Federal election commission

**11 CFR Parts 100, 102, 109, 110, and 114**

**\[Notice 2002 - 27\]**

**Coordinated and Independent Expenditures**

**AGENCY:** Federal Election Commission.

**ACTION:** Final rules and transmittal of regulations to Congress.

**SUMMARY:** The Federal Election Commission is issuing final rules
regarding payments for communications that are coordinated with a
candidate, a candidate's authorized committee, or a political party
committee. The final rules also address expenditures by political party
committees that are made either in coordination with, or independently
from, candidates. These final rules implement several requirements in
the Bipartisan Campaign Reform Act of 2002 ("BCRA") that significantly
amend the Federal Election Campaign Act of 1971, as amended ("FECA" or
the "Act"). Further information is contained in the Supplementary
Information that follows.

**DATE:** \[Insert date thirty days after publication in the Federal
Register\]

**for further**

**information**

**contact**: Mr. John Vergelli, Acting Assistant General Counsel, or
Attorneys Mr. Mark Allen (coordinated party expenditures), and Mr.
Richard Ewell (coordinated communications paid for by other political
committees and other persons), 999 E Street N.W., Washington, D.C.,
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 ("FECA"
or "the Act"), as amended, 2 U.S.C. 431 [et seq.]{.underline} This is
one in a series of rulemakings the Commission is undertaking in order to
implement the provisions of BCRA and to meet the rulemaking deadlines
set out in BCRA.

Section 402(c)(1) of BCRA establishes a general deadline of 270 days for
the Commission to promulgate regulations to carry out BCRA, which is
December 22, 2002. The final rules do not apply with respect to runoff
elections, recounts, or election contests resulting from the November
2002 general election. 2 U.S.C. 431 note.

Because of the brief period before the statutory deadline for
promulgating these rules, the Commission received and considered public
comments expeditiously. The Notice of Proposed Rulemaking ("NPRM"), on
which these final rules are based, was published in the [Federal
Register]{.underline} on September 24, 2002. 67 [Fed.
Register]{.underline} 60,042 (September 24, 2002). The written comments
were due by October 11, 2002. The Commission received 27 comments from
21 commenters. The names of the commenters and their comments are
available at [http://www.fec.gov/register.htm]{.underline} under
"Coordinated and Independent Expenditures." A public hearing was held on
Wednesday, October 23, 2002, and Thursday, October 24, 2002, at which 14
witnesses testified. A transcript of those hearings is also available at
[http://www.fec.gov/register.htm.]{.underline}

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 coordinated and independent expenditures
were transmitted to Congress on December 18, 2002.

**Introduction**

These final rules primarily address communications that are made in
coordination with a candidate, an authorized committee of a candidate,
or a political party committee. The regulations set forth the meaning of
"coordination." They also set forth statutory requirements for political
party committees with respect to the permitted timing of independent and
coordinated expenditures, and transfers and assignments.

## Explanation and Justification

## [1. Statutory Overview]{.underline} 

FECA limits the amount of contributions to Federal candidates, their
authorized committees, and other political committees. 2 U.S.C. 441a(a).
Under FECA and the Commission's regulations, these contributions may
take the form of money or "anything of value" (the latter is an "in-kind
contribution" provided to a candidate or political committee.)
[See]{.underline} 11 CFR 100.52(d)(1). Candidates must disclose all
contributions they receive. 2 U.S.C. 434(b)(2). Since the recipient does
not actually receive a cash payment from an in-kind contribution, the
recipient must report the value of an in-kind contribution as both a
contribution received and an expenditure made so that the receipt of the
contribution will be reported without overstating the cash-on-hand in
the committee's treasury. [See]{.underline} 11 CFR 104.13.

# 2. Overview of BCRA's Changes to the FECA and Commission Regulations

## In BCRA, Congress revised the FECA's definition of "independent expenditure" in 2 U.S.C. 431(17). The revision added a reference to political party committees and their agents and reworked other aspects of the former definition. Corresponding revisions are being made to the regulations in 11 CFR 100.16. 

Congress repealed the Commission's pre-BCRA regulations regarding
"coordinated general public political communications" at former 11 CFR
100.23, and directed the Commission to adopt new regulations on
"coordinated communications" in their place. Pub. L. 107-155, sec.
214(b), (c) (March 27, 2002). A new section 11 CFR 109.21 implements
this Congressional mandate.

In addition, the new and revised rules implement several new
restrictions found in BCRA on the timing of independent and coordinated
expenditures made by committees of political parties. 2 U.S.C.
441a(d)(4). Those regulations are located in new 11 CFR part 109,
subpart D. Similarly, Congress established new restrictions on transfers
between committees of a political party. 2 U.S.C. 441a(d)(4). Those
changes, as well as amendments to the rules on the assignment of
coordinated party expenditure authority in pre-BCRA 11 CFR 110.7, are
reflected in new 11 CFR part 109, subpart D.

Finally, Congress established new reporting obligations for independent
expenditures. 2 U.S.C. 434(a)(5) and (g). These reporting obligations
have been addressed in a separate rulemaking. [See]{.underline} Final
Rules and Explanation and Justification for Bipartisan Campaign Reform
Act of 2002 Reporting, published elsewhere in this issue of the [Federal
Register]{.underline}. The comments received regarding the reporting of
independent expenditures have been addressed separately in the
Explanation and Justification for the amended reporting rules.

# **11 CFR 100.16 Definition of Independent Expenditure**

In light of several Congressional changes to the statutory definition of
"independent expenditure" at 2 U.S.C. 431(17), the Commission is making
several corresponding changes to the definition of the same term in 11
CFR 100.16. Most significantly, the statutory definition of "independent
expenditure" is modified to exclude expenditures coordinated with a
political party committee or its agents (in addition to the pre-BCRA
exclusion of coordination with candidates). 2 U.S.C. 431(17).

Paragraph (a) of section 100.16 contains the revised pre-BCRA section
100.16. The first sentence of paragraph (a) is being changed by adding a
reference to political party committees and their agents, thereby
tracking BCRA's changes in 2 U.S.C. 431(17).

In BCRA, Congress deleted the term "consultation" from the list of
activities that compromise the independence of expenditures.
[See]{.underline} 2 U.S.C. 431(17)(B). Notwithstanding that change, in
the NPRM the Commission proposed the retention of the term
"consultation" because it remains, post-BCRA, in other related
provisions of the Act. Most importantly, the term "consultation" was
used in a closely related provision added by BCRA itself.
[See]{.underline} 2 U.S.C. 441a(a)(7)(B)(ii) as amended by Pub. L.
107-155, sec. 214(a) (expenditures made in "cooperation, consultation,
or concert, with, or at the request or suggestion of, a national, State,
or local committee of a political party"); [see also]{.underline} 2
U.S.C. 441a(a)(7)(B)(i) (expenditures that are made in "cooperation,
[consultation]{.underline}, or concert with, or at the request or
suggestion of" candidates, political committees, and agents thereof are
contributions)(emphasis added).

Similarly, while Congress referred to expenditures "not made in concert
or cooperation with . . . a political party committee [or its
agents]{.underline}" in 2 U.S.C. 431(17) (emphasis added), it did not
refer to agents of a party committee in 2 U.S.C. 441a(a)(7)(B)(ii) when
describing coordination with a party committee. The Commission proposed
in the NPRM including agents of political party committees as persons
who might take actions that would cause a communication to be
coordinated with that party committee.

The Commission received one joint comment from two commenters[^1] on
each of the two proposals above, urging the Commission to include in the
final rules both terms as proposed. The final rules retain the term
"consultation" in paragraph (a) as an element in the regulatory
definition of "independent expenditure," for the reasons outlined in the
NPRM. The Commission is similarly including agents of a political party
within the scope of its independent expenditure definition. 11 CFR
100.16(a).

In BCRA, Congress repealed the pre-BCRA regulatory definition of
"coordinated general public political communication." [See]{.underline}
former 11 CFR 100.23 (January 1, 2001), repealed by Pub. L. 107-155,
section 214(b) (March 27, 2002). Therefore, in one additional change to
paragraph (a) of section 100.16, the Commission is deleting the term
"coordinated general public political communication," and replacing it
with references to a "coordinated communication" from section 109.21 and
a "party coordinated communication" from 11 CFR 109.37.

The Commission is also moving pre-BCRA 11 CFR 109.1(e), which clarifies
the basic definition of "independent expenditure," to paragraph (b) of
section 100.16, without other changes. This rule provides that
expenditures made by a candidate's authorized committee on behalf of
that candidate never qualify as independent expenditures.

The Commission is adding a new paragraph (c) to provide examples of
activities that would disqualify a communication from being treated as
an independent expenditure. This provision does not in any way change
the scope of the definition of coordinated communication in 11 CFR
109.21; it is merely intended to provide additional guidance.

## 11 CFR 100.23 \[Removed and reserved\]

Prior to the enactment of BCRA, the Commission initiated a series of
rulemakings in response to the Supreme Court's ruling on the appropriate
application of the so-called "coordinated party expenditure" provisions
of FECA. [See]{.underline} [Colorado Republican Federal Campaign
Committee v. Federal Election Commission]{.underline}, 518 U.S. 604
(1996) ("[Colorado I]{.underline}"). For example, the Commission
addressed the issue of coordination when it promulgated former 11 CFR
100.23 (January 1, 2001) in December 2000. [See]{.underline} Explanation
and Justification of General Public Political Communications Coordinated
with Candidates and Party Committees; Independent Expenditures, 65 [Fed.
Register]{.underline} 76,138 (Dec. 6, 2000). Former section 100.23
defined a new term, "coordinated general public political
communication," drawing from judicial guidance in [Federal Election
Commission v. The Christian Coalition]{.underline}*,* 52 F.Supp.2d 45,
85 (D.D.C. 1999) ("[Christian Coalition]{.underline}"), to determine
whether expenditures for communications by unauthorized committees,
advocacy groups, and individuals were coordinated with candidates or
qualified as independent expenditures. Consistent with [Christian
Coalition]{.underline}, [id]{.underline}. at 92, the Commission's
regulations stated that such coordination could be found when candidates
or their representatives influenced the creation or distribution of the
communications by making requests or suggestions regarding, or
exercising control or decision-making authority over, or engaging in
"substantial discussion or negotiation" regarding, various aspects of
the communications. Former 11 CFR 100.23(c)(2) (January 1, 2001). The
regulations explained that "substantial discussion or negotiation may be
evidenced by one or more meetings, conversations or conferences
regarding the value or importance of the communication for a particular
election." Former 11 CFR 100.23(c)(2)(iii) (January 1, 2001). The
Commission provided an exception, however, for a candidate's or
political party's response to an inquiry regarding the candidate's or
party's position on legislative or public policy issues.
[See]{.underline} former 11 CFR 100.23(d) (January 1, 2001).

As explained above, Congress repealed 11 CFR 100.23 in BCRA and directed
the Commission to promulgate new regulations to address coordinated
communications. Those new regulations are discussed below in the
Explanation and Justification for

11 CFR part 109. Accordingly, the Commission is now removing former
section 100.23 from Title 11, Chapter 1, of the Code of Federal
Regulations.

11 CFR 102.6(a)(1)(ii) Transfers

As a result of the enactment of 2 U.S.C. 441a(d)(4) and other provisions
from BCRA affecting transfers between political party committees, the
Commission revises

11 CFR 102.6(a)(1)(ii) to clarify the interaction of this section with
those provisions of BCRA. Before BCRA, the Commission permitted
unlimited transfers between or among national party committees, State
party committees and/or any subordinate committees. [See]{.underline}
pre-BCRA 11 CFR 102.6(a)(1)(ii).

First, in BCRA, Congress provided that a national committee of a
political party, including a national Congressional campaign committee
of a political party, may not solicit, receive, or direct to another
person a contribution, donation, or [transfer]{.underline} of funds or
other thing of value, or spend any funds, that are not subject to the
limitations, prohibitions, and reporting requirements of FECA. 2 U.S.C.
441i(a); [see]{.underline} Explanation and Justification for 11 CFR
300.10(a), 67 [Fed. Register]{.underline} 49,122 (July 29, 2002).

Second, in BCRA's "Levin Amendment," Congress placed restrictions on how
State, district, and local party committees raise "Levin funds" and
prohibited certain transfers between political party committees.
[See]{.underline} 2 U.S.C. 441i(b)(2)(C)(i); Explanation and
Justification for 11 CFR 300.31, 67 [Fed. Register]{.underline} 49,124
(July 29, 2002).

Third, also in the Levin Amendment, Congress provided that a State,
district, or local committee of a political party that spends Federal
funds and Levin funds for the newly defined term, Federal election
activity, must raise those funds solely by itself. These committees may
not receive or use transferred funds for this purpose. 2 U.S.C.
441i(b)(2)(B)(iv); [see]{.underline} Explanation and Justification for
11 CFR 300.34(a) and (b), 67 [Fed. Register]{.underline} 49,127 (July
29, 2002).

Fourth, Congress provided in BCRA that a committee of a political party
that makes coordinated party expenditures under 2 U.S.C. 441a(d) in
connection with the general election campaign of a candidate shall not,
during that election cycle, transfer any funds to, assign authority to
make coordinated party expenditures under this subsection to, or receive
a transfer from, a committee of the political party that has made or
intends to make an independent expenditure with respect to the
candidate. 2 U.S.C. 441a(d)(4)(C); [see]{.underline} Explanation and
Justification for 11 CFR 109.35(c), below.

## The Commission adds a new opening clause in paragraph (a)(1)(ii) of section 102.6 incorporating these restrictions by reference into the rules regarding the transfer of funds and the use of transferred funds. 

## The Commission received no comments on this section, and the final rule is unchanged from the proposed rule.

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

The Commission is reorganizing 11 CFR part 109 into four subparts in an
effort to simplify and clarify its regulations while implementing the
Congressional mandates in BCRA regarding payments for coordinated
communications and coordinated expenditures by political party
committees. Subpart A explains the scope of part 109 and defines the key
term "agent." Subpart B, which addresses the reporting and recordkeeping
requirements for independent expenditures, has been addressed in a
separate rulemaking. [See]{.underline} Final Rules and Explanation and
Justification for Bipartisan Campaign Reform Act of 2002 Reporting,
published elsewhere in this issue of the [Federal Register]{.underline}.
Subpart C addresses coordination between a candidate or a political
party and a person making a communication. Subpart D sets forth
provisions applicable only to political party committees, including
those pertaining to independent expenditures and support of candidates
through coordinated party expenditures. [See]{.underline} 2 U.S.C.
441a(d). The special authority for coordinated expenditures by political
party committees, previously set forth in pre-BCRA 11 CFR 110.7, is
being relocated to 11 CFR 109.32 and other sections in subpart D.

## 11 CFR Part 109, Subpart A \-- Scope and Definitions.

## 11 CFR 109.1 When Will this Part Apply?

New section 109.1 introduces the scope of part 109. Section 109.1
explains that the regulations in part 109 set forth the general
reporting requirements for both "independent expenditures" and
"coordinated communications." Note that the definition of "agent" found
in pre-BCRA section 109.1 is being revised and moved to section 109.3.
No comments were received regarding this section.

**11 CFR 109.3 Definitions**

The Commission proposed new 11 CFR 109.3 to define the term "agent,"
which is used throughout 11 CFR part 109. This definition of agent is
based on the same concept that the Commission used in framing the
definition of "agent" in the revised "soft money" rules.
[See]{.underline} Final Rules and Explanation and Justification on
Prohibited and Excessive Contributions: Non-Federal Funds or Soft Money,
67 [Fed. Register]{.underline} 49,081 (July 29, 2002). The definition of
"agent" proposed in the NPRM focused on whether a purported agent has
"actual authority, either express or implied," to engage in one or more
specified activities on behalf of specified principals.

In the NPRM, the Commission listed those specific sets of activities,
which vary slightly depending on whether the agent engages in those
activities on behalf of a national, State, district, or local committee
of a party committee, or on behalf of a Federal candidate or
officeholder. [See]{.underline} proposed 11 CFR 109.3(a) and (b),
respectively. The activities specified in the NPRM closely paralleled
the conduct activities associated with coordinated communications, as
described in 11 CFR 109.21(b). These activities included requesting or
suggesting that a communication be created, produced, or distributed;
making or authorizing certain campaign-related communications; and being
materially involved in decisions regarding specific aspects of
communications. [See]{.underline} proposed 11 CFR 109.3(a)(1) through
(5) and (b)(1) through (5).

Several commenters requested additional clarification of the meaning of
"material involvement," while other commenters suggested broadening this
provision to include authority to be "materially involved" in
discussions, in addition to decisions, regarding a communication. The
Commission notes that the term "materially involved" is merely
incorporated into the specified activities of an agent to preserve the
parallel structure between the definition of "agent" and the
coordination conduct standards in 11 CFR 109.21. [See]{.underline}
Explanation and Justification of 11 CFR 109.21(d)(2), below.

One commenter noted that because the proposed regulations contemplate
the possibility that one candidate for Federal office might pay for a
communication that is coordinated with a different candidate for Federal
office, proposed 11 CFR 109.3(a)(5) should also be included as a
specified activity in 11 CFR 109.3(b). The Commission agrees and is
adding a new paragraph (b)(6) to 11 CFR 109.3 to make it clear that a
person who works for one candidate and is authorized by that candidate
to make a communication on behalf of other candidates based on material
information derived from those other candidates, is to be considered an
agent.

A number of commenters addressed the general scope of the definition.
Seven commenters argued that the proposed definition would be overly
broad because it would not expressly limit the definition of "agent" to
situations where the person is acting within the scope of his or her
"actual authority" as an agent. These commenters also urged the addition
of a requirement that an agent's "coordination" conduct (see 11 CFR
109.21(d), below) toward a third party be based on information that was
gained only due to his or her role as an agent. One of these commenters
asserted that a person should not be considered an "agent" solely based
on his or her authority to act, but should only become an agent when he
or she takes some action. Two commenters expressed their opposition to
any attempt to categorize specific campaign positions or groups of
people as agents [per]{.underline} [se]{.underline}, and one additional
commenter suggested that if the Commission does include a class of
[per]{.underline} [se]{.underline} agents, it should identify the
specific persons within the campaign who would be placed in this
category.

Several commenters expressed concern as to a candidate's or political
party committee's "liability" for a person who qualifies as an agent but
takes actions beyond the scope of his or her actual authority. Two other
commenters expressed concerns that a principal would assume "liability"
for a person who represents more than one candidate or group engaged in
specified conduct while "wearing a different hat" (acting on behalf of a
different person or group.) One of these commenters recommended an
amendment to the rule text to provide that actions must be undertaken
"on behalf of the principal" in order for liability to attach to the
principal. Another commenter raised a particular concern with respect to
common vendors that an "agent" who wears different hats for different
groups might be deemed to engage in coordination [per]{.underline}
[se]{.underline} by essentially sharing information within his or her
own head.

On the other hand, eight commenters, including BCRA's principal
sponsors, expressed concern that the scope of the proposed definition
was underinclusive and would allow candidates or political parties to
effectively coordinate communications with an outside spender through
the use of conduits, including lower-level employees, consultants, or
others with "apparent authority," who could sit in on a discussion and
receive important information and convey that information to the
third-party spender. BCRA's principal sponsors and two other commenters
asserted that the definition of "agent" should not be drawn too narrowly
because the analysis of whether a communication is coordinated should
focus on whether the information was conveyed, not who conveyed it, or
whether the conveyance was authorized. A different commenter suggested
that the Commission's approach would create an incentive for a
candidate, authorized committee, or a political party committee to share
material information with staff members but make no effort to control
the staff members' disclosures to outside entities. Three commenters
urged that a person be deemed an agent if he or she discloses
information to an outside entity in the absence of a strictly enforced
policy against such disclosure. One of these commenters indicated that a
non-disclosure agreement might be employed to rebut the presumption of
agency.

In the final rules, the Commission recognizes the Congressional
determination that a spender can effectively coordinate a communication
by acting in cooperation, consultation, or concert, with, or at the
request or suggestion of, an agent as well as directly with a candidate,
authorized committee, or political party committee. [See]{.underline},
[e.g.]{.underline},

2 U.S.C. 431(17) and 2 U.S.C. 441a(a)(7)(B)(i). In recognition of the
concerns about overbreadth, the Commission is limiting the scope of the
definition of "agent" in three ways. For the purposes of a coordination
analysis under 11 CFR part 109, a person would only qualify as an
"agent" when he or she: (1) receives actual authorization, either
express or implied, from a specific principal to engage in the specific
activities listed in 109.3; (2) engages in those activities on behalf of
that specific principal; and (3) those activities would result in a
coordinated communication if carried out directly by the candidate,
authorized committee staff, or a political party official. Contrary to
the assertions of several commenters, a principal would not assume
"liability" for agents who act outside the scope of their actual
authority, nor would a person be considered an "agent" of a candidate if
that person approaches an outside spender on behalf of a different
organization or person. [See]{.underline} Restatement (Second) of Agency
§ 219(1). The Commission rejects, however, the argument that a person
who has authority to engage in certain activities should be considered
to be acting outside the scope of his or her authority any time the
person undertakes unlawful conduct. It is a settled matter of agency law
that liability may exist "for unlawful acts of \[\] agents, provided
that the conduct is within the scope of the agent's authority, whether
actual or apparent." [U.S. v. Investment Enterprises, Inc.]{.underline},
10 F.3d 263, 266 (5th Cir. 1993).

One commenter specifically requested an exemption for "all persons in
the legislative offices of federal officeholders" unless the "person
dealing with them knows that they are acting on behalf of the
officeholder in her capacity as a candidate." The Commission has
intentionally avoided promulgating a regulation based on apparent
authority, which is the authority of an actor as perceived by a third
party, because such authority is often difficult to discern and would
place the definition of "agent" in the hands of a third party.
Therefore, in the Commission's judgment, apparent authority is not a
sufficient basis for agency for the purposes of revised 11 CFR part 109.
The commenter's suggested approach would necessitate a determination of
agency solely on the basis of apparent authority and is therefore
inconsistent with the structure and purpose of the regulations.

These limitations, however, are not intended to establish any
presumption against the creation of an agency relationship. The grant
and scope of the actual authority, whether the person is acting within
the scope of his or her actual authority, and whether he or she is
acting on behalf of the principal or a different person, are factual
determinations that are necessarily evaluated on a case-by-case basis in
accordance with traditional agency principles. For example, the issue of
whether or not an authorized person is acting on behalf of the principal
is an objective, fact-based examination that is not dependent on that
person's own characterization of whether he or she is acting in an
individual capacity or on behalf of a different principal.

As explained in the NPRM, the Commission's pre-BCRA regulations include
a special definition of "person" for 11 CFR part 109. [See]{.underline}
pre-BCRA 11 CFR 109.1(b)(1). The Commission did not include this
separate definition of the term "person" in the NPRM because the term is
already defined in pre-BCRA 11 CFR 100.10 and the Commission was
concerned that a separate definition of "person" in 11 CFR part 109
might be confusing or misinterpreted as permitting labor organizations,
corporations not qualified under 11 CFR 114.10(c), or other entities or
individuals otherwise prohibited from making contributions or
expenditures under the Act and Commission regulations, to pay for
coordinated communications or to make independent expenditures.
[See]{.underline}, [e.g.]{.underline},

11 CFR 110.20 and 114.2. The Commission has specifically addressed these
prohibitions in 11 CFR 109.22, below, and the Commission did not receive
any comments on the inclusion of a separate definition of "person" in 11
CFR part 109. Therefore, no new definition of "person" is included in
the final rules.

# **11 CFR Part 109, Subpart B** \-- **Independent Expenditures**

11 CFR 109.10 How do political committees and other persons report
independent expenditures?

In the NPRM, the Commission included proposed 11 CFR 109.10 on reporting
requirements for independent expenditures. The Commission announced in
the NPRM its expectation that these rules would not be included in the
final rule of this rulemaking but would instead be finalized in a
separate rulemaking. The Commission has subsequently promulgated 11 CFR
109.10 as part of a separate rulemaking. [See]{.underline} Final Rules
and Explanation and Justification for Bipartisan Campaign Reform Act of
2002 Reporting, published elsewhere in this issue of the [Federal
Register]{.underline}. There are no changes to 11 CFR 109.10 in this
rulemaking.

11 CFR 109.11 When is a Non-Authorization Notice (Disclaimer) Required?
(2 U.S.C. 441d)

The Commission is moving the disclaimer requirements for independent
expenditures from pre-BCRA 11 CFR 109.3 to new 11 CFR 109.11. There are
no substantive changes to this section. Additional changes to disclaimer
requirements are provided at 11 CFR 110.11, which the Commission
addressed in a separate rulemaking in light of BCRA's changes to the
statutory disclaimer requirement. [See]{.underline} 2 U.S.C. 441d and
Final Rules and Explanation and Justification for Disclaimers,
Fraudulent Solicitation, Civil Penalties, and Personal Use of Campaign
Funds, 67 [Fed. Register]{.underline} 76,962 (Dec. 13, 2002).

## 11 CFR Part 109, Subpart C -- Coordination

# **11 CFR 109.20 What Does "Coordinated" Mean?**

Congress did not define the term "coordinated" in FECA or in BCRA, but
it did provide that an expenditure is considered to be a contribution to
a candidate when it is "made by any person in cooperation, consultation,
or concert, with, or at the request or suggestion of," that candidate,
the authorized committee of that candidate, or their agents. 2 U.S.C.
441a(a)(7)(B)(i). Similarly, in BCRA, Congress added a new paragraph to
section 441a(a)(7)(B) to require that expenditures "made by any person
(other than a candidate or candidate's authorized committee) in
cooperation, consultation, or concert, with, or at the request or
suggestion of, a national, State, or local committee of a political
party shall be considered to be contributions made to such party
committee."

2 U.S.C. 441a(a)(7)(B)(ii). Also, as explained above, an expenditure is
not "independent" if it is "made in cooperation, consultation, or
concert, with, or at the request or suggestion of," a candidate,
authorized committee, or a political party committee. [See]{.underline}
11 CFR 100.16.

New section 109.20(a) implements 2 U.S.C. 441a(a)(7)(B)(i) and (ii) by
defining "coordinated" to mean "made in cooperation, consultation or
concert with, or at the request or suggestion of, a candidate, a
candidate's authorized committee, or their agents, or a political party
committee or its agents." While the definition of "coordinated" in 11
CFR 109.20(a) potentially encompasses a variety of payments made by a
person on behalf of a candidate or political party committee, paragraph
(a) is not intended to change current Commission interpretations other
than to recognize the addition of the concept of coordination with
political party committees under 2 U.S.C. 441a(a)(7)(B)(ii). The
Commission notes that it may provide additional guidance in this area
through a subsequent rulemaking.

