibit candidates, officeholders or their agents
from soliciting funds for a 501(c) organization that engages in no
election activity, such as the Red Cross. Accordingly, the final rule at
11 CFR 300.65 addresses the commenters' concerns by more specifically
setting forth the circumstances under which Federal candidates,
officeholders and their agents can make general solicitations on behalf
of 501(c) organizations, without regard to source or limitation, and by
setting forth in paragraph (b) the circumstances under which they can
made specific, limited solicitations to individuals.

In response to a question in the NRPM regarding the scope of the term
"agent" in

2 U.S.C. 441i(e), the sponsors stated that it was their intent that the
restrictions on candidate/officer holder solicitations apply to an agent
"acting on behalf" of either. Accordingly, the final rule states
throughout that it applies to an individual who is an agent "acting on
behalf of a Federal candidate or officeholder. BCRA's sponsors and the
same public interest commenter also pointed out that proposed 11 CFR
300.52(b)(2)(mirrored in proposed 11 CFR 300.65(b)(2)) did not make
clear that the specific solicitations permitted for Federal election
activity or organizations principally engaged in such activities applies
only to 501(c) organizations and not to other tax exempt organizations,
such as Section 527 organizations. The Commission agrees. Accordingly,
the introductory language in the final rule specifically states that the
requirements for solicitations in the rule apply to 501(c)
organizations.

Paragraph (c) enumerates the specific types of Federal election activity
for which a Federal candidate or officeholder can make specific
solicitations and incorporates the definitions of those activities at 11
CFR 100.24(a). Because BCRA permits limited solicitations only for
specific Federal election activities, paragraph (d) has been added to
the final rule to make clear that solicitations are not permitted for
other election activities, including Federal election activity such as
public communications promoting or opposing clearly identified Federal
candidates. [See]{.underline} 11 CFR 100.24(b)(3).

In response to questions raised in the NPRM, BCRA's principal sponsors,
a public interest group and a non-profit organization agreed that 11 CFR
300.65 should include a safe harbor provision for Federal candidates,
officeholders and their agents, similar to the one for party committees
in 11 CFR 300.11 and 11 CFR 300.37. Accordingly, paragraph (e) provides
that a Federal candidate, officeholder, or agent acting on behalf of
either, may obtain and rely upon a certification from a Section 501(c)
organization in determining the scope of the permissible solicitations
they may make on behalf of the organization. Paragraph (e) also sets
forth the requirements for such a certification.

A non-profit organization raised several concerns about the restrictions
on Federal officeholders soliciting for 501(c) organizations. First, the
non-profit group maintained that the regulations should create a
presumption that the principal purpose of any 501(c) organization is not
to conduct election activity because "under federal tax law, no 501(c)
organization may conduct partisan electoral activity as its primary
purpose." The commenter was concerned that requiring a candidate or
officeholder to verify whether or not an organization engages in
election activity as its principal purpose will "result in an
unnecessary chilling effect on their assistance" to 501(c)
organizations. The commenter was also concerned that IRS Form 990 tax
returns and other tax forms mentioned in the NPRM as possible ways to
determine an organization's activities or principal purpose would not
provide a candidate or officeholder with the necessary information.
Second, the commenter urged that any definition of "principal purpose"
be based on a multi-year average of an organization's expenditures for
Federal election activity to more accurately capture an organization's
actual level of electoral activity, which necessarily occurs closer to
elections. Finally, the group urged that the regulations include a safe
harbor permitting candidates and officeholders to appear at a Section
501(c) organization's fundraiser or convention as long as no
solicitations are made for funds for election activities, or
alternatively, for any funds.

Determining whether a particular organization's "principal purpose" is
to conduct election activities, such as voter registration or GOTV, is a
fact-based determination that must be made as to a particular
organization. Thus, creating a presumption that the principal purpose of
any 501(c) organization is not to engage in election activity is
inappropriate and could conflict with IRS determinations. As for
including a definition of "primary purpose" that is based on a
multi-year average of an organization's election expenditures, the
Commission lacks sufficient information to establish a particular
percentage or average at this time. Finally, the Commission notes that
the general and specific solicitations contemplated in 11 CFR 300.65 may
take place at a fundraising event conduct by the 501(c) organization.

As for the concern that Federal candidates and officeholders will be
chilled from assisting 501(c) organizations in fundraising, the safe
harbor provided in paragraph (e) is intended to ease 'federal
candidates' or 'officeholders' concern about inadvertently violating the
Act, as amended by BCRA.

**Subpart E -- State and Local Candidates**

[11 CFR 300.70 Scope]{.underline}

Subpart E implements two provisions of BCRA regarding State and local
candidates. 2 U.S.C. 441i(f)(1), (2). Section 300.70 explains that this
subpart applies to any candidate for State or local office, individual
holding State or local office, or an agent of any such candidate or
individual. 2 U.S.C. 441i(f)(1). For example, the subpart applies to an
individual holding Federal office who is a candidate for State or local
office. It does not, however, apply to an association or similar group
of candidates for State or local office, or of individuals holding State
or local office, because they are not addressed in this section of BCRA.
The Commission received no comments on this section.

[11 CFR 300.71 Federal Funds Required for Certain
Communications]{.underline}

BCRA prohibits State and local candidates and officeholders from funding
certain public communications with non-Federal funds. 2 U.S.C.
441i(f)(1). This prohibition is contained in new 11 CFR 300.71. The
prohibition on use of non-Federal funds encompasses public
communications that refer to a clearly identified candidate for Federal
office, if the communication promotes, supports, attacks, or opposes any
candidate for that Federal office, regardless of whether the
communication expressly advocates voting for or against any candidate.
[See]{.underline} 2 U.S.C. 431(20)(A)(iii). The section contains a cross
reference to section 11 CFR 100.26, which defines the new term [public
communication]{.underline} for purposes of the Act. State and local
candidates and officeholders may, however, use Federal funds for these
public communications.

No commenters addressed this section.

# 11 CFR 300.72 Federal Funds Not Required for Certain Communications

BCRA contains an exception to the prohibition on the use of Federal
funds for certain public communications that permits State and local
candidates and officeholders to use non-Federal funds for public
communications that refer to Federal candidates but do not promote,
support, attack, or oppose any candidate for Federal office. 2 U.S.C.
441i(f)(2). This exception is set forth at new 11 CFR 300.72. Section
300.72 follows the statutory language.

####### XI. Part 9034 \-- Entitlements

[11 CFR 9034.8 Joint fundraising]{.underline}

The ban on national party non-Federal fundraising affects the
Commission's joint fundraising rules under the Presidential Primary
Matching Payment Act at 11 CFR 9034.8. The Commission is, therefore,
adding introductory language to each of these sections, advising readers
that "\[n\]othing in this section shall supersede 11 CFR part 300, which
prohibits any person from soliciting, receiving, directing,
transferring, or spending any non-Federal funds, or from transferring
Federal funds for Federal election activities."

Certification of No Effect Pursuant to 5 U.S.C. 605(b)

**\[Regulatory Flexibility Act\]**

The Commission certifies that the attached proposed rules, if
promulgated, will not have a significant economic impact on a
substantial number of small entities. The basis for this certification
is that the national, State, and local party committees of the two major
political parties are not small entities under 5 U.S.C. 601, and the
number of other small entities to which the rules would apply is not
substantial.

List of Subjects

# 11 CFR Part 100

Elections

[11 CFR Part 102]{.underline}

Political committees and parties, reporting and recordkeeping
requirements.

[11 CFR Part 104]{.underline}

Campaign funds, political committees and parties, reporting and
recordkeeping requirements.

[11 CFR Part 106]{.underline}

Campaign funds, political committees and parties, political candidates.

# 11 CFR Part 108

Elections, reporting and recordkeeping.

# 11 CFR Part 110

#  Campaigns, political parties and committees.

# 11 CFR Part 114

Business and industry, elections, labor.

[11 CFR Part 300]{.underline}

Campaign funds, nonprofit organizations, political committees and
parties, political candidates, reporting and recordkeeping requirements.

[11 CFR Part 9034]{.underline}

Campaign funds, reporting and recordkeeping requirements.

For reasons set out in the preamble, Subchapters A, C and F of Chapter I
of title 11 of the [Code of Federal Regulations]{.underline} is amended
to read as follows:

**PART 100 -- SCOPE AND DEFINITIONS (2 U.S.C. 431)**

1\. The authority citation for 11 CFR part 100 continues to read as
follows:

Authority: 2 U.S.C. 431; 434(a)(11), 438(a)(8).

2\. Section 100.14 is amended by revising paragraphs (a) and (b), and
adding paragraph (c) to read as follows:

**§ 100.14 State committee, subordinate committee, district, or local
committee**

**(2 U.S.C. 431(15)).**

\(a\) [State committee]{.underline} means the organization that by
virtue of the bylaws of a political party or the operation of State law
~~is part of the official party structure, and~~ is responsible for the
day-to-day operation of the political party at the State level,
including an entity that is directly or indirectly established,
financed, maintained, or controlled by that organization, as determined
by the Commission.

\(b\) [Subordinate committee of a State committee]{.underline} means any
organization that ~~is part of the official party structure, and~~ is
responsible for the day-to-day operation of the political party at the
level of city, county, neighborhood, ward, district, precinct, or any
other subdivision of a State or any organization under the control or
direction of the State committee, including an entity that is directly
or indirectly established, financed, maintained, or controlled by that
organization, as determined by the Commission.

\(c\) [District or local committee]{.underline} means any organization
that by virtue of the bylaws of a political party or the operation of
State law ~~is part of the official party structure, and~~ is
responsible~~, under State law,~~ for the day-to-day operation of the
political party at the level of city, county, neighborhood, ward,
district, precinct, or any other subdivision of a State, including an
entity that is directly or indirectly established, financed, maintained,
or controlled by the district or local committee, as determined by the
Commission.

3\. Sections 100.24, 100.25, 100.26, 100.27, and 100.28 are added to
read as follows:

**§ 100.24** **Federal election activity (2 U.S.C. 431(20)).**

\(a\) As used in this section, and in part 300 of this chapter,

\(1\) In connection with an election in which a candidate for Federal
office appears on the ballot means:

\(i\) The period of time beginning on January 1 of each even-numbered
year and ending on December 31 of each even-numbered year; and,

\(ii\) In an odd-numbered year, the period beginning on the date on
which the date of a special election in which a candidate for Federal
office appears on the ballot is set and ending on the date of the
special election.

\(2\) Voter registration activity means contacting individuals by
telephone, in person, or by other direct means to encourage them to or
assist them in registering to vote. Voter registration activity
includes, but is not limited to, printing and distributing registration
and voting information, providing individuals with voter registration
forms, and assisting individuals in the completion and filing of such
forms.

\(3\) Get-out-the-vote activity means contacting registered voters by
telephone, in person, or by other direct means, to encourage them or to
assist them in engaging in the act of voting. The following factors are
relevant to determining whether a given activity is a get-out-the-vote
activity:

\(i\) Whether the activity involves providing to voters information such
as the date of the election, the times when polling places are open, and
the location of particular polling places;

\(ii\) Whether the activity facilitates voting by particular
individuals, for example, offering to transport or actually transporting
voters to polls, or providing babysitting services to allow a parent to
vote;

\(iii\) The proximity of the activity to the date of the election.

\(4\) Voter identification means acquiring information about voters,
including, but not limited to, the costs of obtaining voter lists,
creating voter files or updating and enhancing voter lists by verifying
or adding information about the voters, and contacting voters to
determine their likelihood of voting in an upcoming election or their
likelihood to vote for specific candidates.

~~(a)~~(b) As used in part 300 of this chapter, [Federal election
activity]{.underline} means any of the activities described in
paragraphs (b)(1) through (b)(4) of this section.

\(1\) Voter registration activity during the period that begins on the
date that is 120 calendar days before the date that a regularly
scheduled Federal election is held and ends on the date of the election.
For purposes of voter registration activity, the term "election" does
not include any special election.

> \(2\) The following activities conducted in connection with an
> election in which one or more candidates for Federal office appears on
> the ballot (regardless of whether one or more candidates for State or
> local office also appears on the ballot):
>
> \(i\) Voter identification~~, including canvassing, and other
> activities designed to determine registered voters, likely voters, or
> voters indicating a preference for a specific candidate or political
> party; or~~.
>
> \(ii\) Generic campaign activity, as defined in 11 CFR 100.25~~;~~.

\(iii\) Get-out-the-vote activity ~~Examples of get-out-the-vote
activity include transporting voters to the polls, contacting voters on
election day or shortly before to encourage voting but without referring
to any clearly identified candidate for Federal office, and distributing
printed slate cards, sample ballots, palm cards, or other printed
listing(s) of three or more candidates for any public office;~~.

> \(3\) A public communication that refers to a clearly identified
> candidate for Federal office, regardless of whether a candidate for
> State or local election is also mentioned or identified, and that
> promotes or supports, or attacks or opposes any candidate for Federal
> office. This paragraph applies whether or not the communication
> expressly advocates a vote for or against a Federal candidate~~;or~~.
>
> \(4\) Services provided during any month by an employee of a State,
> district, or local committee of a political party who spends more than
> 25 percent of that individual's compensated time during that month on
> activities in connection with a Federal election.

~~(b)~~(c) [Exceptions]{.underline}. [Federal election
activity]{.underline} does not include any amount expended or disbursed
by a State, district, or local committee of a political party for any of
the following activities:

> \(1\) A public communication that refers solely to one or more clearly
> identified candidates for State or local office and that does not
> promote or support, or attack or oppose a clearly identified candidate
> for Federal office; provided, however, that such a public
> communication shall be considered a Federal election activity if it
> constitutes voter registration activity, generic campaign activity,
> get-out-the-vote activity, or voter identification.

\(2\) A contribution to a candidate for State or local office, provided
the contribution is not designated to pay for voter registration
activity, voter identification, generic campaign activity,
get-out-the-vote activity, a public communication, or employee services
as set forth in paragraphs (a)(1) through (4) of this section.

\(3\) The costs of a State, district, or local political convention.

(4) The costs of grassroots campaign materials, including buttons,
    bumper stickers, handbills, brochures, posters and yard signs, that
    name or depict only candidates for State or local office.

(5) ~~Voter registration activity at any time other than the period of
    time that is 120 days before the date that a regularly scheduled
    Federal election is held through the date of the election.~~

~~(6) Get-out-the-vote activity, voter identification, and generic
campaign activity that is not in connection with an election in which a
candidate for Federal office appears on the ballot.~~

**§ 100.25** **Generic campaign activity (2 U.S.C. 431(21)).**

[Generic campaign activity]{.underline} means a campaign activity that
promotes or opposes a political party and does not promote or oppose a
Federal candidate or a non-Federal candidate.

**§ 100.26** **Public communication** **(2 U.S.C. 431(22)).**

[public communication]{.underline} means a communication by means of any
broadcast, cable or satellite communication, newspaper, magazine,
outdoor advertising facility, mass mailing or telephone bank to the
general public, or any other form of general public political
advertising.

**§ 100.27** **Mass mailing** **(2 U.S.C. 431(23)).**

[mass mailing]{.underline} means a mailing by United States mail or
facsimile of more than 500 pieces of mail matter of an identical or
substantially similar nature within any 30-day period. For purposes of
this section, [substantially similar]{.underline} includes
communications that include substantially the same template or language,
but vary in non-material respects such as communications customized by
the recipient's name, occupation, or geographic location.

**§ 100.28** **Telephone bank** **(2 U.S.C. 431(24)).**

[telephone bank]{.underline} means more than 500 telephone calls of an
identical or substantially similar nature within any 30-day period. For
purposes of this section, [substantially similar]{.underline} includes
communications that include substantially the same template or language,
but vary in non-material respects such as communications customized by
the recipient's name, occupation, or geographic location.

4\. Sections 100.29 through 100.50 are added and reserved.

5\. Sections 100.1 through 100.50 are designated as subpart A -- General
Definitions.

###### PART 102 -- REGISTRATION, ORGANIZATION, AND RECORDKEEPING BY POLITICAL COMMITTEES (2 U.S.C. 433)

6\. The authority citation for part 102 continues to read as follows:

Authority: 2 U.S.C. 432, 433, 434(a)(11), 438(a)(8), 441d.

> 7\. Section 102.5 is revised to read as follows:

**§ 102.5 Organizations financing political activity in connection with
Federal and non-Federal elections, other than through transfers and
joint fundraisers: Accounts and Accounting**

\(a\) [Organizations that are political committees under the Act, other
than National Party]{.underline} [committees]{.underline}.

> \(1\) Each organization, including a State, district or local party
> committee, that finances political activity in connection with both
> Federal and non-Federal elections and that qualifies as a political
> committee under 11 CFR 100.5 shall either:

(i) Establish a separate Federal account in a depository in accordance
    with 11 CFR part 103. Such account shall be treated as a separate
    Federal political committee ~~shall which~~ that must comply with
    the requirements of the Act including the registration and reporting
    requirements of 11 CFR parts 102 and 104. Only funds subject to the
    prohibitions and limitations of the Act shall be deposited in such
    separate Federal account. All disbursements, contributions,
    expenditures and transfers by the committee in connection with any
    Federal election shall be made from its Federal account, except as
    otherwise permitted for State, district and local party committees
    by 11 CFR part 300 and paragraph (a)(6) of this section. No
    transfers may be made to such Federal account from any other
    account(s) maintained by such organization for the purpose of
    financing activity in connection with non-Federal elections, except
    as provided by 11 CFR ~~300.34~~, 300.33, 300.34 and 106.7(e).
    Administrative expenses for political committees other than party
    committees shall be allocated pursuant to 11 CFR 106.7 between such
    Federal account and any other account maintained by such committee
    for the purpose of financing activity in connection with non-Federal
    elections. Administrative expenses for State, district and local
    party committees are subject to 11 CFR 106.7 and 11 CFR part 300; or

> \(ii\) Establish a political committee ~~which~~ that shall receive
> only contributions subject to the prohibitions and limitations of the
> Act, regardless of whether such contributions are for use in
> connection with Federal or non-Federal elections. Such organization
> shall register as a political committee and comply with the
> requirements of the Act.

\(2\) Only contributions meeting the conditions set forth in paragraphs
(a)(2)(i), (ii), or (iii) of this section may be deposited in a Federal
account established under paragraph (a)(1)(i) of this section, or may be
received by a political committee established under paragraph (a)(1)(ii)
of this section.

\(i\) Contributions designated for the Federal account;

> \(ii\) Contributions that result from a solicitation which expressly
> states that the contribution will be used in connection with a Federal
> election; or

(iii) Contributions from contributors who are informed that all
      contributions are subject to the prohibitions and limitations of
      the Act.

\(3\) Any State, district or local party committee solicitation that
makes reference to a Federal candidate or a Federal election shall be
presumed to be for the purpose of influencing a Federal election, and
contributions resulting from that solicitation shall be subject to the
prohibitions and limitations of the Act. This presumption may be
rebutted by demonstrating to the Commission that the funds were
solicited with express notice that they would not be used for Federal
election purposes.

(4) State, district and local party committees that intend to expend
    Levin funds raised pursuant to 11 CFR 300.31 for activities
    identified in 11 CFR 300.32(b)(1) must establish one or more
    separate Levin accounts pursuant to 11 CFR 300.30. Only donations
    meeting the conditions set forth in 11 CFR 300.30(a)(4) may be
    deposited into a Levin account.

\(5\) Solicitations by Federal candidates and Federal officeholders for
State,

> district and local party committees are subject to the restrictions in
> 11 CFR 300.31(e) and 11 CFR part 300, subpart D.

\(6\) State, district and local party committees and organizations may
establish one or more separate allocation accounts to be used for
activities allocable pursuant to 11 CFR 106.7(c) and 11 CFR 300.33.

\(b\) Organizations that are not political committees under the Act.

