[Federal Register Volume 69, Number 225 (Tuesday, November 23, 2004)]
[Rules and Regulations]
[Pages 68056-68068]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 04-25946]


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FEDERAL ELECTION COMMISSION

11 CFR Parts 100, 102, 104, and 106

[Notice 2004-15]


Political Committee Status, Definition of Contribution, and 
Allocation for Separate Segregated Funds and Nonconnected Committees

AGENCY: Federal Election Commission.

ACTION: Final rules and transmittal of regulations to Congress.

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SUMMARY: The Federal Election Commission (``Commission'') is revising 
portions of its regulations regarding the definition of 
``contribution'' and the allocation of certain costs and expenses by 
separate segregated funds (``SSFs'') and nonconnected committees. A new 
rule explains when funds received in response to certain communications 
by any person must be treated as ``contributions.'' In the allocation 
regulations, the final rules eliminate the previous allocation formula 
under which SSFs and nonconnected committees used the ``funds 
expended'' method to calculate a ratio for use of Federal and non-
Federal funds for administrative and generic voter drive expenses, 
replacing it with a flat 50% minimum. These rules also spell out how 
SSFs and nonconnected committees must pay for voter drives and certain 
public communications. Other changes proposed previously regarding the 
definitions of ``political committee'' and ``expenditure'' are not 
being adopted. Further information is provided in the supplementary 
information that follows.

DATES: Effective January 1, 2005.

FOR FURTHER INFORMATION CONTACT: Ms. Mai T. Dinh, Assistant General 
Counsel, Mr. J. Duane Pugh Jr., Senior Attorney, Mr. Richard T. Ewell, 
Attorney, Mr. Robert M. Knop, Attorney, or Ms. Margaret G. Perl, 
Attorney, 999 E Street, NW., Washington, DC 20463, (202) 694-1650 or 
(800) 424-9530.

SUPPLEMENTARY INFORMATION: The Commission published a Notice of 
Proposed Rulemaking on March 11, 2004. See Notice of Proposed 
Rulemaking on Political Committee Status, 69 FR 11736 (Mar. 11, 2004) 
(``NPRM''). Written comments were due by April 5, 2004 for those 
commenters who wished to testify at the Commission hearing on these 
proposed rules, and by April 9, 2004 for commenters who did not wish to 
testify. The NPRM addressed a number of proposed changes to 11 CFR 
parts 100, 102, 104, 106 and 114. The Commission received over 100,000 
comments from the public with regard to the various issues raised in 
the NPRM. The comments are available at http://www.fec.gov/register.htm 
under ``Political Committee Status.'' The Commission held a public 
hearing on April 14 and 15, 2004, at which 31 witnesses testified. A 
transcript of the public hearing is also available at http://www.fec.gov/register.htm under ``Political Committee Status.'' For the 
purposes of this document, the terms ``comment'' and ``commenter'' 
apply to both written comments and oral testimony at the public 
hearing.
    Under the Administrative Procedure 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 at least 30 calendar days before they take effect. The 
final rules that follows were transmitted to Congress on November 18, 
2004.

Explanation and Justification

Solicitations

    The Commission is adopting one addition to the regulatory 
definition of ``contribution'' in 11 CFR part 100, subpart B. This 
addition comports with the statutory standard for ``contribution'' by 
reaching payments ``made * * * for the purpose of influencing any 
election for Federal office.'' 2 U.S.C. 431(8)(A)(i); 11 CFR 100.51 and 
100.52. This addition has several exceptions to avoid sweeping too 
broadly.

11 CFR 100.57--Funds Received in Response to Solicitations

    Section 100.57 is a new rule that explains when funds received in 
response to certain communications by any person must be treated as 
``contributions'' under FECA. Paragraph (a) sets out the general rule, 
paragraphs (b) and (c) create two specific exceptions: Paragraph (b) 
addresses certain allocable solicitations, and paragraph (c) addresses 
joint fundraisers. These rules in new 11 CFR 100.57 apply to all 
political committees, corporations, labor organizations, partnerships, 
organizations and other entities that are ``persons'' under the Federal 
Election Campaign Act of 1971, as amended (``FECA''). See 2 U.S.C. 
431(11). The rules apply without regard to tax status, so they reach 
all FECA ``persons,'' including, for example, entities described in or 
operating under section 501(c)(3), 501(c)(4), and 527 of the Internal 
Revenue Code.