The Commission recognizes, however, that many issues regarding
coordination involve communications, and in BCRA Congress required the
Commission to address coordinated communications. Pub. L. 107-155, sec.
214(c) (March 27, 2002). Therefore, the regulations in 11 CFR 109.21,
explained below, specifically address the meaning of the phrase "made in
cooperation, consultation, or concert, with, or at the request or
suggestion of" in the context of communications paid for by a person
other than the candidate with whom the communication was coordinated,
that candidate's authorized committee, or a political party committee.
Similarly, the regulations in 11 CFR 109.37, explained further below,
specifically address the meaning of the phrase "made in cooperation,
consultation, or concert with, or at the request or suggestion of" in
the context of communications paid for by a political party committee.

In addition, paragraph (b) of section 109.20 addresses expenditures that
are not made for communications but that are coordinated with a
candidate, authorized committee, or political party committee. It is the
successor to pre-BCRA 11 CFR 109.1(c). Paragraph (b) is being revised
from its predecessor to reflect the addition of the concept of
coordination with political party committees under 2 U.S.C.
441a(a)(7)(B)(ii), as well as the replacement of the reference to former
11 CFR 100.23, [see]{.underline} Pub. L. 107-155, section 214(b) (March
27, 2002), and grammatical changes to reflect the new location of the
rule. The Commission emphasizes that the relocation of paragraph (b) is
not intended to change or alter current Commission interpretations of
its predecessor in pre-BCRA section 109.1(c). One commenter asserted
that only express advocacy communications can constitute coordination,
and urged the Commission to provide explicitly that non-communication
expenditures will [not]{.underline} be considered to be coordination.
The Commission disagrees with the commenter's assertion because Congress
has not so limited the statutory provisions relating to coordination.
[See]{.underline} 2 U.S.C. 431(17) and 441a(a)(7)(B)(i) and (ii).
Therefore, the Commission is moving pre-BCRA 11 CFR 109.1(c), to section
109.20(b) with revisions to make it clear that these other expenditures,
when coordinated, are also in-kind contributions (or coordinated party
expenditures, if a political party committee so elects) to the candidate
or political party committee with whom or with which they are
coordinated. The exceptions contained in 11 CFR part 100, subpart C
(exceptions to the definition of "contribution") and subpart E
(exceptions to the definition of "expenditure") continue to apply.

# **11 CFR 109.21 What is a "Coordinated Communication"?**

In BCRA, Congress expressly repealed 11 CFR 100.23, Pub. L. 107-155,
sec. 214(b) (March 27, 2002), and instructed the Commission to
promulgate new regulations on "coordinated communications paid for by
persons other than candidates, authorized committees of candidates, and
party committees." Pub. L. 107-155, sec. 214(c) (March 27, 2002).
Congress also mandated that the new regulations address four specific
aspects of coordinated communications: (1) republication of campaign
materials; (2) the use of a common vendor; (3) communications directed
or made by a former employee of a candidate or political party; and (4)
communications made after substantial discussion about the communication
with a candidate or political party. [See]{.underline} Pub. L. 107-155,
sec. 214(c)(1) through (4) (March 27, 2002).

The Commission is promulgating new 11 CFR 109.21 to comply with this
Congressional mandate. This rule applies to communications coordinated
with candidates, their authorized committees, political party
committees, or the agents of any of the foregoing. Paragraph (a) of this
section begins by defining "coordinated communication." Paragraph (b)
spells out the treatment of "coordinated communications" as in-kind
contributions, which must be reported. Next, paragraph (c) sets out the
content standard for coordinated communications. Paragraph (d)
establishes conduct standards for the coordination analysis. Paragraph
(e) addresses the Congressional guidance that an agreement or formal
collaboration is not required for a communication to be considered
"coordinated." Paragraph (f) provides a safe harbor for certain
inquiries as to legislative and policy issues.

The Commission notes that Congress has provided that candidates and any
entity "acting on behalf of 1 or more candidates" must not "solicit,
receive, direct, transfer, or spend funds in connection with an election
for Federal office, including funds for any Federal election activity,
unless the funds are subject to the limitations, prohibitions, and
reporting requirements of this Act ...." 2 U.S.C. 441i(e)(1)(A). The
Commission has addressed this restriction in a separate rulemaking
([see]{.underline} Final Rules and Explanation and Justification on
Prohibited and Excessive Contributions: Non-Federal Funds or Soft Money,
67 [Fed. Register]{.underline} 49,081 (July 29, 2002)), and does not
necessarily equate activity resulting in a coordinated communication
under 11 CFR 109.21 with "acting on behalf of 1 or more candidates" in 2
U.S.C. 441i(e)(1). Therefore, a determination of whether a coordinated
communication exists must be made separately from, and without reference
to, a determination of whether an entity is "acting on behalf of 1 or
more candidates" under 2 U.S.C. 441i(e)(1)(A).

### 1. 11 CFR 109.21(a) Definition

Paragraph (a) of new section 109.21 sets forth the required elements of
a "coordinated communication," which comprise a three-pronged test. For
a communication to be "coordinated," all three prongs of the test must
be satisfied. While no one of these elements standing alone fully
answers the question of whether a communication is for the purpose of
influencing a Federal election, [see]{.underline} 11 CFR 100.52(a),
100.111(a), the satisfaction of all three prongs of the test set out in
new

11 CFR 109.21 justifies the conclusion that payments for the coordinated
communication are made for the purpose of influencing a Federal
election, and therefore constitute in-kind contributions. Nevertheless,
the Commission notes that the inclusion of one prong of its test, the
content standard, could function efficiently as an initial threshold for
the coordination analysis.

Under the first prong, in paragraph (a)(1), the communication must be
paid for by someone other than a candidate, an authorized committee, a
political party committee, or an agent of any of the foregoing. However,
a person's status as a candidate does not exempt him or her from this
section with respect to payments he or she makes for communications on
behalf of a different candidate. Under paragraph (a)(2), the second
prong of the three-pronged test is a "content standard" regarding the
subject matter of the communication. Under paragraph (a)(3), the third
prong of the test is a "conduct standard" regarding the interactions
between the person paying for the communication and the candidate or
political party committee. A sentence proposed in the NPRM regarding
republication of campaign materials is being moved from proposed
paragraph (a)(3) in the NPRM to paragraph (c)(2) in the final rules.

Of the seven commenters who specifically commented on this three-part
structure for the regulations, two expressed general support for the
approach. The other five, including BCRA's principal sponsors, urged the
Commission to emphasize the actual conduct and minimize the importance
of any content standard. The final rules, however, maintain the same
structure as the proposed rules for the reasons described below. The
Commission recognizes that a content requirement may serve to exclude
some communications that are made with the subjective intent of
influencing a Federal election, thereby potentially narrowing the reach
of 2 U.S.C. 441a(a)(7)(B)(i) and (ii), but the Commission believes that
a content standard provides a clear and useful component of a
coordination definition in that it helps ensure that the coordination
regulations do not inadvertently encompass communications that are not
made for the purpose of influencing a federal election.

[2. 11 CFR 109.21(b) Treatment as an In-Kind Contribution;
Reporting.]{.underline}

Under the Act and the Commission's regulations, a "contribution" is
defined as "a gift, subscription, loan ... advance, or deposit of money
or anything of value made by any person for the purpose of influencing
any election for Federal office," subject to a number of specific
exceptions. [See]{.underline} 11 CFR 100.52(a), [et seq]{.underline}.;
[see also]{.underline} 2 U.S.C. 431(8)(A), [et seq]{.underline}. An
"expenditure" is similarly defined as "any purchase, payment,
distribution, loan, advance, deposit, or gift of money or anything of
value made by any person for the purpose of influencing any election for
Federal office," and is also subject to a list of specific exceptions.
[See]{.underline} 11 CFR 100.111(a), [et seq.]{.underline}; [see
also]{.underline} 2 U.S.C. 431(9)(A), [et seq]{.underline}. Thus, a
"payment" that is "made for the purpose of influencing any election for
Federal office" qualifies as either an "expenditure," a "contribution,"
or both, unless it is specifically excepted.

As explained above, the coordination provisions in the statute, 2 U.S.C.
441a(a)(7)(B)(i) and (ii), state that "expenditures made by any person
in cooperation, consultation, or concert, with, or at the request or
suggestion of," a candidate or a political party committee "shall be
considered to be a contribution" to that candidate or political party
committee. Several commenters argued that the Commission must first
determine whether or not the payment for a communication constitutes an
"expenditure" before proceeding to a coordination analysis. The
Commission concludes that, when read as whole sentences, 2 U.S.C.
441a(a)(7)(B)(i) and (ii) require that for a contribution to exist,
three requirements must be met: (1) there must be some conduct to
differentiate the activity from an "independent expenditure,"
[see]{.underline} 2 U.S.C. 431(17); (2) there must be some form of
payment; and (3) that payment must be made for the purpose of
influencing any election for Federal office. The Commission has
determined that a payment that satisfies the content and conduct
standards of 11 CFR 109.21 satisfies the statutory requirements for an
expenditure in the specific context of coordinated communications, and
thereby constitutes a contribution under 2 U.S.C. 441a(a)(7)(B)(i) and
(ii).

[A. 11 CFR 109.21(b)(1) General Rule]{.underline}

Paragraph (b)(1) of section 109.21 provides that a payment for a
coordinated communication is made "for the purpose of influencing" an
election for Federal office, the same phrase used by Congress in the
definition of both "expenditure" and "contribution." 2 U.S.C. 431(8)(A)
and (9)(A). Paragraph (b)(1) also states the general rule that a payment
for a coordinated communication constitutes an in-kind contribution to
the candidate, authorized committee, or political party committee with
whom or with which it is coordinated, unless excepted under subpart C of
11 CFR part 100. Please note that this section encompasses
electioneering communications under 11 CFR 100.29(a)(1), in addition to
other communications. Congress expressly provided that when these
communications are coordinated with a candidate, authorized committee,
or political party committee, they must be treated like other
coordinated communications in that disbursements for these
communications are in-kind contributions to the candidate or party
committee with whom or which they were coordinated. [See]{.underline} 2
U.S.C. 441a(a)(7)(C). Under BCRA, these coordinated electioneering
communications, like other coordinated communications, must be treated
as expenditures by the candidate, authorized committee, or political
party committee with whom or with which they are coordinated.
[Id.]{.underline}

B. 11 CFR 109.21(b)(2) In-Kind Contributions Resulting From Conduct
Described in Paragraphs (d)(4) or (d)(5) of this Section.

Paragraph (b)(2) clarifies the application of the general rule of
paragraph (b)(1) in a particular circumstance. Under the general rule in
paragraph (b)(1), a candidate's authorized committee or a political
party committee receives an in-kind contribution, subject to the
contribution limits, prohibitions, and reporting requirements of the
Act. As explained below, two of the conduct standards, found in
paragraphs (d)(4) and (d)(5) of section 109.21, do not focus on the
conduct of the candidate, the candidate's authorized committee or
agents, but focus instead on the conduct of a common vendor or a former
employee with respect to the person paying for the communication. To
avoid the result where a candidate, authorized committee, or political
party committee might be held responsible for receiving or accepting an
in-kind contribution that did not result from its conduct or the conduct
of its agents, the Commission explicitly provides that the candidate,
the candidate's authorized committee, or political party committee does
not receive or accept in-kind contributions that result from conduct
described in the conduct standards of paragraphs (d)(4) and (d)(5) of
this section. This treatment is generally analogous to the handling of
republished campaign materials under new 11 CFR 109.23 and the
Commission's pre-BCRA regulations. [See]{.underline} former 11 CFR
109.1(d)(1). However, please note that the person paying for a
communication that is coordinated because of conduct described in
paragraphs (d)(4) or (d)(5) still makes an in-kind contribution for
purposes of the contribution limitations, prohibitions, and reporting
requirements of the Act.

One commenter suggested that the text of paragraph (b)(2) should be
clarified to indicate that a candidate or political party committee
receives and accepts an in-kind contribution resulting from a
coordinated communication in which an [agent]{.underline} of either
engages in the conduct described in paragraphs (d)(1) through (d)(3).
The Commission agrees and is incorporating that suggested change into
the final rules.

[C. 11 CFR 109.21(b)(3) Reporting of Coordinated
Communications]{.underline}

Paragraph (b)(3) of 11 CFR 109.21 provides that a political committee,
other than a political party committee, must report payments for
coordinated communications as in-kind contributions made to the
candidate or political party committee with whom or which they are
coordinated. Paragraph (b)(3) also clarifies that the recipient
candidate, authorized committee, or political party committee with which
a communication is coordinated must report the payor's payment for that
communication as an in-kind contribution received under 11 CFR 104.13
and must also report making a corresponding expenditure in the same
amount. 11 CFR 104.13.

[3. 11 CFR 109.21(c) Content Standards]{.underline}

> The NPRM sought comments as to whether content standards should be
> included in the coordinated communications rules, and if so, what the
> appropriate standard should be. A number of alternative content
> standards were included in the NPRM. Two commenters opposed the
> inclusion of any content standard, arguing that to do so would
> inappropriately narrow the scope of the rules when the conduct of the
> person paying for the communication and the candidate or political
> party committee is sufficient, by itself, to eliminate the
> independence of the communication, thereby creating an in-kind
> contribution under 2 U.S.C. 441a(a)(7)(B)(i) and (ii). Several other
> commenters, however, generally supported the inclusion of a content
> standard, although they disagreed as to what that standard should be.
>
> The Commission is including content standards in the final rules on
> coordinated communications to limit the new rules to communications
> whose subject matter is reasonably related to an election. In the
> NPRM, the Commission proposed three distinct content standards, in
> paragraph (c), along with three alternatives for a fourth standard.
> The three proposed standards were an "electioneering communication"
> standard, a standard encompassing the republication of candidate
> campaign materials, and a standard for communications that "expressly
> advocate" the election or defeat of a clearly identified candidate for
> Federal office. In addition, the three alternative content standards
> ranged from a minimal threshold that would have encompassed any
> "public communication" that refers to a "clearly identified candidate"
> (Alternative A), a public communication that "promoted, supported,
> attacked, or opposed" a candidate for Federal office (Alternative B),
> and a public communication that was made during a specific time period
> shortly before an election, was directed to a specific group of
> voters, and discussed the views or record of a candidate (Alternative
> C). The Commission proposed that a communication that satisfies any
> one of the standards would satisfy the "content" requirement of 11 CFR
> 109.21.
>
> Commenters expressed a wide range of views as to the appropriate
> content standard. One commenter attempted to craft a stand-alone
> unitary content standard through a combination of the electioneering
> communication and republication standards. Four commenters argued that
> an "express advocacy" content standard is necessary to provide clear
> guidance and to ensure that the regulation is not vague or overly
> broad. Most other commenters acknowledged that the three standards of
> electioneering, republication, and express advocacy clearly comport
> with guidance from Congress and the courts, but three commenters
> argued that no additional content standards are warranted in the
> absence of any further directive from Congress. A joint comment by
> three commenters urged the Commission to focus the content standard on
> the content of the communication, rather than "external criteria" such
> as the timing or distribution of the communication. The same
> commenters also requested that the Commission adjust its content
> standard to ensure that communications between a political party
> committee and its "affiliates" are not covered.
>
> Based generally on the approach taken by Congress with respect to
> electioneering communications, five commenters recommended a dual
> time-period approach to the content standard in which communications
> made 30 to 60 days before an election would be subject to lesser, if
> any, content restrictions than communications made outside of that
> time period. BCRA's principal sponsors agreed with this approach in
> their comments and observed that communications made within 30 days of
> a primary or 60 days of a general election are usually campaign
> related. A different commenter also recommended temporal limits, but
> suggested that any communications made outside the 30 or 60 days
> should be completely excluded from being treated as coordinated
> communications. BCRA's principal sponsors specifically rejected this
> approach in their comments.
>
> After considering the concerns raised by the commenters about
> overbreadth, vagueness, underinclusiveness, and potential
> circumvention of the restrictions in the Act and the Commission's
> regulations, the Commission is setting forth four content standards to
> implement the statutory requirements. These standards all provide
> bright-line tests and subject to regulation only those communications
> whose contents, in combination with the manner of its creation and
> distribution, indicate that the communication is made for the purpose
> of influencing the election of a candidate for Federal office.
>
> [A. 11 CFR 109.21(c)(1) Electioneering communications]{.underline}
>
> Congress provided in BCRA that when "any person makes ... any
> disbursement for any electioneering communication ... and such
> disbursement is coordinated with a candidate or an authorized
> committee of such candidate, a Federal, state, or local political
> party committee thereof, or an agent or official of any such
> candidate, party or committee ... such disbursement shall be treated
> as a contribution to the candidate supported by the electioneering
> communication ... and as an expenditure by that candidate." 2 U.S.C.
> 441a(a)(7)(C). To implement that statutory directive, the Commission
> proposed in the NPRM that the first content standard paragraph (c)(1)
> simply focus on whether the communication is an "electioneering
> communication" under 11 CFR 100.29. [See]{.underline} Final Rule on
> Electioneering Communications, 67 [Fed. Register]{.underline} 51,131
> (Oct. 23, 2002). Although the proposed rule in the NPRM described a
> communication "that would otherwise be an electioneering
> communication," this indirect reference has been removed and replaced
> with a direct reference to an electioneering communication.
>
> Four commenters opined that the electioneering communication
> provisions in BCRA are unconstitutional, and opposed their inclusion
> as a content standard. One of these commenters argued that the
> electioneering communication content standard should be limited to
> include only communications containing "express advocacy." The
> Commission concludes, however, that such an interpretation would
> undermine the scope of Congress's definition of an electioneering
> communication, 2 U.S.C. 434(f)(3)(A), especially in light of the
> Congressional mandate in 2 U.S.C. 441a(a)(7)(C). Another commenter
> argued that the Commission should nonetheless exclude the
> electioneering communications from the content standards because
> Congress did not specifically require its inclusion in that exact
> manner. In the Commission's judgment, however, including the
> electioneering communication standard specifically authorized by
> Congress as one of the content standards in the definition of
> "coordinated communication" is a simple and straightforward way to
> implement 2 U.S.C. 441a(a)(7)(C). As one commenter noted, the
> inclusion of electioneering communications as a content standard
> promotes consistency because the term is already defined by Congress
> at 2 U.S.C. 434(f)(3)(A) and in the Commission's new rules at 11 CFR
> 100.29.
>
> The Commission considered and rejected constructing a separate
> definition of "coordination" that would have applied specifically to
> electioneering communications. A separate construction would be
> redundant because the relevant [conduct]{.underline} under it would be
> identical to the conduct standards for other coordinated communication
> containing other types of content. Similarly, the Commission notes
> that Congress provided that an electioneering communication could be
> coordinated with an "official" of a candidate, party, or committee, in
> addition to the candidate, committees, and their agents. 2 U.S.C.
> 41a(a)(7)(C)(ii). The Commission is not, however, separately
> addressing coordination with an official in the final rule because
> such an official is subsumed within the definition of "agent" in 11
> CFR 109.3.
>
> [B. 11 CFR 109.21(c)(2) Dissemination, Distribution, or Republication
> of Campaign Material]{.underline}
>
> The second content standard implements the Congressional mandate that
> the Commission's new rules on coordinated communications address the
> "republication of campaign materials." [See]{.underline} Pub. L.
> 107-155, sec. 214(c)(1) (March 27, 2002). The Commission's former rule
> on republication of campaign materials, which has been moved from
> former 11 CFR 109.1(d) to new section 109.23 with minor changes
> explained below, sets out the required treatment of both the
> coordinated and uncoordinated dissemination, distribution, or
> republication of campaign material prepared by a candidate, an
> authorized committee, or an agent of either. Under section 109.23,
> discussed below, the reporting responsibilities of candidates,
> authorized committees, and political party committees vary depending
> on whether they "coordinate" with a person financing the
> dissemination, distribution, or republication of a candidate's
> campaign material.
>
> In the final rules the "republication" content standard in paragraph
> (c)(2) of section 109.21 expressly links to paragraph (d)(6) of
> section 109.21. This link is important because paragraph (d)(6) of
> this section clarifies the application of the conduct standards of
> paragraph (d) of this section to the unique circumstances of
> republication. This change from the NPRM is intended to emphasize the
> relationship between paragraphs (c)(2) and (d)(6) of section 109.21.
> In addition, section 11 CFR 109.21(c)(2) includes a cross-reference to
> 11 CFR 109.23 to ensure that certain uses of campaign material
> exempted by 11 CFR 109.23(b) from the definition of "contribution"
> will not satisfy the content standard in
>
> 11 CFR 109.21(c)(2).
>
> The Commission is making one change to the republication content
> standard from the rule proposed in the NPRM. In the NPRM, a
> communication would have satisfied the content standard proposed in 11
> CFR 109.21(c)(2) when "the communication" disseminated, distributed,
> or republished campaign materials prepared by a candidate. The
> Commission is changing the standard so that the content standard will
> only be satisfied when "the public communication" disseminates,
> distributes, or republishes campaign materials. Although the
> Commission did not receive specific comments on this point, the
> Commission is employing the term "public communication," as defined at
> 11 CFR 100.26, to conform the scope of this standard with the approach
> the Commission has consistently taken for the other content standards
> discussed below, with the exception of the "electioneering
> communication" standard.

[C. 11 CFR 109.21(c)(3) Express Advocacy]{.underline}

> The third content standard in paragraph (c)(3) of section 109.21
> states that a communication also satisfies the content standard if it
> "expressly advocates" the election or defeat of a clearly identified
> candidate for Federal office. Although the commenters expressed widely
> differing opinions about whether this "express advocacy" standard
> should be the [sole]{.underline} content standard, none of the
> commenters opposed including "express advocacy" as a content standard
> in the regulations.
>
> [D. 11 CFR 109.21(c)(4) Additional Content Standard]{.underline}

In addition to electioneering communications described in 11 CFR 100.29,
communications that republish campaign materials, and communications
that "expressly advocate" the election or defeat of a clearly identified
candidate, the Commission proposed three other possible content
standards in the NPRM and requested comment on additional alternatives.
Each of these alternatives was premised on the communication qualifying
as a "public communication," with additional requirements. Alternative A
required only that the communication qualify as a public communication
and contain a reference to a clearly identified candidate for Federal
office. Alternative B provided that the communication must also promote,
support, attack, or oppose the clearly identified candidate. Alternative
C required that the public communication refer to a clearly identified
candidate, be made within 120 days of an election, be directed to voters
within the jurisdiction of that candidate, and include an "express
statement about the record or position or views on an issue, or the
character, or the qualifications or fitness for office, or party
affiliation," of the clearly identified candidate.

Several commenters criticized Alternative A as overly broad, asserting
that a clearly identified candidate is the minimal standard necessary to
distinguish "issue ads" from communications made for the purpose of
influencing an election. In contrast, several different commenters
argued that the requirement of a clearly identified candidate was too
restrictive because it would fail to encompass communications urging
recipients to "vote Democrat" or "vote Republican." These commenters
suggested that at a minimum the Commission expand the reference to
include a reference to a "clearly identified political party."
Furthermore, two commenters argued that the requirement of a clearly
identified candidate also fails to encompass communications that
"reflect and reinforce the themes and messages of the campaign."

Five commenters criticized Alternative B, arguing that the terms
"promote, support, attack, or oppose" are overly broad. Two different
commenters suggested that the proposed standard relied on subjective
criteria and would discourage public speech and weaken the value of
having a content standard.

Several commenters also criticized Alternative C as overly broad and
containing subjective criteria. One commenter specifically objected to
including communications containing statements about a candidate's
positions on an issue. A different commenter cited a lack of a statutory
basis or empirical support for the 120-day time limit and pointed out
that the rule might be applied to cover communications made in a
jurisdiction other than the jurisdiction of the clearly identified
candidate.

In contrast, four commenters expressed general support for this
standard, but with the removal of the 120 day limit, which they believed
would exclude many coordinated communications made early in the election
cycle. Two of these commenters also suggested that the Commission remove
the word "express" from the requirement of an "express statement." In
addition, a different commenter proposed an alternative standard to
cover a communication that (1) "expressly refers to" a candidate in his
capacity as a candidate; (2) refers to the next election; and (3) is
publicly disseminated and actually reaches 100 eligible voters.

The Commission is including a modified version of Alternative C in the
final rules at 11 CFR 109.21(c)(4). Taking into consideration the
suggestions of the commenters, this content standard is largely based
on, but is somewhat broader than, Congress's definition of an
electioneering communication. A communication meets this content
requirement if (1) it is a public communication; (2) it refers to a
clearly identified candidate or political party; (3) it is directed to
voters in the jurisdiction of the clearly identified Federal candidate;
and (4) it is publicly distributed or publicly disseminated 120 days or
fewer before a primary or general election.

The term "publicly distributed" refers to communications distributed by
radio or television ([see]{.underline} 11 CFR 100.29(b)(3)) and the term
"publicly disseminated'' refers to communications that are made public
via other media, [e.g.]{.underline}, newspaper, magazines, handbills. In
this respect, paragraph (c)(4) reflects the fact that coordinated
communications can occur through media other than television and radio.
Moreover, for purposes of establishing a content standard in a
coordination rule, there is no reason to exclude communications that
meet the [content]{.underline} requirements of an electioneering
communication, but fail to constitute an electioneering communication
only because of the media chosen for the communication.

Perhaps most importantly, paragraph (c)(4) creates parallel requirements
for those whose communications do not technically qualify as
electioneering communications. Because electioneering communications are
by definition limited to broadcast, cable, or satellite communications
([see]{.underline} 11 CFR 100.29), communications made through other
media, such as print communications, are not included under the
electioneering communication-based content standard of paragraph (c)(1).
Similarly, political committees such as separate segregated funds or
non-connected committees do not make electioneering communications
because their payments are treated as expenditures. Therefore, under new
paragraph (c)(4), for example, where a candidate and the separate
segregated fund paying for the communication satisfy the conduct
requirements of new 11 CFR 109.21(d), the separate segregated fund makes
a coordinated communication if it pays for a newspaper advertisement.
Thus, to avoid an arbitrary distinction in the content standards,
paragraph (c)(4) applies to all "public communications," a term defined
and set forth in BCRA by Congress. 2 U.S.C. 431(22); 11 CFR 100.26. The
use of the term "public communication" provides consistency within the
regulations and distinguishes covered communications from, for example,
private correspondence and internal communications between a corporation
or labor organization and its restricted class. The three commenters who
specifically addressed the proposed use of this term expressed support
for its inclusion. One of these commenters pointed out that the use of
"public communication" provides "helpful consistency within the
regulations." In addition, a different commenter suggested that the
Commission "completely exempt" e-mail and Internet communications from
its coordination regulations. By framing the content standard in terms
of a "public communication," the Commission addresses that comment.
Although the term "public communication" covers a broad range of
communications, it does not cover some forms of communications, such as
those transmitted using the Internet and electronic mail. 11 CFR 100.26.

This new standard focuses as much as possible on the face of the public
communication or on facts on the public record. This latter point is
important. The intent is to require as little characterization of the
meaning or the content of communication, or inquiry into the subjective
effect of the communication on the reader, viewer, or listener as
possible. [See]{.underline} [Buckley v. Valeo]{.underline}, 424 U.S. 1,
42-44 (1976). The new paragraph (c)(4) is applied by asking if certain
things are true or false about the face of the public communication or
with limited reference to external facts on the public record. This
fourth content standard does not require a description of a candidate's
views or positions, a requirement in the proposed rules that raised
objections from commenters.