> \(1\) [State, district or local party organizations]{.underline}
>
> \(i\) Any ~~organization that makes contributions or expenditures but
> does not qualify as political committee under 11 CFR.5 and~~ State,
> district or local party organization that makes contributions, ~~or~~
> expenditures, and exempted payments under 11 CFR 100.7(b)(9), (15) and
> (17) and 11 CFR 100.8(b)(10), (16) and (18), but that does not qualify
> as a political committee under 11 CFR 100.5, must keep records of
> deposits into and disbursements from such accounts, and, upon request,
> must make such records available for examination by the Commission.
> ~~or payments for certain Federal election activities under 11 CFR
> 300.32(b), shall either~~ All such party committees must either:
>
> \(A\) Establish at least three separate accounts as follows -
>
> [(1)]{.underline} An account into which only funds subject to the
> prohibitions and limitations of the Act ~~and only funds solicited for
> activities pursuant to 11 CFR 300.32,~~ may be deposited and from
> which contributions, expenditures, and disbursements for exempt
> activities ~~and payments for certain Federal activities shall~~ must
> be made;
>
> [(2)]{.underline} One or more Levin accounts pursuant to 11 CFR
> 300.30(b) into which only funds solicited pursuant to 11 CFR 300.31
> may be deposited and from which payments must be made pursuant to 11
> CFR 300.32 and 300.33; and
>
> [(3)]{.underline} One or more additional accounts pursuant to State
> law from which payments for activities other than those permitted by
> paragraphs (b)(1)(i)(A)(1) and (2) of this section;

\(B\) Establish two separate accounts as follows:

> [(1)]{.underline} A Federal account into which may be deposited both
> funds subject to the prohibitions and limitations of the Act and funds
> solicited for activities pursuant to 11 CFR 300.32. Payments may be
> made from this account for contributions, expenditures and
> disbursements for exempt activities in connection with Federal
> elections and for activities undertaken pursuant to 11 CFR 300.32(b).
> Use of this Federal account as a depository for Levin funds requires
> employment of a general ledger accounting system that segregates
> assets, liabilities, revenue and expenses for activities undertaken
> pursuant to 11 CFR 106.7 and 11 CFR 300.32. If the accounting method
> employed is computer-based, the data must be backed-up on no less than
> a monthly basis; and
>
> [(2)]{.underline} One or more additional accounts pursuant to State
> law from which payments for activities other than those permitted by
> paragraphs (b)(1)(i)(B)([1]{.underline}) may be made; or
>
> \(C\) Establish one account with three or more ledger accounts as
> follows:
>
> Use of one account for all activity requires an accounting method that
> employes general ledger accounts that segregate asets, liabilities,
> revenue and expenses for activities undertaken pursuant to 11 CFR
> 106.7 and 300.32. Funds recorded in a general ledger account as
> received for non-Federal activities may not be reclassified as funds
> available for Federal election activities to be undertaken pursuant to
> 11 CFR 300.32 (i.e., Levin funds), unless the funds to be reclassified
> were received pursuant to a solicitation for Levin funds or so
> designated by the donors. If the accounting method employed is
> computer-based, the data must be backed up on no less than a monthly
> basis.

\(2\) [Organizations that are not political party
organizations]{.underline}

> Any organization that is not a political party organization, and that
> makes
>
> contributions or expenditures under the Act, but does not qualify as a
> political committee under 11 CFR 100.5, must either:

\(i\) Establish a separate account into which only funds subject to the
prohibitions and limitations of the Act shall be deposited and from
which contributions and expenditures shall be made. Such organizations
shall keep records of deposits to and disbursements from such account,
and, upon request, shall make such records available for examination by
the Commission; or

> \(ii\) Demonstrate through a reasonable accounting method that,
> whenever such an organization makes a contribution or expenditure, or
> payment, the organization has received sufficient funds subject to the
> limitations and prohibitions of the Act to make such contribution,
> expenditure or payment. Such organization shall keep records of
> amounts received or expended under this subsection and, upon request,
> shall make such records available for examination by the Commission.

\(c\) [National party committees]{.underline}. Between November 6, 2002,
and December 31, 2002, paragraphs (a) and (b) of this section apply to
national party committees. After December 31, 2002, national party
committees are prohibited from raising and spending non-Federal funds.
Therefore, this section does not apply to national party committees
after December 31, 2002.

8\. Section 102.17 is amended by adding introductory language to
paragraph (a) to read as follows:

**§ 102.17 Joint fundraising by committees other than separate
segregated funds.**

\(a\) [General]{.underline}. Nothing in this section shall supersede 11
CFR part 300, which prohibits any person from soliciting, receiving,
directing, transferring, or spending any non-Federal funds, or from
transferring Federal funds for Federal election activities.

\* \* \* \* \*

**PART 104 -- REPORTS BY POLITICAL COMMITTEES (2 U.S.C. 434)**

9\. The authority citation for part 104 continues to read as follows:

Authority: 2 U.S.C. 431(1), 431(8), 431(9), 432(i), 434, 438(a)(8),
438(b), 439a.

10\. Section 104.8 is amended by revising paragraphs (e) and (f) to read
as follows:

**§ 104.8 Uniform reporting of receipts.**

\* \* \* \* \*

\(e\) For reports covering activity on or before December 31, 2002,
national party committees shall disclose in a memo Schedule A
information about each individual, committee, corporation, labor
organization, or other entity that donates an aggregate amount in excess
of \$200 in a calendar year to the committee\'s non-Federal account(s).
This information shall include the donating individual\'s or entity\'s
name, mailing address, occupation or type of business, and the date of
receipt and amount of any such donation. If a donor\'s name is known to
have changed since an earlier donation reported during the calendar
year, the exact name or address previously used shall be noted with the
first reported donation from that donor subsequent to the name change.
The memo entry shall also include, where applicable, the information
required by paragraphs (b) through (d) of this section.

\(f\) For reports covering activity on or before December 31, 2002,
national party committees shall also disclose in a memo Schedule A
information about each individual, committee, corporation, labor
organization, or other entity that donates an aggregate amount in excess
of \$200 in a calendar year to the committee\'s building fund
account(s). This information shall include the donating individual\'s or
entity\'s name, mailing address, occupation or type of business, and the
date of receipt and amount of any such donation. If a donor\'s name is
known to

have changed since an earlier donation reported during the calendar
year, the exact name or address previously used shall be noted with the
first reported donation from that donor subsequent to the name change.
The memo entry shall also include, where applicable, the information
required by paragraphs (b) through (d) of this section.

11\. Section 104.9 is amended by revising paragraphs (c), (d), and (e)
to read as follows:

**§ 104.9 Uniform reporting of disbursements.**

\* \* \* \* \*

\(c\) For reports covering activity on or before December 31, 2002,
national party committees shall report in a memo Schedule B the full
name and mailing address of each person to whom a disbursement in an
aggregate amount or value in excess of \$200 within the calendar year is
made from the committee\'s non-Federal account(s), together with the
date, amount, and purpose of such disbursement, in accordance with 11
CFR 104.9(b). As used in 11 CFR 104.9, [purpose]{.underline} means a
brief statement or description as to the reasons for the disbursement.
[See]{.underline} 11 CFR 104.3(b)(3)(i)(A).

\(d\) For reports covering activity on or before December 31, 2002,
national party committees shall report in a memo Schedule B the full
name and mailing address of each person to whom a disbursement in an
aggregate amount or value in excess of \$200 within the calendar year is
made from the committee\'s building fund account(s), together with the
date, amount, and purpose of such disbursement, in accordance with 11
CFR 104.9(b). As used in 11 CFR 104.9, [purpose]{.underline} means a
brief statement or description as to the reasons for the disbursement.
[See]{.underline} 11 CFR 104.3(b)(3)(i)(A).

\(e\) For reports covering activity on or before December 31, 2002,
national party committees shall report in a memo Schedule B each
transfer from their non-Federal account(s) to the non-Federal account(s)
of a State or local party committee.

12\. Section 104.10 is revised to read as follows:

**§ 104.10 Reporting by separate segregated funds and nonconnected
committees of expenses allocated among candidates and activities.**

\(a\) [Expenses allocated among candidates]{.underline}. A political
committee that is a separate segregated fund or a nonconnected committee
making an expenditure on behalf of more than one clearly identified
candidate for Federal office shall allocate the expenditure among the
candidates pursuant to 11 CFR ~~106.1~~ part 106. Payments involving
both expenditures on behalf of one or more clearly identified Federal
candidates and disbursements on behalf of one or more clearly identified
non-Federal candidates shall also be allocated pursuant to 11 CFR
~~106.1~~ part 106. For allocated expenditures, the committee shall
report the amount of each in-kind contribution, independent expenditure,
or coordinated expenditure attributed to each Federal candidate. If a
payment also includes amounts attributable to one or more non-Federal
candidates, and is made by a political committee with separate Federal
and non-Federal accounts, then the payment shall be made according to
the procedures set forth in 11 CFR 106.6(e), ~~as appropriate,~~ but
shall be reported pursuant to paragraphs (a)(1) through (a)(4), as
follows:

> \(1\) [Reporting of allocation of expenses attributable to specific
> Federal and non-Federal candidates]{.underline}. In each report
> disclosing a payment that includes both expenditures on behalf of one
> or more Federal candidates and disbursements on behalf of one or more
> non-Federal candidates, the committee shall assign a unique
> identifying title or code to each program or activity conducted on
> behalf of such candidates, shall state the allocation ratio calculated
> for the program or activity, and shall explain the manner in which the
> ratio was derived. The committee shall also summarize the total
> amounts attributed to each candidate, to date, for each joint program
> or activity.
>
> \(2\) [Reporting of transfers between accounts for the purpose of
> paying expenses attributable to specific Federal and non-Federal
> candidates.]{.underline} A political committee that pays allocable
> expenses in accordance with
>
> 11 CFR 106.6(e) shall report each transfer of funds from its
> non-Federal account to its Federal account or to its separate
> allocation account for the purpose of paying such expenses. In the
> report covering the period in which each transfer occurred, the
> committee shall explain in a memo entry the allocable expenses to
> which the transfer relates and the date on which the transfer was
> made. If the transfer includes funds for the allocable costs of more
> than one program or activity, the committee shall itemize the
> transfer, showing the amounts designated for each program or activity
> conducted on behalf of one or more clearly identified Federal
> candidates and one or more clearly identified non-Federal candidates.
>
> \(3\) [Reporting of allocated disbursements attributable to specific
> Federal and non-Federal candidates]{.underline}. A political committee
> that pays allocable expenses in accordance with 11 CFR 106.6(e) shall
> also report each disbursement from its Federal account or its separate
> allocation account in payment for a program or activity conducted on
> behalf of one or more clearly identified Federal candidates and one or
> more clearly identified non-Federal candidates. In the report covering
> the period in which the disbursement occurred, the committee shall
> state the full name and address of each person to whom the
> disbursement was made, and the date, amount, and purpose of each such
> disbursement. If the disbursement includes payment for the allocable
> costs of more than one program or activity, the committee shall
> itemize the disbursement, showing the amounts designated for payment
> of each program or activity conducted on behalf of one or more clearly
> identified Federal candidates and one or more clearly identified
> non-Federal candidates. The committee shall also report the amount of
> each in-kind contribution, independent expenditure, or coordinated
> expenditure attributed to each Federal candidate, and the total amount
> attributed to the non-Federal candidate(s). In addition, the committee
> shall report the total amount expended by the committee that year, to
> date, for each joint program or activity.
>
> \(4\) [Recordkeeping]{.underline}. The treasurer shall retain all
> documents supporting the committee\'s allocation on behalf of specific
> Federal and non-Federal candidates, in accordance with 11 CFR 104.14.

\(b\) [Expenses allocated among activities]{.underline}. A political
committee that is a separate segregated fund or a nonconnected committee
and that has established separate Federal and non-Federal accounts under
11 CFR 102.5(a)(1)(i) shall allocate between those accounts its
administrative expenses and its costs for fundraising and generic voter
drives according to 11 CFR 106.6, ~~as appropriate,~~ and shall report
those allocations according to paragraphs (b) (1) through (5), as
follows:

> \(1\) [Reporting of allocation of administrative expenses and costs of
> generic voter drives]{.underline}.

(i) In the first report in a calendar year disclosing a disbursement for
    administrative expenses or generic voter drives, as described

> in 11 CFR 106.6(b), the committee shall state the allocation ratio to
> be applied to these categories of activity according to 11 CFR
> 106.6(c), and the manner in which it was derived.
>
> \(ii\) In each subsequent report in the calendar year itemizing an
> allocated disbursement for administrative expenses or generic voter
> drives:
>
> \(A\) The committee shall state the category of activity for which
> each allocated disbursement was made, and shall summarize the total
> amount spent by the Federal and non-Federal accounts that year, to
> date, for each such category.
>
> \(B\) The committees shall also report in a memo entry the total
> amounts expended in donations and direct disbursements on behalf of
> specific State and local candidates, to date, in that calendar year.
>
> \(2\) [Reporting of allocation of the direct costs of
> fundraising.]{.underline} In each report disclosing a disbursement for
> the direct costs of a fundraising program, as described in 11 CFR
> 106.6(b), the committee shall assign a unique identifying title or
> code to each such program or activity, shall state the allocation
> ratio calculated for the program or activity according to 11 CFR
> 106.6(d), and shall explain the manner in which the ratio was derived.
> The committee shall also summarize the total amounts spent by the
> Federal and non-Federal accounts that year, to date, for each such
> program or activity.

(3) [Reporting of transfers between accounts for the purpose of
    paying]{.underline}

> [allocable expenses]{.underline}. A political committee that pays
> allocable expenses in accordance with 11 CFR 106.6(e) shall report
> each transfer of funds from its non-Federal account to its Federal
> account or to its separate allocation account for the purpose of
> paying such expenses. In the report covering the period in which each
> transfer occurred, the committee shall explain in a memo entry the
> allocable expenses to which the transfer relates and the date on which
> the transfer was made. If the transfer includes funds for the
> allocable costs of more than one activity, the committee shall itemize
> the transfer, showing the amounts designated for administrative
> expenses and generic voter drives, and for each fundraising program,
> as described in 11 CFR 106.6(b).
>
> \(4\) [Reporting of allocated disbursements]{.underline}. A political
> committee that pays allocable expenses in accordance with 11 CFR
> 106.6(e) shall also report each disbursement from its Federal account
> or its separate allocation account in payment for a joint Federal and
> non-Federal expense or activity. In the report covering the period in
> which the disbursement occurred, the committee shall state the full
> name and address of each person to whom the disbursement was made, and
> the date, amount, and purpose of each such disbursement. If the
> disbursement includes payment for the allocable costs of more than one
> activity, the committee shall itemize the disbursement, showing the
> amounts designated for payment of administrative expenses and generic
> voter drives, and for each fundraising program, as described in 11 CFR
> 106.6(b). The committee shall also report the total amount expended by
> the committee that year, to date, for each category of activity.
>
> \(5\) [Recordkeeping]{.underline}. The treasurer shall retain all
> documents supporting the committee\'s allocated disbursements for
> three years, in accordance with

11 CFR 104.14.

> 13\. Part 104 is amended by adding section 104.17 to read as follows:

§ 104.17 Reporting of allocable expenses by party committees.

\(a\) [Expenses allocated among candidates]{.underline}. A national
party committee making an expenditure on behalf of more than one clearly
identified candidate for Federal office must report the allocation
between or among the named candidates ~~pursuant to 11 CFR 106.1~~. A
national party committee making expenditures and disbursements on behalf
of one or more clearly identified Federal candidates and on behalf of
one or more clearly identified non-Federal candidates must report the
allocation among all named candidates ~~pursuant to 11 CFR part 106~~.
These payments shall be allocated among candidates pursuant to 11 CFR
Part 106, but only Federal funds may be used for such payments. A State,
district, or local party committee making expenditures and disbursements
for Federal election activity as defined at 11 CFR 100.24 on behalf of
one or more clearly identified Federal and one or more clearly
identified non-Federal candidates must make the payments from its
Federal account and must report the allocation among all named
candidates. A State, district, or local party committee making
expenditures and disbursements on behalf of one or more clearly
identified Federal and one or more clearly identified non-Federal
candidates where the activity is not a Federal election activity may
allocate the payments between its Federal and non-Federal account and
must report the allocation among all named candidates. For allocated
expenditures, the committee must report the amount of each in-kind
contribution, independent expenditure, or coordinated expenditure
attributed to each candidate. If a payment also includes amounts
attributable to one or more non-Federal candidates, and is made by a
State, district, or local party committee with separate Federal and
non-Federal accounts, and is not for a Federal election activity, then
the payment shall be made according to the procedures set forth in 11
CFR 106.7(f), but shall be reported pursuant to paragraphs (a)(1)
through (a)(4) of this section, as follows:

### (1) Reporting of allocation of expenses attributable to specific Federal and non-Federal candidates. In each report disclosing a payment that includes both ~~an~~ expenditures ~~and/or disbursement that reflects payments~~ on behalf of one or more Federal candidates and~~/or~~ disbursements on behalf of one or more non-Federal candidates, the committee must assign a unique identifying title or code to each program or activity conducted on behalf of such candidates, ~~and shall~~ state the allocation ratio calculated for the program or activity, and explain the manner in which the ~~percentage of costs~~ ratio applied to each candidate was derived~~, pursuant to 11 CFR 106.1~~. The committee must also summarize the total amounts attributed to each candidate, to date, for each program or activity.

> \(2\) Reporting of transfers between accounts for the purpose of
> paying expenses attributable to specific Federal and non-Federal
> candidates. A State, district, or local party committee that pays
> allocable expenses in accordance with 11 CFR 106.7(f) shall report
> each transfer of funds from its non-Federal account to its Federal
> account or to its separate allocation account for the purpose of
> paying such expenses. In the report covering the period in which each
> transfer occurred, the State, district, or local party committee shall
> explain in a memo entry the allocable expenses to which the transfer
> relates and the date on which the transfer was made. If the transfer
> includes funds for the allocable costs of more than one program or
> activity, the State, district, or local party committee must itemize
> the transfer, showing the amounts designated for each program or
> activity conducted on behalf of one or more clearly identified Federal
> candidates and one or more clearly identified non-Federal candidates.

\(3\) Reporting of allocated disbursements attributable to specific
Federal and non-Federal candidates. A State, district, or local
committee that pays allocable expenses in accordance with 11 CFR
106.7(f) shall also report each disbursement from its Federal account or
its separate allocation account in payment for a program or activity
conducted on behalf of one or more clearly identified Federal candidates
and one or more clearly identified non-Federal candidates. In the report
covering the period in which the disbursement occurred, the State,
district, or local party committee shall state the full name and address
of each person to whom the disbursement was made, and the date, amount,
and purpose of each such disbursement. If the disbursement includes
payment for the allocable costs of more than one program or activity,
the committee shall itemize the disbursement, showing the amounts
designated for payment of each program or activity conducted on behalf
of one or more clearly identified Federal candidates and one or more
clearly identified non-Federal candidates. The State, district, or local
party committee must also report the amount of each in-kind
contribution, independent expenditure, or coordinated expenditure
attributed to each Federal candidate, and the total amount attributed to
the non-Federal candidate(s). In addition, the State, district, or local
party committee must report the total amount expended by the committee
that year, to date, for each joint program or activity.

> \(4\) [Recordkeeping]{.underline}. The treasurer of a State, district,
> or local party committee must retain all documents supporting the
> committee's allocations on behalf of specific Federal and non-Federal
> candidates, in accordance with 11 CFR 104.14.

\(b\) ~~[Expenses allocated among activities]{.underline}~~ Allocation
of activities that are not Federal election activities. ~~A State,
district or local committee of a political party that has established
separate Federal and Levin accounts under 11 CFR 300.30 must report,
pursuant to 11 CFR 300.36, all payments that are allocable between these
accounts pursuant to the allocation rules at 11 CFR 300.33(a) and (b).~~
A State, district, or local committee of a political party that has
established separate Federal and non-Federal accounts, including related
allocation accounts, under 11 CFR 102.5 must report all payments that
are allocable between these accounts pursuant to the allocation rules at
in 11 CFR ~~300.33(a) and (b)~~ 106.7. Disbursements for activities that
are allocable between Federal and Levin accounts, including related
allocation accounts, must be reported pursuant to 11 CFR 300.36.