[[Page 68057]]

1. 11 CFR 100.57(a)--Treatment as Contributions
    New section 100.57(a) classifies all funds provided in response to 
a communication as contributions under the FECA if the communication 
indicates that any portion of the funds received will be used to 
support or oppose the election of a clearly identified Federal 
candidate.
    Most political committees and other organizations pay careful 
attention to communications with potential donors. These communications 
are commonly the cornerstone of the relationship between a group and 
its donors, and their effectiveness is vital to almost all 
organizations. Many groups' fundraising solicitations will say nothing 
of an electoral objective regarding the use of funds (i.e., that any 
funds provided in response to the solicitation will be used to support 
or oppose the election of clearly identified Federal candidates). 
Communications that do so, however, plainly seek funds ``for the 
purpose of influencing Federal elections.'' Thus, the new rule 
appropriately concludes that such funds are ``contributions'' under 
FECA.
    The standard in new section 100.57 draws support from a 1995 
decision of the United States Court of Appeals for the Second Circuit. 
FEC v. Survival Education Fund, Inc., 65 F.3d 285 (2d Cir. 1995). In 
the Second Circuit case, the court found that a July 1984 letter from 
two nonprofit issue advocacy groups solicited ``contributions'' under 
FECA because it included a statement ``[t]hat * * * leaves no doubt 
that the funds contributed would be used to advocate President Reagan's 
defeat at the polls, not simply to criticize his policies during the 
election year.'' Id. at 295. According to the court, the critical 
statement from the mailing was: ``your special election-year 
contribution today will help us communicate your views to hundreds of 
thousands of members of the voting public, letting them know why Ronald 
Reagan and his anti-people policies must be stopped.'' Id. at 289 and 
295 (first emphasis added by court, second in original). The mailing 
described in FEC v. Survival Education Fund, if used following the 
effective date of these rules and modified to identify clearly a 
current Federal candidate, would trigger new section 100.57(a) and 
would require the group issuing the mailing to treat all the funds 
received in response to the mailing as ``contributions'' under FECA.
    The following are examples of solicitations based on the one that 
Survival Education Fund used that illustrate how a variation in the 
text of a solicitation would change the result of whether a 
solicitation is subject to new section 100.57. A solicitation might 
state the following:

<bullet> The President wants to cut taxes again. Our group has been 
fighting for lower taxes since 1960, and we will fight for the 
President's tax cuts. Send us money for our important work.''

Because this solicitation does not indicate that any funds received 
will be used to support or oppose the election of any candidates, any 
funds received in response are not subject to new section 100.57.
    In contrast, a solicitation that would trigger the new rule might 
read as follows:

<bullet> The President wants to cut taxes again. Our group has been 
fighting for lower taxes since 1960, and we will fight to give the 
President four more years to fight for lower taxes. Send us money 
for our important work.''

Because this solicitation indicates that the funds received will be 
used to support the election of a Federal candidate (``give the 
President four more years''), any funds received in response to this 
solicitation are ``contributions'' under the new rule.
    The rule's focus on the planned use of funds leaves the group 
issuing the communication with complete control over whether its 
communications will trigger new section 100.57. After determining that 
a clearly identified candidate is mentioned, new section 100.57 
requires an examination of only the text of a communication. The 
regulation turns on the plain meaning of the words used in the 
communication and does not encompass implied meanings or 
understandings. It does not depend on reference to external events, 
such as the timing or targeting of a solicitation, nor is it limited to 
solicitations that use specific words or phrases that are similar to a 
list of illustrative phrases.
    It is important to note that if a solicitation indicates that any 
portion of the funds received will be used to support or oppose the 
election of a clearly identified candidate, new section 100.57(a) 
applies even if the solicitation states that funds received would be 
used for other purposes too, subject to the exceptions in new 11 CFR 
100.57(b)(2) and (c), discussed below. In addition, a disclaimer 
stating that any funds received that cannot be treated as 
contributions, or that cannot be accepted by a political committee or 
cannot be deposited in a committee's Federal account, will be deposited 
in the organization's non-Federal account does not negate the 
application of new section 100.57(a). Thus, an organization that sends 
out a solicitation that is subject to new section 100.57(a) or (b)(1) 
with a disclaimer similar to the one described above cannot accept any 
funds that are not Federal funds (funds that comply with the amount 
limitations, source prohibitions and reporting requirements of FECA) in 
response to that solicitation unless it satisfies one of the exceptions 
in new section 100.57(b)(2) or (c), discussed below.
    Further examples of communications that solicit contributions under 
new section 100.57(a) are:
    1. ``Electing Joe Smith is crucial to our efforts to preserve the 
environment. Please send money to us so that we can be successful in 
this cause.''
    2. ``Our group strives to preserve Social Security, and 
Representative Jones has a great plan to protect this vital program. 
The Congressman needs our help to stay in Washington and implement his 
plan to save Social Security. Give now to help us fight to save Social 
Security.''
    3. ``Senator Jane Doe voted against a tax package that would have 
helped working families. Your generous gift will enable us to make sure 
Californians remember in November.''
    Because the italicized language in each of these solicitations 
indicates that the funds received will be used to support the election 
or defeat of a Federal candidate, any funds received in response to 
these solicitations are ``contributions'' under the new rule.
    In the NPRM, the proposed regulation text for section 100.57 took a 
different approach. See NPRM at 11757. However, new section 100.57(a) 
is similar to an approach that the Commission sought comment on in the 
narrative of the NPRM. See NPRM at 11743. The commenters did not 
address the approach discussed in the NPRM's narrative, but some 
addressed the proposed regulation text for this provision. Those 
commenters raised objections to proposed section 100.57 based on some 
of the exemptions from the ``expenditure'' definition for certain 
communications, as discussed below. The exemption from the 
``expenditure'' definition for the costs of internal communications by 
corporations, labor organizations and membership organizations in 2 
U.S.C. 431(9)(B)(iii) and 11 CFR 100.134 is not affected by the 
Commission's promulgation of new section 100.57.
    New section 100.57 does not address when the costs of 
communications are expenditures under FECA. Instead, it specifies when 
funds received in response to certain communications must be treated as 
contributions under