Paragraph (c)(4)(ii) of section 109.21 requires that the public
communication must be publicly distributed or publicly disseminated 120
days or fewer before a primary election or a general election. The
120-day time frame is based on 2 U.S.C. 431(20)(A)(i) ([see]{.underline}
11 CFR 100.24(b)(1)) and has several advantages. First, it provides a
"bright-line" rule. Second, it focuses the regulation on activity
reasonably close to an election, but not so distant from the election as
to implicate political discussion at other times. As noted, Congress
has, in part, defined "Federal election activity" in terms of a 120-day
time frame, deeming that period of time before an election to be
reasonably related to that election. [See]{.underline} 2 U.S.C.
431(20)(A)(i). In contrast, the "express advocacy" content standard in
paragraph (c)(3) of section 109.21 applies without time limitation.
Similarly, this 120-day time frame is more conservative than the
treatment of public communications in the definition of Federal election
activity, which regulates public communications without regard to
timeframe. 2 U.S.C. 431(20)(A)(iii); 11 CFR 100.24(b)(3).

The Commission has considered, but rejected, the use of a shorter
time-frame, specifically, thirty days before a primary election and
sixty days before a general election. This shorter time-frame would have
been derived by analogy from the definition of "electioneering
communication." [See]{.underline} 2 U.S.C. 434(f)(3)(A). The shorter
time-frames would have had the advantage of symmetry with the
electioneering communication definition. There is, however, an important
difference between the electioneering communication concept and the
paradigm adopted here for regulating coordination. Although this content
standard (i.e., paragraph (c)(4)(ii)) is obviously similar to the
definition of "electioneering communication," this content standard is
only one part of a three-part test (see discussion of paragraph (a) of
section 109.21, above), whereas the definition of "electioneering
communication" is complete in itself. Under this final rule, even if a
political communication satisfies the content standard, the conduct
standards must still be satisfied before the political communication is
considered "coordinated." In this light, the content standard may be
viewed as a "filter" or a "threshold" that screens outs certain
communications from even being subjected to analysis under the conduct
standards.[^2] Thus it is appropriate to consider a broader time-frame
when applying this content standard because it serves only to identify
political communications that [may]{.underline} be coordinated if other
conditions (i.e., the conduct standards) are satisfied, and thus may be
inappropriately underinclusive if too narrow.

The new standard also encompasses communications that refer to political
parties as well as those that identify candidates, as suggested by
several commenters. This extension of the content standards implements 2
U.S.C. 441a(a)(7)(B)(ii), added by section 214(c) of BCRA, which
provides that expenditures made by any person in coordination with a
political party committee is considered to be a contribution to that
party committee.

Several commenters said that there should be an exception to the content
standards for communications that refer to the "popular name" of a bill
or law that includes the name of a Federal candidate who was a sponsor
of the bill or law. In addition to questions whether such an exception
is necessary in light of the other restrictions explained above, the
Commission believes that the "popular name" proposal would also open new
avenues for the circumvention of the Act and the Commission's
regulations. Because the "popular name" of a bill is not a defined term,
and is not subject to specific restrictions by Congress, an exemption
for the use of a candidate's name in the popular name of a bill might
shield a communication that clearly attacks or supports a candidate by
naming the bill in a way that associates the candidate with a popular or
disfavored stance. The Commission concludes that if one or more of the
conduct standards is met and the communication is directed to voters in
that candidate's jurisdiction and made within 60 days of general
election, Congress does not intend for such a communication to be
exempted from the statutory requirements merely because the
communication contains a reference to a crafted name for a piece of
legislation in addition to the name of the clearly identified candidate.

The new standard also incorporates the concept of the "targeting" of the
communication as an indication of whether it is election-related. BCRA's
principal sponsors commented that a "key factor" in determining whether
a communication should be covered under these rules is whether the
communication is "targeted" to a specific voter audience. By requiring
that the communication be "directed to voters in the jurisdiction of the
clearly identified Federal candidate," the Commission is addressing this
concern. In order to encompass communications that are coordinated with
a political party committee and refer to a political party, but do not
refer to a candidate, the Commission also provides that the content
standard in paragraph (c)(4) would be satisfied when the communication
is directed "to voters in a jurisdiction in which one or more candidates
of the political party appear on the ballot." The "directed to voters"
requirement focuses on the intended audience of the communication,
rather than a quantitative analysis of the number of possible recipients
or the expected geographic limits of a particular media, that will be
determined on a case-by-case basis from the content of the
communication, its actual placement, and other objective indicators of
the intended audience. For example, a public communication that
otherwise makes express statements about promoting or attacking
Representative X or Senator Y for their stance on the "X-Y Bill" does
not satisfy this requirement if it is only broadcast in Washington,
D.C., and not in either Member's district or State. For purposes of new
paragraph (c)(4), "jurisdiction" means a member of Congress' district,
the State of a U.S. Senator, and the entire United States for the
President and Vice President in the general election or before the
national nominating convention.

[4. 11 CFR 109.21(d) Conduct Standards]{.underline}

Paragraph (d) of section 109.21 lists five types of conduct that satisfy
the "conduct standard" of the three-part coordination test. Under these
rules, if one of these types of conduct is present, and the other
requirements described in paragraphs (a) and (c) are satisfied, the
communication is not made "totally independently" from the candidate,
the candidate's authorized committee, or the political party committee,
[see]{.underline} [Buckley]{.underline}, 424 U.S. at 47, and thus is
coordinated. The introductory sentence of paragraph (d) implements the
Congressional mandate in BCRA that the coordination regulation not
require "agreement or formal collaboration." Pub. L. 107-155, sec.
214(c) (March 27, 2002); [see]{.underline} more complete discussion
below.

In the NPRM, the Commission proposed five categories of conduct that
would each satisfy the conduct standard when material information is
conveyed or used: 1) a request or suggestion; 2) material involvement in
decisions; 3) a substantial discussion; 4) use of a common vendor; and
5) use of a former employee or independent contractor of a campaign
committee or political party. Several commenters offered general
observations regarding the Commission's approach to a conduct standard
in the NPRM. One commenter applauded the Commission's decision to focus
on specific transactions leading to a coordinated communication, rather
than general contacts between an organization and a campaign. That same
commenter, however, complained along with three other commenters that
the standards still operated to establish a presumption of coordination
and should be further narrowed to require a direct causal link between
the sharing of information and its use in a particular communication.
One other commenter expressed a concern that the proposed rules would
operate to unduly restrict corporations or labor organizations from
preparing voter guides or "scorecards" to reflect the positions of
candidates on specific legislation or issues.

BCRA's principal sponsors urged the Commission to ensure that lobbying
activities would not result in a finding of coordination under the final
rules. Similarly, a different commenter suggested that the conduct
standards be limited to contacts with a candidate in his or her role as
a candidate, rather than simply in the capacity of a legislator. That
commenter indicated that without such a restriction the conduct rules
would improperly restrict the ability of organizations to coordinate
issue advocacy with elected officials. "An action alert from a nonprofit
asking the public to call their Senators and urge them to pass
McCain-Feingold," the commenter argued, "is more effective if the timing
and content can be coordinated with Senator McCain."

[A. 11 CFR 109.21(d)(1) Request or Suggestion]{.underline}

Under the Act, as amended by BCRA, an expenditure made by any person at
the "request or suggestion" of a candidate, an authorized committee, a
political party committee, or an agent of any of the foregoing is a
contribution to the candidate or political party committee. 2 U.S.C.
441a(a)(7)(B)(i), (ii). The first conduct standard, in 11 CFR
109.21(d)(1), implements this "request or suggestion" statutory
provision. This standard has two prongs and satisfying either prong
satisfies the conduct standard.

Three commenters requested in a joint comment that the term "suggest" be
given additional definition or explanation, proposing that the
definition should reflect a suggestion as a "a palpable communication
intended to, and reasonably understood to, convey a request for some
action." The Commission notes that the "request or suggest" standard is
derived from the Supreme Court's [Buckley]{.underline} decision and has
existed in the Commission's regulations without further definition for
over two decades. [See]{.underline} [Buckley v. Valeo]{.underline}, 424
U.S. at 47 (finding that "the 'authorized or requested' standard of the
Act operates to treat all expenditures placed in cooperation with or
with the consent of a candidate, his agents, or an authorized committee
of the candidate as contributions"); [see]{.underline}
[also]{.underline} H.R. Doc. No. 95-44, at 55 (Jan. 12, 1977)
(Explanation and Justification for 11 CFR 109.1, defining independent
expenditure as an "expenditure ...which is not made ...at the request or
suggestion of" a candidate, authorized committee, or their agents). A
determination of whether a request or suggestion has occurred requires a
fact-based inquiry that, even under the commenters' proffered
explanation, can not be easily avoided through further definition.

A different commenter expressed concern that the proposed rule would
have broadly affected communications made with respect to
[all]{.underline} candidates after the person paying for such
communications has received a request or suggestion from
[any]{.underline} candidate. In this final rule, the Commission does not
intend such an application. Neither of the two prongs of this conduct
standard can be satisfied without some link between the request or
suggestion and the candidate or political party who is, or that is,
clearly identified in the communication. Where Candidate A requests or
suggests that a third party pay for an ad expressly advocating the
election of Candidate B, and that third party publishes such a
communication with no reference to Candidate A, no coordination will
result between Candidate B and the third party payor. However, a
candidate is not removed from the provisions of the conduct standards
merely by virtue of being a candidate. If Candidate A is an "agent" for
Candidate B in the example above, then the communication would be
coordinated. Similarly, if Candidate A requests that Candidate B pay for
a communication that expressly advocates the election of Candidate A,
and Candidate B pays for such a communication, that communication is a
coordinated communication and Candidate B makes an in-kind contribution
to Candidate A.

The first type of conduct, in paragraph (d)(1)(i), is satisfied if the
person creating, producing, or distributing the communication does so at
the request or suggestion of a candidate, authorized committee,
political party committee, or agent of any of the foregoing. The
[Buckley]{.underline} court originally drew on the 1974 House and Senate
Reports accompanying the 1974 amendments to the Act when it upheld the
section in FECA that distinguished a communication made "at the request
or suggestion" of the candidate or political party committee from those
that are made "totally independently from the candidate and his
campaign." [Buckley,]{.underline} 424 U.S. at 47 (citing H.R. Rep. No.
93-1239, at 6 (1974) and S. Rep. No. 93-689, at 18 (1974)). A "request
or suggestion" is therefore a form of coordination under the Act, as
approved by [Buckley]{.underline}. A request or suggestion encompasses
the most direct form of coordination, given that the candidate or
political party committee communicates desires to another person who
effectuates them.

In the NPRM, the Commission noted that this provision, for example,
would not apply to a speech at a campaign rally, but, in appropriate
cases, would apply to requests or suggestions directed to specific
individuals or small groups for the creation, production, or
distribution of communications. One commenter agreed with this approach,
requesting that the rule itself more clearly reflect this explanation.
However, the Commission is not amending its rules because it could be
potentially confusing to delineate in a rule every conceivable situation
that could arise. Instead, the Commission offers the following
explanation of the new rule. The "request or suggestion" conduct
standard in paragraph (d)(1) is intended to cover requests or
suggestions made to a select audience, but not those offered to the
public generally. For example, a request that is posted on a web page
that is available to the general public is a request to the general
public and does not trigger the conduct standard in paragraph (d)(1),
but a request posted through an intranet service or sent via electronic
mail directly to a discrete group of recipients constitutes a request to
a select audience and thereby satisfies the conduct standard in
paragraph (d)(1). Similarly, a request in a public campaign speech or a
newspaper advertisement is a request to the general public and is not
covered, but a request during a speech to an audience at an
invitation-only dinner or during a membership organization function is a
request to a select audience and thereby satisfies the conduct standard
in paragraph (d)(1).

The second way to satisfy the "request or suggestion" conduct standard
(paragraph (d)(1)(ii)) is for a person paying for a communication to
suggest the creation, production, or distribution of the communication
to the candidate, authorized committee, political party committee, or
agent of any of the foregoing, and for the candidate, authorized
committee, political party committee, or agent to assent to the
suggestion. The NPRM explained that this second way of satisfying the
conduct standard is intended to prevent circumvention of the statutory
"request or suggestion" test (2 U.S.C. 441a(a)(7)(B)(i), (ii)) by, for
example, the expedient of implicit understandings without a formal
request or suggestion. Two commenters supported the addition of this new
prong in order to prevent such circumvention of the Act. Two different
commenters suggested that only affirmative assent should satisfy the
conduct standard, although one of these commenters proposed that the
rule should also cover situations where the parties have a prior
agreement that a certain response be taken as an affirmative answer.
Three other commenters opposed an assent standard entirely as overly
complex and dependent on subjective criteria. One of these commenters
argued that such an approach would undermine the Commission's efforts to
create bright lines with respect to conduct resulting in coordination,
and joined with another of these commenters in expressing concern that
such a standard would be too easily triggered in the context of lobbying
or other discussions with elected representatives. Another of these
commenters also questioned whether certain responses, such as silence or
"when a Congressman's eyes light up at the mention of a certain
communication," constitute assent. One commenter also questioned whether
evidence of circumvention exists to justify this approach. This
commenter warned that the assent standard could run afoul of the
district court's decision in [Christian Coalition]{.underline}, which,
in the commenter's words, determined that "coordination does not exist
where a union or corporation merely informs a candidate about its own
political plans."

The Commission recognizes that the assent of a candidate may take many
different forms, but it disagrees that a standard encompassing assent to
a suggestion is overly complex. Assent to a suggestion is merely one
form of a request; it is "an expression of a desire to some person for
something to be granted or done." [See]{.underline} [Black's Law
Dict.]{.underline} (6^th^ ed. 1990) p. 1304 (definition of "request"). A
determination of whether assent to a suggestion occurs is necessarily a
fact-based determination, but no more so than a determination of whether
other forms of a request or suggestion occur. The Commission therefore
also disagrees with the commenter who suggested that the approach in the
NPRM might not be permissible in light of the [Christian
Coalition]{.underline} decision. The Commission did not, as that
commenter suggested, propose that coordination could result where a
payor "merely informs" a candidate or political party committee of its
plans. Rather, under the proposed rule, a candidate or a political party
committee will have accepted an in-kind contribution only if there is
assent to the suggestion; by rejecting the suggestion, the candidate or
political party committee may unilaterally avoid any coordination.

It is the Commission's judgment that the assent to a suggestion must be
encompassed by this conduct standard to prevent the circumvention of the
requirements of the Act in this area. Therefore, and in light of the
reasons set forth in the NPRM and above, the Commission is promulgating
the request or suggestion standard without change from its form in the
NPRM.

One commenter suggested that the Commission should permit a person to
rebut the "presumption" of coordination after a request or suggestion
"by demonstrating that the organization had decided to make that
communication prior to the contact with the candidate, campaign, or
party." The Commission does not agree with the creation of such a
"presumption." Instead, a request or suggestion must be based on
specific facts, rather than presumed, to satisfy this conduct standard.
Thus, the absence of a presumption obviates the need to establish a
mechanism for rebuttal.

As discussed above, the [Buckley]{.underline} Court expressly recognized
a request or suggestion by a candidate as a direct form of coordination
resulting in a contribution. [Buckley]{.underline}, 424 U.S. at 47. In
the NPRM, the Commission sought comment on whether the unique nature of
requests or suggestions by candidates or political party committees
indicates that such conduct should be handled differently under the
coordination regulations. Specifically, the Commission asked whether a
request or suggestion for a communication by a candidate or political
party committee should be viewed as a special case, and as sufficient,
in and of itself, regardless of the contents of the communication, to
establish coordination. Three commenters opposed any rule in which a
request or suggestion, without any content standard, could constitute a
coordinated communication. One of these commenters argued that such an
approach would permit a "false positive," such as when a group that has
long planned a lobby effort meets with a legislator, and the legislator
"expresses her hope" that the group will publicize a particular piece of
legislation bearing her name. Similarly, another of these commenters
asserted that there are "numerous communications that may be made at the
request or suggestion of a candidate that have no relationship to any
election." The Commission agrees with these commenters' concerns. Even
supporters of this approach appeared to acknowledge in their testimony
that a request to run an advertisement well before the next election
might not be in an "electoral context" and therefore should not
necessarily be treated as a coordinated communication under the
Commission's regulations. Therefore, the final rules do not create any
exception from the content standard for the "request or suggestion"
conduct standard.

> [B. 11 CFR 109.21(d)(2) Material Involvement]{.underline}

The second conduct standard, 11 CFR 109.21(d)(2), addresses situations
in which a candidate, authorized committee, or a political party
committee is "materially involved in decisions" regarding specific
aspects of a public communication paid for by someone else. Those
specific aspects are listed in paragraphs (i) through (vi) of paragraph
(d)(2): (i) the content of the communication; (ii) the intended
audience; (iii) the means or mode of the communication; (iv) the
specific media outlet used; (v) the timing or frequency of the
communication; or (vi) the size or prominence of a printed communication
or duration of a communication by means of broadcast, cable, or
satellite. Please note that "the specific media outlet used" includes
those listed in the definition of "public communication" in 11 CFR
100.26, including the broadcast and print media, mass mailings, and
telephone banks. The "content of the communication" would include the
script of telephone calls.

One commenter argued that this conduct standard should be limited to
situations in which a candidate or political party has "significant
control or influence over decisions" regarding the communication. The
Commission disagrees, as such a standard would do little to clarify the
rule or its application. The same commenter expressed concern about the
scope of the "material involvement" standard, arguing that one
candidate's actions with respect to a third-party spender might "taint"
all of that third-party's communications with respect to different
candidates. For the same reasons discussed above in the context of the
"request or suggestion" standard, the Commission is not tailoring its
rules to address that perceived potential outcome.

Two other commenters characterized the material involvement standard as
redundant in light of the "substantial discussion" conduct standard, and
one also opposed its inclusion because of vagueness and because Congress
did not mandate this specific approach in BCRA, nor was it mandated by
[Christian Coalition]{.underline}. In contrast, four commenters
indicated general support for the inclusion of this standard in the
final rules and urged the Commission to expand it to cover material
involvement in "discussions," in addition to decisions, regarding a
communication. The Commission recognizes that there is a potential
overlap between the "material involvement" standard and the "substantial
discussion" standard explained below. Many activities that satisfy the
"substantial discussion" conduct standard will also satisfy the
"material involvement" standard, but the "material involvement" standard
encompasses some activities that would not be encompassed by the
"substantial discussion" standard or any of the other conduct standards.
For example, a candidate is materially involved in a decision regarding
the content of a communication paid for by another person if he or she
has a staffer deliver to that person the results of a polling project
recently commissioned by that candidate, and the polling results are
material to the payor's decision regarding the intended audience for the
communication. However, as explained below, the "substantial discussion"
standard would not be satisfied by such delivery without some
"discussion" or some form of interactive exchange between the candidate
and the person paying for the communication. The Commission thus
believes that the "material involvement" standard is necessary to
address forms of "real world" coordination that would not be addressed
in any of the other conduct standards.

One commenter advised against any interpretation of the rule that would
define "material" to require a showing of direct causation. For the
purposes of 11 CFR part 109, "material" has its ordinary legal meaning,
which is "important; more or less necessary; having influence or effect;
going to the merits." [Black's Law Dict.]{.underline} (6^th^ ed. 1990)
p. 976. Thus, the term "materially involved in decisions" does not
encompass all interactions, only those that are important to the
communication. The term "material" is included to safeguard against the
inclusion of incidental participation that is not important to, or does
not influence, decisions regarding a communication. The factual
determination of whether a candidate's or authorized committee's
involvement is "material" must be made on a case-by-case basis.

The "material involvement" standard does not provide a "bright-line"
because its operation is necessarily fact-based. Nevertheless the
inclusion of a "materiality" requirement serves to protect against
overbreadth, consistent with Supreme Court jurisprudence. In construing
the meaning of "material" in the context of Securities Exchange
Commission regulations, the Supreme Court specifically rejected a
"bright-line rule" for materiality:

> A bright-line rule indeed is easier to follow than a standard that
> requires the exercise of judgment in the light of all the
> circumstances. But ease of application alone is not an excuse for
> ignoring the purposes of the Securities Acts and Congress\' policy
> decisions. Any approach that designates a single fact or occurrence as
> always determinative of an inherently fact-specific finding such as
> materiality, must necessarily be overinclusive or underinclusive.

[Basic v. Levinson]{.underline}, 485 U.S. 224, 236 (1988). Therefore,
the "material involvement" standard does not impose a requirement of
direct causation, but focuses instead on the nature of the information
conveyed and its importance, degree of necessity, influence or the
effect of involvement by the candidate, authorized committee, political
party committee, or their agents in any of the communication decisions
enumerated in 11 CFR 109.21(d)(2)(i) through (vi).

The Commission has considered and rejected the suggestion of the
commenter who recommended that "material involvement" be narrowed to a
"but-for" test, which would require proof that the communication would
not have occurred [but for]{.underline} the material involvement of a
candidate, authorized committee, political party committee, or agent.
The Commission is not adopting this approach or any similar requirement
of direct causation in its final rules. Under such an analysis,
information would only be "material" if all other potential influences
on the content of the communication, its intended audience, its means or
mode, the specific media outlet used, the timing or frequency of the
communication, or the size, prominence, or duration of the communication
could be eliminated. This would result in an extremely intrusive factual
determination. For example, under the commenter's suggested approach, a
candidate might propose a specific date for publication of a
communication, but that candidate would not be materially involved in
the decision regarding the timing of the communication unless the
Commission could prove that no alternate factor could have led to the
same timing decision. Such an approach is also unworkable because
foreclosing all potential alternatives imposes an unnecessarily high
burden of proof. The Commission also believes that such an approach
would be unwarranted because the plain meaning of "material," as
explained above, provides sufficient guidance for an inherently
fact-based determination. For the same reasons, the Commission rejects
any interpretation of "material involvement" that would require a
showing that the communication is made "as a result of" the involvement
of a candidate, an authorized committee, a political party committee, or
an agent.

Instead, a candidate, authorized committee, or political party committee
is considered "materially involved" in the decisions enumerated in
paragraph (d)(2) after sharing information about plans, projects,
activities, or needs with the person making the communication, but only
if this information is found to be material to any of the
above-enumerated decisions related to the communication. Similarly, a
candidate or political party committee is "materially involved in
decisions" if the candidate, political party committee, or agent conveys
approval or disapproval of the other person's plans. The candidate or
representatives of an authorized committee or political party committee
need not be present or included during formal decisionmaking process but
need only participate to the extent that he or she assists the ultimate
decisionmaker, much like a lawyer who provides legal advice to a client
is materially involved in a client's decision even when the client
ultimately makes the decision.

The Commission notes that as with the "request or suggest" standard, the
"material involvement" standard would not be satisfied, for example, by
a speech to the general public, but is satisfied by remarks addressed
specifically to a select audience, some of whom subsequently create,
produce, or distribute public communications. However, it is not
necessary that the involvement of the candidate or political party
committee be traced directly to one specific communication. Rather, a
candidate's or political party committee's involvement is material to a
decision regarding a particular communication if that communication is
one of a number of communications and the candidate or political party
committee was materially involved in decisions regarding the strategy
for those communications. For example, if a candidate is materially
involved in a decision about the content or timing of a 10-part
advertising campaign, then each of the 10 communications is coordinated
without the need for further inquiry into the decisions regarding each
individual ad on its own.

In order to respond to requests by several commenters for additional
clarification about how the standard would operate, the Commission is
providing the following hypothetical: Candidate A reads in the newspaper
that the Payor Group is planning an advertising campaign urging voters
to support Candidate A. Candidate A faxes over her own ad buying
schedule to Payor Group, hoping that Payor Group will plan its own ad
buying schedule around Candidate A\'s schedule to maximize the effect of
both ad campaigns. The Payor Group subsequently runs ads that are all on
NBC and ABC during the 6:00 news hour and during the most expensive
weekday timeslot on NBC, whereas Candidate A\'s ads are run on CBS
during the 6:00 news hour and during the most expensive time slot on
CBS. When asked, Payor Group acknowledges that it received the fax from
Candidate A, but says only that its plans for the timing of the campaign
were in flux at the time they received the fax. The analysis under the
\"materially involved\" conduct standard focuses on whether the fax
constituted material involvement by the candidate in a decision
regarding the timing of the Payor Group communications. Significant
facts might include that the Payor Group changed its previously planned
schedule, or that Payor Group had not yet made plans and had factored in
the fax in its decision to choose CBS and the same time slot, or show in
some other way that the fax was \"important; more or less necessary,
having influence or effect, \[or\] going to the merits\" with respect to
the Payor Group's decisions about the timing of its ads. The
transmission and receipt of the fax in combination with the correlation
of the two ad campaigns gives rise to a reasonable inference that
Candidate A's involvement was material to the Payor group's decision
regarding the timing of its ad campaign. If, on the other hand, the
example is changed so that the Payor Group's ads run on the same channel
right after the candidate's ads in a way that lessens the effect of both
ad campaigns, it may be appropriate to conclude that Candidate A's
involvement was [not]{.underline} material to the Payor group's decision
regarding the timing of its ad campaign. In other words, the degree to
which the communications overlapped or did not overlap is one indication
of whether Candidate A's involvement was material to the timing of the
Payor Group communications.

> [C. 11 CFR 109.21(d)(3) Substantial Discussion]{.underline}

In BCRA, Congress also directed the Commission to address "payments for
communications made by a person after substantial discussion about the
communication with a candidate or political party." Pub. L. 107-155,
sec. 214(c)(4) (March 27, 2002). In the NPRM, the Commission proposed a
third conduct standard that would apply when a communication satisfying
one or more of the content standards "is created, produced, or
distributed after one or more substantial discussions about the
communication between the person paying for the communication" and a
candidate, authorized committee, political party committee, or an agent
of any of the foregoing. 67 [Fed. Register]{.underline} at 60,065
(September 24, 2002). The proposed rule also specified that a discussion
is substantial "if information about the plans, projects, or needs of
the candidate or political party committee is conveyed to a person
paying for the communication, and that information is material to the
creation, production, or distribution of the communication." 67 [Fed.
Register]{.underline} at 60,066 (September 24, 2002).

Three commenters supported the inclusion of this standard exactly as
proposed in the NPRM. Two different commenters, however, characterized
this standard as redundant in light of the "material involvement"
standard and suggested that they be combined into a single standard. One
other commenter asserted that there was "insufficient quantification" as
to the meaning of a "substantial" discussion and recommended that
"substantial discussion" join "material involvement" as subjects for
future rulemaking consideration. A different commenter advised that
"material" should be further defined in the context of this standard.
Two commenters advocated a return to the [Christian
Coalition]{.underline} test of whether or not the candidate and the
spender emerge as "partners or joint venturers," while one of these
commenters urged the Commission to specifically exclude discussions
about policy and legislation in this context.