> [(1) Reporting of allocations of expenses for activities]{.underline}
> that are not Federal election activities.
>
> \(i\) In the first report in a calendar year disclosing a disbursement
> allocable pursuant to 11 CFR 106.7 ~~11 CFR 300.33~~, a State,
> district, or local committee shall state and explain the allocation
> percentages to be applied to each category of allocable activity
> (e.g., 36% Federal/64% non-Federal in Presidential and Senate election
> years) pursuant to 11 CFR 106.7(d) ~~11 CFR 300.33(b)~~.
>
> \(ii\) In each subsequent report in the calendar year itemizing an
> allocated disbursement, the State, district, or local party committee
> shall state the category of activity for which each allocated
> disbursement was made, and shall summarize the total amounts expended
> ~~by the~~ from Federal and non-Federal accounts, or from allocation
> accounts, that year to date for each such category.
>
> \(iii\) In each report disclosing disbursements for allocable
> ~~activity~~ activities as described in 11 CFR 106.7 ~~11 CFR
> 300.33~~, the State, district, or local party committee shall assign a
> unique identifying title or code to each such program or activity, and
> shall state the applicable Federal/non-Federal percentage for any
> direct costs of fundraising. Unique identifying titles or codes are
> not required for certain salaries and other compensation, including
> benefits, allocated pursuant to 11 CFR 106.7(c)(1), or for other
> administrative costs allocated pursuant to 11 CFR 106.7(c)(2).
>
> \(2\) [Reporting of transfers between the accounts of State, district,
> and local party committees]{.underline} and into allocation accounts
> [for allocable expenses]{.underline}. A State, district, or local
> committee of a political party that pays allocable expenses in
> accordance with 11 CFR 106.7 ~~11 CFR 300.33(d)~~ shall report each
> transfer of funds from its non-Federal account ~~or its Levin
> account~~ to its Federal account, or each transfer from its Federal
> account and its non-Federal account into an allocation account, for
> the purpose of payment of such expenses. In the report covering the
> period in which each transfer occurred, the State, district, or local
> party committee must explain in a memo entry the allocable expenses to
> which the transfer relates and the date on which the transfer was
> made. If the transfer includes funds for the allocable costs of more
> than one activity, the State, district, or local party committee must
> itemize the transfer, showing the amounts designated for each category
> of expense as described in 11 CFR 106.7 ~~11 CFR 300.33(b)~~.
>
> \(3\) [Reporting of allocated disbursements for ~~joint Federal and
> non-Federal activity~~]{.underline} certain allocable activity that is
> not Federal election activity.
>
> \(i\) A State, district, or local committee of a political party that
> pays allocable expenses in accordance with 11 CFR 106.7 ~~11 CFR
> 300.33(d)~~ shall report each disbursement from its Federal account
> for the Federal portion of allocable expenses ~~and for activity paid
> from Federal/Levin activity (see 11 CFR 300.36)~~, or each payment
> from an allocation account for such activity. In the report covering
> the period in which the disbursement occurred, the State, district, or
> local committee shall state the full name and address of each
> individual or vendor to which the disbursement was made, the date,
> amount, and purpose of each such disbursement, and the amounts
> allocated to Federal~~, Levin~~ and non-Federal portions of the
> allocable activity. If the disbursement includes payment for the
> allocable costs of more than one activity, the State, district, or
> local party committee ~~shall~~ must itemize the disbursement, showing
> the amounts designated for payments of ~~certain salaries, of other
> administrative costs and of costs for voter registration outside 120
> days before an election,~~ particular categories of activity as
> described in 11 CFR ~~300.33~~ 106.7. ~~See also 11 CFR
> 300.36((b)(2).~~ The State, district, or local party committee
> ~~shall~~ must also report the total amount ~~expended by the
> committee~~ paid that calendar year to date for each category of
> allocable activity.
>
> \(ii\) A State, district, or local committee of a political party that
> pays allocable expenses from a Federal account and a Levin account in
> accordance with 11 CFR 300.33~~(d)~~ shall report disbursements from
> those accounts according to the requirements of 11 CFR 300.36.
>
> \(4\) [Recordkeeping]{.underline}. The treasurer of a State, district,
> or local party committee must retain all documents supporting the
> committee's allocations of expenditures and disbursements for the
> costs and activities cited at paragraph (b)(1) of this section, in
> accordance with 11 CFR 104.14.

###### PART 106 -- ALLOCATIONS OF CANDIDATE AND COMMITTEE ACTIVITIES

14\. The authority citation for part 106 continues to read as follows:

Authority: 2 U.S.C. 438(a)(8), 441a(b), 441a(g).

15\. Section 106.1 is amended by revising paragraphs (a)(1), (a)(2), and
(e) to read as follows:

§ 106.1 Allocation of expenses between candidates.

\(a\) [General rule]{.underline}.

\(1\) Expenditures, including in-kind contributions, independent
expenditures, and coordinated expenditures made on behalf of more than
one clearly identified Federal candidate shall be attributed to each
such candidate according to the benefit reasonably expected to be
derived. For example, in the case of a publication or broadcast
communication, the attribution shall be determined by the proportion of
space or time devoted to each candidate as compared to the total space
or time devoted to all candidates. In the case of a fundraising program
or event where funds are collected by one committee for more than one
clearly identified candidate, the attribution shall be determined by the
proportion of funds received by each candidate as compared to the total
receipts by all candidates. In the case of a phone bank, the attribution
shall be determined by the number of questions or statements devoted to
each candidate as compared to the total number of questions or
statements devoted to all candidates. These methods shall also be used
to allocate payments involving both expenditures on behalf of one or
more clearly identified Federal candidates and disbursements on behalf
of one or more clearly identified non-Federal candidates. ~~Party
committees must use only Federal funds for such payments. See 11 CFR
100.24(a)(5).~~

\(2\) An expenditure made on behalf of more than one clearly identified
Federal candidate shall be reported pursuant to 11 CFR 104.10(a) or
104.17(a), as appropriate. A payment ~~by a separate segregated fund or
a nonconnected committee~~ that also includes amounts attributable to
one or more non-Federal candidates, and that is made by a political
committee with separate Federal and non-Federal accounts, shall be made
according to the procedures set forth in 11 CFR 106.6(e) or 106.7(f),
but shall be reported pursuant to 11 CFR 104.10(a) or 104.17(a). If a
State, district, or local party committee's payment on behalf of both a
Federal candidate and a non-Federal candidate is for a Federal election
activity, only Federal funds may be used for the entire payment.

\* \* \* \* \*

(e) State, district, and local party committees, separate segregated
    funds, and nonconnected committees that make ~~disbursements for~~
    ~~certain salaries, other administrative expenses, fundraising,
    generic voter drives, Levin activities, or certain voter
    registration activities, in connection with both Federal and
    non-Federal elections,~~ mixed Federal/non-Federal payments for
    activities other than an acitvity entailing an expenditure for a
    Federal candidate and disbursement for a non-Federal candidate, or
    that make mixed Federal/Levin fund payments, shall allocate
    ~~their~~ those expenses in accordance with 11 CFR 106.6, 106.7(f),
    or 300.33, as appropriate.

16\. Section 106.5 is revised to read as follows:

**§ 106.5 Allocation of expenses between federal and non-federal
activities by national party committees.**

\(a\) [General rules]{.underline}.

> \(1\) [Disbursements from Federal and non-Federal
> accounts]{.underline}. National party committees that make
> disbursements in connection with Federal and non-Federal elections
> shall make those disbursements entirely from funds subject to the
> prohibitions and limitations of the Act, or from accounts established
> pursuant to 11 CFR 102.5. Political committees that have established
> separate Federal and non-Federal accounts under 11 CFR 102.5(a)(1)(i)
> shall allocate expenses between those accounts according to this
> section. Organizations that are not political committees but have
> established separate Federal and non-Federal accounts under 11 CFR
> 102.5(b)(1)(i), or that make Federal and non-Federal disbursements
> from a single account under 11 CFR 102.5(b)(1)(ii) shall also allocate
> their Federal and non-Federal expenses according to this section. This
> section covers:
>
> \(i\) General rules regarding allocation of Federal and non-Federal
> expenses by party committees;
>
> \(ii\) Percentages to be allocated for administrative expenses and
> costs of generic voter drives by national party committees;
>
> \(iii\) Methods for allocation of administrative expenses, costs of
> generic voter drives, and of fundraising costs by national party
> committees; and
>
> \(iv\) Procedures for payment of allocable expenses. Requirements for
> reporting of allocated disbursements are set forth in 11 CFR 104.10.
>
> \(2\) [Costs to be allocated]{.underline}. National party committees
> that make disbursements in connection with Federal and non-Federal
> elections shall allocate expenses according to this section for the
> following categories of activity:
>
> \(i\) Administrative expenses including rent, utilities, office
> supplies, and salaries, except for such expenses directly attributable
> to a clearly identified candidate;
>
> \(ii\) The direct costs of a fundraising program or event including
> disbursements for solicitation of funds and for planning and
> administration of actual fundraising events, where Federal and
> non-Federal funds are collected by one committee through such program
> or event; and
>
> \(iii\) \[Removed and reserved\]
>
> \(iv\) Generic voter drives including voter identification, voter
> registration, and get-out-the-vote drives, or any other activities
> that urge the general public to register, vote or support candidates
> of a particular party or associated with a particular issue, without
> mentioning a specific candidate.

\(b\) [National party committees other than Senate or House campaign
committees; fixed percentages for allocating administrative expenses and
costs of generic voter drives]{.underline}\--

> \(1\) [General rule]{.underline}. Each national party committee other
> than a Senate or House campaign committee shall allocate a fixed
> percentage of its administrative expenses and costs of generic voter
> drives, as described in paragraph (a)(2) of this section, to its
> Federal and non-Federal account(s) each year. These percentages shall
> differ according to whether or not the allocable expenses were
> incurred in a presidential election year. Such committees shall
> allocate the costs of each combined Federal and non-Federal
> fundraising program or event according to paragraph (f) of this
> section, with no fixed percentages required.
>
> \(2\) [Fixed percentages according to type of election
> year]{.underline}. National party committees other than the Senate or
> House campaign committees shall allocate their administrative expenses
> and costs of generic voter drives according to paragraphs (b)(2) (i)
> and (ii) as follows:
>
> \(i\) [Presidential election years]{.underline}. In presidential
> election years, national party committees other than the Senate or
> House campaign committees shall allocate to their Federal accounts at
> least 65% each of their administrative expenses and costs of generic
> voter drives.
>
> \(ii\) [Non-presidential election years]{.underline}. In all years
> other than presidential election years, national party committees
> other than the Senate or House campaign committees shall allocate to
> their Federal accounts at least 60% each of their administrative
> expenses and costs of generic voter drives.

\(c\) [Senate and House campaign committees of a national party; method
and minimum Federal percentage for allocating administrative expenses
and costs of generic voter drives\--]{.underline}

> \(1\) [Method for allocating administrative expenses and costs of
> generic voter drives]{.underline}. Subject to the minimum percentage
> set forth in paragraph (c)(2) of this section, each Senate or House
> campaign committee of a national party shall allocate its
> administrative expenses and costs of generic voter drives, as
> described in paragraph (a)(2) of this section, according to the funds
> expended method, described in paragraphs (c)(1)(i) and (ii) as
> follows:
>
> \(i\) Under this method, expenses shall be allocated based on the
> ratio of Federal expenditures to total Federal and non-Federal
> disbursements made by the committee during the two-year Federal
> election cycle. This ratio shall be estimated and reported at the
> beginning of each Federal election cycle, based upon the committee\'s
> Federal and non-Federal disbursements in a prior comparable Federal
> election cycle or upon the committee\'s reasonable prediction of its
> disbursements for the coming two years. In calculating its Federal
> expenditures, the committee shall include only amounts contributed to
> or otherwise spent on behalf of specific federal candidates.
> Calculation of total Federal and non-Federal disbursements shall also
> be limited to disbursements for specific candidates, and shall not
> include overhead or other generic costs.
>
> \(ii\) On each of its periodic reports, the committee shall adjust its
> allocation ratio to reconcile it with the ratio of actual Federal and
> non-Federal disbursements made, to date. If the non-Federal account
> has paid more than its allocable share, the committee shall transfer
> funds from its Federal to its non-Federal account, as necessary, to
> reflect the adjusted allocation ratio. The committee shall make note
> of any such adjustments and transfers on its periodic reports,
> submitted pursuant to 11 CFR 104.5.
>
> \(2\) [Minimum Federal percentage for administrative expenses and
> costs of generic voter drives]{.underline}. Regardless of the
> allocation ratio calculated under paragraph (c)(1) of this section,
> each Senate or House campaign committee of a national party shall
> allocate to its Federal account at least 65% each of its
> administrative expenses and costs of generic voter drives each year.
> If the committee\'s own allocation calculation under paragraph (c)(1)
> of this section yields a Federal share greater than 65%, then the
> higher percentage shall be applied. If such calculation yields a
> Federal share lower than 65%, then the committee shall report its
> calculated ratio according to 11 CFR 104.10(b), and shall apply the
> required minimum Federal percentage.
>
> \(3\) [Allocation of fundraising costs]{.underline}. Senate and House
> campaign committees shall allocate the costs of each combined Federal
> and non-Federal fundraising program or event according to paragraph
> (f) of this section, with no minimum percentages required.

\(d\) \[Removed and reserved\].

\(e\) \[Removed and reserved\].

\(f\) [National party committees; method for allocating direct costs of
fundraising]{.underline}.

> \(1\) If Federal and non-Federal funds are collected by one committee
> through a joint activity, that committee shall allocate its direct
> costs of fundraising, as described in paragraph (a)(2) of this
> section, according to the funds received method. Under this method,
> the committee shall allocate its fundraising costs based on the ratio
> of funds received into its Federal account to its total receipts from
> each fundraising program or event. This ratio shall be estimated prior
> to each such program or event based upon the committee\'s reasonable
> prediction of its Federal and non-Federal revenue from that program or
> event, and shall be noted in the committee\'s report for the period in
> which the first disbursement for such program or event occurred,
> submitted pursuant 11 CFR 104.5. Any disbursements for fundraising
> costs made prior to the actual program or event shall be allocated
> according to this estimated ratio.
>
> \(2\) No later than the date 60 days after each fundraising program or
> event from which both Federal and non-Federal funds are collected, the
> committee shall adjust the allocation ratio for that program or event
> to reflect the actual ratio of funds received. If the non-Federal
> account has paid more than its allocable share, the committee shall
> transfer funds from its Federal to its non-Federal account, as
> necessary, to reflect the adjusted allocation ratio. If the Federal
> account has paid more than its allocable share, the committee shall
> make any transfers of funds from its non-federal to its federal
> account to reflect the adjusted allocation ratio within the 60-day
> time period established by this paragraph. The committee shall make
> note of any such adjustments and transfers in its report for any
> period in which a transfer was made, and shall also report the date of
> the fundraising program or event that serves as the basis for the
> transfer. In the case of a telemarketing or direct mail campaign, the
> [date]{.underline} for purposes of this paragraph is the last day of
> the telemarketing campaign, or the day on which the final direct mail
> solicitations are mailed.

\(g\) [Payment of allocable expenses by committees with separate Federal
and non-Federal accounts]{.underline}\--

> \(1\) [Payment options]{.underline}. Committees that have established
> separate Federal and non-Federal accounts under 11 CFR 102.5(a)(1)(i)
> or (b)(1)(i) shall pay the expenses of joint Federal and non-Federal
> activities described in paragraph (a)(2) of this section according to
> either paragraph (g)(1)(i) or (ii), as follows:
>
> \(i\) [Payment by Federal account; transfers from non-Federal account
> to Federal account]{.underline}. The committee shall pay the entire
> amount of an allocable expense from its Federal account and shall
> transfer funds from its non-Federal account to its Federal account
> solely to cover the non-Federal share of that allocable expense.

(ii) [Payment by separate allocation account; transfers from Federal and
     non-Federal accounts to allocation account]{.underline}.

> \(A\) The committee shall establish a separate allocation account into
> which funds from its Federal and non-Federal accounts shall be
> deposited solely for the purpose of paying the allocable expenses of
> joint Federal and non-Federal activities. Once a committee has
> established a separate allocation account for this purpose, all
> allocable expenses shall be paid from that account for as long as the
> account is maintained.
>
> \(B\) The committee shall transfer funds from its Federal and
> non-Federal accounts to its allocation account in amounts
> proportionate to the Federal or non-Federal share of each allocable
> expense.
>
> \(C\) No funds contained in the allocation account may be transferred
> to any other account maintained by the committee.

\(2\) [Timing of transfers between accounts]{.underline}.

> \(i\) Under either payment option described in paragraphs (g)(1)(i) or
> (ii) of this section, the committee shall transfer funds from its
> non-Federal account to its Federal account or from its Federal and
> non-Federal accounts to its separate allocation account following
> determination of the final cost of each joint Federal and non-Federal
> activity, or in advance of such determination if advance payment is
> required by the vendor and if such payment is based on a reasonable
> estimate of the activity\'s final cost as determined by the committee
> and the vendor(s) involved.
>
> \(ii\) Funds transferred from a committee\'s non-Federal account to
> its Federal account or its allocation account are subject to the
> following requirements:
>
> \(A\) For each such transfer, the committee must itemize in its
> reports the allocable activities for which the transferred funds are
> intended to pay, as required by 11 CFR 104.10(b)(3); and
>
> \(B\) Except as provided in paragraph (f)(2) of this section, such
> funds may not be transferred more than 10 days before or more than 60
> days after the payments for which they are designated are made.

(ii) Any portion of a transfer from a committee\'s non-Federal account
     to its Federal account or its allocation account that does not meet
     the requirements of paragraph (g)(2)(ii) of this section shall be
     presumed to be a loan or contribution from the non-Federal account
     to a Federal account, in violation of the Act.

> \(3\) [Reporting transfers of funds and allocated
> disbursements]{.underline}. A political committee that transfers funds
> between accounts and pays allocable expenses according to this section
> shall report each such transfer and disbursement pursuant to 11 CFR
> 104.10(b).

\(h\) [Sunset provision]{.underline}. This section applies from November
6, 2002, to December 31, 2002. After December 31, 2002,
[see]{.underline} 11 CFR 106.7(a).

17\. Section 106.7 is added to part 106 to read as follows:

**§ 106.7 Allocation of expenses between Federal and non-Federal
accounts ~~activities~~ by party committees, other than for Federal
election activities.**

\(a\) National party committees are prohibited from raising or spending
non-Federal

funds. Therefore, these committees shall not allocate expenditures and
disbursements between Federal and non-Federal accounts. ~~Only~~ All
disbursements by a national party committee must be made from a Federal
account~~s may be used~~.

\(b\) State, district, and local party committees that make expenditures
and disbursements in connection with both Federal and non-Federal
elections for activities that are not Federal election activities
pursuant to 11 CFR 100.24 ~~300.32~~ may use only funds subject to the
prohibitions and limitations of the Act, or ~~from accounts established
pursuant to 11 CFR 102.5 and 11 CFR 300.30~~ they may allocate such
expenditures and disbursements between their Federal and their
non-Federal accounts. ~~Political~~ State, district, and local party
committees that are political committees that have established separate
Federal~~, Levin,~~ and~~/or~~ non-Federal accounts under 11 CFR
102.5(a)(1)(i) ~~and 11 CFR 300.30~~ shall allocate expenses between
those accounts according to paragraphs (c) and (d) of this section. ~~11
CFR 300.33~~. Party organizations that are not political committees but
have established separate Federal~~, Levin,~~ and~~/or~~ non-Federal
accounts under 11 CFR 102.5(b)(1)(i), or that make Federal and
non-Federal disbursements from a single account under 11 CFR
102.5(b)(1)(ii), shall also allocate their Federal and non-Federal
expenses according to ~~11 CFR 300.33~~ paragraphs (c) and (d) of this
section. In lieu of establishing separate accounts, party organizations
that are not political committees may choose to use an accounting method
that employs general ledger accounts pursuant to 11 CFR 102.5 and
300.30.

\(c\) Costs allocable by State, district, and local party committees
between Federal and non-Federal accounts.

> \(1\) [Salaries]{.underline} and other compensation including
> benefits. State, district, and local party committees may, for
> employees who spend 25% or less of their time in any given month
> ~~Federal election activity~~ in connection with a Federal election,
> either pay their salaries and other compensation, including benefits,
> from a Federal account, or allocate the salaries and other
> compensation, including benefits, between the committee's Federal and
> non-Federal accounts. [See]{.underline} 11 CFR 300.33(c)(2).
>
> \(2\) [Administrative costs]{.underline}. State, district, and local
> party committees may either pay administrative costs, including rent,
> utilities, office equipment, office supplies, postage for other than
> mass mailings, and routine building maintenance, upkeep and repair,
> from their Federal account, or allocate such expenses between their
> Federal and non-Federal accounts, except that any such expenses
> directly attributable to a clearly identified Federal candidate must
> be paid only from the Federal account.
>
> \(3\) [~~Other~~]{.underline} Exempt party activities that are not
> Federal election activities. State, district, and local party
> committees may pay expenses ~~for voter registration activities
> undertaken by a State, district, or local party outside the period
> beginning 120 days before an election and ending on the date of the
> election,~~ for party activities that are exempt from the definitions
> of contribution and expenditure under 11 CFR 100.7(b)(9), (15), or
> (17), and 100.8(b)(10), (16), or (18), and that are not Federal
> election activities pursuant to 11 CFR 100.24, from their Federal
> accounts, or may allocate these expenses between their Federal and
> non-Federal accounts. If exempt party activities that are not Federal
> election activities are conducted in conjunction with non-Federal
> activities, their costs must be allocated between Federal and
> non-Federal accounts.
>
> \(4\) Certain fundraising costs. State, district, and local party
> committees may allocate the direct costs of certain fundraising
> programs or events between their Federal and non-Federal accounts
> provided that none of the proceeds from the activities or events will
> ever be used for Federal election activities. The proceeds of
> fundraising allocated pursuant to this paragraph must be segregated in
> bank or book accounts that are never used for Federal election
> activity. Direct costs of fundraising include disbursements for the
> planning and administration of specific fundraising events or
> programs.
>
> \(5\) Voter-drive activities that do not qualify as Federal election
> activities and that are not party exempt activities[.]{.underline}
> Expenses for voter identification, voter registration, and
> get-out-the-vote drives, and any other activities that urge the
> general public to register, vote, or promote or oppose a political
> party, without promoting or opposing a candidate or non-Federal
> candidate, that do not qualify as Federal election activities and that
> are not exempt party activities, must be paid with Federal funds or
> may be allocated between the committee's Federal and non-Federal
> accounts.