The Commission is including the "substantial discussion" standard in the
final rules on coordinated communications because, as stated above,
Congress required it to address this issue. Pub. L. 107-155, sec.
214(c)(4) (March 27, 2002). Under paragraph (d)(3) of 11 CFR 109.21, a
communication meets the conduct standard if it is created, produced, or
distributed after one or more substantial discussions between the person
paying for the communication, or the person's agents, and the candidate
clearly identified in the communication, his or her authorized
committee, his or her opponent, or the opponent's authorized committee,
a political party committee, or their agents. While the Commission
recognizes the commenter's concerns that "substantial" and "material"
are not set forth as bright-line tests, the Commission views an analysis
of a "substantial discussion" as necessarily fact-specific and not
naturally conducive to a meaningful bright-line analysis. Nevertheless,
the Commission is providing an analytical framework in which a finder of
fact determines whether a discussion occurred, whether certain
information was conveyed, and whether that information is material to
the creation, production, or distribution of the communication. The
[Christian Coalition]{.underline} suggestion that a candidate and
spender emerge as "joint venturers" would only serve to confuse readers.
The "substantial discussion" conduct standard in this final rule
addresses a direct form of coordination between a candidate, authorized
committee, political party committee, or their agents and a third-party
spender, and the Commission is narrowing the scope of this standard
through the additional requirements that the discussion be "substantial"
and the information conveyed be "material." Paragraph (d)(3) explains
that a "discussion" is "substantial" if information about the plans,
projects, activities, or needs of the candidate, authorized committee,
or political party committee that is material to the creation,
production or distribution of the communication is conveyed to a person
paying for the communication. "Discuss" has its plain and ordinary
meaning, which the Commission understands to mean an interactive
exchange of views or information. "Material" has the meaning explained
above in the context of the "materially involved" standard. In other
words, the substantiality of the discussion is measured by the
materiality of the information conveyed in the discussion.

[D. 11 CFR 109.21(d)(4) Common Vendor]{.underline}

In BCRA, Congress required the Commission to address "the use of a
common vendor" in the context of coordination. Pub. L. 107-155, sec.
214(c)(2) (March 27, 2002). In the NPRM, the Commission proposed the
conduct standard in paragraph (d)(4) of section 109.21 to implement this
Congressional mandate. Proposed paragraphs (d)(4)(i) and (ii) provide
that a common vendor is a commercial vendor who is contracted to create,
produce, or distribute a communication by the person paying for that
communication after that vendor has, during the same election cycle,
provided any one of a number of listed services to a candidate who is
clearly identified in that communication, or his or her authorized
committee, or his or her opponent or the opponent's authorized
committee, or a political party committee, or an agent of any of the
foregoing. Under proposed paragraph (d)(4)(iii), the conduct standard
would be satisfied if the common vendor conveys material information
about the plans, projects, or needs of a candidate, authorized
committee, or political party committee to the person paying for the
communication, or if the vendor uses that material information in the
creation, production, or distribution of a covered communication.

Many commenters addressed the "common vendor" standard proposed in the
NPRM. One commenter asserted that this rule would not be enforceable
because the term "common vendor" was "inadequately defined" to cover
most vendors. This commenter warned that proposed standard would not
reach many vendors who continuously re-organize personnel, merge, or
dissolve and reorganize as different entities during or between election
cycles. The same commenter believed it was important to include in the
list of covered services media production vendors, pollsters, and media
buying firms (for purchasing time slots) because they work closely
together.

The Commission recognizes the possibility that commercial vendors may
attempt to circumvent the new rules by re-organizing as different
entities or replacing personnel. However, the Commission notes that the
final rules focus on the use or conveyance of information used by a
vendor, including its owner, officers, and employees, in providing
services to a candidate, authorized committee, or political party
committee, rather than the particular structure of the vendor. The
specific reference to a vendor's owners and officers was not included in
the proposed rule, but is being added to the final rule to address the
commenter's concern. Therefore, if an individual or entity qualifies as
a commercial vendor at the time that individual or entity contracts with
the person paying for a communication to provide any of the specified
services, then the individual or entity qualifies as a common vendor to
the extent that the same individual or entity, "or any owner, officer,
or employee" of the commercial vendor, has provided any of the
enumerated services to the candidate during the specified time period.
Thus, a commercial vendor may qualify as a common vendor under 11 CFR
109.21(d)(4) even after reorganizing or shifting personnel.

Five commenters argued that the Commission should presume that the
conduct standard is satisfied whenever a candidate and an outside
spender use the same common vendor. According to these commenters, the
rule proposed by the Commission in the NPRM would create an "impossibly
high standard to meet" if it required a showing that the common vendor
actually "uses" particular information.

In contrast, five different commenters asserted that any such
presumption would be overly broad and "taint" the vendor, or submit the
candidate, political party committee, vendor, or spender to unwarranted
"liability" for communications presumed to be coordinated merely because
of the use of the vendor. Several commenters in this latter group were
concerned that an overly broad rule would chill speech and discourage
vendors from providing services to candidates or political party
committees, which the commenters warned would be particularly
troublesome in areas where only a limited number of vendors provide
specific services. One commenter argued that the proposed standard could
lead to extensive and burdensome investigations that would place
spenders at a disadvantage because it would be difficult for them to
show that the vendor had not used certain information from a candidate's
campaign committee or political party committee to create a
communication. One commenter, who described himself as being in the
business of "buying media spot time on behalf of various political
clients," stated that he had spent a substantial sum of money responding
to investigations, and opposed any rule in which "merely associating"
with a common vendor might expose the person paying for a communication
to the risk of enforcement proceedings. Four of these commenters,
however, were generally supportive of the Commission's proposal to
require that the common vendor "use or convey" material information to
the person making the communication at issue, as opposed to simply
providing services to both a candidate or party and the spender.

Similarly, three other commenters expressed concern about the
"[per]{.underline} [se]{.underline} inclusion of vendors by class" and
suggested that the inclusion of specific types of vendors should merely
raise a "rebuttable presumption." These three commenters further noted
that the proposed reference to "material information" would include
information "used previously" in providing services to the candidate or
party. These commenters questioned how a vendor might account for the
"use" of material information.

After considering the wide range of comments, the Commission has decided
to promulgate a final rule that is similar in many respects to the
proposed rule, with certain modifications discussed below. It disagrees
with those commenters who contended the proposed standard created any
"prohibition" on the use of common vendors, and likewise disagrees with
the commenters who suggested it established a presumption of
coordination. Instead, the Commission notes that a different group of
commenters urged the Commission to adopt such a presumption precisely
because they believed the proposed standard did not already contain a
presumption and would therefore be difficult to meet. The final rules in
11 CFR 109.21(d)(4) restrict the potential scope of the "common vendor"
standard by limiting its application to vendors who provide specific
services that, in the Commission's judgment, are conducive to
coordination between a candidate or political party committee and a
third party spender. But under this final rule, even those vendors who
provide one or more of the specified services are not in any way
prohibited from providing services to both candidates or political party
committees and third-party spenders. This regulation focuses on the
sharing of information about plans, projects, activities, or needs of a
candidate or political party through a common vendor to the spender who
pays for a communication that could not then be considered to be made
"totally independently" from the candidate or political party committee.

The only commenter who identified himself as providing vendor services
indicated that it is not the common practice for vendors to make use of
one client's media plans in executing the instructions of a different
client, and sharing "any client information given by another" would
"compromise the professional relationship" that is at the "core of any
service business." That commenter observed that "\[c\]ommon vendors, at
whatever tier, who avoid such conduct should never be at risk of being
deemed an instrument of coordination." No other commenters offered
conflicting information on these points. Thus, because the Commission
addresses only the use or conveyance of information material to the
communication, the final rules narrowly target the coordination activity
without unduly intruding into existing business practices.

The common vendor rule is carefully tailored to ensure that all four of
the following conditions must be met. First, under 11 CFR
109.21(d)(4)(i), the person paying for the communication, or the agent
of such a person, must contract with, or employ, a "commercial vendor"
to create, produce, or distribute the communication. The term
"commercial vendor" is defined in the Commission's pre-BCRA regulations
at 11 CFR 116.1(c) as "any person\[\] providing goods or services to a
candidate or political committee whose usual and normal business
involves the sale, rental, lease, or provision of those goods or
services." Thus, this standard only applies to a vendor whose usual and
normal business includes the creation, production, or distribution of
communications, and does not apply to the activities of persons who do
not create, produce, or distribute communications as a commercial
venture.

The second condition, in paragraph (d)(4)(ii), is that the commercial
vendor must have provided certain services to the candidate or political
party committee that puts the commercial vendor in a position to acquire
information about the campaign plans, projects, activities, or needs of
the candidate or political party committee that is material to the
creation, production or distribution of the communication. Nine specific
services are enumerated in paragraphs (d)(4)(ii)(A) through (I).
Providing these services places the "common vendor" in a position to
convey information about the candidate's or party committee's campaign
plans, projects, activities, or needs to the person paying for the
communication where that information is material to the communication.

The third condition is that the new rule only applies to common vendors
who provide the specified services during the current election cycle.
"Election cycle" is defined in 11 CFR 100.3. The Commission sought
comment on whether a different time period, such as a fixed two-year
period, would more accurately align the rule with existing campaign
practices. One commenter responded that a two-year period would be too
long and suggested that the standard should pertain "only to vendors who
were common during the election year," or possibly further limited to
vendors who provide services during the 30-day period before a primary
election or the 60-day period before an election. That commenter also
suggested that a time limit be placed on the use or conveyance of
information received from a candidate or political party in recognition
that such information would eventually become stale and unworthy of
restriction. A different commenter, however, suggested that a two-year
time limit would be too short because it would not appropriately
encompass election activity that takes place throughout the six-year
Senate election cycle. Another commenter advised that the time limit for
common vendor activities should be limited to the period "during the
calendar year in which the candidate's name is on the ballot for
election to Federal office." One commenter proposed an alternative in
which a vendor's services would not be covered by the rule outside of
the 30 days following the time the vendor ceased working for the
candidate or political party committee.

The Commission is retaining "election cycle" as the temporal limit in
the final rules. The election cycle provides a clearly defined period of
time that is reasonably related to an election. The mixture of an
election cycle with a calendar year cutoff would likely cause confusion.

The fourth condition, in paragraph (d)(4)(iii), requires that the
commercial vendor "uses or conveys information about the candidate's
campaign plans, projects, activities, or needs" or the political party
committee's campaign plans, projects, activities, or needs where that
information is material to the creation, production, or distribution of
the communication. This requirement encompasses situations in which the
vendor assumes the role of a conduit of information between a candidate
or political party committee and the person making or paying for the
communication, as well as situations in which the vendor makes use of
the information received from the candidate or political party committee
without actually transferring that information to another person. By
referring in the final rule to the candidate's "campaign" plans,
projects, activities, or needs, the Commission clarifies that this
conduct standard is not intended to encompass lobbying activities or
information that is not related to a campaign. The Commission notes,
however, that to the extent information relates to campaign plans,
projects, activities, or needs, that information would be covered by
this provision even if that information also related to non-campaign
plans, projects, activities, or needs of the candidate.

Several commenters opposed the inclusion of the "use or convey"
requirement as being exceedingly difficult to prove, while other
commenters viewed it as necessary protection against an unduly
burdensome rule. Two of the commenters who supported a general
presumption of coordination suggested that a confidentiality agreement
might be used to rebut the presumption, while three others opposed a
general presumption suggested that the Commission establish a safe
harbor for spenders who enter into a confidentiality agreement filed
under seal with the Commission. A different commenter suggested that the
"use or convey" provision would be "unworkable" unless it provided for
some form of exception for the use of an "ethical screen." Otherwise,
according to that commenter, a single employee might "disqualify" an
entire firm from providing services to both a candidate and a
third-party spender.

The final rule does not require the use of any confidentiality agreement
or ethical screen because it does not presume coordination from the mere
presence of a common vendor. The final rule also does not dictate any
specific changes to the business relationship between a vendor and its
clients. The Commission does not anticipate that a person who hires a
vendor and who, irrespective of BCRA's requirements, follows prudent
business practices, will be inconvenienced by the final rule.
Nevertheless, the Commission does not agree that the mere existence of a
confidentiality agreement or ethical screen should provide a [de
facto]{.underline} bar to the enforcement of the limits on coordinated
communication imposed by Congress. Without some mechanism to ensure
enforcement, these private arrangements are unlikely to prevent the
circumvention of the rules.

The Commission also sought comment on the list of common vendor services
covered in paragraph (d)(4)(ii), and specifically whether purchasing
advertising time slots for television, radio, or other media should be
added to that list. Several commenters recommend excluding the following
groups of vendor classes from those listed in the proposed rules on the
principle that they lack adequate control as decisionmakers or they have
little knowledge of communications: 1) "media time buyers and others
where the technical nature of their services diminishes their role in
controlling the content of strategically sensitive communications;" 2)
fundraisers; 3) vendors involved in selecting personnel, contractors, or
subcontractors; 4) vendors involved in consulting; and

5\) vendors involved in identifying or developing voter lists, mailing
lists, or donor lists. A media buyer urged the Commission not to include
media buyers in the list of covered activities because they have little
decisionmaking authority and act within "predetermined strategic
parameters including timing, geographic and demographic target
audiences, and budget," but do not "create, produce, or distribute" a
communication by themselves.

The Commission is incorporating the list of covered common vendor
services into the final rules without change from its form in proposed
section 109.21(d)(4)(ii) of the NPRM. The Commission recognizes that
media buyers might potentially serve a number of different roles at the
direction of various clients. Therefore, the Commission is not including
"purchasing advertising time slots for television, radio, or other
media" as a distinct category in the list of common vendor services
covered in paragraph (d)(4)(ii). However, media buyers and other similar
service providers are included to the extent that their services fit
within one of the other categories already listed in paragraph
(d)(4)(ii).

[E. 11 CFR 109.21(d)(5) Former Employee/Independent
Contractor]{.underline}

In BCRA, Congress required the Commission to address in its revised
coordination rules "persons who previously served as an employee of" a
candidate or political party committee." Pub. L. 107-155, sec. 214(c)(3)
(March 27, 2002). In the NPRM, the Commission proposed 11 CFR 109.21
(d)(5) to implement this Congressional requirement. Proposed paragraph
(d)(5) would have applied to communications paid for by a person who was
previously an employee or an independent contractor of a candidate,
authorized committee, or political party committee, or by the employer
of such a person. Under the rule proposed in the NPRM, the "former
employee" conduct standard would be satisfied if the former employee or
independent contractor "makes use of or conveys" "material information"
about the candidate's or political party committee's plans, projects, or
needs to the person paying for the communication.

Commenters responding to the proposed rules made many of the same points
about the "former employee" standard as they made with respect to the
"common vendor" standard. One commenter opposed the proposal in the NPRM
that covered the "use" of material information provided by a former
employee. Such a standard, that commenter asserted, would be too broad
and would amount to a "[per]{.underline} [se]{.underline}" rule that
would lead to overly intrusive investigations. In contrast, four
commenters argued that the proposed standard was not broad enough and
suggested that the Commission establish a presumption of coordination
when a former employee or an independent contractor of a campaign
committee or political party committee pays for, or his or her current
employer pays for, a communication that satisfies the content
requirements of this section. These commenters argued that without such
a presumption, it would be far too difficult to prove that an employee
used material information or conveyed information to the new employer.
In addition, however, three of these commenters suggested that the
Commission limit the application of this presumption of coordination to
a specified class of employees who are likely to "possess material
political information." A different commenter indicated that it would be
difficult to enforce this conduct standard because the definition of
"independent contractor" in the NPRM was underinclusive in that it
failed to account for the fact that an independent contractor might
reorganize or change names, making it difficult to verify the identity
of the independent contractor or former employee. As with the potential
reorganization of common vendors discussed above, the Commission does
not believe that new requirements are necessary at this time to address
the commenter's concerns. Employees and independent contractors are
natural persons, rather than corporations or other entities or legal
constructs, so the Commission anticipates that reorganization for the
purpose of circumventing the new rules is even less likely than in the
context of common vendors.

Three other commenters asserted that Congress had not mandated the
proposed rule and expressed concern about the "increased risk of legal
liability" for both party committees and former employees" that they
believed would "stigmatize" the former employee and make it difficult
for that person to find subsequent employment.

This proposed rule would have required that the employment or
independent contractor relationship exist during the current election
cycle. As discussed above with regard to paragraph (d)(4) on common
vendors, the Commission requested comments on whether this time period
should be a fixed two-year period, or the same election cycle, but not
more than two years. Most comments on this provision were identical to
the comments on the temporal requirements in paragraph (d)(4). One
commenter believed the two-year time frame was "inappropriate and overly
injurious both to corporations trying to communicate about legislative
topics and to those former employees of candidates seeking employment
with such corporations." In contrast, a different commenter suggested a
six-year time period and asserted that the two-year period was too short
to fully address the real-world practices in this area. Another
commenter offered the same proposal the commenter had offered with
respect to common vendors: the former employee should be covered during
the calendar year in which the candidate's name is on the ballot for
election to Federal office. A fourth commenter suggested that the time
frame be limited to the previous two years of the current election
cycle.

The final rule in paragraph (d)(5) incorporates the temporal limit of
the "election cycle," which is defined in 11 CFR 100.3. This time limit
establishes a clear boundary based on an existing definition and ensures
that there is a clear link between the conveyance or use of the material
information and the time period in which that material might be
relevant. In addition, the Commission disagrees with the single
commenter who claimed that the two-year limit would harm the job
prospects of former employees or inhibit discussions between
corporations and candidates or political party committees. The
Commission notes that the final rule focuses only on the use or
conveyance of information that is material to a subsequent communication
and does not in any way prohibit or discourage the subsequent employment
of those who have previously worked for a candidate's campaign or a
political party committee.

One commenter proposed a "cooling off period" for a former employee
instead of a temporal limit based on a calendar year or an election
cycle. Under that proposed approach, the former employee or independent
contractor of a candidate or political party would have to wait for a
certain time period, which the commenter proposed as 30-60 days, before
providing services to a person paying for a communication covered by
section 109.21(c). After that period, the former employee or independent
contractor would not trigger the proposed conduct standard. The
Commission is unwilling to impose a complete ban on an individual's
employment opportunities, as a "cooling off period" requirement would
function. Instead, the Commission views the narrowly tailored approach
proposed in the NPRM as preferable and is therefore not incorporating a
"cooling off period" into the final rules.

This conduct standard expressly extends to an individual who had
previously served as an "independent contractor" of a candidate's
campaign committee or a political party committee. One commenter opposed
the inclusion of independent contractors, arguing that an "independent
contractor" is legally distinct from an "employee" and Congress,
recognizing this distinction in other statutes, must have made an
intentional decision to exclude independent contractors by using the
term "employee" in section 214(c)(3). The Commission disagrees with this
assumption and instead notes that the inclusion of independent
contractors is entirely consistent with the use of "employee" because
both groups receive some form of payment for services provided to the
candidate, authorized committee or political party committee. Therefore,
the Commission includes the term "independent contractor" in the final
rule to preclude circumvention by the expedient of characterizing an
"employee" as an "independent contractor" where the characterization
makes no difference in the individual's relationship with the candidate
or political party committee. This coordination standard also applies to
the employer of an individual who was an employee or independent
contractor of a candidate, authorized committee, or political party
committee. The Commission interprets the Congressional intent behind
section 214(c)(3) of BCRA to encompass situations in which former
employees, who by virtue of their former employment have been in a
position to acquire information about the plans, projects, activities,
or needs of the candidate's campaign or the political party committee,
may subsequently use that information or convey it to a person paying
for a communication. The Commission has added the requirement that the
information must be material to the subsequent communication in order to
ensure that the conduct standard is not overly broad.

One commenter argued that the proposed rule's incorporation of the
phrase "material information used ... in providing services to the
candidate" was vague and overly broad, and should be limited to material
information about "campaign strategy and tactics," excluding policy
views. This commenter also questioned whether the information must be
material to the communication itself, or whether the information used to
serve the candidate was material to those services. The Commission notes
that in many cases the information may be material to both, but for the
purposes of this final rule the Commission is only concerned with
whether the information is material to the communication, not to the
services previously provided to the candidate. As with the common vendor
standard, this requirement encompasses both situations in which the
former employee assumes the role of a conduit of information and
situations in which the former employee makes use of the information but
does not share it with the person who is paying for the communication.

The Commission is including this conduct standard to address what it
understands to be Congress' primary concern, which is a situation in
which a former employee of a candidate goes to work for a third party
that pays for a communication that promotes or supports the former
employer/candidate or attacks or opposes the former employer/candidate's
opponent. One commenter proposed that the former employer (i.e., the
candidate's campaign or a political party committee) must be shown to
exercise ongoing control over its former employee. A different
commenter, however, recognized that the Commission's proposed rules
would address such a concern by removing the reporting duties that might
otherwise be triggered by the actions of the former employee who acted
without the knowledge of his or her former employer. This reporting rule
is included in the final rules in 11 CFR 109.21(b)(2). This commenter,
however, raised a similar concern by suggesting that the final rule
should be limited to cover only former employees when they are acting
under the direction or control of their new employer, the third-party
spender, to ensure that the former employee does not use or convey
material information without the [spender's]{.underline} knowledge. The
Commission notes, however, that such a limitation is unnecessary and
confusing in cases where the former employee or independent contractor
pays for the communication by himself or herself.

The conduct standard in the final rule in 11 CFR 109.21(d)(5) does not
require that the former employee act under the continuing direction or
control of, at the behest of, or on behalf of, his or her former
employer. This is because a former employee who acts under such
circumstances is a present agent, and the revised rules covering agents
apply to this individual. [See]{.underline} 11 CFR 109.3. To give effect
to the statutory language requiring that the Commission's coordination
regulations address "former employees" ([see]{.underline} Pub. L.
107-155, sec. 214(c)(3)) the Commission concluded that a "former
employee," as that term is used in the statute, must be different from
"agent." Furthermore, the Commission does not find in BCRA, the FECA, or
the general legal principles of employer-employee law, a need or
justification for such an exception that would, in essence,
categorically free employers from responsibility for the actions of
their employees. Instead, the Commission reiterates its observation
offered above with respect to the "common vendor" standard. Irrespective
of the Congressional requirements in BCRA, employers may elect to
clearly define the scope of employee responsibilities and to institute
prudent policies or practices to ensure that the employee adheres to the
scope of those expectations.

One commenter supported an exception to the "common vendor" and "former
employee" conduct standards to permit persons in either of those classes
to use or convey information if that vendor or former employee "makes
use of information in a manner that is adverse to the candidate or
political party committee without any coordination with the candidate
benefiting from the communication." In the Commission's judgment, such
an exception would obfuscate otherwise bright lines and provide a clear
path for the circumvention of the Act and the Commission's regulations
without offering a discernible benefit. Under the proposed exception,
"use of information in a manner that is adverse to the candidate or
political party committee" requires a subjective determination of both
the interests of the candidate or political party and the effect that
the "information" has on those interests.

The Commission also sought comment as to whether this conduct standard
should be extended to volunteers, such as "fundraising partners," who by
virtue of their relationship with a candidate or a political party
committee, have been in a position to acquire material information about
the plans, projects, activities, or needs of the candidate or political
party committee. Three commenters opposed the inclusion of volunteers.
One of these commenters argued that volunteers traditionally participate
in more than one campaign at a time and "as a matter of practice,
campaigns attempt to make volunteers feel more involved in the campaign
by the intentional communication of 'insider' information." While the
FECA exempts campaign volunteers from certain requirements, this
"practice" of sharing "insider" information is not adequate
justification to exclude volunteers. Rather, the Commission recognizes
that some, but not all, "volunteers" operate as highly placed
consultants who might be given information about the plans, projects,
activities, or needs of the candidate or political party committee with
the expectation that the "volunteer" will use or convey that information
to effectively coordinate a communication paid for by that "volunteer"
or by a third-party spender. Nevertheless, the Commission is not
extending the scope of the "former employee" standard in its final rules
to encompass volunteers for a different reason. The Commission views the
choice of the word "employee" in section 214(c)(3) as a significant
indication of Congressional intent that the regulations be limited to
individuals who were in some way employed by the candidate's campaign or
political party committee, either directly or as an independent
contractor. The Commission also notes that even though volunteers are
not subject to the "former employee" conduct standard, their actions
could nonetheless come within a different conduct standard in new 11 CFR
109.21(d). For example, if a candidate requests that a volunteer pay for
a communication, and the volunteer does so, the communication is
coordinated if the content of the communication satisfies one or more of
the content standards in new

11 CFR 109.21(c). Also, in some cases a volunteer may qualify as an
agent of a candidate or a political party under the definition in new 11
CFR 109.3.

### 

F. 11 CFR 109.21(d)(6) Dissemination, Distribution, or Republication of
Campaign Materials

Paragraph (d)(6) clarifies the application of the conduct standards to a
candidate or authorized committee after the initial preparation of
campaign materials when those materials are subsequently disseminated,
distributed, or republished, in whole or in part, by another person. In
light of the candidate's initial role in preparing the campaign material
that is subsequently incorporated into a republished communication, it
is possible that the candidate's involvement in the original preparation
of part or all of that content might be construed as triggering
[per]{.underline} [se]{.underline} one or more of the conduct standards
in paragraph (d) of 11 CFR 109.21. To avoid this result, the Commission
is including

11 CFR 109.21(d)(6) in the final rules to clarify that the candidate's
actions in preparing the [original]{.underline} campaign materials are
not to be considered in the conduct analysis of paragraph (d)(1) through
(d)(3) of section 109.21. ([See]{.underline} above). Instead, 11 CFR
109.21(d)(6) explains that the focus is on the conduct of the candidate
that occurs [after]{.underline} the initial preparation the campaign
materials. For example, if a candidate requests or suggests that a
supporter pay for the republication of a campaign ad, the resulting
communication paid for by the supporter satisfies both a content
standard (republication) and conduct standard (request or suggestion),
and is therefore a coordinated communication. However, without that
request or suggestion, and assuming no other contacts with the
candidate, the candidate's authorized committee, or their agents, the
communication does not satisfy the "request or suggestion" conduct
standard and is not a coordinated communication even though it contains
campaign material prepared by the candidate.

The final rules are being changed from the proposed rules to explain
more clearly the application of the conduct standards in paragraphs
(d)(4) and (d)(5) to republished campaign materials, as well as to
clarify the relationship between paragraph (c)(2) and (d)(6) of section
109.21 as well as between 11 CFR 109.37(a)(2)(i) and paragraph (d)(6) of
section 109.21. The conduct standards in paragraph (d)(4) and (d)(5)
would not be affected by (d)(6). Whereas a candidate's or authorized
committee's original preparation of campaign materials might have
possibly been misconstrued as satisfying the conduct standards in (d)(1)
through (d)(3) without the addition of (d)(6), there is no such danger
that the (d)(4) "common vendor" standard or the (d)(5) "former employee"
standard would be satisfied by the candidate's or authorized committee's
original preparation of campaign materials. However, to avoid any
potential confusion, the second sentence in paragraph (d)(6) clarifies
that a communication that satisfies the conduct standards in (d)(4) or
(d)(5) is still a coordinated communication even if the communication
only satisfies the content standard in paragraph (c)(2).