\(d\) [Allocation percentages, ratios, and record-keeping]{.underline}.

> \(1\) [Salaries]{.underline} and other compensation, including
> benefits. Committees must keep time records for all employees for
> purposes of determining the percentage of time spent on activities in
> connection with a Federal election. Allocations of salaries and other
> compensation, including benefits, shall be undertaken as follows:
>
> \(i\) Salaries and other compensation, including benefits, paid for
> ~~of~~ employees who spend 25% or less of their compensated time in a
> given month on activities in connection with a Federal election shall
> be allocated between the committee's Federal and non-Federal account,
> subject to the following requirements:
>
> \(A\) [Presidential election years]{.underline}. In any year in which
> a Presidential candidate, but no Senate candidate appears on the
> ballot, and in the preceding year, at least 28 % of such amounts
> ~~salaries~~ must be allocated to the Federal account.
>
> \(B\) [Presidential and Senate election year]{.underline}. In any year
> in which a Presidential candidate and a Senate candidate appear on the
> ballot, and in the preceding year, at least 36 % of such amounts
> ~~salaries~~ must be allocated to the Federal account.
>
> \(C\) [Senate election year]{.underline}. In any year in which a
> Senate candidate, but no Presidential candidate, appears on the
> ballot, and in the preceding year, at least 21% of such amounts
> ~~salaries~~ must be allocated to the Federal account.
>
> \(D\) [Non-Presidential and non-Senate year]{.underline}. In any year
> in which neither a Presidential nor a Senate candidate appears on the
> ballot, and in the preceding year, at least 15% of such amounts
> ~~salaries~~ must be allocated to the Federal account.
>
> \(E\) Salaries and other compensation, including benefits,
> ~~Salaries~~ paid to employees who spend no time in a given month on
> activities in connection with a Federal election may be paid solely
> from the non-Federal account.
>
> \(ii\) Salaries and other compensation, including benefits, paid for
> employees who spend more than 25% of their compensated time on
> activities in connection with a Federal election must be paid only
> from a Federal account. [See]{.underline} 11 CFR 300.33(c)(2), and
> paragraph (e)(2) of this section.
>
> \(2\) [Administrative costs]{.underline}. State, district, and local
> party committees that choose to allocate administrative expenses may
> do so subject to the following requirements:
>
> \(i\) [Presidential election years]{.underline}. In any year in which
> a Presidential candidate, but no Senate candidate appears on the
> ballot, and in the preceding year, State, district, and local party
> committees must allocate at least 28 % of administrative expenses to
> their Federal accounts.

\(ii\) [Presidential and Senate election year]{.underline}. In any year
in which a

> Presidential candidate and a Senate candidate appear on the ballot,
> and in the preceding year, State, district, and local party committees
> must allocate at least 36 % of administrative expenses to their
> Federal accounts.

\(iii\) [Senate election year]{.underline}. In any year in which a
Senate candidate, but no Presidential candidate, appears on the ballot,
and in the preceding year, State, district, and local party committees
must allocate at least 21% of administrative expenses to their Federal
account.

\(iv\) [Non-Presidential and non-Senate year]{.underline}. In any year
in which neither a Presidential nor a Senate candidate appears on the
ballot, and in the preceding year, State, district, and local party
committee must allocate at least 15% of administrative expenses to their
Federal account.

> \(3\) ~~Voter registration outside 120 day period, other~~
> ~~e~~E[xempt party activities and voter drive activities~~, and voter
> identification, GOTV and generic campaign activities~~ that are not
> Federal election activities.]{.underline} State, district, and local
> party committees that choose to allocate expenses for ~~voter
> registration activities addressed in this section, or that choose to
> allocate~~ exempt ~~party~~ activities~~, or other voter registration,
> GOTV and generic campaign activities~~ that are not Federal election
> activities, must do so subject to the following requirements:
>
> \(i\) [Presidential election years]{.underline}. In any year in which
> a Presidential candidate, but no Senate candidate appears on the
> ballot, and in the preceding year, State, district, and local party
> committees must allocate at least 28 % of these expenses to their
> Federal accounts.

\(ii\) [Presidential and Senate election year]{.underline}. In any year
in which a

> Presidential candidate and a Senate candidate appear on the ballot,
> and in the preceding year, State, district, and local party committees
> must allocate at least 36 % of these expenses to their Federal
> accounts.

\(iii\) [Senate election year]{.underline}. In any year in which a
Senate candidate, but no Presidential candidate, appears on the ballot,
and in the preceding year, State, district, and local party committees
must allocate at least 21% of these expenses to their Federal account.

\(iv\) [Non-Presidential and non-Senate year]{.underline}. In any year
in which neither a Presidential nor a Senate candidate appears on the
ballot, and in the preceding year, State, district, and local party
committee must allocate at least 15% of these expenses to their Federal
account.

> \(4\) Fundraising for Federal and non-Federal accounts. If Federal and
> non-Federal funds are collected by a State, district, or local party
> committee through a joint fundraising activity, that committee must
> allocate its direct fundraising costs using to funds received method
> and according to the following procedures:
>
> \(i\) The committee must allocate its fundraising costs based on the
> ratio of funds received into its Federal account to its total receipts
> from each fundraising program or event. This ratio shall be estimated
> prior to each such program or event based upon the committee\'s
> reasonable prediction of its Federal and non-Federal revenue from that
> program or event, and must be noted in the committee\'s report for the
> period in which the first disbursement for such program or event
> occurred, submitted pursuant to 11 CFR 104.5. Any disbursements for
> fundraising costs made prior to the actual program or event must be
> allocated according to this estimated ratio.
>
> \(ii\) No later than the date 60 days after each fundraising program
> or event from which both Federal and non-Federal funds are collected,
> the committee shall adjust the allocation ratio for that program or
> event to reflect the actual ratio of funds received. If the
> non-Federal account has paid more than its allocable share, the
> committee shall transfer funds from its Federal to its non-Federal
> account, as necessary, to reflect the adjusted allocation ratio. If
> the Federal account has paid more than its allocable share, the
> committee shall make any transfers of funds from its non-Federal to
> its Federal account to reflect the adjusted allocation ratio within
> the 60-day time period established by this paragraph. The committee
> shall make note of any such adjustments and transfers in its report
> for any period in which a transfer was made, and shall also report the
> date of the fundraising program or event that serves as the basis for
> the transfer. In the case of a telemarketing or direct mail campaign,
> the date for purposes of this paragraph is the last day of the
> telemarketing campaign, or the day on which the final direct mail
> solicitations are mailed.

\(e\) [Costs not allocable by State, district, and local party
committees]{.underline} between Federal and non-Federal
accounts[.]{.underline} The following costs incurred by State, district,
and local party committees shall be paid only with Federal funds:

> \(1\) Disbursements for State, district, and local party committees
> for activities that refer only to one or more candidates for Federal
> office must not be allocated ~~between Federal, non-Federal and Levin
> accounts~~. ~~Only~~ All such disbursements must be made from a
> Federal account~~s may be used~~.

(2) Salary and other compensation, including benefits[.]{.underline}
    Salaries and other

> compensation, including benefits, for employees who spend more than
> 25% of their compensated time in a given month on activities in
> connection with a Federal election must not be allocated**.** ~~Only~~
> All such disbursements must be made from a Federal account~~s may be
> used~~. [See]{.underline} ~~11 CFR 100.24 and~~ 11 CFR 300.33(c)(2).

(3) Federal election activities. Activities that are Federal election
    activities pursuant

> to 11 CFR 100.24 must not be allocated between Federal and non-Federal
> accounts. Only Federal funds, or a mixture of Federal funds and Levin
> funds, as provided in 11 CFR 300.33, may be used.
>
> \(4\) Fundraising Costs. Expenses incurred by State, district, and
> local party committees directly related to programs or events
> undertaken to raise funds to be used, in whole or in part, for
> activities in connection with Federal and non-Federal elections that
> are Federal election activities pursuant to 11 CFR 100.24 must not be
> allocated between Federal and non-Federal accounts. All such
> disbursements must be made from a Federal account.

\(f\) [Transfers between accounts to cover allocable
expenses]{.underline}. State, district, and local party committees may
transfer funds from their non-Federal to their Federal accounts or to an
allocation account solely to meet allocable expenses under this section
and only pursuant to the following requirements:

\(1\) [Payments from Federal accounts or from allocation
accounts]{.underline}.

> \(i\) State, district, and local party committees must pay the entire
> amount of an allocable expense from their Federal account~~s~~ and
> transfer funds from their non-Federal account to the Federal account
> ~~for administrative expenses~~ solely to cover the non-Federal share
> of that allocable expense; or
>
> \(ii\) State, district, or local party committees may establish a
> separate allocation account into which funds from its Federal and
> non-Federal accounts may be deposited solely for the purpose of paying
> the allocable expenses of joint Federal and non-Federal activities.

\(2\) [Timing]{.underline}.

> \(i\) If a Federal account is used to make allocable expenditures and
> disbursements, State, district, and local party committees must
> transfer funds from their non-Federal to their Federal accounts to
> meet allocable expenses no more than 10 days before and no more than
> 60 days after the payments for which they are designated are made from
> a Federal account, except that transfers may be made more than 10 days
> before a payment is made from the Federal account if advance payment
> is required by the vendor(s) and if such payment is based on a
> reasonable estimate of the activity's final costs as determined by the
> committee and the vendor(s) involved.
>
> \(ii\) Any portion of a transfer from a committee's non-Federal
> account to its Federal account that does not meet the requirement of
> paragraph (d)(2)(i) ~~of this section~~ shall be presumed to be a loan
> or contribution from the non-Federal account to the Federal account,
> in violation of the Act.

###### PART 108 -- FILING COPIES OF REPORTS AND STATEMENTS WITH STATE OFFICERS (2 U.S.C. 439)

18\. The authority citation for part 108 continues to read as follows:

######  Authority: 2 U.S.C. 434(a)(2), 438(a)(8), 439, 453.

######  19. Section 108.7 is amended by revising paragraphs (c)(4) and (c)(5) and adding paragraph (c)(6) to read as follows:

**§ 108.7 Effect on State law (2 U.S.C. 453).**

\* \* \* \* \*

\(c\) \* \* \*

\(4\) Prohibition of false registration, voting fraud, theft of ballots,
and similar offenses;

\(5\) Candidate\'s personal financial disclosure; or

> \(6\) Application of State law to the funds used for the purchase or
> construction of a State or local party office building to the extent
> described in 11 CFR 300.35.

####### 

####### PART 110 -- CONTRIBUTION AND EXPENDITURE LIMITATIONS AND 

######## PROHIBITIONS

20\. The authority citation for part 110 continues to be read as
follows:

Authority: 2 U.S.C. 431(8), 431(9), 432(c)(2), 437d(a)(8), 438(a)(8),
441a, 441b, 441d, 441e, 441f, 441g, 441h.

21\. Section 110.1 is amended by adding new paragraph (c)(5) to read as
follows:

**§ 110.1 Contributions by persons other than multicandidate political
committees (2 U.S.C. 441a(a)(1)).**

\* \* \* \* \*

\(c\) \* \* \*

> \(5\) On or after January 1, 2003, no person shall make contributions
> to a political committee established and maintained by a State
> committee of a political party in any calendar year that, in the
> aggregate, exceed \$10,000.

\* \* \* \* \*

###### PART 114 -- CORPORATE AND LABOR ORRGANIZATION ACTIVITY

22\. The authority citation for part 114 continues to read as follows:

Authority: 2 U.S.C. 431(8)(B), 431(9)(B), 432, 434(a)(11), 437d(a)(8),
438(a)(8), 441b.

23\. Section 114.1 is amended by revising paragraph (a)(2)(ix) to read
as follows:

**§ 114.1 Definitions.**

\(a\) \* \* \*

\(2\) \* \* \*

(ix) Donations to a State or local party committee used for the purchase
     or construction of its office building are subject to 11 CFR
     300.35. No exception applies to contributions or donations to a
     national party committee that are made or used for the purchase or
     construction of any office building or facility; or

\* \* \* \* \*

24\. Subchapter C is added to Chapter I to read as follows:

#### SUBCHAPTER C -- BCRA REGULATIONS

#### PART 300 -- NON-FEDERAL FUNDS

Sec.

300.1 Scope, effective date, and organization.

300.2 Definitions.

**Subpart A -- National Party Committees**

300.10 General prohibitions on raising and spending non-Federal funds.

300.11 Prohibition on fundraising for and donating to certain tax-exempt
organizations.

300.12 Transition rules.

300.13 Reporting.

**Subpart B -- State, District, and Local Party Committees and
Organizations**

300.30 Accounts.

300.31 Receipt of Levin funds.

300.32 Expenditures and disbursements.

300.33 Allocation.

300.34 Transfers.

300.35 Office buildings.

300.36 Reporting Federal election activity; recordkeeping.

300.37 Prohibitions on fundraising for and donating to certain
tax-exempt organizations.

**Subpart C -- Tax-exempt Organizations**

300.50 Prohibited fundraising by national party committees (2 U.S.C.
441i(d)).

300.51 Prohibited fundraising by State, district, and local party
committees

(2 U.S.C. 441i(d)).

300.52 Fundraising by Federal candidates and Federal officeholders

(2 U.S.C. 441i(e)(4)).

**Subpart D -- Federal Candidates and Officeholders**

300.60 Scope.

300.61 Federal elections.

300.62 Non-Federal elections.

300.63 Exception for State party candidates

300.64 Exemption for attending or speaking at fundraising events.

300.65 Exceptions for certain tax-exempt organizations.

**Subpart E -- State and Local Candidates**

300.70 Scope.

300.71 Federal funds required for certain public communications

(2 U.S.C. 441i(f)(1)).

300.72 Federal funds not required for certain communications (2 U.S.C.
441i(f)(2)).

Authority: 2 U.S.C. 434(e), 438(a)(8), 441a(a)(i), 441i, 453.

**§ 300.1** **Scope and effective date, and organization.**

\(a\) [Introduction]{.underline}. This part implements changes to the
Federal Election Campaign Act of 1971, as amended ("FECA" or the "Act"),
enacted by Title I of the Bipartisan Campaign Finance Reform Act of 2002
("BCRA"). Public Law 107-155. Unless expressly stated to the contrary,
nothing in this part alters the definitions, restrictions, liabilities,
and obligations imposed by sections 431 to 455 of Title 2, United States
Code, or regulations prescribed thereunder (11 CFR parts 100 to 116).

\(b\) [Effective dates]{.underline}.

\(1\) Except as otherwise specifically provided in this part, this part
shall take effect on November 6, 2002. However, subpart B of this part
shall not apply with respect to runoff elections, recounts, or election
contests resulting from elections held prior to such date.
[See]{.underline} 11 CFR 300.12 for transition rules applicable to
subpart A of this part.

\(2\) The increase in individual contribution limits to State committees
of political parties, as described in 11 CFR 110.1(c)(5), shall apply to
contributions made on or after January 1, 2003.

\(c\) [Organization of part]{.underline}. Part 300, which generally
addresses non-Federal funds and closely related topics, is organized
into five subparts. Each subpart is oriented to the perspective of a
category of persons facing issues related to non-Federal funds.

\(1\) Subpart A of this part prescribes rules pertaining to national
party committees, including general non-Federal funds prohibitions,
fundraising, and donation prohibitions with regard to certain tax-exempt
organizations, transition rules as BCRA takes effect, and reporting.

(2) Subpart B of this part pertains to State, district, and local
    political party

> committees and organizations. Subpart B of this part focuses on "Levin
> Amendment" to BCRA; office buildings; and fundraising and donation
> prohibitions with regard to certain tax-exempt organizations.

(2) Subpart C of this part addresses non-Federal funds from the

> perspective of tax-exempt organizations, setting out rules about
> prohibited fundraising for certain tax-exempt organizations by
> national party committees, State, district, and local party
> committees, and Federal candidates and officeholders.

(3) Subpart D of this part includes regulations pertaining to soliciting
    non-

> Federal funds from the perspective of Federal candidates and
> officeholders in Federal and non-Federal elections; including
> exceptions for those who are also State candidates and exceptions for
> those attending and speaking at fundraising events, or who solicit for
> certain tax-exempt organizations.

(4) Subpart E of this part focuses on State and local candidates,
    including

> regulations about using Federal funds for certain public
> communications, and exceptions for entirely non-Federal
> communications.

\(6\) For rules pertaining to convention and host committees,
[see]{.underline} 11 CFR

part 9008.

§ 300.2 Definitions.

\(a\) A 501(c) organization [that makes expenditures or disbursements in
connection with a Federal election]{.underline} as that term is used in
11 CFR 300.10, 300.37, 300.50, and 300.51 includes an organization that,
within the current election cycle and the two years preceding it, has
taken, or within the current election, plans to undertake the following
activities:

> \(1\) Directly or indirectly establishes, finances, maintains,
> supports, or controls a political committee;

\(2\) Makes expenditures or disbursements for Federal election activity;

\(3\) Finances voter registration ~~at any time~~;

> \(4\) Finances voter guides, candidate questionnaires, or candidate
> surveys that refer to one or more candidates for Federal office; or

\(5\) Finances get-out-the-vote communications that refer to one or more
candidates for Federal office.

\(b\) [Agent]{.underline}. ~~means any person who has actual express
oral or written authority to act on behalf of a candidate, officeholder,
or a national committee of a political party, or a State, district or
local committee of a political party, or an entity directly or
indirectly established, financed, maintained, or controlled by a party
committee. An agent has actual authority if he or she has instructions,
either oral or written, from the candidate or a committee official.~~
For the purposes of part 300 of chapter I, agent means any person who
has actual authority, either express or implied, to engage in any of the
following activities on behalf of the specified persons:

\(1\) In the case of a national committee of a political party:

\(i\) To solicit, direct, or receive any contribution, donation, or
transfer of funds; or,

\(ii\) To solicit any funds for, or make or direct any donations to, an
organization that is described in 26 U.S.C 501(c) and exempt from
taxation under 26 U.S.C. 501(a) (or has submitted an application for
determination of tax exempt status under 26 U.S.C. 501(a)), or an
organization described in 26 U.S.C. 527 (other than a political
committee, a State, district, or local committee of a political party,
or the authorized campaign committee of a candidate for State or local
office).

\(2\) In the case of a State, district, or local committee of a
political party:

\(i\) To expend or disburse any funds for Federal election activity; or

\(ii\) To transfer, or accept a transfer of, funds to make expenditures
or disbursements for Federal election activity; or

\(iii\) To engage in joint fundraising activities with any person if any
part of the funds raised are used, in whole or in part, to pay for
Federal election activity; or

\(iv\) To solicit any funds for, or make or direct any donations to, an
organization that is described in 26 U.S.C. 501(c) and exempt from
taxation under 26 U.S.C. 501(a) (or has submitted an application for
determination of tax exempt status under 26 U.S.C. 501(a)), or an
organization described in 26 U.S.C. 527 (other than a political
committee, a State, district, or local committee of a political party,
or the authorized campaign committee of a candidate for State or local
office).

\(3\) In the case of an individual who is a Federal candidate or an
individual holding Federal office, to solicit, receive, direct,
transfer, or spend funds in connection with any election.

\(4\) In the case of an individual who is a candidate for State or local
office, to spend funds for a public communication (see 11 CFR 100.26).

\(c\) [Directly or indirectly establish, maintain, finance, or
control.]{.underline}

\(1\) This paragraph (c) applies to national, State, district, and local
committees of a political party, candidates, and holders of Federal
office, including an officer, employee, or agent of any of the foregoing
persons, which shall be referred to as "sponsors" in this section.