### 5. 11 CFR 109.21(e) No Requirement of Agreement or Formal Collaboration

When Congress, in BCRA, required the Commission to promulgate new
regulations on coordinated communications, it specifically barred any
regulatory requirement of "agreement or formal collaboration" to
establish coordination. Pub. L. 107-155, sec. 214(c) (March 27, 2002).
In the NPRM, the Commission noted that although Congress did not define
this phrase, earlier versions of BCRA stated that "collaboration or
agreement" was not required to show coordination. [See]{.underline} S.
27, 107th Cong., 1^st^ Sess. (as passed by the Senate and transferred to
the House, 478 Cong. Rec. H2547 (May 22, 2001)). The phrase "agreement
or formal collaboration" reached its final form through a substitute
amendment to H.R. 2356 offered by Representative Shays.
[See]{.underline} H. Amdt. 417, 478 Cong. Rec. H393 through H492
(February 13, 2002). New

11 CFR 109.21(d) provides that each of the five conduct standards can be
satisfied "whether or not there is agreement or formal collaboration,
which is defined in paragraph (e)," thereby implementing the
Congressional prohibition against any requirement of agreement or formal
collaboration in the coordination analysis. The final rule follows the
proposed rule, with only a small grammatical change.

One commenter supported a distinction between "formal collaboration" and
"collaboration." Two other commenters strongly supported this paragraph
as proposed in the NPRM. Another commenter recognized the Congressional
prohibition on a requirement of agreement or formal collaboration, but
urged the Commission to establish clear guidelines as to what is and is
not permissible activity. The Commission attaches significance to the
addition of the term "formal" as it modifies the term "collaboration."
Thus, paragraph (e) states that the conduct standards in paragraph (d)
of section 109.21 require some degree of collaboration, but not "formal"
collaboration in the sense of being planned or systematically approved
or executed.

New paragraph (e) also explains the term "agreement." Coordination under
section 109.21 does not require a mutual understanding or meeting of the
minds as to all, or even most, of the material aspects of a
communication. Any agreement means the communication is not made
"totally independently" from the candidate or party. [See]{.underline}
[Buckley]{.underline}, 424 U.S. at 47. In the case of a request or
suggestion under paragraph (d)(1) of section 109.21, agreement is not
required at all.

A fourth commenter suggested that there should be no finding of
coordination where "the organization was not seeking the candidate's
agreement and would have run the ad anyway." This commenter recommended
that the Commission further refine the requirement so that a
communication is considered coordinated only if the request, agreement
or collaboration of the candidate or political party is shown to lead
the organization to change some aspect of the communication.

The Commission is not adopting either of these suggestions as they
require a subjective determination of the intent of the spender and are
therefore inconsistent with the Commission's approach of establishing
clear guidance through objective determinations where possible.
Paragraph (e) therefore does not require any particular form of
investigation or finding, but simply implements the judgment of Congress
by clarifying the two criteria that are [not]{.underline} required.

[6. 11 CFR 109.21(f) Safe Harbor for Responses to Inquiries About
Legislative or Policy Issues]{.underline}

In the NPRM, the Commission requested comment on whether any specific
"safe harbor" provisions or exceptions to the conduct or content
standards should be included in the final rules. Commenters recommended
a number of possible exceptions and safe harbors. As explained below,
the Commission is including one of the proposed exceptions in its final
rules in 11 CFR 109.21(f).

Several commenters urged the Commission to adopt an exception to the
conduct standards for a candidate's response to an inquiry, whether in
writing or other form, regarding his or her position on legislative or
policy issues. These responses are helpful in preparing voter guides,
voting records, in debates or other communications. One commenter cited
constitutional considerations and argued that such an exception is
required by [Clifton v. FEC]{.underline}, 114 F.3d 1309 (1st Cir. 1997).
Another advised that this exception would provide notice that the
regulation is not intended to deter certain activities that groups or
individuals "might otherwise avoid out of an abundance of caution." A
different commenter advocated an exemption for any public
communications, including republication of materials from candidates,
their committees or political parties, that meet the criteria of 11 CFR
110.13 regarding candidate debates and forums, and 11 CFR 114.4(c)
regarding voter registration drives and voter education.

In new section 109.21(f) the Commission is providing a "safe harbor" to
address the commenters' concerns that the preparation of a voter guide
or other inquiries about the views of a candidate or political party
committee might satisfy one of the conduct standards in section
109.21(d). This safe harbor applies to inquiries regarding views on
legislation or other policy issues, but does not include a response that
conveys information about the candidate's or political party's campaign
plans, projects, activities, or needs that is material to the creation,
production, or distribution of a subsequent communication.

This exception satisfies the requirements of [Clifton v.
FEC]{.underline}, 114 F.3d 1309. [See]{.underline} [also]{.underline}
new 11 CFR 114.4(c)(5), explained below. In [Clifton]{.underline}, the
Court examined the Commission's then-new regulations at 11 CFR
114.4(c)(4) and (5). The Commission's old regulations permitted
corporations and labor organizations to prepare and produce "voter
guides" to the general public, subject to the following prohibition:

> \[T\]he corporation or labor organization shall not contact or in any
> other way act in cooperation, coordination, or consultation with or at
> the request or suggestion of the candidates, the candidates\'
> committees or agents regarding the preparation, contents and
> distribution of the voter guide, except that questions may be directed
> in writing to the candidates included in the voter guide and the
> candidates may respond in writing;

11 CFR 114.4(c)(5)(ii)(A) (1996). While [Clifton]{.underline}
invalidated that regulation as unauthorized by the Act, 927 F. Supp. at
500, the Court nevertheless suggested that a safe harbor might have
survived. The safe harbor in new 11 CFR 109.21(f) is more permissive
than the regulations at issue in [Clifton]{.underline} in several
respects. First, the regulations in section 109.21 do not institute a
general prohibition on [any]{.underline} contact with the candidate or
political party committee, so paragraph (f) functions as a safe harbor
from less-restrictive regulations. For example, organizations whose
activities are confined to producing voter guides may contact a
candidate and discuss aspects of that candidate's campaign plans,
projects, activities, or needs without making a coordinated
communication so long as the voter guide does not contain express
advocacy and it is not directed to voters in a specific jurisdiction and
made available within the designated time period directly before an
election, as provided in paragraphs 109.21(c)(1) and (4). In addition,
whereas the regulations at issue in [Clifton]{.underline} specifically
required that both the inquiry and the response be written, paragraph
(f) does not.

Three commenters urged the Commission to adapt its rules to exclude
lobbying contacts with a candidate. Similarly, a different commenter
proposed an exception for any legislative communication made prior to a
vote, hearing, or other legislative consideration of the issue, and that
"coincidentally" occurs prior to an election. Another commenter also
urged the Commission to exempt grassroots communications that urge the
people to contact state, local or national officials urging them to take
action in their official capacity so long as they do not refer to the
election or an official's status or qualifications as a federal
candidate.

The Commission has considered these possible exceptions as well as the
statements of BCRA's principal sponsors that the Commission's
regulations should not interfere with lobbying activities. Therefore,
these final rules are not intended to restrict communications or
discussions regarding pending legislation or other issues of public
policy. The Commission has determined, however, that sufficient
safeguards exist in the final rules to ensure that lobbying and other
activities that are not reasonably related to elections will not be
unduly restricted. Additional exceptions are unnecessary and
inappropriate because they could be exploited to circumvent the
requirements of 11 CFR part 109.

One commenter proposed an exemption for a "legislative communication"
made during legislative consideration of an issue when the communication
"coincidentally" occurs just before an election. This exemption is
neither necessary nor workable, as it hinges on a complex analysis of
several separate factors, as well as a determination of what qualifies
as a "legislative communication." The potential number of communications
that might satisfy the content standard, satisfy the conduct standard,
[and]{.underline} "coincidentally" occur just before an election is
likely to be quite small in comparison to the potential number of
communications that would actually be made for the purpose of
influencing an election but carefully tailored to fit within the
proposed exemption.

In addition, one commenter cautioned that exceptions are not appropriate
to the extent that they apply to communications that meet the
"electioneering communication" content standard. This commenter asserted
that the plain language of the BCRA provides the Commission with little
to no room to craft exceptions with respect to electioneering
communications. The Commission disagrees that any such Congressional
directive can be derived from plain language of BCRA in the context of
coordinated electioneering communications.

11 CFR 109.22 Who is Prohibited from Making Coordinated Communications?

The Commission requested comment on whether to include a separate
section to clarify that any person who is otherwise prohibited under the
Act from making a contribution or expenditure is also prohibited from
making a coordinated communication. No comments addressed this
provision. Section 109.22 is included in the final rules to avoid any
potential misconception that 11 CFR 100.16, 11 CFR 109.23, or any
portion of 11 CFR part 109 in any way permit a corporation, labor
organization, foreign national, or other person to make a contribution
or expenditure when that person is otherwise prohibited by any provision
of the Act or the Commission's regulations from doing so.

## 

11 CFR 109.23 How are Payments for the Dissemination, Distribution, or
Republication of Candidate Campaign Materials Treated and Reported?

The Commission has decided to implement only those regulatory changes
that are necessary to implement section 214 of BCRA at this time. In the
NPRM, the Commission proposed moving former 11 CFR 109.1(d) to proposed
new section 11 CFR 100.57, along with several substantive changes. To
whatever extent that proposed

11 CFR 100.57 would have elaborated on former 11 CFR 109.1(d), the
Commission has reconsidered and instead is addressing the payments for
the republication of campaign materials in new 11 CFR 109.23, which more
closely follows former section 109.1(d). New section 109.23 implements
post-BCRA 2 U.S.C. 441a(a)(7)(B)(iii), with several changes made to
reflect new requirements in BCRA. Paragraph (a) of section 109.23
corresponds to former 11 CFR 109.1(d)(1), and paragraph (b) of section
109.23 addresses the exceptions in former 11 CFR 109.1(d)(2), in
addition to several new exceptions.

[1. 11 CFR 109.23(a) Financing of the Dissemination, Distribution, or
Republication of Campaign Materials Prepared by a Candidate]{.underline}

Paragraph (a) of 11 CFR 109.23 addresses the financing of the
dissemination, distribution, or republication of campaign materials
prepared by the candidate, the candidate's authorized committee, or
their agents and is the successor to former 11 CFR 109.1(d)(1). The only
changes from the former rule are the replacement of one cross-reference
to former 11 CFR 100.23 (repealed by Congress in BCRA), a clarification
that a candidate does not receive or accept an in-kind contribution
unless there is coordination, and minor grammatical changes. Paragraph
(a) provides that the financing of the distribution, or republication of
campaign materials prepared by the candidate, the candidate's authorized
committee, or an agent of either is considered a contribution for the
purposes of the contribution limitations and reporting responsibilities
by the person making the expenditure but is not considered an in-kind
contribution received or an expenditure made by the candidate or the
candidate's authorized committee unless the dissemination, distribution,
or republication of campaign materials is coordinated.

Under former 11 CFR 109.1(d)(1), coordination was determined by whether
the dissemination, distribution, or republication of the campaign
material qualified as a "coordinated general public political
communication" under former 11 CFR 100.23, which was repealed by
Congress in BCRA. Therefore, under new 11 CFR 109.23, whether the
dissemination, distribution, or republication is coordinated is
determined by reference to the new coordinated communication rules in 11
CFR 109.21 and 109.37.

As discussed above in the Explanation and Justification for 11 CFR
109.21(c)(2) and 109.21(d)(6), a communication that disseminates,
distributes, or republishes campaign material prepared by a candidate,
the candidate's authorized committee, or an agent of either, and that
satisfies one of the conduct standards in section 109.21(d), is a
coordinated communication. Under 11 CFR 109.21(b), and by implication
from paragraph (a) of section 109.23, the financing of such a
"coordinated communication" is an in-kind contribution received by the
candidate, authorized committee, or political party committee with whom
or with which it was coordinated. In other words, the person financing
the dissemination, distribution, or republication of candidate campaign
material has provided something of value to the candidate, authorized
committee, or political party committee. [See]{.underline} 2 U.S.C.
431(8)(A)(i). Note that this is the same result under former section
109.1(d)(1). Even though the candidate, authorized committee, or
political party committee does not receive cash-in-hand, the practical
effect of this constructive receipt is that the candidate, authorized
committee, or political party committee must report the in-kind
contribution in accordance with 11 CFR 104.13, meaning that it must
report the amount of the payment as a receipt under 11 CFR 104.3(a) and
also as an expenditure under 11 CFR 104.3(b).

To the extent that the financing of the dissemination, distribution, or
republication of campaign materials finances does [not]{.underline}
qualify as a coordinated communication, the candidate or authorized
committee that originally prepared the campaign materials has no
reporting responsibilities and has not received or accepted an in-kind
contribution. However, whether or not the dissemination, distribution,
or republication qualifies as a coordinated communication under 11 CFR
109.21, paragraph (a) of section 109.23, like former section
109.1(d)(1), requires the person financing such dissemination,
distribution, or republication always to treat that financing, for the
purposes of that person's contribution limits and reporting
requirements, as an in-kind contribution made to the candidate who
initially prepared the campaign material. In other words, the person
financing the communication must report the payment for that
communication if that person is a political committee or is otherwise
required to report contributions. Furthermore, that person must count
the amount of the payment towards that person's contribution limits with
respect to that candidate under 11 CFR 110.1 (persons other than
political committees) or 11 CFR 110.2 (multicandidate political
committees), and with respect to the aggregate bi-annual contribution
limitations for individuals set forth in 11 CFR 110.5.

Although paragraph (a) of 11 CFR 109.23 is nearly otherwise unchanged
from former 11 CFR 109.1(d)(1), the new reference to 11 CFR 109.21 has
an important impact because new section 109.21 reflects Congress's
decision in post-BCRA 2 U.S.C. 441a(a)(7)(B)(ii) that expenditures may
be coordinated with a political party committee. Therefore, the
republication of campaign material may be coordinated with a political
party committee. As explained above, the financing "[by any
person]{.underline} of the dissemination, distribution, or republication
of campaign material prepared by a candidate [qualifies as an
expenditure for the purposes of 2 U.S.C.
441a(a)(7)(B)(ii)]{.underline}." [See]{.underline} 2 U.S.C.
441a(a)(7)(B)(iii) (emphasis added.) Under 2 U.S.C. 441a(a)(7)(B)(ii),
"expenditures" that are coordinated with a political party committee
"shall be considered to be contributions made to such party committee."
Thus, reading 2 U.S.C. 441a(a)(7)(B)(ii) and (iii) together, the
Commission concludes that when a person coordinates with a political
party committee to finance the dissemination, distribution, or
republication of a candidate's campaign material, that financing
constitutes a contribution to the political party committee. Therefore,
under paragraph (a) of section 109.23, the financing of the
dissemination, distribution, or republication of campaign material
prepared by a candidate constitutes an in-kind contribution to a
political party committee with which it was coordinated, and the amount
of that financing must be reported by that political party committee as
both an in-kind contribution received and an expenditure made.
[See]{.underline}

11 CFR 104.13. The Commission notes that section 109.23 does not
encompass in this respect the dissemination, distribution, or
republication of campaign material prepared by the political party
committee, but only campaign material prepared by a candidate.

[2. 11 CFR 109.23(b) Exceptions]{.underline}

In the NPRM, the Commission proposed several exceptions to the general
"republication" rule proposed 11 CFR 100.57. Proposed 11 CFR 100.57(b)
would have clarified that five listed uses of campaign material prepared
by a candidate would not qualify as a contribution under proposed 11 CFR
100.57(a). The exceptions were largely drawn from uses already permitted
by other rules.

Several commenters focused on the proposed exceptions or proposed
additional exemptions. One commenter proposed that republication should
[not]{.underline} be considered a contribution unless there is
coordination. The Commission does not discern any instruction from
Congress, nor any other basis, that justifies such a departure from the
Commission's longstanding interpretation of the underlying republication
provision in the Act, now set forth at 2 U.S.C. 441a(a)(7)(B)(iii). The
same commenter also inquired as to whether a corporation or labor
organization may pay for the republication of campaign materials for use
outside its restricted class, so long as that republication is not
coordinated with a candidate under the applicable conduct standards set
forth in 11 CFR 109.21(d) (see below). The Commission normally addresses
specific inquiries about the application of particular provisions
through its Advisory Opinion process, rather than in the rulemaking
context, but the Commission takes this opportunity to emphasize that
this rulemaking is not intended to change existing law with respect to
the practices of corporations or labor organizations. [See]{.underline}
11 CFR 109.22. Both the pre- and post-BCRA regulations provide that the
financing of the dissemination, distribution, or republication of a
candidate's campaign material constitutes a contribution to that
candidate. Furthermore, such financing for activities outside the
restricted class of a corporation or labor organization would also
constitute an expenditure by the labor organization or corporation made
in connection with an election for Federal office that would therefore
be prohibited by 2 U.S.C. 441b(a). Therefore, a corporation or labor
organization may not disseminate, distribute, or republish campaign
materials except as provided in

11 CFR 114.3(c)(1).

The same commenter also proposed additional exceptions for paragraph (b)
to cover republication and distribution of original campaign material
that already exists in the public domain, such as presentations made by
candidates, biographies, positions on issues or voting records. The
Commission declines to promulgate a "public domain" exception because
such an exception could "swallow the rule," given that virtually all
campaign material that could be republished could be considered to be
"in the public domain." In the event that a campaign retains the
copyright to its campaign materials, and the campaign materials are thus
not in the public domain as a matter of law, this means that the
republisher would presumably have to obtain permission from the campaign
to republish the campaign materials, raising issues of authorization or
coordination. [See]{.underline} 11 CFR 110.11.

Similarly, a commenter suggested an exception to permit the "fair use"
of campaign materials, which would presumably permit the republication
of campaign slogans and other limited portions of campaign materials for
analysis and other uses provided under the legal tests developed with
respect to intellectual property law. This commenter also argued that
the "fair use" exception should be available to supporters of the
candidate who originally produced the materials, as well as that
candidate's opponents.

The Commission, however, believes that a "fair use" exception could
swallow the rule. Furthermore, the Commission notes that "fair use" is
an exception in the intellectual property arena intended to protect
literary, scholastic, and journalistic uses of material without
infringing upon the intellectual property rights of those who created
the material. The Commission declines to import this concept into the
political arena where it would not serve to promote the same important
purposes, and where the exceptions to the definitions of "contribution"
and "expenditure" already address these concerns. [See]{.underline},
[e.g.]{.underline}, 11 CFR 100.73 and 100.132 (exceptions to the
definition of "contribution" and "expenditure," respectively, for news
stories, commentary, and editorials.) In the context of intellectual
property law, the republication of another person's work is generally
viewed as undesirable by the original author, thus the "fair use"
exception provides a limited exception to the general limitations on
such republication. In contrast, Congress has addressed republication of
campaign materials through 2 U.S.C. 441a(a)(7)(B)(iii) in a context
where the candidate/author generally views the republication of his or
her campaign materials, even in part, as a benefit. Given the different
purpose served by intellectual property law and campaign finance law, a
"fair use" exception would be inappropriate and unworkable in the
campaign arena. Additionally, the Commission believes that such
legitimate benefits as would flow from a fair use exception are met
through application of 11 CFR 109.23(b)(4).

The Commission is including the exceptions proposed in 100.57(b) in its
final rules at CFR 109.23(b). Under 11 CFR 109.23(b)(1), a candidate or
political party committee is permitted to disseminate, distribute, or
republish its own materials without making a contribution. Paragraph
(b)(2) exempts the use of material in a communication advocating the
defeat of the candidate or party who prepared the material. For example,
Person A does not make a contribution to Candidate B if Person A
incorporates part of Candidate B's campaign material into its own public
communication that advocates the defeat of Candidate B. However, if the
same public communication also urged the election of Candidate B's
opponent, Candidate C, and incorporated a picture or quote that had been
prepared by Candidate C's campaign, then the result does constitute a
contribution to Candidate C.

A third exception, in paragraph (b)(3), makes it clear that campaign
material may be republished as part of a [bona fide]{.underline} news
story as provided in 11 CFR 100.73 or 11 CFR 100.132. In paragraph
(b)(4), the Commission allows limited use of candidate materials in
communications to illustrate a candidate's position on an issue.

Finally, in paragraph (b)(5), the Commission recognizes that a national,
State, or subordinate committee of a political party makes a coordinated
party expenditure rather than an in-kind contribution when it uses its
coordinated party expenditure authority under 11 CFR 109.32 to pay for
the dissemination, distribution, or republication of campaign material.
This rule is based on former 11 CFR 109.1(d)(2), which provided that a
State or subordinate party committee could engage in such dissemination,
distribution, or republication as an agent designated by a national
committee pursuant to former 11 CFR 110.7(a)(4), but is somewhat broader
than former 11 CFR 109.1(d)(2).

## 

## 11 CFR Part 109, Subpart D \-- Special Provisions for Political Party Committees

11 CFR 109.30 How are Political Party Committees Treated for Purposes of
Coordinated and Independent Expenditures?

A national, State, or subordinate committee of a political party may
make expenditures up to prescribed limits in connection with the general
election campaign of a Federal candidate that do not count against the
committees' contribution limits. [See]{.underline} 2 U.S.C. 441a(d).
These expenditures are commonly referred to as "coordinated party
expenditures." Political party committees, however, need not demonstrate
actual coordination with their candidates to avail themselves of this
additional spending authority. Nor are political party committees
restricted as to the nature of the expenditures they may make on behalf
of a candidate that are treated as coordinated party expenditures.
Political party committees may also make independent expenditures.
[See]{.underline} [Colorado Republican Federal Campaign Committee v.
Federal Election Commission]{.underline}, 518 U.S. 604 (1996) ("Colorado
I").

In BCRA, Congress set certain new restrictions on these "coordinated
party expenditures" and related restrictions on political party
committee independent expenditures. There are also certain new
restrictions on transfers and assignments of coordinated party
expenditure authorizations between party committees. 2 U.S.C.
441a(d)(4)(A) through (C).

Section 109.30 provides an introduction to subpart D of part 109 that
states how political party committees are treated for purposes of
coordinated and independent expenditures. This new section first
clarifies that political party committees may make independent
expenditures subject to the provisions of sections 109.35 and 109.36.
([See]{.underline} discussion below.) Second, section 109.30 explains
that political party committees may support candidates with coordinated
party expenditures and states that these coordinated party expenditures
are subject to limits that are separate from and in addition to the
contribution limits at 11 CFR 110.1 and 110.2.

No comments were received on this section, and the final rule is
unchanged from the proposed rule in the NPRM except that the reference
to other 11 CFR part 109, subpart D provisions has been revised to
exclude section 109.31.

# **11 CFR 109.31 \[Reserved\]** 

The Commission in the NPRM proposed rules at 11 CFR 109.30 to 109.37
regarding political party committees. The Commission is issuing final
rules at 11 CFR 109.30 and 109.32 to 109.37, but not at 11 CFR 109.31.
The reasons regarding proposed section 109.31 are set forth below.

Under FECA, certain political party committees have long been authorized
to make what have come to be known as "coordinated party expenditures."
2 U.S.C. 441a(d). Although this term is used extensively
([see]{.underline}, [e.g.]{.underline}, the Commission's Campaign
Guides), it is not formally defined in the Commission's regulations.

The Commission in the NPRM proposed a rule which would have defined
"coordinated party expenditure" at 11 CFR 109.31. That proposed
definition included payments made by a national committee of a political
party, including a national Congressional campaign committee, or a State
committee of a political party, including any subordinate committee of a
State committee, under 2 U.S.C. 441a(d) for anything of value in
connection with the general election campaign of a candidate, including
party coordinated communications defined at 11 CFR 109.37.

The Commission received two comments on section 109.31 in support of the
proposed rule. One witness at the hearing criticized this provision,
asserting that in conjunction with 11 CFR 109.20 this provision would
subject everything political parties do to the coordinated party
expenditure limits.

In light of the concern raised, the Commission's recognition that this
rule is not required by BCRA, and in order to devote the Commission's
resources to the rules that are most directly required by BCRA to be
completed this calendar year, the Commission is not issuing a final rule
at 11 CFR 109.31. Instead, the Commission is adding and reserving this
section and may revisit the "coordinated party expenditures" definition
in the future.

The Commission notes, however, that the term "coordinated party
expenditures" does appear in the final rules at 11 CFR 109.23(b),
109.20(b), 109.30, 109.32, 109.33, 109.34, and 109.35. To prevent any
confusion, the Commission clarifies in the absence of a definition at
section 109.31 that the term "coordinated party expenditure" refers to
an expenditure made by a political party committee pursuant to 2 U.S.C.
441a(d). The Commission stresses that it is not restricting the
traditional flexibility political parties have had in making coordinated
expenditures in support of their candidate.

**11 CFR 109.32 What are the Coordinated Party Expenditure Limits?**

The Commission's restructuring of 11 CFR part 109 includes moving the
coordinated party expenditure limits found at former 11 CFR 110.7(a) and
(b) to 11 CFR 109.32. This new section retains the basic organizational
structure of paragraphs (a) and (b) of former section 110.7, while
making the revisions explained below. The final rule is unchanged from
the proposed rule in the NPRM except where noted below.

[1. 11 CFR 109.32(a) Coordinated Party Expenditure Limits for
Presidential Elections]{.underline}

The Commission sets forth in paragraph (a) of section 109.32, in amended
fashion, the coordinated party expenditure limit for the national
committee of a political party for Presidential elections that appeared
at former section 110.7(a). Because political party committees may also
make independent expenditures, [Colorado I]{.underline}, 518 U.S. at
618, the heading of paragraph (a) clarifies that the "expenditures"
referred to in section 109.32 are "coordinated party expenditures."
[See]{.underline} 2 U.S.C. 441a(d). This clarification also appears in
paragraphs (a)(1), (2), (3), and (4) of section 109.32.

Paragraph (a)(1) authorizes the national committee of a political party
to make coordinated party expenditures in connection with the general
election campaign of any candidate for President of the United States
affiliated with the party. The final rule deletes the words "the
party's" as surplusage that was inadvertently added into the proposed
rule. Paragraph (a)(1) is the successor to former 11 CFR 110.7(a)(1) and
is unchanged from that rule except for the clarification noted above.

Paragraph (a)(2) sets out the coordinated party expenditure limit, which
is two cents multiplied by the voting age population of the United
States, following former 11 CFR 110.7(a)(2). Paragraph (a)(2) of section
109.32 also states that this spending limit shall be increased in
accordance with 11 CFR 110.17, which the Commission is adding to clarify
that this spending limit is subject to increase. Section 110.17 is the
successor to former 11 CFR 110.9(c). [See]{.underline} Final Rules and
Explanation and Justification for Contribution Limitations and
Prohibitions, 67 [Fed. Register]{.underline} 69,928 (November 19, 2002).
Paragraph (a)(2) of section 109.32 also refers to 11 CFR 110.18, the
definition of the term "voting age population," which is discussed
below.

Paragraph (a)(3) provides that any coordinated party expenditure under
paragraph (a) of this section is in addition to any expenditure by a
national committee of a political party serving as the principal
campaign committee of a candidate for President of the United States, as
well as any contribution by the national committee to the candidate
permissible under 11 CFR 110.1 or 110.2. Paragraph (a)(3) is the
successor to former

11 CFR 110.7(a)(3) and is substantively unchanged from that rule.

Paragraph (a)(4) provides that any coordinated party expenditures made
by the national committee of a political party pursuant to paragraph (a)
of this section, or made by any other party committee under authority
assigned by a national committee of a political party under 11 CFR
109.33, on behalf of that party's Presidential candidate shall not count
against the candidate's expenditure limitations under 11 CFR 110.8. The
only change to paragraph (a)(4) from the proposed rule is that the term
"designated" has been changed to "assigned" in order to be consistent
with the terminology applied in section 109.33.

Paragraph (a)(4) is the successor to former 11 CFR 110.7(a)(6), and is
revised to clarify that only the national party committee has
coordinated party expenditure authority for Presidential general
elections and that any other political party committee making a
coordinated party expenditure in such an election must be so assigned by
the national committee.

[2. 11 CFR 109.32(b) Coordinated Party Expenditure Limits for Other
Federal Elections]{.underline}

Paragraph (b) of section 109.32 addresses coordinated party expenditures
in other Federal elections, and is the successor to former 11 CFR
110.7(b). Paragraph (b) applies to the national committee of a political
party and a State committee of a political party, including any
subordinate committee of a State committee, for Federal elections other
than Presidential elections. As in paragraph (a) above, paragraph (b)
clarifies that the "expenditures" referred to in paragraphs (b)(1), (2),
and (4) are coordinated party expenditures.

Paragraph (b)(1) authorizes the national committee of a political party
and a State committee of a political party, including any subordinate
committee of a State committee, to make coordinated party expenditures
in connection with the general election campaign of a candidate for
Federal office in that State who is affiliated with the party. The
phrase "a candidate for Federal office in that State who is affiliated
with the party" is changed from the phrase "the party's candidate for
Federal office in that State" that was inadvertently included in the
proposed rule. Paragraph (b)(1) is the successor to former 11 CFR
110.7(b)(1) and is unchanged from the previous rule except for the
clarification noted above.

Paragraph (b)(2)(i) sets out the coordinated party expenditure limit for
Senate candidates and for House candidates from a State that is entitled
to only one Representative at the greater of two cents multiplied by the
voting age population of the State or \$20,000. Paragraph (b)(2)(ii)
sets out the coordinated party expenditure limit for House candidates
from any other State at \$10,000. Paragraph (b)(2) follows former 11 CFR
110.7(a)(2). Paragraph (b)(2) of section 109.32 also refers to 11 CFR
110.18, the definition of the term "voting age population," which is
discussed below.

Paragraph (b)(3) provides that the spending limitations in paragraph
(b)(2) shall be increased in accordance with 11 CFR 110.17, which is the
successor to former 11 CFR 110.9(c). [See]{.underline} Final Rules and
Explanation and Justification for Contribution Limitations and
Prohibitions, 67 [Fed. Register]{.underline} 69,928 (November 19, 2002).
The Commission is adding paragraph (b)(3) to the rule in order to
clarify that this limit is subject to increase. The Commission is
changing the citation to 11 CFR 110.17(c), as proposed in the NPRM, to a
citation to 11 CFR 110.17, to make it consistent with the reference to
section 110.17 in paragraph (a)(2) described above.

Paragraph (b)(4) provides that any coordinated party expenditure under
paragraph (b) of this section shall be in addition to any contribution
by a political party committee to the candidate permissible under 11 CFR
110.1 or 110.2. Paragraph (b)(4) of 11 CFR 109.32 is the successor to
former 11 CFR 110.7(b)(3), and is unchanged apart from the clarification
noted above and a clarification that the contributions referenced are
those made by a political party committee.

The Commission received two comments on this section, one which
supported the rule proposed in the NPRM and another which stated the
commenter's agreement with the statement of the coordinated party
expenditure limits set forth in 2 U.S.C. 441a(d).

11 CFR 109.33 May a Political Party Committee Assign its Coordinated
Party Expenditure Authority to Another Political Party Committee?

Section 109.33 restates and clarifies the pre-BCRA rule permitting
assignment of coordinated party expenditure authority between political
party committees. Section 109.33 replaces the authorizing provisions
found in the pre-BCRA regulations at 11 CFR 110.7(a)(4) and (c); further
changes to section 110.7 are addressed below.

In light of the new statutory restrictions on coordination and
independent expenditures in BCRA, such assignments of coordinated party
expenditure authority are prohibited under certain circumstances in
which the assigning political party committee has made coordinated party
expenditures (using part of the spending authority) and the intended
assignee political party committee has made or intends to make
independent expenditures with respect to the same candidate during an
election cycle. [See]{.underline} 2 U.S.C. 441a(d)(4)(C) and 11 CFR
109.35(c). Therefore, paragraph (a) of section 109.33 begins with a
cross-reference to 11 CFR 109.35(c), which implements the statutory
restrictions on assignments and transfers.

Paragraph (a) of section 109.33 restates the Commission's longstanding
policy that a political party committee with authority to make
coordinated party expenditures may assign all or part of that authority
to other political party committees, and that this interpretation
extends to both national and State committees of political parties.
[See]{.underline} [Campaign Guide for Political Party
Committees]{.underline} at p.16 (1996). Paragraph (a) of section 109.33
provides that coordinated party expenditure authority may be assigned
only to other political party committees. [See]{.underline} 2 U.S.C.
441a(d). Pre-BCRA 11 CFR 110.7(a)(4) indicated that coordinated
expenditures may be made "through any [designated agent]{.underline},
including State and subordinate party committees." \[Emphasis added.\]
This limitation of assignment to other political party committees
precludes possible circumvention of the new restrictions on transfers
and assignments between political party committees found in BCRA. 2
U.S.C. 441a(d)(4)(B), (C). It is the Commission's understanding that,
historically, political party committees have not assigned coordinated
spending authority to entities that are not party committees, and thus
this prophylactic measure should not adversely affect party committees.

Paragraph (a) provides that whenever a political party committee
authorized to make coordinated party expenditures assigns another
political party committee to use part or all of its spending authority,
the assignment must be in writing, must specify a dollar amount, and
must be made before the party committee receiving the assignment
actually makes the coordinated party expenditure. In this respect, the
rule codifies longstanding Commission interpretation. [See]{.underline}
[Campaign Guide for Political Party Committees]{.underline} at p.16
(1996). This provision applies to both national and State party
committees wishing to assign their 2 U.S.C. 441a(d) authority.

Paragraph (b) of section 109.33 is the successor to pre-BCRA 11 CFR
110.7(c). It provides that, for purposes of the coordinated spending
limits, a State committee includes subordinate committees of the State
committee. Unlike its predecessor, pre-BCRA section 110.7(c), paragraph
(b) of section 109.33 covers district and local political party
committees ([see]{.underline} 11 CFR 100.14(b)) to the extent that a
State committee assigns to them its coordinated spending authority,
given that these district or local committees may not qualify as
"subordinate State committees."

Paragraphs (b)(1) and (2) of section 109.33 restate with only minor
non-substantive revision the pre-BCRA rule in 11 CFR 110.7(c)(1) and (2)
setting out the State committees' methods of administering the
coordinated party expenditure authority.

Paragraph (c) of section 109.33 sets forth recordkeeping requirements.
This new paragraph (c) provides that a political party committee that
assigns its authority to make coordinated party expenditures under this
section, or that receives an assignment of coordinated expenditure
authority, must maintain the written assignment for at least three years
in accordance with 11 CFR 104.14. This three-year requirement is
consistent with other recordkeeping requirements in the Act and in the
Commission's regulations. [See]{.underline} 2 U.S.C. 432(d); 11 CFR
102.9(c).

Although the Commission did not include this precise recordkeeping
requirement in proposed section 109.33 in the NPRM, it sought comment
more generally on whether to require political party committees to
attach copies of written assignments to reports they file with the
Commission, or to fax or e-mail them if they are electronic filers. The
comments received regarding section 109.33, as described below, did not
address the reporting issue.

The Commission has decided to require recordkeeping rather than
reporting in section 109.33. Recordkeeping is less burdensome for
political party committees and should provide sufficient documentation
of assignments of coordinated party expenditure authority should
questions subsequently arise. Indeed, the required maintenance of such
documentation may serve a political party committee's own interest.
[See]{.underline} MUR 5246.

The Commission received two comments on this section as proposed in the
NPRM. The commenters, while supporting the rule proposed in the NPRM,
asserted that it should be made clear that nothing in the rule
supersedes the prohibition on political party committees making both
coordinated and independent expenditures with respect to a candidate
after nomination. [See]{.underline} 2 U.S.C. 441a(d)(4)(A); 11 CFR
109.35(b). The Commission does not intend for section 109.33 to
supersede that prohibition, which is in the final rules at section
109.35(b). The Commission believes that section 109.35(b), in its final
rule formulation, and section 109.35(c) referenced within section
109.33, serve to maintain the prohibition against circumvention through
assignments of coordination party expenditure authority under section
109.33.

Finally, the Commission is making a non-substantive change from the NPRM
in the title of section 109.33 in the final rule. The Commission is
changing the word "limit" to "authority" in order to match the text of
the rule. The only other changes to the NPRM aside from the addition of
paragraph (c) are non-substantive changes to paragraphs (a) and (b).

11 CFR 109.34 When May a Political Party Committee Make Coordinated
Party Expenditures?

Section 109.34 restates without substantive revision the pre-BCRA rule
in

11 CFR 110.7(d) permitting a political party committee to make
coordinated party expenditures in connection with the general election
campaign [before]{.underline} or [after]{.underline} its candidate has
been nominated. All pre-nomination coordinated expenditures continue to
be subject to the coordinated party expenditure limitations, whether or
not the candidate on whose behalf they are made receives the party's
nomination. The Commission received one comment on this section, which
supported the proposed rule*.*

**11 CFR 109.35 What are the Restrictions on a Political Party Committee
Making Both Independent Expenditures and Coordinated Party Expenditures
in Connection with the General Election of a Candidate?**

In BCRA, Congress prohibits political party committees, under certain
conditions, from making both coordinated party expenditures and
independent expenditures with respect to the same candidate, and from
making transfers and assignments to other political party committees. 2
U.S.C. 441a(d)(4). A critical threshold issue is identifying the
political party committees to which these prohibitions apply. Congress
provided that for the purposes of these new prohibitions, "all political
committees established and maintained by a national political party
(including all Congressional campaign committees) and all political
committees established and maintained by a State political party
(including any subordinate committee of a State committee) shall be
considered to be a single political committee." 2 U.S.C. 441a(d)(4)(B).
Congress plainly intended to combine certain political party committees
into a collective entity or entities for purposes of these prohibitions.
2 U.S.C. 441a(d)(4)(B).

[1. 11 CFR 109.35(a) Applicability]{.underline}

In the NPRM, the Commission proposed a rule that divided a political
party into a national group of political committees and various State
and local groups of political committees for the purposes of
implementing the BCRA provisions governing independent and coordinated
expenditures by a political party. [See]{.underline} 2 U.S.C.
441a(d)(4). The NPRM acknowledged the legislative history supporting a
"single committee" interpretation that combined the national, State and
local party committees, but proposed the "dual groups" interpretation in
order to give the fullest possible effect to the transfer and assignment
provision of the same statute. 67 [Fed. Register]{.underline} at 60,054
(September 24, 2002). Under the transfer and assignment provision, a
"committee of a political party" that makes coordinated party
expenditures under 2 U.S.C. 441a(d) in connection with the general
election campaign of a candidate must not, during that election cycle,
transfer any funds to, assign authority to make coordinated party
expenditures to, or receive a transfer from, "a committee of the
political party" that has made or intends to make an independent
expenditure with respect to that candidate. 2 U.S.C. 441a(d)(4)(C). The
NPRM questioned whether, without more than one group or aggregation of
political party committees, transfers or assignments
[between]{.underline} political party committees could occur as
contemplated in section 441a(d)(4)(C).

Several commenters, including BCRA's principal sponsors, urged that the
Commission adopt the "single committee" approach, asserting that it
followed from the statutory language as well as the legislative history.

One commenter criticized the "single committee" approach as contrary to
[Colorado I]{.underline}, asserting that this Supreme Court decision
permitted political party committees to make both coordinated and
independent expenditures.

Several witnesses testifying at the hearing argued that treating all
party committees as a single entity is impractical because party
committees at the national or State level do not control party
committees at lower levels in their organizations. These commenters
complained that a local party committee under the "single committee"
approach, by making an independent expenditure with respect to a
candidate, could preclude the State or national party committee from
making coordinated party expenditures with respect to that candidate.

No comments were received that supported the NPRM's "dual groups"
approach, although two witnesses testified at the hearing that the dual
approach would be preferable to the "single committee" approach (one of
these commenters, however, also testified that the BCRA sponsors
intended the "single committee" approach).

Commenters favoring the "single committee" approach suggested examples
of how the transfer and assignment provision could be given meaningful
effect. One commenter proposed that the transfer and assignment
provision may apply prior to nomination, unlike the prohibition on
making both coordinated and independent expenditures with respect to a
candidate, which applies only after nomination. Two commenters suggested
that the transfer and assignment provision could be read to prohibit a
national party from making coordinated party expenditures with respect
to a candidate prior to nomination and then transferring funds to a
State party committee that would then try to make supposedly independent
expenditures with respect to that candidate.

In the final rules, paragraph (a) of 11 CFR 109.35 generally tracks the
statutory language in 2 U.S.C. 441a(d)(4)(B).

[2. 11 CFR 109.35(b) Restrictions on Certain Coordinated and Independent
Expenditures]{.underline}

Congress provided in BCRA that on or after the date on which a political
party nominates a candidate, no "committee of the political party" may
make: 1) any coordinated expenditure under 2 U.S.C. 441a(d) with respect
to the candidate during the election cycle at any time after it makes
any independent expenditure with respect to the candidate during the
election cycle; or 2) any independent expenditure with respect to the
candidate during the election cycle at any time after it makes any
coordinated expenditure under 2 U.S.C. 441a(d) with respect to the
candidate during the election cycle. 2 U.S.C. 441a(d)(4)(A).

Section 109.35(b) generally tracks the statute.

As noted above, the result that any political party committee within the
"single committee" could bind all the political party committees within
the "single committee" was criticized by several commenters at the
hearing. These commenters asserted that this result would preclude a
national or State committee of a political party from making a
coordinated party expenditure with respect to a nominee if a local party
committee first made an independent expenditure with respect to that
same nominee, even of small size and without the State or national
committee's prior knowledge or consent. The Commission notes the
commenters' concerns, but points out that just that result is the
apparent aim of the statute. 2 U.S.C. 441a(d)(4)(A).

###### [3. 11 CFR 109.35(c) Restrictions on Certain Transfers and Assignments]{.underline}

Congress provided in BCRA that a "committee of a political party" that
makes coordinated party expenditures with respect to a candidate shall
not, during an election cycle, transfer any funds to, assign authority
to make coordinated party expenditures under 2 U.S.C. 441a(d) to, or
receive a transfer of funds from, a "committee of the political party"
that has made or intends to make an independent expenditure with respect
to the candidate. 2 U.S.C. 441a(d)(4)(C).

In the final rules, paragraph (c) of 11 CFR 109.35 generally tracks the
statutory language in 2 U.S.C. 441a(d)(4)(C).

Finally, the Commission noted in the NPRM that it was not proposing
specific rules to implement the statutory language in the transfer and
assignment provision that a political party committee "intends to make"
an independent expenditure with respect to a candidate. 2 U.S.C.
441a(d)(4)(C). The Commission received no comments on this issue and
incorporates no specific language into section 109.35.

[4. Impact of Political Party Committee Activity Carried Out Pursuant to
Contribution Limits and Coordinated Party Expenditure
Authority]{.underline}

2 U.S.C. 441a(d)(4) applies to coordinated party expenditures and to
political party committee independent expenditures. Congress did not
directly address political party committees' monetary and in-kind
contributions to candidates that are subject to the contribution limits
under 2 U.S.C. 441a(a) and 441a(h). [See]{.underline} 2 U.S.C.
441a(d)(1) ("[Notwithstanding any other provision of law with respect to
. . . limitations on contributions]{.underline}, \[political party
committees\] may make expenditures in connection with the general
election campaign of candidates for Federal office, subject to the
limitations contained \[in this subsection\]" \[emphasis added\]); 2
U.S.C. 441a(d)(4)(A) (addresses coordinated party expenditures made
under section 441a(d) and does not directly address contributions).
[See]{.underline} [also]{.underline} 11 CFR 109.30, 109.32.

Political party committees may make in-kind contributions to a candidate
in the form of coordinated activity. [See]{.underline} 2 U.S.C.
441a(a)(7)(B)(i) and 11 CFR 109.20, discussed above. The Commission
notes that such coordination between a political party committee and a
candidate may compromise the actual independence of any simultaneous or
subsequent independent expenditures the political party committee may
attempt with respect to that candidate. Similarly, coordinated party
expenditures made by a political party committee with respect to a
candidate prior to nomination, [see]{.underline} 11 CFR 109.34, may be
considered evidence that could compromise the actual independence of any
simultaneous or subsequent independent expenditures the political party
committee may attempt with respect to that candidate. [See]{.underline}
11 CFR 109.35; [Buckley v. Valeo]{.underline}, 424 U.S. at 47 (in
striking down limits on independent expenditures, the Court described
such expenditures as made "[totally]{.underline} independently of the
candidate and his campaign" \[emphasis added\]).

Finally, the title of section 109.35 in this Explanation and
Justification has been altered from the NPRM to match the title in the
rule.

11 CFR 109.36 Are There Additional Circumstances Under Which a Political
Party Committee is Prohibited from Making Independent Expenditures?

Prior to the enactment of BCRA, the Commission's rules prohibited a
national committee of a political party from making independent
expenditures in connection with the general election campaign of a
candidate for President. [See]{.underline} former 11 CFR 110.7(a)(5). In
the NPRM, the proposed rule at 11 CFR 109.36 would have largely deleted
this prohibition. The NPRM limited the remaining application of the
prohibition to certain circumstances in which the national committee of
a political party serves as the principal campaign committee or
authorized committee of its Presidential candidate, as permitted under 2
U.S.C. 432(e)(3)(A)(i) and 441a(d)(2). [See]{.underline} 11 CFR
102.12(c)(1) and 9002.1(c). Such a prohibition is consistent with 11 CFR
100.16(b) (redesignated from former section 109.1(e)) providing that no
expenditure by an authorized committee of a candidate on behalf of that
candidate shall qualify as an independent expenditure.

The Commission received several comments on this section, each of which
urged the Commission to retain the prohibition at former 11 CFR
110.7(a)(5) regarding national party committee independent expenditures
with respect to Presidential nominees. One commenter asserted that
neither [Colorado I]{.underline} nor BCRA require the deletion of the
prohibition, and that in light of the significance of this issue,
Congress would have expressly addressed it if Congress desired a change
in the current regulation. The commenter noted that such a change in the
rule is based upon a misinterpretation of BCRA, which should not be read
as affirmatively authorizing political party committees to engage in any
particular activity. Another commenter claimed that to allow in a broad
fashion national party committees to make independent expenditures on
behalf of their Presidential candidates is to invite abuse. The
commenter stated that Presidential candidates and their parties are so
inextricably intertwined as to preclude any meaningful possibility that
one can operate "independently" of the other, and that the degree of
coordination that exists between a national party committee and its
Presidential candidate typically far exceeds even the level of
coordination between a party committee and its congressional candidates.

The Commission acknowledges the concerns expressed in the comments but
for the following reasons is including 11 CFR 109.36 in the final rules.
First, the Commission does not believe it appropriate to retain in its
rules a conclusive presumption of coordination after [Colorado
I]{.underline}. Even though [Colorado I]{.underline} expressly involved
only Congressional races, and arguably the likelihood of coordination
may be greater between a national party committee and its Presidential
nominee, the rule at section 109.36 is consistent with the Supreme
Court's decision.

Second, the Commission concludes that Congress in BCRA effectively
repealed the prohibition at 11 CFR 110.7(a)(5). [See]{.underline} 2
U.S.C. 441a(d)(4). Under a new statutory provision, Congress prohibits
political party committees from making both post-nomination independent
expenditures and post-nomination coordinated expenditures in support of
a candidate. [See]{.underline} 2 U.S.C. 441a(d)(4)(A). A national party
committee could thus make independent expenditures with respect to a
candidate after nomination, if not prohibited under section
441a(d)(4)(A). [See]{.underline} 11 CFR 109.35(a). Because this
provision appears to apply equally to party committee expenditures on
behalf of either Presidential or Congressional candidates, a national
party committee may be able to make independent expenditures with
respect to a Presidential candidate under certain circumstances. Thus,
while Congress did not specifically require the deletion of the
prohibition at former 11 CFR 110.7(a)(5), the Commission has concluded
that a provision within BCRA is consistent with that result. To the
extent that BCRA, and [Colorado I]{.underline} as discussed above, do
not require the Commission to promulgate the rule at section 109.36, the
Commission nonetheless exercises its discretion to do so as a
permissible interpretation of BCRA and [Colorado I]{.underline}.

Finally, the Commission notes that if coordination occurs between a
national party committee and its Presidential nominee, it would negate
the actual independence of independent expenditures the national party
committee attempted with respect to that candidate. [See]{.underline}
[Buckley v. Valeo]{.underline}, 424 U.S. at 47 (in striking down limits
on independent expenditures, the Court described such expenditures as
made "[totally]{.underline} independently of the candidate and his
campaign" \[emphasis added\]). The Commission recognizes that the
ability of a national party committee to make such independent
expenditures may be unlikely in practice, but the Commission's rules
must allow for such a possibility, and as noted above, must reject a
conclusive presumption that such expenditures are always coordinated.

Finally, section 109.36 contains one non-substantive change from the
NPRM, and the title of section 109.36 in this Explanation and
Justification has been slightly altered from the NPRM to match the title
in the rule.

**11 CFR 109.37 What is a "Party Coordinated Communication"?**

In BCRA, Congress required the Commission to promulgate new regulations
on "coordinated communications" that are paid for by persons other than
candidates, authorized committees of candidates, and party committees.
Pub. L. 107-155, sec. 214(b), (c); [see]{.underline} 11 CFR 109.21
above. Although Congress did not specifically direct the Commission to
address coordinated communications paid for by political party
committees, the Commission is doing so to give clear guidance to those
affected by BCRA.

The Commission in the NPRM proposed a rule which would have been at 11
CFR 109.37, political party coordinated communications, using the same
content and conduct standards as proposed in section 109.21 for
coordinated communications by other persons.

The Commission received a number of comments on this proposal. The
comments fall into two general categories. One group of commenters urged
the Commission to defer this party coordinated communication rulemaking,
arguing (1) that it is not strictly required by BCRA, (2) that the
Commission should be focusing its resources at this time on the
rulemaking most directly required by BCRA, and (3) that the comment
period was a difficult time for the political parties to focus on the
rulemaking because it was shortly before the 2002 general election.
These commenters also asserted that party coordinated communications is
a complicated subject area, citing the many questions posed in the NPRM
in their claim that the Commission should defer this rulemaking.

On the substance of the proposed rule, this group of commenters
testified at the hearing that the proposed content and conduct standards
were both overbroad. ([See]{.underline} the discussion above regarding
11 CFR 109.21). These commenters noted that any coordination standard
for political party committees must allow for the regular contacts
between a political party committee and its candidates. Another
commenter raised an equal protection argument, asserting that a
regulation that on its face appears to treat political party committees
the same as other persons may as a practical matter have an unequal
impact on the political parties.

The other group of commenters relied on the relationship between a
political party committee and its candidates for the assertion that the
Commission should promulgate a party coordinated communication rule
using a rebuttable presumption that the communications are coordinated
with candidates. These commenters stated that this presumption could be
rebutted by a showing of actual independence. One commenter believed
that the Commission's rule should describe ways in which a political
party committee could establish its independence from a candidate.
Another commenter noted that [Colorado I]{.underline}, which struck down
a conclusive presumption of coordination, does not prevent the use of a
rebuttable presumption, and that such a rule is necessary to ensure that
political party committee independent expenditures are in fact "totally
independent" from candidates as required by the Supreme Court in
[Buckley]{.underline}.

While the Commission recognizes that Congress in BCRA did not
specifically direct the Commission to address coordinated communications
paid for by political party committees, the Commission is doing so to
give clear guidance to those affected by BCRA. Congress determined to
regulate political party committees' independent expenditures and
coordinated party expenditures, and thus it is appropriate and useful
for the Commission to promulgate rules at this time detailing standards
for party coordinated communications. [See]{.underline} 2 U.S.C.
441a(d)(4) and 11 CFR 109.35, discussed above.

The Commission is promulgating final rules similar to those in proposed
section 109.37, generally applying the same regulatory analysis to
communications paid for by the political party committees that is
applied to communications paid for by other persons. [See]{.underline}
11 CFR 109.21(a) through (f). This analysis determines when
communications paid for by a political party committee are considered to
be coordinated with a candidate, a candidate's authorized committee, or
their agents.

Following 11 CFR 109.21(a), section 109.37(a) defines the circumstances
in which communications paid for by political party committees are
considered to be coordinated with a candidate, a candidate's authorized
committee, or agents of any of the foregoing. Under 11 CFR 109.37(a)(1)
through (3), such communications are deemed to be "party coordinated
communications" when they were paid for by a political party committee
or its agent, satisfy at least one of the content standards in section
109.37(a)(2)(i) through (iii), and satisfy at least one of the conduct
standards in 11 CFR 109.21(d)(1) through (d)(6), subject to the
provisions of 11 CFR 109.21(e) and other conditions.

The party coordinated communication content standards in section
109.37(a)(2)(i) through (iii) are adopted from 11 CFR 109.21(c)(2)
through (c)(4). The first content standard, at paragraph (a)(2)(i) of
section 109.37, is a public communication that disseminates,
distributes, or republishes, in whole or in part, campaign materials
prepared by a candidate, the candidate's authorized committee, or an
agent of any of the foregoing, unless the dissemination, distribution,
or republication is excepted under 11 CFR 109.23(b). The Commission also
provides in this content standard that for a communication that
satisfies this standard, see the conduct standard in 11 CFR
109.21(d)(6), under which the communication is evaluated.
[See]{.underline} the discussion above of 11 CFR 109.21(c)(2). This
content standard at 11 CFR 109.37(a)(2)(i) for party coordinated
communications is the same as the standard set forth for coordinated
communications by other persons in 11 CFR 109.21(c)(2).