~~(1) A sponsor directly or indirectly establishes, finances, maintains,
or controls an entity if one or more of the following conditions are
satisfied as a result of actions taken by the sponsor, or by an officer,
employee, or agent of the sponsor acting on behalf of the sponsor or at
the sponsor's behest:~~

~~(i) The sponsor and the entity are affiliated under 11 CFR 100.5(g).~~

~~(ii) The sponsor, alone or in combination with other persons, forms,
organizes, or otherwise creates the entity, including providing any of
the funds used to form, organize or create the entity. As used in this
paragraph, "forms, organizes, or otherwise creates" includes the
conversion, reorganization, or redirection of a pre-existing entity.~~

~~(iii) The sponsor provides a significant amount of the entity's
funding at any point in the entity's existence, whether by contribution
(including in-kind contribution), donation (including in-kind donation),
transfer, or other means. In determining whether or not this condition
is satisfied, one or more of the following factors, any one of which may
be dispositive, may be considered:~~

~~(A) The percentage of the entity's total funding in a given calendar
year represented by the amount of funding provided by the sponsor.~~

~~(B) Whether the sponsor provided funding to the entity on a one-time
basis or more systematically over a period of time, including the
frequency, regularity, and duration of funding.~~

~~(C) The amount of time that has elapsed since the sponsor last
provided funding to the entity.~~

~~(iv) The sponsor provides or has provided legal, accounting,
consulting, administrative, or other services to the entity.~~

~~(v) The sponsor, alone or in combination with other persons, sets or
has set policies for soliciting contributions or donations to the entity
or for the making of expenditures or disbursements by the entity.~~

~~(vi) The same person or persons has or has had decision-making
authority over the management of both the sponsor and the entity.~~

\(2\) To determine whether a sponsor directly or indirectly established,
finances, maintains, or controls an entity, the factors described in
paragraphs (c)(2)(i) through (x) of this section must be examined in the
context of the overall relationship between sponsor and the entity to
determine whether the presence of any factor or factors is evidence that
the sponsor directly or indirectly established, finances, maintains, or
controls the entity. Such factors include, but are not limited to:

\(i\) Whether a sponsor, directly or through its agent, owns controlling
interest in the voting stock or securities of the entity;

\(ii\) Whether a sponsor, directly or through its agent, has the
authority or ability to direct or participate in the governance of the
entity through provisions of constitutions, bylaws, contracts, or other
rules, or through formal or informal practices or procedures;

\(iii\) Whether a sponsor, directly or through its agent, has the
authority or ability to hire, appoint, demote, or otherwise control the
officers, or other decision-making employees or members of the entity;

\(iv\) Whether a sponsor has a common or overlapping membership with the
entity that indicates a formal or ongoing relationship between the
sponsor and the entity;

\(v\) Whether a sponsor has common or overlapping officers or employees
with the entity that indicates a formal or ongoing relationship between
the sponsor and the entity;

\(vi\) Whether a sponsor has any members, officers or employees who were
members, officers or employees of the entity that indicates a formal or
ongoing relationship between the sponsor and the entity, or that
indicates the creation of a successor entity;

\(vii\) Whether a sponsor, directly or through its agent, provides funds
or goods in a significant amount or on an ongoing basis to the entity,
such as through direct or indirect payments for administrative,
fundraising, or other costs, but not including the transfer to a
committee of its allocated share of proceeds jointly raised pursuant to
11 CFR 102.17, and otherwise lawfully;

\(viii\) Whether a sponsor, directly or through its agent, causes or
arranges for funds in a significant amount or on an ongoing basis to be
provided to the entity, but not including the transfer to a committee of
its allocated share of proceeds jointly raised pursuant to 11 CFR
102.17, and otherwise lawfully;

\(ix\) Whether a sponsor, directly or through its agent, had an active
or significant role in the formation of the entity; and

\(x\) Whether the sponsor and the entity have similar patterns of
receipts or disbursements that indicate a formal or ongoing relationship
between the sponsor and the entity.

\(3\) Determinations by the Commission.

\(i\) A sponsor or entity may request an advisory opinion of the
Commission to determine whether the sponsor is no longer directly or
indirectly financing, maintaining, or controlling the entity for
purposes of this part. The request for such an advisory opinion must
meet the requirements of 11 CFR part 112 and must demonstrate that the
entity is not directly or indirectly financed, maintained, or controlled
by the sponsor.

\(ii\) Notwithstanding the fact that a sponsor may have established an
entity within the meaning of paragraph ~~(c)(1)(ii)~~ (c)(2) of this
section, the committee or the entity may request an advisory opinion of
the Commission determining that the relationship between the sponsor and
the entity has been severed. The request for such an advisory opinion
must meet the requirements of

11 CFR part 112, and~~specifically include a complete description of all
facts relevant to showing that~~ must demonstrate that all material
connections between the sponsor and the entity have been severed for at
least five years.

\(d\) [Disbursement]{.underline} means 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 the Act. ~~made by a political
committee or organization that is not a political committee.~~

\(e\) For purposes of part 300, [donation]{.underline} means a payment,
gift, subscription, loan, advance, deposit, or anything of value given
to a ~~non-Federal candidate or a party~~ ~~committee, 501(c)
organization, or a section 527 organization,~~ person, but does not
include contributions or transfers.

\(f\) [Federal account]{.underline} means an account at a ~~financial
depository institution~~ campaign depository ~~or other account~~ that
contains funds to be used in connection with a Federal election.

\(g\) [Federal funds]{.underline} mean funds that comply with the
limitations, prohibitions, and reporting requirements of the Act.

\(h\) [Levin account]{.underline} means an account at a campaign
depository established by a State, district, or local committee of a
political party pursuant to 11 CFR 300.30, for purposes of making
expenditures or disbursements for Federal election activity or
non-Federal activity (subject to State law) under 11 CFR 300.32.

\(i\) [Levin funds]{.underline} mean ~~non-Federal~~ funds that comply
with the limitations, prohibitions, and reporting requirements set out
in subpart B of this part, which are raised pursuant to 11 CFR 300.30
and 300.31 and are or will be disbursed by a State, district, or local
committee of a political party for Federal election activity or
non-Federal activity (subject to State law) under 11 CFR 300.32.

\(j\) [Non-Federal account]{.underline} means an account ~~at a
financial depository institution or~~ ~~other account~~ that contains
funds to be used in connection with a State or local election.

\(k\) [Non-Federal funds]{.underline} mean funds that are not subject to
the limitations and prohibitions of the Act.

\(l\) \[Reserved\].

\(m\) [To solicit]{.underline} means to request or suggest or recommend
that another person make a contribution, donation or transfer of funds,
whether the contribution, donation or transfer of funds is to be made
directly, or through a conduit or intermediary. A solicitation does not
include merely providing information or guidance as to the requirement
of particular law.

\(n\) [To direct]{.underline} means to provide the name of a candidate,
political committee or organization to a person who has expressed an
interest in making a contribution, donation or transfer of funds to
those who support the beliefs or goals of the contributor or donor.
Direction does not include merely providing information or guidance as
to the requirement of particular law.

\(o\) [Individual holding Federal office]{.underline} means 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.

**Subpart A -- National Party Committees**

**§ 300.10 General prohibitions on raising and spending non-Federal
funds**

**(2 U.S.C. 441i(a) and (c)).**

\(a\) [Prohibitions]{.underline}. A national committee of a political
party, including a national congressional campaign committee, must not:

\(1\) Solicit, receive, or direct to another person a contribution,
donation, or transfer of funds, or any other thing of value that is not
subject to the prohibitions, limitations and reporting requirements of
the Act; or

\(2\) Spend any funds that are not subject to the prohibitions,
limitations, and reporting requirements of the Act; or

\(3\) Solicit, receive, direct or transfer to another person, or spend,
Levin funds.

\(b\) [Fundraising costs.]{.underline} A national committee of a
political party, including a national congressional campaign committee,
must use only Federal funds to raise funds that are used, in whole or in
part, for expenditures and disbursements for Federal election activity.

\(c\) [Application]{.underline}. This section also applies to:

> \(1\) An officer or agent acting on behalf of a national party
> committee or a national congressional campaign committee; and
>
> \(2\) An entity that is directly or indirectly established, financed,
> maintained, or controlled by a national party committee or a national
> congressional campaign committee.

**§ 300.11 Prohibitions on fundraising for and donating to certain
tax-exempt organizations (2 U.S.C 441i(d))**.

\(a\) [Prohibitions.]{.underline} A national committee of a political
party, including a national ~~party~~ congressional campaign committee,
must not solicit any funds for, or make or direct any donations to ~~the
following organizations~~:

\(1\) An organization that is described in 26 U.S.C. 501(c) and exempt
from taxation under section 26 U.S.C. 501(a) and that makes expenditures
or disbursements in connection with an election for Federal office,
including expenditures or disbursements for Federal election activity;

> \(2\) An organization that has submitted an application for tax-exempt
> status under
>
> 26 U.S.C. 501(c) and that makes expenditures or disbursements in
> connection with an election for Federal office, including expenditures
> or disbursements for Federal election activity; or

(3) An organization described in 26 U.S.C. 527, ~~except for a political
    party~~

unless the organization is:

\(i\) A political committee under 11 CFR 100.5;

\(ii\) A State, district, or local committee of a political party; or

\(iii\) The authorized campaign committee of a State or local candidate;

\(b\) [Application]{.underline}. This section also applies to:

\(1\) An officer or agent acting on behalf of a national party
committee, including a national ~~party~~congressional campaign
committee;

> \(2\) An entity that is directly or indirectly established, financed,
> maintained or controlled by a national party committee, including a
> national ~~party~~congressional campaign committee, or an officer or
> agent acting on behalf of such an entity; or
>
> \(3\) An entity that is directly or indirectly established, financed,
> maintained, or controlled by an agent of a national, State, district,
> or local committee of a political party, including a national
> ~~party~~congressional campaign committee.

\(c\) Determining whether a section 502© organization makes expenditures
or disbursements in connection with Federal elections. In determining
whether an organization makes expenditures or disbursements in
connection with a Federal election as described in paragraphs (a)(1) and
(2), a national committee of a political party, including a national
congressional campaign committee, or any other person described in
paragraph (b) may obtain and rely upon a certification from the
organization that satisfies the criteria described in paragraph (d) of
this section.

\(d\) Certification. A national committee of a political party,
including a national congressional campaign committee, or any person
described in paragraph (b) of this section, may rely upon a
certification that meets all of the following criteria:

\(1\) The certification states with specificity that, in the current
election cycle, and within the two years preceding the current cycle,
the organization has not and does not intend to:

> \(i\) Establish, finance, maintain, support, or control a political
> committee;
>
> \(ii\) Make expenditures or disbursements for Federal election
> activity;
>
> \(iii\) Finance voter registration;
>
> \(iv\) Finance voter guides, candidate questionnaires, or candidate
> surveys that refer to one or more candidates for Federal office; or
>
> \(v\) Finance get-out-the-vote communications that refer to one or
> more candidates for Federal office;

\(2\) The certification is signed and sworn to by an officer or other
authorized representative of the organization with knowledge of the
organization's activities; and

\(3\) The certification is accompanied by:

> \(i\) The organization's Form 990 tax returns for the current election
> cycle and the last two fiscal years preceding it and its application
> for tax exempt status if the organization has already been granted
> exempt status under 501(c); or
>
> \(ii\) The organization's Form 990 tax return and its application for
> tax exempt status once these documents are become available if the
> organization has submitted an application for determination of
> tax-exempt status under 26 U.S.C. 501(c) that has not yet been granted
> or denied.

**§ 300.12 Transition rules.**

\(a\) [Permissible uses of excess non-Federal funds]{.underline}.
Non-Federal funds received before November 6, 2002, by a national
committee of a political party, including a national congressional
campaign committee, and in its possession on that date, must be used
before January 1, 2003. Subject to the restrictions in paragraphs (b)
and (e) of this section, such funds may be used ~~only~~ solely as
follows:

\(1\) To retire outstanding debts or obligations that were incurred
solely in connection with an election held prior to November 6, 2002; or

\(2\) To pay expenses, retire outstanding debts, or pay for obligations
incurred solely in connection with any run-off election, recount, or
election contest resulting from an election held prior to November 6,
2002.

\(b\) [Prohibited uses of non-Federal funds]{.underline}. Non-Federal
funds received by a national committee of a political party, including a
national ~~party~~ congressional campaign committee, before November 6,
2002, and in its possession on that date, may not be used for the
following purposes:

\(1\) To pay any expenditure as defined in 2 U.S.C. 431(9);

(2) To retire outstanding debts or obligations that were incurred for
    any expenditure; or

(3) To defray the costs of the construction or purchase of any office
    building or facility.

\(c\) Any non- funds remaining after payment of debts and obligations
permitted in paragraph (a) of this section must be disgorged to the
United States Treasury no later than December 31, 2002.

\(d\) [National party committee office building or facility
accounts]{.underline}. Before November 6, 2002, the national committee
of a political party, including a national congressional campaign
committee, may accept funds into its party office building or facility
account, established pursuant to repealed 2 U.S.C. 431(8)(B)(viii), and
may use the funds in the account only for the construction or purchase
of an office building or facility. After November 5, 2002, the national
party committees may no longer accept funds into such an account and
must not use such funds for the purchase or construction of any office
building or facility. Funds on deposit in any party office building or
facility account on November 6, 2002, must be disgorged to the United
States Treasury.

\(e\) [Application.]{.underline} This section also applies to:

\(1\) An officer or agent acting on behalf of a national party committee
or a national ~~party~~ congressional campaign committee; and

> \(2\) An entity that is directly or indirectly established, financed,
> maintained, or controlled by a national party committee or a national
> congressional campaign committee.

\(f\) [Treatment of Federal and non-Federal accounts during transition
period]{.underline}. The following provisions applicable to the
allocation of, and payment for, expenses between Federal and non-Federal
accounts of national party committees shall remain in effect between
November 6 and December 31, 2002: 11 CFR 106.5(a), 106.5(b), 106.5(c),
106.5(f) and 106.5(g).

**§ 300.13 Reporting (2 U.S.C. §§ 431 note and 434(e)).**

\(a\) [In general]{.underline}. The national committee of a political
party, any national ~~party~~ congressional campaign committee of a
political party, and any subordinate committee of either, shall report
all receipts and disbursements during the reporting period.

\(b\) [Termination report for non-Federal accounts]{.underline}. Each
committee described in paragraph (a) of this section shall file a
termination report disclosing the disposition of ~~all~~ funds in all
non-Federal accounts and building fund accounts by January 31, 2003.

\(c\) [Transitional reporting rules]{.underline}.

\(1\) The reporting requirements in 11 CFR 104.8(e), 104.9(c) and
104.9(e) for national party committee non-Federal accounts shall remain
in effect for the report covering activity between November 6 and
December 31, 2002.

\(2\) The reporting requirements in 11 CFR 104.8(f) and 104.9(d) for
national party committee building fund accounts shall remain in effect
for the report covering activity between November 6 and December 31,
2002.

**Subpart B -- State, District, and Local Party Committees and
Organizations**

**§ 300.30 Accounts**

\(a\) Political Committees.

\(1\) [Federal Account]{.underline}s

> \(i\) Each State, district, and local party organization that
> qualifies as a political committee under 11 CFR 100.5 and that
> finances political activity in connection with both Federal and
> non-Federal elections shall, in accordance with 11 CFR 102.5(a),
> either:
>
> \(A\) Establish a Federal account in a depository, in accordance with
> 11 CFR part 103, which shall be treated as a separate political
> committee and be required to comply with the requirements of the Act
> including the registration and reporting requirements of 11 CFR part
> 102 and part 104; or
>
> \(B\) Establish a separate Federal political committee that shall
> register as a political committee and comply with the requirements of
> the Act.
>
> ~~(2) Each State, district and local party organization that does not
> qualify as a political committee under 11 CFR 100.5, but that finances
> political activity in connection with both Federal and non-Federal
> elections, and or that makes payments for certain Federal election
> activities pursuant to 11 CFR 300.32(b), shall, [in accordance with 11
> CFR 102.5(b)(1),]{.underline} establish a Federal account in a
> depository.~~
>
> ~~(ii) Demonstrate by a reasonable accounting method that whenever
> such organization makes a contribution or expenditure, that
> organization has received sufficient funds that are permissible under
> the Act to make such contribution or expenditure. Such organization
> shall keep records of amounts received or expenditures under this
> subsection and, upon request, shall make such records available for
> examination by the Commission.~~
>
> \(ii\) Only contributions that are permissible pursuant to the
> limitations and prohibitions of the Act shall be deposited into any
> Federal account established pursuant to paragraph (a)(1)(i) of this
> section, regardless of whether such contributions are for use in
> connection with Federal, ~~or~~ with non-Federal elections, or for the
> Federal portion of Federal election activities.
>
> \(iii\) Only contributions solicited and received pursuant to the
> following conditions may be deposited in a Federal account established
> under paragraph (a)(1)(i) of this section:
>
> \(A\) Contributions must be designated by the contributors for the
> Federal account;
>
> \(B\) The solicitation must expressly state that contributions may be
> used wholly or in part in connection with a Federal election; or
>
> \(C\) The solicitation must expressly state that all contributions are
> subject to the prohibitions and limitations of the Act.
>
> \(iv\) All disbursements, contributions, and expenditures made wholly
> or in part by any State, district, or local party ~~committee~~
> organization in connection with a Federal election must be made from
> either:
>
> \(A\) A Federal account, except as permitted by 11 CFR 300.32; or
>
> \(B\) A separate allocation account.
>
> \(v\) If all payments in connection with a Federal election, including
> payments for Federal election activities, are to be made from a
> Federal account, not an allocation account, expenditures and
> disbursements for costs that are allocable pursuant to 11 CFR 106.7 or
> 11 CFR 300.33 must be made from ~~a~~ the Federal account in their
> entirety, with the shares of a non-Federal account or of a Levin
> account being transferred to the Federal account pursuant to 11 CFR
> 300.33 and 11 CFR 300.34.
>
> \(vi\) No transfers may be made to a Federal account from any other
> account(s) maintained by a State, district, or local party committee
> or from any other party committee at any level for the purpose of
> financing Federal election activity ~~in connection with Federal
> elections~~, except as provided by paragraphs (a)(1)(v) of this
> section or 11 CFR 300.33 and 300.34.
>
> \(vii\) State, district, and local party committees may choose to make
> non-Federal disbursements from a ~~the~~ Federal account, subject to
> State law, provided that such disbursements are reported pursuant to
> 11 CFR 104.17 and provided that contributors of the Federal funds so
> used were notified that their contributions were subject to the
> limitations and prohibitions of the Act.

\(2\) [Levin accounts.]{.underline}

> \(i\) Any State, district, or local party organization that is a
> political committee, including any organization that is directly or
> indirectly established, financed, maintained, or controlled by a
> State, district, or local committee of a political party and any
> officer or agent of such a committee or organization, that intends to
> engage in voter registration, voter identification, get-out-the-vote
> activity, and/or generic campaign activity pursuant to 11 CFR
> 300.32(b), must maintain one or more separate accounts in a depository
> for this purpose. These ~~This~~ accounts shall be known as ~~a~~
> Levin accounts.
>
> \(ii\) Only donations solicited and received pursuant to the following
> conditions may be deposited in a Levin account established under
> paragraph (a)(2) of this section:
>
> \(A\) Donations must be designated by the contributors for the Levin
> account; or
>
> \(B\) Donors must have been informed that donations will be subject to
> the special contribution limitations and prohibitions of 2 U.S.C.
> 441i(b)(2)(B) and 11 CFR 300.31(c) and (d).
>
> \(iii\) A State, district, or local party committee may use its Levin
> account(s) ~~to make expenditures or disbursements~~ only for the
> categories of activities described at 11 CFR 300.32(b)(1) or for
> other, non-Federal activities permissible under State law.
>
> \(iv\) A State, district, or local party committee may use its Levin
> account(s) to make expenditures or disbursements only if all of the
> following conditions are met:
>
> \(A\) The expenditure or disbursement does not pay for an activity
> that refers to a clearly identified candidate for Federal office;
>
> \(B\) The expenditure or disbursement does not pay for any part of the
> costs of any broadcasting, cable, or satellite communication, other
> than a communication that refers solely to a clearly identified
> candidate for State or local office; and
>
> \(C\) The funds used for the expenditure or disbursement have
>
> been solicited, donated, received, and deposited in accordance with 11
> CFR 300.31.

\(3\) [Non-Federal account.]{.underline}

> \(i\) Any State, district, or local party committee that makes
> disbursements solely in connection with State or local elections must
> establish a separate non-Federal account in a depository. The funds
> deposited into this account ~~may be~~ are governed by State law.
>
> \(ii\) Disbursements, contributions, and expenditures made wholly or
> in part in connection with Federal elections must not be made from any
> non-Federal account, except as permitted by 11 CFR 300.33 and 11 CFR
> 300.34.
>
> \(4\) Allocation accounts. At the discretion of the party committee or
> organization, separate allocationaccounts may be established for
> purposes of making allocable expenditures anddisbursements.

\(i\) Only funds from the party committee or organization's Federal and

> non-Federal accounts may be deposited into an allocation account used
> to make allocable expenditures and disbursements for activities in
> connection with Federal and non-Federal elections.
>
> \(ii\) Only funds from the party committee or organization's Federal
> account and Levin account(s) may be deposited into an allocation
> account used to make allocable expenditures and disbursements for
> activities undertaken pursuant to 11 CFR 300.32(b).
>
> \(iii\) Once a party committee or organization has established a
> separate allocation account for activities in connection with Federal
> and non-Federal elections and a separate account for activities
> undertaken pursuant to 11 CFR 300.32(b), all allocable expenses shall
> be paid from the appropriate allocation account for as long as that
> account is maintained.
>
> \(iv\) The organization shall transfer to the appropriate allocation
> account funds from its Federal and non-Federal or Levin accounts in
> amounts proportionate to the Federal, non-Federal and Levin shares of
> each allocable expense pursuant to 11 CFR 300.33. The transfers shall
> be made pursuant to 11 CFR 300.34.
>
> \(v\) No funds contained in an allocation account may be transferred
> to any other account maintained by the party committee or
> organization.

\(b\) State, district, and local party organizations that are not
political committees. Any State, district, or local party organization
that makes payments for certain Federal election activities pursuant to
11 CFR 300.32(b), but that does not qualify as a political committee
under 11 CFR 100.5, must either:

\(1\) Establish at least three separate accounts in depositories as
follows -

> \(i\) An account into which only funds subject to the prohibitions and
> limitations of the Act ~~and only funds solicited for activities
> pursuant to 11 CFR 300.32,~~ may be deposited and from which
> contributions, expenditures, disbursements for exempt activities and
> payments for certain Federal activities ~~shall~~ must be made;
>
> \(ii\) One or more Levin accounts pursuant to 11 CFR 300.30(b) into
> which only funds solicited pursuant to 11 CFR 300.31 may be deposited
> and from which payments must be made pursuant to 11 CFR 300.32 and
> 300.33; and
>
> \(iii\) One or more additional accounts pursuant to State law from
> which payments for activities other than those permitted by paragraphs
> (b)(1)(i) and (ii) of this section;

\(2\) Establish two separate accounts in depositories as follows:

> \(i\) An Federal account into which may be deposited both funds
> subject to the prohibitions and limitations of the Act and funds
> solicited for activities pursuant to 11 CFR 300.32. Payments may be
> made from this account for contributions, expenditures and
> disbursements for exempt activities in connection with Federal
> elections and for activities undertaken pursuant to 11 CFR 300.32(b).
> Use of this Federal account as a depository for Levin funds requires
> employment of a general ledger accounting system that segregates
> assets, liabilities, revenue and expenses for activities undertaken
> pursuant to 11 CFR 106.7 and 11 CFR 300.32. If the accounting method
> employed is computer-based, the data must be backed-up on no less than
> a monthly basis.
>
> \(ii\) One or more additional accounts pursuant to State law from
> which payments for activities other than those permitted by paragraphs
> (b)(1)(i) and (ii) must be made; or

\(3\) Establish one account in a depository using three or more general
ledger accounts as follows: Use of one account for all activity requires
an accounting method that employs general ledger accounts that segregate
assets, liabilities, revenue and expenses for activities undertaken
pursuant to 11 CFR 106.7 and 300.32. Funds recorded in a general ledger
account as received for non-Federal activities may not be reclassified
as funds available for Federal election activities to be undertaken
pursuant to 11 CFR 300.32 (i.e., Levin funds), unless the funds to be
reclassified were received pursuant to a solicitation for Levin funds or
were so designated by the donors. If the accounting method employed is
computer-based, the data must be backed up on no less than a monthly
basis.

\(c\) All party organizations must keep records of deposits into and
disbursements from such accounts, and, upon request, must make such
records available for examination by the Commission.

**§ 300.31 Receipt of Levin funds.**

\(a\) [General rule.]{.underline} Levin funds expended or disbursed by
any State, district, or local committee must be raised solely by the
committee that expends or disburses them.

\(b\) [Compliance with State law]{.underline}. Each donation of Levin
funds solicited or accepted by a State, district, or local committee of
a political party must be lawful under the laws of the State in which
the committee is organized.

\(c\) [Donations from sources permitted by State law but prohibited by
the Act]{.underline}. If the laws of the State in which a State,
district, or local committee of a political party is organized permit
donations to the committee from a source prohibited by the Act and this
chapter, other than 2 U.S.C. 441e, the committee may solicit and accept
donations of Levin funds from that source, subject to paragraph (d) of
this section.

\(d\) [Donation amount limitation]{.underline}.

\(1\) [General rule.]{.underline} A State, district, or local committee
of a political party must not solicit or accept from any person
(including any ~~person~~ entity established, financed, maintained, or
controlled by such person) one or more donations of Levin funds
aggregating more than \$10,000 in a calendar year.

\(2\) [Effect of different State limitations.]{.underline} If the laws
of the State in which a State, district, or local committee of a
political party is organized limit donations to that committee to less
than the amount specified in paragraph (d)(1) of this section, then the
State law amount limitations shall control. If the laws of the State in
which a State, district, or local committee of a political party is
organized permit donations to that committee in amounts greater than the
amount specified in paragraph (d)(1) of this section, then the amount
limitations in paragraph (d)(1) of this section shall control.

\(3\) [No affiliation of committees for purposes of this
paragraph]{.underline}. For purposes of determining compliance with
paragraph (d) of this section only, State, district, and local
committees of the same political party shall not be considered
affiliated. Subject to the amount limitations specified in paragraphs
(d)(1) and (d)(2) of this section, ~~A~~ a person (including any
~~person~~ entity established, financed, maintained, or controlled by
such person) may donate ~~up to \$10,000 per calendar year~~ to each and
every State, district, and local committee of a political party.

\(e\) [No Levin funds from a national party committee or a Federal
candidate or officeholder]{.underline}. A State, district, or local
committee of a political party disbursing Levin funds pursuant to 11 CFR
300.32 must not accept or use for such purposes any donations or other
funds that are solicited, received, directed, transferred, or spent by
or in the name of any of the following persons:

\(1\) A national committee of a political party (including a national
congressional campaign committee of a political party), any officer or
agent acting on behalf of such a national party committee, or any entity
that is directly or indirectly established, financed, maintained, or
controlled by such a national party committee. Notwithstanding 11 CFR
102.17, a State, district, or local committee of a political party must
not raise Levin funds by means of joint fundraising with a national
committee of a political party, any officer or agent acting on behalf of
such a national party committee, or any entity that is directly or
indirectly established, financed, maintained, or controlled by such a
national party committee. Nothing in this section shall be construed to
prohibit a State, district, or local committee of a political party from
jointly raising, under 11 CFR 102.17, Federal funds not to be used for
Federal election activity with a national committee of a political
party, or its agent, or any entity directly or indirectly established,
financed, maintained, or controlled by such a national party committee.

\(2\) A Federal candidate, or an individual holding Federal office, or
an agent of a Federal candidate or officeholder, or an entity directly
or indirectly established, financed, maintained, or controlled by, or
acting on behalf of, one or more Federal candidates or individuals
holding Federal office. Notwithstanding 11 CFR 102.17, a State,
district, or local committee of a political party must not raise Levin
funds by means of joint fundraising with a Federal candidate, an
individual holding Federal office, or an entity directly or indirectly
established, financed, maintained, or controlled by, or acting on behalf
of, one or more candidates or individuals holding Federal office. A
Federal candidate or individual holding Federal office may attend,
speak, or be a featured guest at a fundraising event for a State,
district, or local committee of a political party at which Levin funds
are raised. [See]{.underline} 11 CFR 300.64.

\(f\) [Certain joint fundraising prohibited]{.underline}.
Notwithstanding 11 CFR 102.17, a State, district, or local committee of
a political party must not raise Levin funds by means of any joint
fundraising activity with any other State, district, or local committee
of any political party, the agent of such a committee, or an entity
directly or indirectly established, financed, maintained, or controlled
by such a committee. This prohibition includes State, district, and
local committees of a political party organized in another State.
Nothing in this section shall be construed to prohibit two or more
State, district, or local committees of a political party from jointly
raising, under 11 CFR 102.17, Federal funds not to be used for Federal
election activity.

\(g\) Common vendors. The use of a common vendor for fundraising by more
than one State, district, or local committee of a political party, or
the agent of such a committee, shall not, by itself, be deemed joint
fundraising for purposes of this paragraph.

**§ 300.32 Expenditures and disbursements.**

\(a\) [Federal funds]{.underline}.

\(1\) A State, district, or local committee of a political party, or an
association or similar group of candidates for State or local office, or
an association or similar group of individuals holding State or local
office, that makes an expenditure ~~or disbursement~~ for the purpose of
influencing a Federal election must use Federal funds for the
expenditure, subject to the provisions of this chapter.

\(2\) Except as provided in this part, a State, district, or local
committee of a political party that makes expenditures or disbursements
for Federal election activity must use Federal funds for that purpose,
subject to the provisions of this chapter. An association or similar
group of candidates for State or local office, or an association or
similar group of individuals holding State or local office, must make
any expenditures or disbursements for Federal election activity solely
with Federal funds.

\(3\) State, district, and local party committees that ~~engage in~~
~~fundraising~~ raise Federal funds to be used, in whole or in part, for
Federal election activities must pay ~~all~~ the direct costs ~~related
to~~ of such fundraising only with Federal funds. The direct costs of a
fundraising program or event include expenses for the solicitation of
funds and for the planning and administration of actual fundraising
programs and events.

\(4\) State, district, and local party committees that ~~engage in
fundraising~~ raise Levin funds to be used, in whole or in part, for ~~a
Levin account~~ Federal election activity must pay ~~all~~ the direct
costs ~~related to raising such funds~~ of such fundraising only with
Federal funds. The direct costs of a fundraising program or event
include expenses for the solicitation of funds and for the planning and
administration of actual fundraising programs and events.

\(b\) [Levin funds]{.underline}. A State, district, or local committee
of a political party may spend Levin funds in accordance with this part
on the following types of activity:

\(1\) Subject to the conditions set out in paragraph (c) of this
section, only the following types of Federal election activity:

\(i\) Voter registration activity during the period that begins on the
date that is 120 days before the date a regularly scheduled Federal
election is held and ends on the date of the election; and

\(ii\) Voter identification, get-out-the-vote activity, or generic
campaign activity conducted in connection with an election in which a
candidate for Federal office appears on the ballot (regardless of
whether a candidate for State or local office also appears on the
ballot).

\(2\) Any use that is lawful under the laws of the State in which the
committee is organized, other than the Federal election activities
defined in 11 CFR 100.24(b)(3) and (4). A disbursement of Levin funds
under this paragraph need not comply with paragraphs (c)(1) and (c)(2)
of this section, except as required by State law.

\(c\) [Conditions and restrictions on spending Levin funds ~~for Federal
election activity~~]{.underline}.

\(1\) The Federal election activity for which the expenditure or
disbursement is made must not refer to a clearly identified candidate
for Federal office.

\(2\) The expenditure or disbursement must not pay for any part of the
costs of any broadcasting, cable, or satellite communication, other than
a communication that refers solely to a clearly identified candidate for
State or local office.

\(3\) The expenditure or disbursement must be made from funds raised in
accordance with 11 CFR 300.31.

\(4\) The expenditure or disbursement for Federal election activity must
be allocated between Federal funds and Levin funds according to 11 CFR
300.33.

\(d\) [Non-Federal ~~funds~~]{.underline} activities. A State, district,
or local committee of a political party that makes disbursements for
non-Federal activity may make those disbursements from its Federal,
Levin, or non-Federal funds, subject to the laws of the State in which
it is organized. A State, district, or local party committee that
engages in fundraising for solely non-Federal funds may pay the costs
related to such fundraising from any account, subject to State law,
including a Federal account.

**§ 300.33 Allocation of costs of Federal election activity.**

\(a\) [Costs]{.underline} of Federal election activity [allocable by
State, district, and local party committees]{.underline} and
organizations.

> ~~(1) [Salaries.]{.underline} State, district and local party
> committees may allocate the salaries of employees who spend 25% or
> less of their time in any given month on Federal election activity
> between the committee's Federal and non-Federal accounts. The salaries
> of those employees who spend more than 25% of their time in any given
> month on Federal election activity must be paid only with Federal
> funds.~~
>
> ~~(2) [Administrative costs]{.underline}. State, district and local
> party committees may allocate administrative costs, including rent,
> utilities, office equipment, office supplies, postage for other than
> mass mailings, and routine building maintenance, upkeep and repair,
> between their Federal and non-Federal accounts except that any such
> expenses directly attributable to a clearly identified Federal
> candidate must be paid only from Federal accounts.~~
>
> \(1\) [Costs of voter registration.]{.underline} ~~voter
> identification, get-out-the vote activity and generic campaign
> activity within certain time periods~~[.]{.underline} State, district,
> and local party committees and organizations ~~that have established a
> Federal account and a separate Levin account pursuant to 11 CFR
> 300.30(b)~~ may allocate disbursements or expenditures between Federal
> funds and Levin funds for ~~(i)~~ voter registration activity, as
> defined in 11 CFR 100.24(a)(2), that takes place during the period
> that begins on the date that is 120 days before the date of a
> regularly scheduled Federal election and that ends on the date of the
> election, provided that the activity does not refer to a clearly
> identified Federal candidate.
>
> \(2\) Costs of voter identification, get-out-the-vote activity, or
> generic campaign activities within certain time periods. State,
> district, and local party committees and organizations ~~that have
> established a Federal account and a separate Levin account pursuant to
> 11 CFR 300.30(b)~~ may allocate disbursements or expenditures between
> ~~these two accounts~~ Federal funds and Levin funds for voter
> identification, get-out-the-vote activity, or generic campaign
> activities, as defined in 11 CFR 100.24(a)(3) and (4) and 11 CFR
> 100.25, that are conducted in connection with an election in which a
> candidate for Federal office is on the ballot and within the time
> periods set forth in 11 CFR 100.24(a)(1), provided that the activity
> does not refer to a clearly identified Federal candidate.

\(b\) [Allocation percentages~~, ratios and
record-keeping~~]{.underline}. State, district, and local party
committees and organizations that choose ~~to make expenditures and
disbursements in connection with activities described in paragraph
(a)(3) of this section must to allocate~~ to allocate between Federal
funds and non-Federal funds their expenditures and disbursements in
connection with activities described in paragraph (a)~~(3)~~ of this
section that take place within the time periods set forth in 11 CFR
100.24(a)(1) or paragraph (a) of this section must allocate the
following minimum percentages to their Federal funds: ~~The allocation
must result in the following minimum percentages to their Federal
accounts:~~

\(1\) [Presidential election years]{.underline}. ~~In any year in
which~~ If a Presidential candidate, but no Senate candidate appears on
the ballot, State, district, and local party committees and
organizations must allocate at least 28% of expenses for activities
described in paragraph (a) of this section to their Federal ~~account~~
funds.

\(2\) [Presidential and Senate election year]{.underline}. ~~In any year
in which~~ If a Presidential candidate and a Senate candidate appear on
the ballot, State, district, and local party committees and
organizations must allocate at least 36% of expenses for activities
described in paragraph (a)~~(2)~~ of this section to their Federal
~~accoun~~t funds.

\(3\) [Senate election year]{.underline}. ~~In any year in which~~ If a
Senate candidate, but no Presidential candidate, appears on the
ballot**,** State, district, and local party committees and
organizations must allocate at least 21% of expenses for activities
described in paragraph (a)(~~2)~~ of this section to their Federal
~~account~~ funds.

\(4\) [Non- Presidential and non-Senate year]{.underline}. ~~In any year
in which~~ If neither a

Presidential nor a Senate candidate appears on the ballot, State,
district, and local party committees and organizations must allocate at
least 15% of expenses for activities described in paragraph (a)~~(2)~~
of this section to their Federal ~~account~~ funds.

~~(4) [Other voter registration activities]{.underline}. Expenses for
voter registration activitied undertaken by a State, district or local
party committee outside the period beginning 120 days before an election
and ending on the date of the election may be paid with 100% non-Federal
funds, or they may be allocated between the committee's Federal and
non-Federal accounts.~~

~~(5) [Other get-out-the-vote activities when no Federal candidate is on
the ballot]{.underline}. Expenses for voter registration activities
undertaken by a State, district or local party committee may be paid
with 100% non-Federal funds, or they may be allocated between the
committee's Federal and non-Federal accounts.~~

\(c\) [Costs]{.underline} of Federal election activity [not allocable by
State, district, and local party committees]{.underline}. The following
costs incurred by State, district, and local party committees and
organizations must be paid only with Federal funds:

> ~~(1) [Activities that refer to clearly identified Federal
> candidates]{.underline}.~~
>
> ~~Disbursements by State, district and local party committees for
> activities that refer to a clearly identified candidate for Federal
> office must not be allocated between or among Federal, non-Federal and
> Levin accounts. Only Federal funds may be used.~~
>
> ~~(2) [Activities that refer to Federal and to State and/or local
> elections]{.underline}. With the exception of activities described in
> paragraph (a)(3) of this section, disbursements by State, district and
> local party committees for activities that do not refer to a clearly
> identified Federal candidate, but that are wholly or in part in
> connection with Federal elections, must not be allocated between or
> among Federal, non-Federal and Levin accounts. Only Federal funds may
> be used.~~
>
> \(1\) Public communications. Expenditures for public communications as
> defined in 11 CFR 100.26 by State, district, and local party
> committees and organizations that refer to a clearly identified
> candidate for Federal office and that promote, support, attack, or
> oppose any such candidate for Federal office must not be allocated
> between or among Federal, non-Federal, and Levin accounts. Only
> Federal funds may be used.
>
> \(2\) Salary and other compensation, including benefits. Salaries and
> other
>
> compensation, including benefits, for employees who spend more than
> 25% of their compensated time in a given month on activities in
> connection with a Federal election must not be allocated between or
> among Federal, non-Federal, and Levin accounts. Only Federal funds may
> be used.
>
> \(3\) [Fundraising costs]{.underline}. Disbursements for direct
> fundraising costs incurred by State, district, and local party
> committees and organizations for funds to be used, in whole or in
> part, for Federal election activity, including the activities
> described in paragraph (a)~~(3)~~ of this section, must not be
> allocated between or among Federal, non-Federal and Levin ~~accounts~~
> funds. Only Federal funds may be used. ~~However, if such
> disbursements are for solely non-Federal fundraising costs,
> non-Federal funds may be used.~~

\(d\) [Transfers between accounts to cover allocable
expenses]{.underline}. State, district, and local party committees and
organizations may transfer funds from their Levin accounts to their
Federal accounts or to allocation accounts solely to meet expenses
allocable pursuant to paragraphs (a)(1) and (2) of this section and only
pursuant to the following ~~requirements~~ methods:

> \(1\) [Payments from Federal accounts or from allocation
> accounts]{.underline}.
>
> [(i)]{.underline} If Federal accounts are used to make payments for
> allocable activities, State, district, and local party committees and
> organizations must pay the entire amount of ~~an~~ allocable expenses
> from their Federal accounts and transfer funds from their Levin
> accounts to their Federal accounts solely to cover the Levin accounts'
> portions of the expenses; or
>
> \(ii\) State, district, and local party committees and organizations
> may establish separate allocation accounts into which Federal funds
> and Levin funds may be deposited solely for the purpose of paying
> allocable expenses.
>
> \(2\) [Timing]{.underline}.
>
> \(i\) If ~~a~~ Federal accounts ~~is~~ are used to make allocable
> expenditures and disbursements, State, district, and local party
> committees and organizations must transfer Levin funds ~~from their
> Levin accounts~~ to their Federal accounts to meet allocable expenses
> no more than 10 days before and no more than 60 days after the
> payments for which they are designated are made from a Federal
> account, except that transfers may be made more than 10 days before a
> payment is made from the Federal account if advance payment is
> required by the vendor(s) and if such payment is based on a reasonable
> estimate of the activity's final costs as determined by the committee
> and the vendor(s) involved.
>
> \(ii\) Any portion of a transfer ~~from a committee's Levin account~~
> of Levin funds to ~~it's~~ a party committee or organization's Federal
> account that does not meet the requirement of paragraph (d)(2)(i) of
> this section shall be presumed to be a loan or contribution from the
> Levin account to the Federal account, in violation of the Act.

§ 300.34 Transfers.