The second content standard, at paragraph (a)(2)(ii) of section 109.37,
is a public communication that expressly advocates the election or
defeat of a clearly identified candidate for Federal office. This
content standard for party coordinated communications is identical to
the standard set forth for coordinated communications by other persons
in 11 CFR 109.21(c)(3).

The third content standard, at paragraph (a)(2)(iii) of section 109.37,
is a public communication that 1) refers to a clearly identified
candidate for Federal office; 2) is publicly distributed or otherwise
publicly disseminated 120 days or fewer before a general, special, or
runoff election, or 120 days or fewer before a primary or preference
election, or a convention or caucus of a political party that has
authority to nominate a candidate; and 3) is directed to voters in the
jurisdiction of the clearly identified candidate. 11 CFR
109.37(a)(2)(iii)(A)-(C). [See]{.underline} the discussion above of 11
CFR 109.21(c)(4). This content standard at section 109.37(a)(2)(iii) is
based on the content standard at section 109.21(c)(4) but limits its
coverage to communications that refer to a clearly identified candidate
for Federal office.

Finally, the Commission notes that the content standard at 11 CFR
109.21(c)(1), coordinated electioneering communications, is not applied
to party coordinated communications because electioneering
communications, as defined, exclude communications which constitute
expenditures under the Act, which includes political party committee
expenditures. [See]{.underline} 2 U.S.C. 434(f)(3)(B)(ii); 11 CFR
100.29(c)(3).

For the conduct standards for party coordinated communications, in
paragraph (a)(3) of section 109.37, the Commission refers to the conduct
standards set forth in 11 CFR 109.21(d)(1) through (d)(6), subject to
the provisions of 11 CFR 109.21(e) and other conditions. As in 11 CFR
109.21(d), agreement or formal collaboration is not necessary for a
finding that a communication is coordinated. [See]{.underline} the
discussion above of 11 CFR 109.21(d) and (e). Further, paragraph (a)(3)
of section 109.37 provides that a candidate's response to an inquiry
about that candidate's positions on legislative or policy issues, but
not including a discussion of campaign plans, projects, activities, or
needs, does not satisfy any of the conduct standards in 11 CFR
109.21(d)(1) through (d)(6). This safe harbor parallels the safe harbor
at 11 CFR 109.21(f). [See]{.underline} the discussion above of 11 CFR
109.21(f).

The Commission also addresses in paragraph (a)(3) of section 109.37
circumstances in which the in-kind contribution results solely from
conduct in 11 CFR 109.21(d)(4) or (d)(5). Under these circumstances, the
candidate does not receive or accept an in-kind contribution and is not
required to report an expenditure. [See]{.underline} the discussion
above regarding 11 CFR 109.21(b)(2).

Paragraph (b) of section 109.37 explains the treatment of party
coordinated communications. This paragraph provides that political party
committees must treat payments for communications coordinated with
candidates as either in-kind contributions or coordinated party
expenditures.

The Commission excepts from 11 CFR 109.37(b) such payments that are
otherwise excepted from the definitions of "contribution" and
"expenditure" found at 11 CFR part 100 subparts C and E. For example,
the payment by a State or local committee of a political party of the
costs of preparation, display, or mailing or other distribution incurred
by such committee with respect to a printed slate card, sample ballot,
palm card, or other printed listing(s) of three or more candidates for
any public office for which an election is held in the State in which
the committee is organized is not a contribution or an expenditure. 11
CFR 100.80 and 100.140. Thus, if such communications were coordinated
with candidates, the payments for such communications would not be
treated as either in-kind contributions or as coordinated party
expenditures.

For such a payment that a political party committee treats as an in-kind
contribution, paragraph (b)(1) of section 109.37 states that it is made
for the purpose of influencing a Federal election. [See]{.underline} the
discussion above regarding 11 CFR 109.21(b).

For such a payment that a political party committee treats as a
coordinated party expenditure, paragraph (b)(2) of section 109.37 states
that such expenditure is made pursuant to coordinated party expenditure
authority under 11 CFR 109.32 in connection with the general election
campaign of the candidate with whom it was coordinated.

Finally, paragraphs (b)(1) and (b)(2) of section 109.37 each refer to
the reporting obligations flowing from party coordinated communications
under 11 CFR part 104.

11 CFR 110.1 Contributions by Persons Other Than Multicandidate
Political Committees

The Commission clarifies that the section 110.1 limitations on
contributions to political committees making independent expenditures
apply to contributions made by persons other than multicandidate
committees to political party committees that make independent
expenditures. [See]{.underline} 11 CFR 110.1(n). Paragraph 110.1(n)
replaces pre-BCRA paragraph (d)(2) of section 110.1 regarding the
application of the contribution limits to contributions to committees
that make independent expenditures.

This section is being updated because under pre-BCRA paragraph (d)(2) of
section 110.1, the Commission recognized that political committees other
than party committees may make independent expenditures, but did not
contemplate party committees doing so. [See]{.underline} [Colorado
I]{.underline}, 518 U.S. at 618. For example, national party committees
may receive contributions aggregating \$20,000 per year from
individuals, a contribution limit that Congress increased to \$25,000
for contributions made on or after January 1, 2003. [See]{.underline} 2
U.S.C. 441a(a)(1)(B). Consequently, under BCRA, the \$20,000 (\$25,000)
contribution limit continues to apply when the recipient national party
committee uses the contribution to make independent expenditures. The
Commission notes that 11 CFR 110.1(h) regarding contributions to
political committees supporting the same candidate, remains unchanged
except to state that the support to candidates by political party
committees may include independent expenditures. The Commission received
no comments on this section.

Additional changes to 11 CFR 110.1 are addressed in a separate
rulemaking on BCRA's increased contribution limits. [See]{.underline}
Final Rules and Explanation and Justification for Contribution
Limitations and Prohibitions, 67 [Fed. Register]{.underline} 69,928
(November 19, 2002).

11 CFR 110.2 Contributions by Multicandidate Political Committees

The Commission clarifies that the section 110.2 limitations on
contributions to political committees making independent expenditures
apply to contributions made by multicandidate committees to political
party committees that make independent expenditures. [See]{.underline}
11 CFR 110.2(k). Paragraph 110.2(k) replaces pre-BCRA paragraph (d)(2)
of section 110.2 regarding the application of the contribution limits to
contributions to committees that make independent expenditures.

This section is being updated for the reasons set forth above in the
discussion regarding 11 CFR 110.1. The Commission received no comments
on this section.

Additional changes to 11 CFR 110.2 were addressed in a separate
rulemaking on BCRA's increased contribution limits. [See]{.underline}
Final Rules and Explanation and Justification for Contribution
Limitations and Prohibitions, 67 [Fed. Register]{.underline} 69,928
(November 19, 2002).

# **11 CFR 110.7 Removed and Reserved**

The pre-BCRA regulations at 11 CFR 110.7 contained the coordinated party
expenditure limits and related provisions. As explained above, the
Commission is moving section 110.7, in amended form, to 11 CFR part 109,
subpart D. Specifically, the provisions in section 110.7 are revised and
redesignated as follows: 11 CFR 110.7(a) and (b) to 11 CFR 109.32(a) and
(b) and 109.36; 11 CFR 110.7(c) to 11 CFR 109.33; and 11 CFR 110.7(d) to
11 CFR 109.34.

# **11 CFR 110.8 Presidential Candidate Expenditure Limitations**

As in 11 CFR 109.32(a) and (b) discussed above, the Commission clarifies
that the expenditure limits for publicly funded Presidential candidates
are increased in accordance with 11 CFR 110.17. [See]{.underline} 11 CFR
110.8(a)(2). To accommodate this new section 110.8(a)(2), the Commission
is re-designating pre-BCRA paragraphs (a)(1) and (a)(2) as (a)(1)(i) and
(a)(1)(ii), respectively.

In 11 CFR 110.8(a)(3), the Commission references the definition of
"voting age population" at 11 CFR 110.18. The voting age population is a
factor in the calculation of expenditure limitations in 11 CFR 110.8(a).
No commenters addressed this section*.*

The Commission also made additional changes to 11 CFR 110.9(c) in a
separate rulemaking, including moving it to 11 CFR 110.17.
[See]{.underline} Final Rules and Explanation and Justification for
Contribution Limitations and Prohibitions, 67 [Fed.
Register]{.underline} 69,928 (November 19, 2002).

11 CFR 110.14 Contributions to and Expenditures by Delegates and
Delegate Committees

In light of the Congressional repeal of former 11 CFR 100.23, the
removal of the separate definition of "independent expenditure" under 11
CFR 109.1, and the removal of 11 CFR 109.2, [see]{.underline} Final
Rules and Explanation and Justification for Bipartisan Campaign Reform
Act of 2002 Reporting, published elsewhere in this issue of the [Federal
Register]{.underline}, the Commission is making several necessary
technical revisions to 11 CFR 110.14. These technical revisions were not
originally proposed in the NPRM. Within 11 CFR 110.14, the Commission is
replacing all references to a "coordinated general public political
communication under 11 CFR 100.23" with references to "coordinated
communication under 11 CFR 109.21." In addition, the Commission is
replacing all citations to former 11 CFR 109.2 with citations to 11 CFR
109.10. Finally, the Commission is replacing all references to
independent expenditures under 11 CFR part 109 with references to
independent expenditures under 11 CFR 100.16 to reflect the removal of
the definition of "independent expenditure" in former 11 CFR 109.1.

##  

# **11 CFR 110.18 Voting Age Population**

The Commission is moving pre-BCRA section 110.9(d) regarding voting age
population ("VAP") to 11 CFR 110.18 as part of a reorganization of
section 110.9. This provision is referenced in sections 109.32(a) and
(b) (coordinated party expenditure limits) and 110.8(a)(3) (Presidential
candidate expenditure limits) where the VAP is used as a factor in
calculating the limits. Section 110.18 is revised from pre-BCRA section
110.9(d) to clarify that the Secretary of Commerce each year certifies
to the Commission and publishes in the Federal Register an estimate of
the VAP pursuant to 2 U.S.C. 441a(e). No comments addressed this
provision.

Changes to the other provisions of section 110.9, including paragraph
(c) of this section, are addressed in a separate rulemaking*.*
[See]{.underline} Final Rules and Explanation and Justification for
Contribution Limitations and Prohibitions, 67 [Fed.
Register]{.underline} 69,928 (November 19, 2002).

## 11 CFR 114.4 Disbursements for Communications Beyond the Restricted Class in Connection with a Federal Election

Paragraph (c)(5) of section 114.4 pertains to voter guides paid for by
corporations and labor organizations. The Commission makes several
changes to this paragraph to conform with other regulatory changes in
response to BCRA.

The pre-BCRA version of paragraphs (c)(5)(i) and (ii) of section 114.4
provided that a corporation or labor organization must not, among other
things, "contact" a candidate in the preparation of a voter guide,
except in writing. In this rulemaking, the Commission is promulgating a
safe harbor in the coordination rules that allows a person, such as a
corporation or labor union, to contact a candidate to inquire about the
candidate's positions on legislative or policy issues without a
subsequent communication paid for by that person being deemed
coordinated with the candidate (assuming there are no other actions
resulting in coordination). [See]{.underline} 11 CFR 109.21(f) and the
above discussion relating to this provision.

Accordingly, paragraph (c)(5)(i) of section 114.4 is being amended to
delete the prohibition against any contact with a candidate in the
preparation of a voter guide.

Paragraph (c)(5)(ii) of section 114.4 is being amended to delete the
requirement that contact with the candidate be in writing.

The Commission is also making several non-substantive changes to
paragraphs (c)(5)(i) and (ii) of section 114.4 to conform these
provisions to the statutory provisions on which they are based.
[Compare]{.underline} 2 U.S.C. 441a(a)(7)(B) [with]{.underline} 11 CFR
114.5(c)(5)(i) and (ii).

The Commission received three comments on this section, all of which
urged the Commission to include an exception to the coordination
standard at 11 CFR 109.21 for inquiries to candidates in connection with
voter guides. The Commission is including the described safe harbor at
11 CFR 109.21(f) to address this concern.

The Commission notes that an appeals court in one circuit invalidated
portions of pre-BCRA 11 CFR 114.4(c)(5). [See]{.underline} [Clifton v.
Federal Election Commission]{.underline}, 927 F. Supp. 493 (D. Me.
1996), [modified in part and remanded in part]{.underline}, 114 F.3d
1309 (1^st^ Cir. 1997), [cert. denied]{.underline}*,* 522 U.S. 1108
(1998). Subsequently a Petition for Rulemaking asked the Commission to
repeal its voter guide regulation. [See]{.underline} Notice of
Availability, 64 [Fed.]{.underline} [Register]{.underline} 46,319 (Aug.
25, 1999). The Commission's present rulemaking consists of changes
necessitated by BCRA, although any additional changes to the voter guide
regulations could be addressed in a future rulemaking.

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

**\[Regulatory Flexibility Act\]**

The Commission certifies that the attached rules will not have a
significant economic impact on a substantial number of small entities.
The basis of this certification is that the national, State, and local
party committees of the two major political parties, and other political
committees are not small entities under 5 U.S.C. 601 because they are
not small businesses, small organizations, or small governmental
jurisdictions. Further, individual citizens operating under these rules
are not small entities.

To the extent that any political committee may fall within the
definition of "small entities," their numbers are not substantial,
particularly the number that would coordinate expenditures with
candidates or political party committees in connection with a Federal
election.

In addition, the small entities to which the rules apply will not be
unduly burdened by the proposed rules because there is no significant
extra cost involved, as any new potential recordkeeping responsibilities
would be minimal and optional. Any commercial vendors whose clients
include campaign committees or political party committees were
previously subject to different rules regarding coordination, and will
not experience a significant economic impact as a result of the new
rules because the requirements of these new rules are no more than what
is necessary to comply with the new statute enacted by Congress.

**Derivation Table**

The following derivation table identifies the new sections in parts 100,
109, and 110 and the corresponding pre-BCRA rules that addressed those
subject areas.

## 

  ---------------- ------------------------------------------------------
  New section      Old section

                   

  100.16(b)        109.1(e)

  109.1            New

  109.3            109.1(b)(5)

  109.11           109.3

  109.20           109.1(c)

  109.21           New

  109.22           New

  109.23           109.1(d)

  109.30           New

  109.31           New\--Reserved

  109.32(a)        110.7(a) (except para. (a)(4) and para. (a)(5))

  109.32(b)        110.7(b)

  109.33           110.7(a)(4) and (c)

  109.34           110.7(d)

  109.35           New

  109.36           110.7(a)(5)

  109.37           New

  110.1(n)         New

  110.2(k)         New

  110.8(a)(2)      New

  110.8(a)(3)      New

  110.18           110.9(d)
  ---------------- ------------------------------------------------------

List of Subjects

[11 CFR Part 100]{.underline}

Elections

[11 CFR Part 102]{.underline}

Political committees and parties, reporting and recordkeeping
requirements.

[11 CFR Part 109]{.underline}

Elections, reporting and recordkeeping requirements.

[11 CFR Part 110]{.underline}

Campaign funds, political committees and parties.

## [11 CFR Part 114]{.underline}

Business and industry, elections, labor.

for the reasons set out in the preamble, subchapter A of chapter 1 of
title 11 of the [Code of Federal Regulations]{.underline} is amended as
follows:

part 100 -- scope and definitions

1\. The authority citation for part 100 is revised to read as follows:

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

2\. Section 100.16 is revised to read as follows:

§ 100.16 Independent expenditure (2 U.S.C. 431(17)).

\(a\) The term [independent expenditure]{.underline} means an
expenditure by a person for a communication expressly advocating the
election or defeat of a clearly identified candidate that is not made in
cooperation, consultation, or concert with, or at the request or
suggestion of, a candidate, a candidate's authorized committee, or their
agents, or a political party committee or its agents. A communication is
"made in cooperation, consultation, or concert with, or at the request
or suggestion of, a candidate, a candidate's authorized committee, or
their agents, or a political party committee or its agents" if it is a
coordinated communication under 11 CFR 109.21 or a party coordinated
communication under 11 CFR 109.37.

\(b\) No expenditure by an authorized committee of a candidate on behalf
of that candidate shall qualify as an independent expenditure.

\(c\) No expenditure shall be considered independent if the person
making the expenditure allows a candidate, a candidate's authorized
committee, or their agents, or a political party committee or its agents
to become materially involved in decisions regarding the communication
as described in 11 CFR 109.21(d)(2), or shares financial responsibility
for the costs of production or dissemination with any such person.

**§ 100.23 \[Removed and reserved.\]**

3\. Remove and reserve § 100.23.

**part 102 -- registration, organization, and recordkeeping by political
committees (2 U.s.c. 433)**

4\. The authority citation for Part 102 continues to read as follows:

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

5\. Section 102.6(a)(1)(ii) is revised to read as follows:

**§ 102.6 Transfers of funds; collecting agents.**

\(a\) \* \* \*

\(1\) \* \* \*

> \(ii\) Subject to the restrictions set forth at 11 CFR 109.35(c),
> 300.10(a), 300.31and 300.34(a) and (b), transfers of funds may be made
> without limit on amount between or among a national party committee, a
> State party committee and/or any subordinate party committee whether
> or not they are political committees under
>
> 11 CFR 100.5 and whether or not such committees are affiliated.

\* \* \* \* \*

6\. Part 109 is revised to read as follows:

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

Sec.

###### Subpart A -- Scope and Definitions

§ 109.1 When will this part apply?

§ 109.2 \[Reserved\]

§ 109.3 Definitions.

**Subpart B -- Independent Expenditures**

§ 109.10 How do political committees and other persons report
independent expenditures?

§ 109.11 When is a "non-authorization notice" (disclaimer) required?

###### Subpart C -- Coordination

§ 109.20 What does "coordinated" mean?

§ 109.21 What is a "coordinated communication"?

§ 109.22 Who is prohibited from making coordinated communications?

§ 109.23 How are payments for the dissemination, distribution, or
republication of candidate campaign materials treated and reported?

**Subpart D -- Special Provisions for Political Party Committees**

§ 109.30 How are political party committees treated for purposes of
coordinated and independent expenditures?

§ 109.31 \[Reserved\]

§ 109.32 What are the coordinated party expenditure limits?

§ 109.33 May a political party committee assign its coordinated party
expenditure authority to another political party committee?

§ 109.34 When may a political party committee make coordinated party
expenditures?

§ 109.35 What are the restrictions on a political party making both
independent expenditures and coordinated party expenditures in
connection with the general election of a candidate?

§ 109.36 Are there additional circumstances under which a political
party committee is prohibited from making independent expenditures?

§ 109.37 What is a "party coordinated communication"?

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

# **Subpart A -- Scope and Definitions**

**§ 109.1 When will this part apply?**

This part applies to expenditures that are made independently from a
candidate, an authorized committee, a political party committee, or
their agents, and to those payments that are made in coordination with a
candidate, an authorized committee, a political party committee, or
their agents. The rules in this part explain how these types of payments
must be reported and how they must be treated by candidates, authorized
committees, and political party committees. In addition, subpart D of
part 109 describes procedures and limits that apply only to payments,
transfers, and assignments made by political party committees.

**§ 109.2 \[Reserved\]**

§ 109.3 Definitions.

For the purposes of 11 CFR part 109 only, [agent]{.underline} 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:

\(a\) In the case of a national, State, district, or local committee of
a political party, any one or more of the activities listed in
paragraphs (a)(1) through (a)(5) of this section:

> \(1\) To request or suggest that a communication be created, produced,
> or distributed.
>
> \(2\) To make or authorize a communication that meets one or more of
> the content standards set forth in 11 CFR 109.21(c).
>
> \(3\) To create, produce, or distribute any communication at the
> request or suggestion of a candidate.
>
> \(4\) To be materially involved in decisions regarding:
>
> \(i\) The content of the communication;
>
> \(ii\) The intended audience for the communication;
>
> \(iii\) The means or mode of the communication;
>
> \(iv\) The specific media outlet used for the communication;
>
> \(v\) The timing or frequency of the communication; or,
>
> \(vi\) The size or prominence of a printed communication, or duration
> of a communication by means of broadcast, cable, or satellite.
>
> \(5\) To make or direct a communication that is created, produced, or
> distributed with the use of material or information derived from a
> substantial discussion about the communication with a candidate.

\(b\) In the case of an individual who is a Federal candidate or an
individual holding Federal office, any one or more of the activities
listed in paragraphs (b)(1) through (b)(6) of this section:

> \(1\) To request or suggest that a communication be created, produced,
> or distributed.
>
> \(2\) To make or authorize a communication that meets one or more of
> the content standards set forth in 11 CFR 109.21(c).
>
> \(3\) To request or suggest that any other person create, produce, or
> distribute any communication.
>
> \(4\) To be materially involved in decisions regarding:
>
> \(i\) The content of the communication;

(ii) The intended audience for the communication;

(iii) The means or mode of the communication;

> \(iv\) The specific media outlet used for the communication;
>
> \(v\) The timing or frequency of the communication;
>
> \(vi\) The size or prominence of a printed communication, or duration
> of a communication by means of broadcast, cable, or satellite.

(5) To provide material or information to assist another person in the
    creation, production, or distribution of any communication.

(6) To make or direct a communication that is created, produced, or
    distributed with the use of material or information derived from a
    substantial discussion about the communication with a different
    candidate.

**Subpart B -- Independent Expenditures**

> **§ 109.10 How do political committees and other persons report
> independent expenditures?**
>
> \(a\) Political committees, including political party committees, must
> report independent expenditures under 11 CFR 104.4.
>
> \(b\) Every person that is not a political committee and that makes
> independent expenditures aggregating in excess of \$250 with respect
> to a given election in a calendar year shall file a verified statement
> or report on FEC Form 5 in accordance with 11 CFR 104.4(e) containing
> the information required by paragraph (e) of this section. Every
> person filing a report or statement under this section shall do so in
> accordance with the quarterly reporting schedule specified in
> 11 CFR 104.5(a)(1)(i) and (ii) and shall file a report or statement
> for any quarterly period during which any such independent
> expenditures that aggregate in excess of \$250 are made and in any
> quarterly reporting period thereafter in which additional independent
> expenditures are made.

\(c\) Every person that is not a political committee and that makes
independent expenditures aggregating \$10,000 or more with respect to a
given election any time during the calendar year up to and including the
20th day before an election, must report the independent expenditures on
FEC Form 5, or by signed statement if the person is not otherwise
required to file electronically under 11 CFR 104.18. (See 11 CFR
104.4(f) for aggregation.) The person making the independent
expenditures aggregating \$10,000 or more must ensure that the
Commission receives the report or statement by 11:59 p.m. Eastern
Standard/Daylight Time on the second day following the date on which a
communication is publicly distributed or otherwise publicly
disseminated. Each time subsequent independent expenditures relating to
the same election aggregate an additional \$10,000 or more, the person
making the independent expenditures must ensure that the Commission
receives a new 48-hour report of the subsequent independent
expenditures. Each 48-hour report must contain the information required
by paragraph (e)(1) of this section.

\(d\) Every person making, after the 20th day, but more than 24 hours
before 12:01 a.m. of the day of an election, independent expenditures
aggregating \$1,000 or more with respect to a given election must report
those independent expenditures and ensure that the Commission receives
the report or signed statement by 11:59 p.m. Eastern Standard/Daylight
Time on the day following the date on which a communication is publicly
distributed or otherwise publicly disseminated. Each time subsequent
independent expenditures relating to the same election aggregate \$1,000
or more, the person making the independent expenditures must ensure that
the Commission receives a new 24-hour report of the subsequent
independent expenditures. (See 11 CFR 104.4(f) for aggregation.) Such
report or statement shall contain the information required by paragraph
(e) of this section.

\(e\) [Content of verified reports and statements and verification of
reports and statements.]{.underline}

\(1\) [Contents of verified reports and statement.]{.underline} If a
signed report or statement is submitted, the report or statement shall
include:

\(i\) The reporting person\'s name, mailing address, occupation, and the
name of his or her employer, if any;

\(ii\) The identification (name and mailing address) of the person to
whom the expenditure was made;

\(iii\) The amount, date, and purpose of each expenditure;

\(iv\) A statement that indicates whether such expenditure was in
support of, or in opposition to a candidate, together with the
candidate\'s name and office sought;

\(v\) A verified certification under penalty of perjury as to whether
such expenditure was made in cooperation, consultation, or concert with,
or at the request or suggestion of a candidate, a candidate's authorized
committee, or their agents, or a political party committee or its
agents; and

\(vi\) The identification of each person who made a contribution in
excess of \$200 to the person filing such report, which contribution was
made for the purpose of furthering the reported independent expenditure.

\(2\) [Verification of independent expenditure statements and
reports.]{.underline} Every person shall verify reports and statements
of independent expenditures filed pursuant to the requirements of this
section by one of the methods stated in paragraph (2)(i) or (ii) of this
section. Any report or statement verified under either of these methods
shall be treated for all purposes (including penalties for perjury) in
the same manner as a document verified by signature.

\(i\) For reports or statements filed on paper ([e.g.,]{.underline} by
hand-delivery, U.S. Mail, or facsimile machine), the person who made the
independent expenditure shall certify, under penalty of perjury, the
independence of the expenditure by handwritten signature immediately
following the certification required by paragraph (e)(1)(v) of this
section.

\(ii\) For reports or statements filed by electronic mail, the person
who made the independent expenditure shall certify, under penalty of
perjury, the independence of the expenditure by typing the treasurer's
name immediately following the certification required by paragraph
(e)(1)(v) of this section.

**§ 109.11 When is a "non-authorization notice" (disclaimer) required?**

Whenever any person makes an independent expenditure for the purpose of
financing communications expressly advocating the election or defeat of
a clearly identified candidate, such person shall comply with the
requirements of 11 CFR 110.11.

# **Subpart C -- Coordination**

**§ 109.20 What does "coordinated" mean?**

\(a\) [Coordinated]{.underline} means made in cooperation, consultation
or concert with, or at the request or suggestion of, a candidate, a
candidate's authorized committee, or their agents, or a political party
committee or its agents.

\(b\) Any expenditure that is coordinated within the meaning of
paragraph (a) of this section, but that is not made for a coordinated
communication under 11 CFR 109.21 or a party coordinated communication
under 11 CFR 109.37, is either an in-kind contribution to, or a
coordinated party expenditure with respect to, the candidate or
political party committee with whom or with which it was coordinated and
must be reported as an expenditure made by that candidate or political
party committee, unless otherwise exempted under 11 CFR part 100,
subparts C or E.

**§ 109.21 What is a "coordinated communication"?**

\(a\) [Definition]{.underline}. A communication is coordinated with a
candidate, an authorized committee, a political party committee, or an
agent of any of the foregoing when the communication:

\(1\) Is paid for by a person other than that candidate, authorized
committee, political party committee, or agent of any of the foregoing;

> \(2\) Satisfies at least one of the content standards in paragraph (c)
> of this section; and
>
> \(3\) Satisfies at least one of the conduct standards in paragraph (d)
> of this section.