\(a\) [Federal funds]{.underline}.

\(1\) Notwithstanding 11 CFR 102.6(a)(1)(ii), a State, district, or
local committee of a political party must not use any Federal funds
transferred to it from, or otherwise accepted by it from, any of the
persons enumerated in paragraphs (b)(1) and (b)(2) of this section as
the Federal component of an expenditure for Federal election activity
under 11 CFR 300.32. A State, district, or local committee of a
political party must itself raise the Federal component of an
expenditure allocated between Federal funds and Levin funds under 11 CFR
300.32 and 300.33.

\(2\) A State, district, or local committee of a political party that
makes an expenditure of Federal funds for Federal election activities
must demonstrate that the Federal funds used to make the expenditure do
not include Federal funds transferred to the committee in violation of
this section. To make this demonstration, the committee must use an
accounting method that employs general ledger accounts and that
segregates assets, liabilities, revenue and expenses for Federal
election activity undertaken pursuant to 11 CFR 300.32. If the
accounting method is computer-based, the data must be back up no less
than monthly. Alternatively, a State, district, or local committee of a
political party committee may establish a separate Federal account into
which the committee deposits only Federal funds raised by the committee
itself, and from which all expenditures of Federal funds for Federal
election activities are made.

\(b\) [Levin funds]{.underline}. Levin funds must be raised solely by
the State, district, or local committee of a political party that
expends or disburses the funds. A State, district, or local committee of
a political party must not use as Levin funds any funds transferred or
otherwise provided to the committee by:

\(1\) Any other State, district, or local committee of any political
party, any officer or agent acting on behalf of such a committee, or any
entity directly or indirectly established, financed, maintained or
controlled by such a committee; or,

\(2\) The national committee of any political party (including a
national congressional campaign committee of a political party), any
officer or agent acting on behalf of such a committee, or any entity
directly or indirectly established, financed, maintained, or controlled
by such a committee.

\(c\) [Allocation transfers]{.underline}. Transfers of Levin funds
between the accounts of a State, district, or local committee of a
political party for allocation purposes must comply with 11 CFR 300.33.

**§ 300.35 Office buildings.**

\(a\) [General provision]{.underline}. For the purchase or construction
of its office building, a State or local party committee may spend funds
that are not subject to the limitations, prohibitions, and disclosure
provisions of the Act, so long as such funds are not contributed or
donated by a foreign national. See 2 U.S.C. 441e. Funds received by the
State or local party committee that are spent for the purchase or
construction of its office building are subject to State law. An office
building must not be purchased or constructed for the purpose of
influencing the election of any candidate in any particular election for
Federal office. For purposes of this section, the term [local party
committee]{.underline} shall include a [district party
committee]{.underline}.

\(b\) [Application of State law]{.underline}. Amounts received by a
State or local party committee that are spent for the purchase or
construction of its office building are subject to State law as set
forth in paragraphs (b)(1), (2), and (3) of this section.

\(1\) [Non-Federal account]{.underline}. If a State or local party
committee uses non-Federal funds, Federal law does not preempt or
supersede State law as to the source of funds used, the permissibility
of the disbursements, or the reporting of the receipt and disbursement
of such funds, except as provided in paragraphs (a) and (d) of this
section.

\(2\) [Federal account]{.underline}. If a State or local party committee
uses funds from its accounts containing only Federal funds, Federal law
does not supersede or preempt State law as to the permissibility of the
disbursements, except as provided in paragraphs (a) and (d) of this
section. Federal law also does not preempt or supersede any State law
that establishes additional prohibitions or limitations as to the source
of the funds, as ascertained by application of a reasonable accounting
method prescribed under State law.

\(3\) [Levin funds]{.underline}. Levin funds may be used for the
purchase or construction of a State or local party committee office
building, if permitted by State law.

\(c\) [Definition of "purchase or construction of an office
building."]{.underline}

(1) [Office building]{.underline} means a structure and the land
    underlying the structure,

> comprised of structural components and fixtures essential to the
> operation or appearance of the office building, and that is lawfully
> occupied and used by a State or local party committee solely for its
> own party administration and election campaign support purposes.
> [Office building]{.underline} does not include office furnishings,
> furniture, equipment, and machinery (such as computers, file cabinets,
> photocopiers, or audio-visual production equipment).

\(2\) [Purchase]{.underline} means any payment to acquire the sole legal
title to the building, including fees directly related to the
acquisition of the building, such as sales commissions and real estate
closing or settlement fees. Purchase does not include payments for the
rent or leasing of an office building, property taxes and similar
assessments, building maintenance, utility services, and office
equipment.

\(3\) [Construction]{.underline} includes the design and erection of the
structure of a building. Construction does not include the maintenance
or repair of the building or its structural components, unless the
repair work reaches a level to constitute major restoration or
renovation of the building.

> [(d) Allocation of expenses not within the definition of "purchase or
> construction of an office building."]{.underline} If funds raised by a
> State or local party committee are used for an expense for its office
> building and the expense does not fall within the definitions in
> paragraph (c) of this section, the expense is an allocable
> administrative expense unless it falls within another category, such
> as support for a Federal or non-Federal candidate. If the expense is
> an allocable administrative expense, 11 CFR ~~300.33~~ 106.7
> applies~~, and the administrative expense is subject to the
> limitations and prohibitions of the Act~~.
>
> \(e\) [Leasing a portion of the party office building.]{.underline} A
> State or local party committee may lease a portion of its office
> building to others to generate income at the usual and normal charge.
> If the building is purchased or constructed in whole or in part with
> non-Federal funds, all rental income shall be deposited in the
> committee's non-Federal account and used only for non-Federal
> purposes. Such rental income and its use must also comply with State
> law. If the building is purchased or constructed solely with Federal
> funds, the rental income may be deposited in the Federal account only
> if the sources of the revenue collected comply with the limitations
> and prohibitions of the Act and the revenue does not exceed the
> limitations of the Act. The receipt of such funds shall be reported in
> compliance with 11 CFR 104.3(a)(4)(vi).

\(f\) [Transitional Provisions for State Party Building or Facility
Account.]{.underline} Up to and including November 5, 2002, the State
committee of a political party may accept funds into its party office
building or facility account, established pursuant to repealed 2 U.S.C.
431(8)(B)(viii), and use the funds in the account only for the
construction or purchase of an office building or facility. Starting on
November 6, 2002, the funds in the account will be subject to the
provisions of paragraphs (a) through (c) of this section if used for a
State party office building. They may not be used for Federal account or
Levin account purposes. They may be used for any non-Federal purposes,
as permitted under State law.

**§ 300.36 Reporting Federal election activity; recordkeeping.**

\(a\) [Requirements for a State, district, or local committee of a
political party]{.underline}, or an association or similar group of
candidates for State or local office or of individuals holding State or
local office, [that is not a political committee]{.underline}.

\(1\) A State, district, or local committee of a political party, or an
association or similar group of candidates for State or local office or
of individuals holding State or local office, that is not a political
committee ([see]{.underline} 11 CFR 100.5) must demonstrate ~~through a
reasonable accounting method~~ that whenever it makes a payment of
Federal funds for Federal election activity ([see]{.underline} 11 CFR
300.32 and 300.33) it has received sufficient funds subject to the
limitations and prohibitions of the Act to make the payment. To make
this demonstration, the committee must use an accounting method that
employs general ledger accounts and that segregates assets, liabilities,
revenue and expenses for Federal election activity undertaken pursuant
to 11 CFR 300.32. If the accounting method is computer-based, the data
must be back up no less than monthly. Such an organization must keep
records of amounts received or expended under this paragraph and, upon
request, shall make such records available for examination by the
Commission.

\(2\) A payment of Federal funds for Federal election activity shall
constitute an expenditure for purposes of determining whether a State,
district, or local committee of a political party, or an association or
similar group of candidates for State or local office or of individuals
holding State or local office, qualifies as a political committee under
11 CFR 100.5, unless the payment is excluded from the definition of
expenditure under 11 CFR 100.8. A payment of Federal funds for Federal
election activity that meets the criteria of 11 CFR 100.8(b)(10), (16),
or (18) ([exempt activities]{.underline}) shall be treated as a payment
for exempt activity in accordance with all applicable provisions of this
chapter, including, but not limited to, 11 CFR 100.5(c).

\(b\) [Requirements for a State, district, or local committee of a
political party]{.underline}, or an association or similar group of
candidates for State or local office or of individuals holding State or
local office, [that is a political committee]{.underline}.

\(1\) ~~[Reporting disbursements of Federal funds for Federal election
activity]{.underline}~~. Requirements for a State, district, or local
committee of a political party that has less than \$5,000 of aggregate
receipts and disbursements for Federal election activity in a calendar
year, and for an association or similar group of candidates for State or
local office or of individuals holding State or local office at all
times. This paragraph applies to ~~A~~ a State, district, or local
committee of a political party that is a political committee, and that
has less \$5,000 of aggregate receipts and disbursements for Federal
election activity in a calendar year; and, at all times, to an
association or similar group of candidates for State or local office or
of individuals holding State or local office that is a political
committee ([see]{.underline} 11 CFR 100.5). ~~Either~~ ~~s~~Such a party
committee or association of candidates or officeholders must report all
receipts and disbursements of Federal funds for Federal election
activity, including the Federally allocated portion of a payment for
Federal election activity. ~~This requirement applies whether or not the
committee's aggregate total receipts and disbursements for Federal
election activity is \$5,000 or more during the calendar year.~~ ~~For
purposes of this paragraph, a~~A disbursement of Federal funds for
Federal election activity ([see]{.underline} 11 CFR 300.32 and 300.33)
by ~~a State, district, or local committee of a political party that is
a political committee~~ either such a party committee or association of
candidates or officeholders shall be deemed an expenditure and reported
as such pursuant to 11 CFR part 104, unless the disbursement is excluded
from the definition of expenditure under 11 CFR 100.8.

\(2\) ~~[Reporting all receipts and disbursements for Federal election
activity; threshold]{.underline}~~. Requirements for a State, district,
or local committee of a political party that has \$5,000 or more of
aggregate receipts and disbursements for Federal election activity in a
calendar year. ~~In addition to the requirements of paragraph (b)(1) of
this section, a~~A State, district, or local committee of a political
party that is a political committee ([see]{.underline} 11 CFR 100.5)
must report all receipts and disbursements made for Federal election
activity if the aggregate amount of such receipts and disbursements is
\$5,000 or more during the calendar year. The disclosure required by
this paragraph must include receipts and disbursements of Federal funds
and of Levin funds used for Federal election activity~~, notwithstanding
the otherwise non-Federal nature of the Levin funds~~.

\(i\) [Reporting of ~~payments for Federal election activity
allocated~~]{.underline} allocation of expenses [between Federal funds
and Levin funds]{.underline}. A State, district, or local committee of a
political party that makes a ~~payment~~ disbursement for Federal
election activity that is allocated between Federal funds and Levin
funds ([see]{.underline} 11 CFR 300.33) must report for each such
~~payment~~ disbursement:

\(A\) In the first report of a calendar year disclosing an allocated
disbursement for Federal election activity, the committee must state the
allocation percentages to be applied for allocable Federal election
activity pursuant to 11 CFR 300.33(b).

\(B\) In each subsequent report in the calendar year itemizing an
allocated disbursement for Federal election activity, the committee must
state the category of Federal election activity (see 11 CFR 100.24(b))
for which each allocated disbursement was made, and must disclose the
total amounts disbursed from Federal funds and Levin funds for that year
to date for each such category.

\(ii\) Reporting of allocation transfers. A committee that makes
allocated disbursements for Federal election activities in accordance
with 11 CFR 300.33(d) shall report each transfer of Levin funds from its
Levin account, to its Federal account, and each transfer from its
Federal account and its Levin account into an allocation account, for
the purpose of making such disbursements. In the report covering the
period in which each transfer occurred, the committee must explain in a
memo entry the allocated disbursement to which the transfer relates and
the date on which the transfer was made. If the transfer includes funds
for the allocable costs of more than one category of Federal election
activity, the committee must itemize the transfer, showing the amounts
designated for each category.

\(iii\) Reporting of allocated disbursements. For each disbursement
allocated between Federal funds and Levin funds, the committee must
report ~~T~~the full name and address of each person to whom the
~~payment~~ disbursement was made, the date of the ~~payment~~
disbursement, amount and purpose of the ~~payment~~ disbursement~~, and
the amount of and explanation for the allocation percentage used for the
payment, as provided in S11 CFR 104.17(b)~~. If the ~~payment~~
disbursement is for the allocable costs of more than one category of
Federal election activity, the committee must itemize the ~~payment~~
disbursement, showing the amounts designated for each ~~Federal election
activity~~ category. The committee must also ~~report~~ disclose the
total amount ~~paid~~ disbursed from Federal funds and Levin funds for
Federal election activity that calendar year, to date, for each category
of Federal election activity.

\(iv\) [Itemization]{.underline}. The disclosure required by paragraph
(b)(2) of this section must include, in addition to any other applicable
reporting requirement of this chapter, the itemized disclosure of
receipts and disbursements of \$200 or more to or from any person for
Federal election activities~~, as provided in part 104~~.

\(3\) [Reporting of ~~other payments~~]{.underline} disbursements
[allocated between Federal funds and non-Federal funds]{.underline},
other than Levin funds. A State, district, or local committee of a
political party that makes a ~~payment~~ disbursement for costs
allocable between Federal and non-Federal funds, other than the costs of
Federal election activity that is allocated between Federal funds and
Levin funds under 11 CFR 300.33, must comply with 11 CFR 104.17.

\(c\) [Filing.]{.underline}

\(1\) [Schedule]{.underline}. A State, district, or local committee of a
political party, or an association or similar group of candidates for
State or local office or of individuals holding State or local office,
that must file reports under paragraph (b) of this section must comply
with the monthly filing schedule in 11 CFR 104.5(c)(3).

\(2\) Electronic filing. Receipts of Federal funds for Federal election
activity that constitute contributions under 11 CFR 100.7, and
disbursements of Federal funds for Federal election activity that
constitute expenditures under 11 CFR 100.8, apply when determining
whether a political committee must file reports in an electronic format
under 11 CFR 104.18.

\(d\) [Recordkeeping]{.underline}. A State, district, or local committee
of a political party, or an association or similar group of candidates
for State or local office or of individuals holding State or local
office, that must file reports under paragraph (b) of this section must
comply with the requirements of 11 CFR 104.14.

**§ 300.37 Prohibitions on fundraising for and donating to certain
tax-exempt organizations (2 U.S.C. 441i(d)).**

\(a\) [Prohibitions.]{.underline} A State, district, or local committee
of a political party must not solicit any funds for, or make or direct
any donations to:

\(1\) An organization that is described in 26 U.S.C. 501(c) and exempt
from taxation under section 26 U.S.C. 501(a) and that makes expenditures
or disbursements in connection with an election for Federal office,
including expenditures or disbursements for Federal election activity;

> \(2\) An organization that has submitted an application for tax-exempt
> status under
>
> 26 U.S.C. 501(c) and that makes expenditures or disbursements in
> connection with an election for Federal office, including expenditures
> or disbursements for Federal election activity; or

(4) An organization described in 26 U.S.C. 527, ~~except for a political
    party~~

unless the organization is:

\(i\) A political committee under 11 CFR 100.5;

\(ii\) A State, district, or local committee of a political party;

(iii) The authorized campaign committee of a State or local candidate;
      or

\(iv\) A political committee under State law, that supports only State
or local candidates and that does not make expenditures or disbursements
in connection with an election for Federal office, including
expenditures or disbursements for Federal election activity.

\(b\) [Application]{.underline}. This section also applies to:

\(1\) An officer or agent acting on behalf of a State, district, or
local committee of a political party;

> \(2\) An entity that is directly or indirectly established, financed,
> maintained, or controlled by a State, district, or local committee or
> a political party or an officer or agent acting on behalf of such an
> entity; or

\(3\) An entity that is directly or indirectly established, financed,
maintained, or controlled by an agent of a State, district, or local
committee of a political party.

\(c\) Determining whether an organization makes expenditures or
disbursements in connection with a Federal election. In determining
whether a section 501(c) organization makes expenditures or
disbursements in connection with a Federal election as described in
paragraphs (a)(1) and (2), including expenditures and disbursements for
Federal election activity, a State, district, or local committee of a
political or any other person described in paragraph (b) may obtain and
rely upon a certification from the organization that satisfies the
criteria described in paragraph (d) of this section. In determining
whether section 527 organization is a State-registered political
committee that supports only State or local candidates and does not make
expenditures or disbursements in connection with an Federal election, as
described in paragraph (a)(3), including expenditures and disbursements
for Federal election activity, a State, district, or local committee of
a political or any other person described in paragraph (b) may obtain
and rely upon a certification from the organization that satisfies the
criteria described in paragraph (e) of this section.

\(d\) Certification from section 501(c) organization. A State, district,
or local committee of a political or any other person described in
paragraph (b) of this section may rely upon a certification that meets
all of the following criteria:

\(1\) The certification states with specificity that, in the current
election cycle, and within the two years preceding the current cycle,
the organization has not and does not intend to:

> \(i\) Establish, finance, maintain, support, or control a political
> committee;
>
> \(ii\) Make expenditures or disbursements for Federal election
> activity;
>
> \(iii\) Finance voter registration;
>
> \(iv\) Finance voter guides, candidate questionnaires, or candidate
> surveys that refer to one or more candidates for Federal office; or
>
> \(v\) Finance get-out-the-vote communications that refer to one or
> more candidates for Federal office;

\(2\) The certification is signed and sworn to by an officer or other
authorized representative of the organization with knowledge the
organization's activities; and

\(3\) The certification is accompanied by:

> \(i\) The organization's Form 990 tax returns for the current election
> cycle and the last two fiscal years preceding it and its application
> for tax exempt status if the organization has already been granted
> exempt status under 501(c); or
>
> \(ii\) The organization's Form 990 tax return and its application for
> tax exempt status once these documents are become available if the
> organization has submitted an application for determination of
> tax-exempt status under
>
> 26 U.S.C. 501(c) that has not yet been granted or denied.

\(e\) Certification from section 527 organization. A State, district, or
local committee of a political or any other person described in
paragraph (b) of this section may rely upon a certification from a
State-registered section 527 organization that meets all of the
following criteria:

\(1\) The certification states with specificity that, in the current
election cycle, and within the two years preceding the current cycle,
the organization has not and does not intend to:

> \(i\) Establish, finance, maintain, support, or control a political
> committee;
>
> \(ii\) Make expenditures or disbursements for Federal election
> activity;
>
> \(iii\) Finance voter registration;
>
> \(iv\) Finance voter guides, candidate questionnaires, or candidate
> surveys that refer to one or more candidates for Federal office; or
>
> \(v\) Finance get-out-the-vote communications that refer to one or
> more candidates for Federal office.

\(2\) The certification is signed and sworn to by an officer or other
authorized representative of the State-registered section 527
organization, including the treasurer, who has knowledge of the
organization's activities.

\(3\) The certification is accompanied by the organization's IRS Forms
8871 and 8872 for the current election cycle and the last two fiscal
years preceding it.

**Subpart C -- Tax-exempt Organizations**

**§ 300.50 Prohibited fundraising by national party committees (2 U.S.C.
441i(d)).**

\(a\) [Prohibitions on fundraising and donations.]{.underline} A
national committee of a political party, including a national ~~party~~
congressional campaign committee, must not solicit any funds for, or
make or direct any donations to:

\(1\) An organization that is described in 26 U.S.C. 501(c) and exempt
from taxation under section 26 U.S.C. 501(a) and that makes expenditures
or disbursements in connection with an election for Federal office,
including expenditures or disbursements for Federal election activity;

> \(2\) An organization that has submitted an application for tax-exempt
> status under
>
> 26 U.S.C. 501(c) and that makes expenditures or disbursements in
> connection with an election for Federal office, including expenditures
> or disbursements for Federal election activity; or
>
> \(3\) An organization described in 26 U.S.C. 527, ~~except for a
> political party~~ unless the organization is:

\(i\) A political committee under 11 CFR 100.5;

\(ii\) A State, district, or local committee of a political party; or

\(iii\) The authorized campaign committee of a State or local candidate;

\(b\) [Application]{.underline}. This section also applies to:

\(1\) An officer or agent acting on behalf of a national party
committee, including a national ~~party~~congressional campaign
committee;

> \(2\) An entity that is directly or indirectly established, financed,
> maintained or controlled by a national party committee, including a
> national ~~party~~congressional campaign committee, or an officer or
> agent acting on behalf of such an entity; or
>
> \(3\) An entity that is directly or indirectly established, financed,
> maintained, or controlled by an agent of a national, State, district,
> or local committee of a political party, including a national
> ~~party~~congressional campaign committee.

\(c\) Determining whether an organization makes expenditures or
disbursements in connection with Federal elections. In determining
whether an organization makes expenditures or disbursements in
connection with a Federal election as described in paragraphs (a)(1) and
(2), a national committee of a political party, including a national
congressional campaign committee, or any other person described in
paragraph (b) may obtain and rely upon a certification from the
organization or committee that satisfies the criteria described in
paragraph (d) of this section.

\(d\) Certification. A national committee of a political party,
including a national congressional campaign committee, or any person
described in paragraph (b) of this section may rely upon a certification
that meets all of the following criteria:

\(1\) The certification states with specificity that, in the current
election cycle, and within the two years preceding the current cycle,
the organization has not and does not intend to:

> \(i\) Establish, finance, maintain, support, or control a political
> committee;
>
> \(ii\) Make expenditures or disbursements for Federal election
> activity;
>
> \(iii\) Finance voter registration;
>
> \(iv\) Finance voter guides, candidate questionnaires, or candidate
> surveys that refer to one or more candidates for Federal office; or
>
> \(v\) Finance get-out-the-vote communications that refer to one or
> more candidates for Federal office;

\(2\) The certification is signed and sworn to by an officer or other
authorized representative of the organization with knowledge the
organization's activities; and

\(3\) The certification is accompanied by:

> \(i\) The organization's Form 990 tax returns for the current election
> cycle and the last two fiscal years preceding it and its application
> for tax exempt status if the organization has already been granted
> exempt status under 501(c); or
>
> \(ii\) The organization's Form 990 tax return and its application for
> tax exempt status once these documents are become available if the
> organization has submitted an application for determination of
> tax-exempt status under
>
> 26 U.S.C. 501(c) that has not yet been granted or denied.

**§ 300.51 Prohibited fundraising by State, district, or local party
committees (2 U.S.C. 441i(d)).**

\(a\) [Prohibitions.]{.underline} A State, district, or local committee
of a political party must not solicit any funds for, or make or direct
any donations to:

> \(1\) An organization that is described in 26 U.S.C. 501(c) and exempt
> from taxation under section 26 U.S.C. 501(a) and that makes
> expenditures or disbursements in connection with an election for
> Federal office, including expenditures or disbursements for Federal
> election activity;
>
> \(2\) An organization that has submitted an application for tax-exempt
> status under
>
> 26 U.S.C. 501(c) and that makes expenditures or disbursements in
> connection with an election for Federal office, including expenditures
> or disbursements for Federal election activity; or

\(3\) An organization described in 26 U.S.C. 527, ~~except for a
political party~~ unless the organization is:

\(i\) A political committee under 11 CFR 100.5;

\(ii\) A State, district, or local committee of a political party;

(iv) The authorized campaign committee of a State or local candidate; or

\(iv\) A political committee under State law, that supports only state
or local candidates and that does not make expenditures or disbursements
in connection with an election for Federal office, including
expenditures or disbursements for Federal election activity.

\(b\) [Application]{.underline}. This section also applies to:

\(1\) An officer or agent acting on behalf of a State, district, or
local committee of a political party;

> \(2\) An entity that is directly or indirectly established, financed,
> maintained or controlled by a State, district, or local committee or a
> political party or an officer or agent acting on behalf of such an
> entity; or

\(3\) An entity that is directly or indirectly established, financed,
maintained, or controlled by an agent of a State, district, or local
committee of a political party.

\(c\) Determining whether an organization makes expenditures or
disbursements in connection with a Federal election. In determining
whether a Section 501(c) organization makes expenditures or
disbursements in connection with a Federal election as described in
paragraphs (a)(1) and (2), including expenditures and disbursements for
Federal election activity, a state, district, or local committee of a
political or any other person described in paragraph (b) may obtain and
rely upon a certification from the organization that satisfies the
criteria described in paragraph (d) of this section. In determining
whether Section 527 organization is a State-registered political
committee that supports only state or local candidates and does not make
expenditures or disbursements in connection with an Federal election, as
described in paragraph (a)(3), including expenditures and disbursements
for Federal election activity, a state, district, or local committee of
a political or any other person described in paragraph (b) may obtain
and rely upon a certification from the organization that satisfies the
criteria described in paragraph (e) of this section.

\(d\) Certification from Section 501(c) organization. A state, district,
or local committee of a political or any other person described in
paragraph (b) of this section may rely upon a certification that meets
all of the following criteria:

\(1\) The certification states with specificity that, in the current
election cycle, and within the two years preceding the current cycle,
the organization has not and does not intend to:

> \(i\) Establish, finance, maintain, support, or control a political
> committee;
>
> \(ii\) Make expenditures or disbursements for Federal election
> activity;
>
> \(iii\) Finance voter registration;
>
> \(iv\) Finance voter guides, candidate questionnaires, or candidate
> surveys that refer to one or more candidates for Federal office; or
>
> \(v\) Finance get-out-the-vote communications that refer to one or
> more candidates for Federal office;

\(2\) The certification is signed and sworn to by an officer or other
authorized representative of the organization with knowledge the
organization's activities; and

\(3\) The certification is accompanied by:

> \(i\) The organization's Form 990 tax returns for the current election
> cycle and the last two fiscal years preceding it and its application
> for tax exempt status if the organization has already been granted
> exempt status under 501(c); or
>
> \(ii\) The organization's Form 990 tax return and its application for
> tax exempt status once these documents are become available if the
> organization has submitted an application for determination of
> tax-exempt status under
>
> 26 U.S.C. 501(c) that has not yet been granted or denie

\(e\) Certification from Section 527 organization. A state, district, or
local committee of a political or any other person described in
paragraph (b) of this section may rely upon a certification from a
state-registered Section 527 organization that meets all of the
following criteria:

\(1\) The certification states with specificity that, in the current
election cycle, and within the two years preceding the current cycle,
the organization has not and does not intend to:

> \(i\) Establish, finance, maintain, support, or control a political
> committee;
>
> \(ii\) Make expenditures or disbursements for Federal election
> activity;
>
> \(iii\) Finance voter registration;
>
> \(iv\) Finance voter guides, candidate questionnaires, or candidate
> surveys that refer to one or more candidates for Federal office; or
>
> \(v\) Finance get-out-the-vote communications that refer to one or
> more candidates for Federal office.

\(2\) The certification is signed and sworn to by an officer or other
authorized representative of the state-registered 527 organization,
including the treasurer, who has knowledge of the organization's
activities.

\(3\) The certification is accompanied by the organization's IRS Forms
8871 and 8872 for the current election cycle and the last two fiscal
years preceding it.

**§ 300.52 Fundraising by Federal candidates and Federal officeholders
(2 U.S.C. 441i(e)(1)&(4)).**

A Federal candidate, an individual holding Federal office, and an
individual agent acting on behalf of either may make the following
solicitations of funds on behalf of any organization described in 26
U.S.C. 501(c) and exempt from taxation under 26 U.S.C. 501(a), or an
organization that has submitted an application for determination of
tax-exempt status under 26 U.S.C. 501(c):

\(a\) [General solicitations.]{.underline} A Federal candidate, an
individual holding Federal office or an individual agent acting on
behalf of either, may make a general solicitation of funds, without
regard to source or limitation, if:

> \(1\) The organization does not engage in activities in connection
> with an election, including any activity described in paragraph (c) of
> this section; or

\(2\) (i) The organization conducts activities in connection with an
election, but the organization's principal purpose is not to conduct
election activity or any activity described in paragraph (c) of this
section; and

> \(ii\) The solicitation is not to obtain funds for activities in
> connection with an election or any activity described in paragraph (c)
> of this section.

\(b\) [Specific solicitations]{.underline}. A Federal candidate, an
individual holding Federal office, or an individual agent acting on
behalf of either, may make a solicitation explicitly to obtain funds for
any activity described in paragraph (c) of this section or for an
organization whose principal purpose is to conduct that activity, if:

\(1\) The solicitation is made only to individuals; and

> \(2\) The amount solicited from any individual does not exceed
> \$20,000 during any calendar year.

\(c\) Voter registration, voter identification, get-out-the-vote
activity and generic campaign activity. This section applies to only the
following types of Federal election activity:

> \(1\) Voter registration activity, as described in 11 CFR
> 100.24(a)(2), during the period that begins on the date that is 120
> days before the date a regularly scheduled Federal election is held
> and ends on the date of the election; or
>
> \(2\) The following activities conducted in connection with an
> election in which one or more Federal candidates appear on the ballot
> (see 11 CFR 100.24(a)(1)), regardless of whether one or more State
> candidates also appears on the ballot:
>
> \(i\) Voter identification as described in 11 CFR 100.24(a)(4);
>
> \(ii\) Get-out-the-vote activity as described in 11 CFR 100.24(a)(3);
> or
>
> \(iii\) Generic campaign activity as defined in 11 CFR 100.25.

\(d\) Prohibited solicitations. A Federal candidate, an individual
holding Federal office, and an individual who is an agent acting on
behalf of either, must not make any solicitation on behalf of any
organization described in 26 U.S.C. 501(c) and exempt from taxation
under 26 U.S.C. 501(a), or an organization that has submitted an
application for determination of tax-exempt status under 26 U.S.C.
501(c) for any election activity other than a Federal election activity
as described in paragraph (c) of this section.

\(e\) Safe Harbor. In determining whether a 501(c) organization is one
whose principal purpose is to conduct the activities described in
paragraph (c) of this section, a Federal candidate, an individual
holding Federal office, or an individual agent acting on behalf of
either may obtain and rely upon a certification from the organization
that satisfies the following criteria:

\(1\) The certification states with specificity that the organization's
principal purpose is not, and within the last two years has not been, to
conduct election activities, including election activities described in
paragraphs (c) of this section;

\(2\) The certification is signed and sworn to by an officer or other
authorized representative of the organization with knowledge the
organization's activities; and

\(3\) The certification is accompanied by:

> \(i\) The organization's Form 990 tax returns for the last two fiscal
> years and its application for tax exempt status if the organization
> has already been granted exempt status under 501(c); or
>
> \(ii\) The organization's Form 990 tax return and its application for
> tax exempt status if the organization once these documents are
> available if the organization has submitted an application for
> determination of tax-exempt status under 26 U.S.C. § 501(c), that has
> not been granted or denied.

**Subpart D -- Federal Candidates and Officeholders**

**§ 300.60 Scope (2 U.S.C. 441i(e)(1)).**

This subpart applies to:

\(a\) Federal candidates;

\(b\) Individuals holding Federal office ([see]{.underline} 11 CFR
100.4);

\(c\) Agents of a Federal candidate or individual holding Federal
office, and

\(d\) Entities that are directly or indirectly established, financed,
maintained, or controlled by, or acting on behalf of, one or more
Federal candidates or individuals holding Federal office.

**§ 300.61 Federal elections (2 U.S.C. 441i(e)(1)(A)).**

No person described in 11 CFR 300.60 shall solicit, receive, direct,
transfer, ~~or~~ spend, or disburse funds in connection with an election
for Federal office, including funds for any Federal election activity as
defined in 11 CFR 100.24, unless the amounts consist of Federal funds
that are subject to the limitations, prohibitions, and reporting
requirements of the Act.

**§ 300.62 Non-Federal elections (2 U.S.C. 441i(e)(1)(B)).**

~~No~~ A person described in 11 CFR 300.60 ~~shall~~ may solicit,
receive, direct, transfer, ~~or~~ spend, or disburse funds in connection
with any non-Federal election~~, unless the amounts consist of Federal
funds that are subject to the limitations and prohibitions of the Act.~~
only in amounts and from sources that are consistent with State law, and
that do not exceed the Act's contribution limits or come from prohibited
sources under the Act.

**§ 300.63 Exception for State party candidates (2 U.S.C. 441i(e)(2)).**

Section 300.62 shall not apply to a Federal candidate or individual
holding Federal office who is a candidate for State or local office, if
the solicitation, receipt or spending of funds is permitted under State
law; and refers only to that State or local candidate, to any other
candidate for that same State or local office, or both. If an individual
is simultaneously running for both Federal and State or local office,
the individual must raise, accept, and spend only Federal funds for the
Federal election.

§ 300.64 Exemption for attending or speaking at fundraising events (2
U.S.C. 441i(e)(3)).

Notwithstanding the provisions of 11 CFR 100.24, 300.61 and 300.62, a
Federal candidate or individual holding Federal office may attend,
speak, or be a featured guest at a fundraising event for a State,
district, or local committee of a political party, including a
fundraising event at which Levin funds are raised, or at which
non-Federal funds are raised. The sponsoring entity may advertise,
announce, or otherwise publicize that the Federal candidate or Federal
officeholder will attend, speak, or be a featured guest at the event.
The Federal candidate or individual holding Federal office must not:

\(a\) Serve on the host committee for a fundraising event;

\(b\) Sign a solicitation for the event;

\(c\) Actively solicit funds at the event;

\(d\) Receive or accept contributions or donations; or

\(e\) Direct contributions or donations to others.

**§ 300.65 Exceptions for certain tax-exempt organizations (2 U.S.C.
441i(e)(1)&(4)).**

A Federal candidate, an individual holding Federal office, and an
individual agent acting on behalf of either may make the following
solicitations of funds on behalf of any organization described in 26
U.S.C. 501(c) and exempt from taxation under 26 U.S.C. 501(a), or an
organization that has submitted an application for determination of
tax-exempt status under 26 U.S.C. 501(c):

\(a\) [General solicitations.]{.underline} A Federal candidate, an
individual holding Federal office or an individual agent acting on
behalf of either, may make a general solicitation of funds, without
regard to source or limitation, if:

> \(1\) The organization does not engage in activities in connection
> with an election, including any activity described in paragraph (c) of
> this section; or

\(2\) (i) The organization conducts activities in connection with an
election, but the organization's principal purpose is not to conduct
election activity or any activity described in paragraph (c) of this
section; and

> \(ii\) The solicitation is not to obtain funds for activities in
> connection with an election or any activity described in paragraph (c)
> of this section.

\(b\) [Specific solicitations]{.underline}. A Federal candidate, an
individual holding Federal office, or an individual agent acting on
behalf of either, may make a solicitation explicitly to obtain funds for
any activity described in paragraph (c) of this section or for an
organization whose principal purpose is to conduct that activity, if:

\(1\) The solicitation is made only to individuals; and

> \(2\) The amount solicited from any individual does not exceed
> \$20,000 during any calendar year.

\(c\) Voter registration, voter identification, get-out-the-vote
activity and generic campaign activity. This section applies to only the
following types of Federal election activity:

> \(1\) Voter registration activity, as described in 11 CFR
> 100.24(a)(2), during the period that begins on the date that is 120
> days before the date a regularly scheduled Federal election is held
> and ends on the date of the election; or
>
> \(2\) The following activities conducted in connection with an
> election in which one or more Federal candidates appear on the ballot
> (see 11 CFR 100.24(a)(1)), regardless of whether one or more State
> candidates also appears on the ballot:
>
> \(i\) Voter identification as described in 11 CFR 100.24(a)(4);
>
> \(ii\) Get-out-the-vote activity as described in 11 CFR 100.24(a)(3);
> or
>
> \(iii\) Generic campaign activity as defined in 11 CFR 100.25.

\(d\) Prohibited solicitations. A Federal candidate, an individual
holding Federal office, and an individual who is an agent acting on
behalf of either, must not make a general or specific solicitation on
behalf of any organization described in 26 U.S.C. 501(c) and exempt from
taxation under 26 U.S.C. 501(a), or an organization that has submitted
an application for determination of tax-exempt status under 26 U.S.C.
501(c) for any election activity other than a activity described in
paragraph (c) of this section.

\(e\) Safe Harbor. In determining whether a 501(c) organization is one
whose principal purpose is to conduct the activities described in
paragraph (c) of this section, a Federal candidate, an individual
holding Federal office, or an individual agent acting on behalf of
either may obtain and rely upon a certification from the organization
that satisfies the following criteria:

\(1\) The certification states with specificity that the organization's
principal purpose is not, and within the last two years has not been, to
conduct election activities, including election activities described in
paragraph (c) of this section;

\(2\) The certification is signed and sworn to by an officer or other
authorized representative of the organization with knowledge the
organization's activities; and

\(3\) The certification is accompanied by:

> \(i\) The organization's Form 990 tax returns for the last two fiscal
> years and its application for tax exempt status if the organization
> has already been granted exempt status under 501(c); or
>
> \(ii\) The organization's Form 990 tax return and its application for
> tax exempt status if the organization once these documents are
> available if the organization has submitted an application for
> determination of tax-exempt status under 26 U.S.C. § 501(c), that has
> not been granted or denied.

**Subpart E -- State and Local Candidates**

**§ 300.70 Scope (2 U.S.C. 441i(f)(1)).**

This subpart applies to any candidate for State or local office,
individual holding State or local office, or an agent of any such
candidate or individual. For example, this subpart applies to an
individual holding Federal office who is a candidate for State or local
office. This subpart does not apply to an association or similar group
of candidates for State or local office or of individuals holding State
or local office.

**§ 300.71 Federal funds required for certain public communications (2
U.S.C. 441i(f)(1)).**

No individual described in 11 CFR 300.70 shall spend any funds for a
public communication that refers to a clearly identified candidate for
Federal office (regardless of whether a candidate for State or local
office is also mentioned or identified), and that promotes or supports
any candidate for that Federal office, or attacks or opposes any
candidate for that Federal office (regardless of whether the
communication expressly advocates a vote for or against a candidate)
unless the funds consist of Federal funds that are subject to the
limitations, prohibitions, and reporting requirements of the Act.
[See]{.underline} definition of [public communication]{.underline} at 11
CFR 100.26

**§ 300.72 Federal funds not required for certain communications (2
U.S.C. 441i(f)(2)).**

The requirements of section 11 CFR 300.71 shall not apply if the public
communication is in connection with an election for State or local
office, and refers to one or more candidates for State or local office
or to a State or local officeholder but does not promote, support,
attack, or oppose any candidate for Federal office~~, as defined at 11
CFR 300.2(l)~~.

**PART 9034 -- ENTITLEMENTS**

25\. The authority citation for Part 9034 continues to read as follows:

Authority: 26 U.S.C. 9034 and 9039(b).

26\. Section 9034.8 is amended by adding introductory language to
paragraph (a) to read as follows:

**§ 9034.8 Joint fundraising.**

\(a\) [General]{.underline}. Nothing in this section shall supersede 11
CFR part 300, which prohibits any person from soliciting, receiving,
directing, transferring, or spending any non-Federal funds, or from
transferring Federal funds for Federal election activities.

\* \* \* \* \*

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

David. M. Mason

#####  Chairman

Federal Election Commission

DATED: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

BILLING CODE: 6715‑01‑P

[^1]: Future rulemakings will address: (1) electioneering communications
    and issue ads;

    \(2\) coordinated and independent expenditures; (3) the so-called
    "millionaires' amendments," which increases contribution limits for
    congressional candidates facing self-financed candidates on a
    sliding scale, based on the amount of personal funds the opponent
    contributes to his or her campaign; (4) the increase in contribution
    limits; and (5) other new and amended provisions, including
    contribution prohibitions and reporting. This last rulemaking will
    address contributions by minors, foreign nationals, and U.S.
    nationals; inaugural committees; fraudulent solicitations;
    disclaimers; personal use of campaign funds; and civil penalties.
    BCRA's impact on national nominating conventions will be addressed
    in a separate rulemaking.

[^2]: BCRA's deadline for promulgation of the remaining rules is 270
    days after the date of enactment, or December 22, 2002.

[^3]: For discussion of exempt activities, [see]{.underline} Explanation
    and Justification for 11 CFR 100.24, above; [see also]{.underline} 2
    U.S.C. 431(8)(B)(v), (ix), and (xi), and 431(9)(B)(iv),(viii), and
    (ix).

[^4]: Because corporations can issue written solicitations for
    contributions for their separate segregated funds only twice in one
    year to employees outside of the restricted class, [see]{.underline}
    11 CFR 114.6, the issue of what is and what is not a solicitation
    takes on great importance.

[^5]: The Commission cited these same factors in its Campaign Guide for
    Corporations and Labor Organizations issued in March 1992.

[^6]: The raising and spending of non-Federal funds by State, district,
    and local committees or organizations are addressed in 11 CFR part
    300, subpart B, discussed below.

[^7]: The Commission emphasizes that revisions to section 102.6(a)
    regarding transfers may be forthcoming in a future rulemaking to
    implement changes to 2 U.S.C. 441a(d) made by BCRA. The present
    discussion and this rulemaking extend only to Title I of BCRA. Pub
    L. 107-155, March 27, 2002.