\(b\) [Treatment as an in-kind contribution and expenditure;
Reporting.]{.underline}

\(1\) [General rule.]{.underline} A payment for a coordinated
communication is made for the purpose of influencing a Federal election,
and is an in-kind contribution under 11 CFR 100.52(d) to the candidate,
authorized committee, or political party committee with whom or which it
is coordinated, unless excepted under 11 CFR part 100, subpart C, and
must be reported as an expenditure made by that candidate, authorized
committee, or political party committee under 11 CFR 104.13, unless
excepted under 11 CFR part 100, subpart E.

> \(2\) [In-kind contributions resulting from conduct described in
> paragraphs (d)(4) or (d)(5) of this section.]{.underline}
> Notwithstanding paragraph (b)(1) of this section, the candidate,
> authorized committee, or political party committee with whom or which
> a communication is coordinated does not receive or accept an in-kind
> contribution, and is not required to report an expenditure, that
> results from conduct described in paragraphs (d)(4) or (d)(5) of this
> section, unless the candidate, authorized committee, or political
> party committee, or an agent of any of the foregoing, engages in
> conduct described in paragraphs (d)(1) through (d)(3) of this section.

\(3\) [Reporting of coordinated communications.]{.underline} A political
committee, other than a political party committee, that makes a
coordinated communication must report the payment for the communication
as a contribution made to the candidate or political party committee
with whom or which it was coordinated and as an expenditure in
accordance with 11 CFR 104.3(b)(1)(v). A candidate, authorized
committee, or political party committee with whom or which a
communication paid for by another person is coordinated must report the
usual and normal value of the communication as an in-kind contribution
in accordance with 11 CFR 104.13, meaning that it must report the amount
of the payment as a receipt under 11 CFR 104.3(a) and as an expenditure
under 11 CFR 104.3(b).

\(c\) [Content standards]{.underline}. Each of the types of content
described in paragraphs (c)(1) through (c)(4) satisfies the content
standard of this section.

\(1\) A communication that is an electioneering communication under 11
CFR 100.29.

\(2\) A public communication that disseminates, distributes, or
republishes, in whole or in part, campaign materials prepared by a
candidate, the candidate's authorized committee, or an agent of any of
the foregoing, unless the dissemination, distribution, or republication
is excepted under 11 CFR 109.23(b). For a communication that satisfies
this content standard, see paragraph (d)(6) of this section.

\(3\) A public communication that expressly advocates the election or
defeat of a clearly identified candidate for Federal office.

\(4\) A communication that is a public communication, as defined in

> 11 CFR 100.26, and about which each of the following statements in
> paragraphs (c)(4)(i), (ii), and (iii) of this section are true.

\(i\) The communication refers to a political party or to a clearly
identified candidate for Federal office;

\(ii\) The public communication is publicly distributed or otherwise
publicly disseminated 120 days or fewer before a general, special, or
runoff election, or 120 days or fewer before a primary or preference
election, or a convention or caucus of a political party that has
authority to nominate a candidate; and

\(iii\) The public communication is directed to voters in the
jurisdiction of the clearly identified candidate or to voters in a
jurisdiction in which one or more candidates of the political party
appear on the ballot.

\(d\) [Conduct standards]{.underline}. Any one of the following types of
conduct satisfies the conduct standard of this section whether or not
there is agreement or formal collaboration, as defined in paragraph (e)
of this section:

\(1\) [Request or suggestion]{.underline}.

(i) The communication is created, produced, or distributed at the
    request or suggestion of a candidate or an authorized committee,
    political party committee, or agent of any of the foregoing; or

(ii) The communication is created, produced, or distributed at the
     suggestion of a person paying for the communication and the
     candidate, authorized committee, political party committee, or
     agent of any of the foregoing, assents to the suggestion.

\(2\) [Material involvement]{.underline}. A candidate, an authorized
committee, a political party committee, or an agent of any of the
foregoing, is materially involved in decisions regarding:

> \(i\) The content of the communication;
>
> \(ii\) The intended audience for the communication;
>
> \(iii\) The means or mode of the communication;
>
> \(iv\) The specific media outlet used for the communication;
>
> \(v\) The timing or frequency of the communication; or
>
> \(vi\) The size or prominence of a printed communication, or duration
> of a communication by means of broadcast, cable, or satellite.

\(3\) [Substantial discussion]{.underline}. The communication is
created, produced, or distributed after one or more substantial
discussions about the communication between the person paying for the
communication, or the employees or agents of the person paying for the
communication, and the candidate who is clearly identified in the
communication, or his or her authorized committee, or his or her
opponent or the opponent's authorized committee, or a political party
committee, or an agent of any of the foregoing. A discussion is
substantial within the meaning of this paragraph if information about
the candidate's or political party committee's campaign plans, projects,
activities, or needs is conveyed to a person paying for the
communication, and that information is material to the creation,
production, or distribution of the communication.

\(4\) [Common vendor]{.underline}. All of the following statements in
paragraphs (d)(4)(i) through (d)(4)(iii) of this section are true:

\(i\) The person paying for the communication, or an agent of such
person, contracts with or employs a commercial vendor, as defined in 11
CFR 116.1(c), to create, produce, or distribute the communication;

\(ii\) That commercial vendor, including any owner, officer, or employee
of the commercial vendor, has provided any of the following services to
the candidate who is clearly identified in the communication, or his or
her authorized committee, or his or her opponent or the opponent's
authorized committee, or a political party committee, or an agent of any
of the foregoing, in the current election cycle:

(A) Development of media strategy, including the selection or purchasing
    of advertising slots;

(B) Selection of audiences;

(C) Polling;

(D) Fundraising;

(E) Developing the content of a public communication;

(F) Producing a public communication;

(G) Identifying voters or developing voter lists, mailing lists, or
    donor lists;

(H) Selecting personnel, contractors, or subcontractors; or

(I) Consulting or otherwise providing political or media advice; and

\(iii\) That commercial vendor uses or conveys to the person paying for
the communication:

\(A\) Information about the clearly identified candidate's campaign
plans, projects, activities, or needs, or his or her opponent's campaign
plans, projects, activities, or needs, or a political party committee's
campaign plans, projects, activities, or needs and that information is
material to the creation, production, or distribution of the
communication; or

\(B\) Information used previously by the commercial vendor in providing
services to the candidate who is clearly identified in the
communication, or his or her authorized committee, or his or her
opponent or the opponent's authorized committee, or a political party
committee, or an agent of any of the foregoing, and that information is
material to the creation, production, or distribution of the
communication.

\(5\) [Former employee or independent contractor.]{.underline} Both of
the following statements in paragraph (d)(5)(i) and (d)(5)(ii) of this
section are true:

\(i\) The communication is paid for by a person, or by the employer of a
person, who was an employee or independent contractor of the candidate
who is clearly identified in the communication, or his or her authorized
committee, or his or her opponent or the opponent's authorized
committee, or a political party committee, or an agent of any of the
foregoing, during the current election cycle; and

\(ii\) That former employee or independent contractor uses or conveys to
the person paying for the communication:

\(A\) Information about the clearly identified candidate's campaign
plans, projects, activities, or needs, or his or her opponent's campaign
plans, projects, activities, or needs, or a political party committee's
campaign plans, projects, activities, or needs, and that information is
material to the creation, production, or distribution of the
communication; or

\(B\) Information used by the former employee or independent contractor
in providing services to the candidate who is clearly identified in the
communication, or his or her authorized committee, or his or her
opponent or the opponent's authorized committee, or a political party
committee, or an agent of any of the foregoing, and that information is
material to the creation, production, or distribution of the
communication.

> \(6\) [Dissemination, distribution, or republication of campaign
> material.]{.underline} A communication that satisfies the content
> standard of paragraph (c)(2) of this section or 11 CFR 109.37(a)(2)(i)
> shall only satisfy the conduct standards of paragraphs (d)(1) through
> (d)(3) of this section on the basis of conduct by the candidate, the
> candidate's authorized committee, or the agents of any of the
> foregoing, that occurs after the original preparation of the campaign
> materials that are disseminated, distributed, or republished. The
> conduct standards of paragraphs (d)(4) and (d)(5) of this section may
> also apply to such communications as provided in those paragraphs.

\(e\) [Agreement or formal collaboration.]{.underline} Agreement or
formal collaboration between the person paying for the communication and
the candidate clearly identified in the communication, his or her
authorized committee, his or her opponent, or the opponent's authorized
committee, a political party committee, or an agent of any of the
foregoing, is not required for a communication to be a coordinated
communication. [Agreement]{.underline} means a mutual understanding or
meeting of the minds on all or any part of the material aspects of the
communication or its dissemination. [Formal collaboration]{.underline}
means planned, or systematically organized, work on the communication.

\(f\) [Safe harbor for responses to inquiries about legislative or
policy issues.]{.underline} A candidate's or a political party
committee's response to an inquiry about that candidate's or political
party committee's positions on legislative or policy issues, but not
including a discussion of campaign plans, projects, activities, or
needs, does not satisfy any of the conduct standards in paragraph (d) of
this section.

**§ 109.22 Who is prohibited from making coordinated communications?**

Any person who is otherwise prohibited from making contributions or
expenditures under any part of the Act or Commission regulations is
prohibited from paying for a coordinated communication.

**§ 109.23 Dissemination, distribution, or republication of candidate
campaign materials**

\(a\) [General rule.]{.underline} The financing of the dissemination,
distribution, or republication, in whole or in part, of any broadcast or
any written, graphic, or other form of campaign materials prepared by
the candidate, the candidate's authorized committee, or an agent of
either of the foregoing shall be considered a contribution for the
purposes of contribution limitations and reporting responsibilities of
the person making the expenditure. The candidate who prepared the
campaign material does not receive or accept an in-kind contribution,
and is not required to report an expenditure, unless the dissemination,
distribution, or republication of campaign materials is a coordinated
communication under 11 CFR 109.21 or a party coordinated communication
under 11 CFR 109.37.

\(b\) [Exceptions]{.underline}. The following uses of campaign materials
do not constitute a contribution to the candidate who originally
prepared the materials:

> \(1\) The campaign material is disseminated, distributed, or
> republished by the candidate, the candidate's authorized committee, or
> an agent of either of the foregoing who prepared that material;
>
> \(2\) The campaign material is incorporated into a communication that
> advocates the defeat of the candidate or party that prepared the
> material;
>
> \(3\) The campaign material is disseminated, distributed, or
> republished in a news story, commentary, or editorial exempted under
> 11 CFR 100.73 or 11 CFR 100.132;

\(4\) The campaign material used consists of a brief quote of materials
that demonstrate a candidate's position as part of a person's expression
of its own views; or

\(5\) A national political party committee or a State or subordinate
political party committee pays for such dissemination, distribution, or
republication of campaign materials using coordinated party expenditure
authority under 11 CFR 109.32.

**Subpart D -- Special Provisions for Political Party Committees**

§ 109.30 How are political party committees treated for purposes of
coordinated and independent expenditures?

Political party committees may make independent expenditures subject to
the provisions in this subpart. [See]{.underline} 11 CFR 109.35 and
109.36. Political party committees may also make coordinated party
expenditures in connection with the general election campaign of a
candidate, subject to the limits and other provisions in this subpart.
[See]{.underline} 11 CFR 109.32 through 11 CFR 109.35.

**§ 109.31 \[Added and reserved\]**

**§ 109.32 What are the coordinated party expenditure limits?**

\(a\) [Coordinated party expenditures in Presidential
elections]{.underline}.

\(1\) The national committee of a political party may make coordinated
party expenditures in connection with the general election campaign of
any candidate for President of the United States affiliated with the
party.

\(2\) The coordinated party expenditures shall not exceed an amount
equal to two cents multiplied by the voting age population of the United
States. [See]{.underline} 11 CFR 110.18. This limitation shall be
increased in accordance with 11 CFR 110.17.

\(3\) Any coordinated party expenditure under paragraph (a) of this
section shall be in addition to\--

> \(i\) Any expenditure by a national committee of a political party
> serving as the principal campaign committee of a candidate for
> President of the United States; and
>
> \(ii\) Any contribution by the national committee to the candidate
> permissible under 11 CFR 110.1 or 110.2.

\(4\) Any coordinated party expenditures made by the national committee
of a political party pursuant to paragraph (a) of this section, or made
by any other party committee under authority assigned by a national
committee of a political party under 11 CFR 109.33, on behalf of that
party's Presidential candidate shall not count against the candidate's
expenditure limitations under 11 CFR 110.8.

\(b\) [Coordinated party expenditures in other Federal
elections.]{.underline}

\(1\) The national committee of a political party, and a State committee

> of a political party, including any subordinate committee of a State
> committee, may each make coordinated party expenditures in connection
> with the general election campaign of a candidate for Federal office
> in that State who is affiliated with the party.

\(2\) The coordinated party expenditures shall not exceed:

> \(i\) In the case of a candidate for election to the office of
> Senator, or of Representative from a State which is entitled to only
> one Representative, the greater of\--
>
> \(A\) Two cents multiplied by the voting age population of the State
> ([see]{.underline} 11 CFR 110.18); or

\(B\) Twenty thousand dollars.

> \(ii\) In the case of a candidate for election to the office of
> Representative, Delegate, or Resident Commissioner in any other State,
> \$10,000.
>
> \(3\) The limitations in paragraph (b)(2) of this section shall be
> increased in accordance with 11 CFR 110.17.
>
> \(4\) Any coordinated party expenditure under paragraph (b) of this
> section shall be in addition to any contribution by a political party
> committee to the candidate permissible under 11 CFR 110.1 or 110.2.

§ 109.33 May a political party committee assign its coordinated party
expenditure authority to another political party committee?

\(a\) [Assignment]{.underline}. Except as provided in 11 CFR 109.35(c),
the national committee of a political party and a State committee of a
political party, including any subordinate committee of a State
committee, may assign its authority to make coordinated party
expenditures authorized by 11 CFR 109.32 to another political party
committee. Such an assignment must be made in writing, must state the
amount of the authority assigned, and must be received by the assignee
committee before any coordinated party expenditure is made pursuant to
the assignment.

\(b\) [Compliance]{.underline}. For purposes of the coordinated party
expenditure limits, [State committee]{.underline} includes a subordinate
committee of a State committee and includes a district or local
committee to which coordinated party expenditure authority has been
assigned. State committees and subordinate State committees and such
district or local committees combined shall not exceed the coordinated
party expenditure limits set forth in 11 CFR 109.32. The State committee
shall administer the limitation in one of the following ways:

\(1\) The State committee shall be responsible for insuring that the
coordinated party expenditures of the entire party organization are
within the coordinated party expenditure limits, including receiving
reports from any subordinate committee of a State committee or district
or local committee making coordinated party expenditures under 11 CFR
109.32, and filing consolidated reports showing all coordinated party
expenditures in the State with the Commission; or

> \(2\) Any other method, submitted in advance and approved by the
> Commission, that permits control over coordinated party expenditures.

\(c\) [Recordkeeping.]{.underline}

> \(1\) A political party committee that assigns its authority to make
> coordinated party expenditures under this section must maintain the
> written assignment for at least three years in accordance with 11 CFR
> 104.14.
>
> \(2\) A political party committee that is assigned authority to make
> coordinated party expenditures under this section must maintain the
> written assignment for at least three years in accordance with 11 CFR
> 104.14.

§ 109.34 When may a political party committee make coordinated party
expenditures?

A political party committee authorized to make coordinated party
expenditures may make such expenditures in connection with the general
election campaign before or after its candidate has been nominated. All
pre-nomination coordinated party expenditures shall be subject to the
coordinated party expenditure limitations of this subpart, whether or
not the candidate on whose behalf they are made receives the party's
nomination.

§ 109.35 What are the restrictions on a political party committee making
both independent expenditures and coordinated party expenditures in
connection with the general election of a candidate?

\(a\) [Applicability]{.underline}. For the purposes of this section, all
political committees established and maintained by a national political
party (including all congressional campaign committees) and all
political committees established and maintained by a State political
party (including any subordinate committee of a State committee) shall
be considered to be a single political committee.

\(b\) [Restrictions on certain coordinated and independent
expenditures.]{.underline} On or after the date on which a political
party nominates a candidate for election to Federal office, no committee
of the political party may make:

> \(1\) Any coordinated party expenditure under 11 CFR 109.32 with
> respect to the candidate during the election cycle at any time after
> it makes any independent expenditure with respect to the candidate
> during the election cycle; or
>
> \(2\) Any independent expenditure with respect to the candidate during
> the election cycle at any time after it makes any coordinated
> expenditure under 11 CFR 109.32 with respect to the candidate during
> the election cycle.

\(c\) [Restrictions on certain transfers and assignments.]{.underline} A
committee of a political party that makes coordinated expenditures under
11 CFR 109.32 with respect to a candidate shall not, during the election
cycle, transfer any funds to, assign authority to make coordinated
expenditures under 11 CFR 109.32 to, or receive a transfer of funds
from, a committee of the political party that has made or intends to
make an independent expenditure with respect to the candidate.

§ 109.36 Are there additional circumstances under which a political
party committee is prohibited from making independent expenditures?

The national committee of a political party must not make independent
expenditures in connection with the general election campaign of a
candidate for President of the United States if the national committee
of that political party is designated as the authorized committee of its
Presidential candidate pursuant to 11 CFR 9002.1(c).

§ 109.37 What is a "party coordinated communication"?

\(a\) [Definition]{.underline}. A political party communication is
coordinated with a candidate, a candidate's authorized committee, or
agent of any of the foregoing, when the communication satisfies the
conditions set forth in paragraphs (a)(1), (a)(2), and (a)(3) of this
section.

\(1\) The communication is paid for by a political party committee or
its agent.

\(2\) The communication satisfies at least one of the content standards
described in paragraphs (a)(2)(i) through (a)(2)(iii) of this section.

\(i\) A public communication that disseminates, distributes, or
republishes, in whole or in part, campaign materials prepared by a
candidate, the candidate's authorized committee, or an agent of any of
the foregoing, unless the dissemination, distribution, or republication
is excepted under 11 CFR 109.23(b). For a communication that satisfies
this content standard, see 11 CFR 109.21(d)(6).

\(ii\) A public communication that expressly advocates the election or
defeat of a clearly identified candidate for Federal office.

> \(iii\) A communication that is a public communication, as defined in
>
> 11 CFR 100.26, and about which each of the following statements in
> paragraphs (a)(2)(iii)(A) through (a)(2)(iii)(C) of this section are
> true.

\(A\) The communication refers to a clearly identified candidate for
Federal office;

\(B\) The public communication is publicly distributed or otherwise
publicly disseminated 120 days or fewer before a general, special, or
runoff election, or 120 days or fewer before a primary or preference
election, or a convention or caucus of a political party that has
authority to nominate a candidate; and

> \(C\) The public communication is directed to voters in the
> jurisdiction of the clearly identified candidate.

\(3\) The communication satisfies at least one of the conduct standards
in 11 CFR 109.21(d)(1) through (d)(6), subject to the provisions of 11
CFR 109.21(e). A candidate's response to an inquiry about that
candidate's positions on legislative or policy issues, but not including
a discussion of campaign plans, projects, activities, or needs, does not
satisfy any of the conduct standards in 11 CFR 109.21(d)(1) through
(d)(6). Notwithstanding paragraph (b)(1) of this section, the candidate
with whom a party coordinated communication is coordinated does not
receive or accept an in-kind contribution, and is not required to report
an expenditure, that results from conduct described in 11 CFR
109.21(d)(4) or (d)(5), unless the candidate, authorized committee, or
an agent of any of the foregoing, engages in conduct described in 11 CFR
109.21(d)(1) through (d)(3).

\(b\) [Treatment of a party coordinated communication.]{.underline} A
payment by a political party committee for a communication that is
coordinated with a candidate, and that is not otherwise exempted under
11 CFR part 100, subpart C or E, must be treated by the political party
committee making the payment as either:

> \(1\) An in-kind contribution for the purpose of influencing a Federal
> election under 11 CFR 100.52(d) to the candidate with whom it was
> coordinated, which must be reported under 11 CFR part 104; or
>
> \(2\) A coordinated party expenditure pursuant to coordinated party
> expenditure authority under 11 CFR 109.32 in connection with the
> general election campaign of the candidate with whom it was
> coordinated, which must be reported under 11 CFR part 104.

part 110 -- contribution and expenditure limitations and prohibitions

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

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

8\. In section 110.1, paragraph (d) is revised and paragraph (n) is
added to read as follows:

**§ 110.1 Contributions by persons other than multicandidate political
committees.**

\* \* \* \* \*

\(d\) [Contributions to other political committees]{.underline}. No
person shall make contributions to any other political committee in any
calendar year which, in the aggregate, exceed \$5,000.

\* \* \* \* \*

\(n\) [Contributions to committees making independent
expenditures]{.underline}. The limitations on contributions of this
section also apply to contributions made to political committees making
independent expenditures under 11 CFR Part 109.

9\. In section 110.2, paragraph (d) is revised and paragraph (k) is
added to read as follows:

**§ 110.2 Contributions by multicandidate political committees.**

\* \* \* \* \*

\(d\) [Contributions to other political committees]{.underline}. No
multicandidate political committee shall make contributions to any other
political committee in any calendar year which, in the aggregate, exceed
\$5,000.

\* \* \* \* \*

\(k\) [Contributions to multicandidate political committees making
independent expenditures]{.underline}. The limitations on contributions
of this section also apply to contributions made to multicandidate
political committees making independent expenditures under 11 CFR Part
109.

§ 110.7 \[Removed and reserved\].

10\. Remove and reserve § 110.7.

11\. In section 110.8, paragraph (a) is amended as follows:

\(a\) The introductory text is redesignated as paragraph (a)(1);

\(b\) Paragraph (a)(1) is redesignated as paragraph (a)(1)(i);

\(c\) Paragraph (a)(2) is redesignated as paragraph (a)(1)(ii);

\(d\) Paragraph (a)(2) is revised to read as follows; and

\(e\) A paragraph (a)(3) is added to read as follows:

§ 110.8 Presidential candidate expenditure limitations.

\(a\) \* \* \*

\(2\) The expenditure limitations in paragraph (a)(1) of this section
shall be increased in accordance with 11 CFR 110.17.

\(3\) Voting age population is defined at 11 CFR 110.18.

\* \* \* \* \*

12\. Section 110.14 is amended as follows:

\(a\) Paragraph (f)(2)(i) is revised to read as follows;

\(b\) Paragraph (f)(2)(ii) is revised to read as follows;

\(c\) Paragraph (f)(3)(iii) is revised to read as follows;

\(d\) Paragraph (i)(2)(i) is revised to read as follows;

\(e\) Paragraph (i)(2)(ii) is revised to read as follows;

\(f\) Paragraph (i)(3)(iii) is revised to read as follows:

**§ 110.14** **Contributions to and expenditures by delegates and
delegate committees.**

\(f\) \* \* \*

\(2\) \* \* \*

> \(i\) Such expenditures are independent expenditures under 11 CFR
> 100.16 if they are made for a communication expressly advocating the
> election or defeat of a clearly identified Federal candidate that is
> not a coordinated communication under 11 CFR 109.21.
>
> \* \* \* \* \*

(ii) Such expenditures are independent expenditures under 11 CFR 100.16
     if they are made for a communication expressly advocating the
     election or defeat of a clearly identified Federal candidate that
     is not a coordinated communication under 11 CFR 109.21.

> \* \* \* \* \*
>
> \(B\) The delegate shall report the portion of the expenditure
> allocable to the Federal candidate as an independent expenditure in
> accordance with 11 CFR 109.10.
>
> \(3\) \* \* \*
>
> \(iii\) Such expenditures are not chargeable to the presidential
> candidate\'s expenditure limitation under 11 CFR 110.8 unless they
> were coordinated communications under 11 CFR 109.21.

\* \* \* \* \*

\(i\) [Expenditures by a delegate committee referring to a candidate for
public office]{.underline} *\--*

\(2\) \* \* \*

> \(i\) Such expenditures are in-kind contributions to a Federal
> candidate if they are coordinated communications under 11 CFR 109.21.
>
> \* \* \* \* \*
>
> \(ii\) Such expenditures are independent expenditures under 11 CFR
> 100.16 if they are made for a communication expressly advocating the
> election or defeat of a clearly identified Federal candidate that is
> not a coordinated communication under 11 CFR 109.21.
>
> \(A\) Such independent expenditures must be made in accordance with
> the requirements of 11 CFR part 100.16.
>
> \(B\) The delegate committee shall report the portion of the
> expenditure allocable to the Federal candidate as an independent
> expenditure in accordance with 11 CFR 109.10.
>
> \(3\) \* \* \*
>
> \(iii\) Such expenditures are not chargeable to the presidential
> candidate\'s expenditure limitation under 11 CFR 110.8 unless they
> were coordinated communications under 11 CFR 109.21.

\* \* \* \* \*

13\. Section 110.18 is added to read as follows:

**§ 110.18 Voting Age Population.**

There is annually published by the Department of Commerce in the
[Federal Register]{.underline} an estimate of the voting age population
based on an estimate of the voting age population of the United States,
of each State, and of each Congressional district. The term [voting age
population]{.underline} means resident population, 18 years of age or
older.

## 

## PART 114 -- CORPORATE AND LABOR ORGANIZATION ACTIVITY

14\. 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), and 441b.

15\. In section 114.4, paragraphs (c)(5)(i) and (c)(5)(ii)(A) is revised
to read as follows:

§ 114.4 Disbursements for communications beyond the restricted class in
connection with a Federal election.

\* \* \*

\(c\) [Communications by a corporation or labor organization to the
general public.]{.underline}

\* \* \*

\(5\) [Voter guides.]{.underline}

\* \* \*

\(i\) The corporation or labor organization must not act in cooperation,
consultation, or concert with or at the request or suggestion of the
candidates, the candidates' committees or agents regarding the
preparation, contents and distribution of the voter guide, and no
portion of the voter guide may expressly advocate the election or defeat
of one or more clearly identified candidate(s) or candidates of any
clearly identified political party.

> \(ii\) (A) The corporation or labor organization must not act in
> cooperation, consultation, or concert with or at the request or
> suggestion of the candidates, the candidates' committees or agents
> regarding the preparation, contents and distribution of the voter
> guide;
>
> \* \* \* \* \*
>
> \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

David M. Mason

Chairman

Federal Election Commission

DATED: \_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

> BILLING CODE: 6715-01-P

[^1]: For the purposes of this Explanation and Justification, all
    persons who expressed their views on the rules proposed in the NPRM
    are referred to as "commenters" without regard to whether those
    views were expressed to the Commission in writing or through
    testimony at the hearing.

[^2]: In effect, the content standard of paragraph (c)(4)(ii) operates
    as a "safe harbor" in that communications that are publicly
    disseminated or distributed more than 120 days before the primary or
    general election will not be deemed to be "coordinated" under this
    particular content standard under any circumstances.