[[Page 68058]]

FECA. Thus, a corporation, labor organization or membership 
organization that issues an internal communication of the type 
described in new section 100.57 may consider the costs of the 
communication to be disbursements not subject to FECA requirements 
under section 100.134, but it must treat any funds received in response 
as FECA contributions under new section 100.57. If the corporation, 
labor organization, or membership organization maintains a separate 
segregated fund (``SSF''), treating the funds received in response to 
the communication as contributions to the SSF will satisfy new section 
100.57.
    Section 100.141 exempts from the ``expenditure'' definition any 
payments made by corporations or labor organizations that are 
permissible under 11 CFR part 114. Part 114 authorizes the use of non-
Federal funds for the costs of various corporate, labor organization, 
and membership organization communications under certain conditions. 
See, e.g., 11 CFR 114.3 to 114.8; 2 U.S.C. 441b(b)(2)(A), (b)(2)(B), 
(b)(4)(B). New section 100.57 does not make the costs of these 
communications expenditures; instead, it concerns the treatment of 
funds received in response to certain communications without regard to 
how the costs of those communications were paid.
    One commenter argued that its status as an MCFL-type corporation (a 
qualified nonprofit corporation allowed to make independent 
expenditures pursuant to 11 CFR 114.10) means its communications that 
inform potential contributors of the organization's ability to advocate 
in connection with a Federal election must be immune from FECA 
consequences. The Supreme Court holding in FEC v. Massachusetts 
Citizens for Life, 479 U.S. 238 (1986) (``MCFL''), is not so broad. 
Indeed, the Court twice has recognized that an MCFL-type corporation's 
independent spending can have FECA consequences. See id. at 262 
(noting: ``should MCFL's independent spending become so extensive that 
the organization's major purpose may be regarded as campaign activity, 
the corporation would be classified as a political committee''); see 
also FEC v. Beaumont, 539 U.S. 146, 149 (2003) (holding that the ban on 
corporate contributions directly to Federal candidates applies to MCFL-
type corporations). Independent expenditures were the core of the MCFL 
holding, yet the opinion expressly notes that the independent 
expenditures can trigger political committee status. Nonetheless, the 
commenter claims that an MCFL corporation's ability to explain to 
potential contributors that it will make independent expenditures on 
behalf of particular Federal candidates must be immune from 
consequences under new section 100.57. Just as an MCFL corporation's 
independent expenditures can make it a political committee, an MCFL 
corporation's solicitations can make it the recipient of contributions 
under the FECA. These contributions will not transform an MCFL 
corporation into a political committee unless its expenditures and 
contributions become so extensive as to lead to a conclusion that the 
organization's major purpose is campaign activity. Therefore, new 
section 100.57 is not inconsistent with MCFL.
    Some commenters addressed the interplay between this regulation and 
other proposed rules that the Commission is not adopting, which renders 
these comments moot.
    New section 100.57 provides one example of communications that can 
generate contributions; it is not an exhaustive list. The rule 
addresses communications that indicate that the funds received in 
response will be used to support or oppose the election of a clearly 
identified Federal candidate. Other communications that do not include 
such an indication may also generate contributions under FECA. A 
solicitation that states that the funds received will be used to 
influence Federal elections will generate FECA contributions, see 11 
CFR 102.5(a)(2)(ii), even though such a communication would not be 
subject to new section 100.57 because it does not mention a clearly 
identified Federal candidate.
    Any funds that are ``contributions'' by operation of new section 
100.57 are contributions for purposes of the ``political committee'' 
definition in 2 U.S.C. 431(4)(A) and 11 CFR 100.5(a), which defines a 
``political committee'' as any group that makes $1,000 of expenditures 
or receives $1,000 of contributions during a calendar year. In Buckley 
v. Valeo, 424 U.S. 1, 79 (1976), the Supreme Court narrowed the 
``political committee'' definition with a ``major purpose'' test, which 
is discussed further below. The ``major purpose'' test applies in the 
same way to groups that make or receive $1,000 of contributions and 
groups that make $1,000 of expenditures.
2. 11 CFR 100.57(b)--Certain Allocable Solicitations
a. 11 CFR 100.57(b)(1)
    New section 100.57(b)(1) states that a solicitation that meets 
section 100.57(a) and refers to a political party so that its costs are 
allocable under 11 CFR 106.6 or 106.7 is nonetheless subject to the 
rule that all of its proceeds are ``contributions'' under FECA. This 
approach is consistent with the ``candidate-driven'' approach in the 
revised allocation rules, discussed below. See, e.g., Explanation and 
Justification for new 11 CFR 106.6(f)(1).
b. 11 CFR 100.57(b)(2)
    New section 100.57(b)(2) provides that where the costs of a 
solicitation are allocable under 11 CFR 106.1, 106.6 or 106.7, if the 
solicitation also refers to at least one clearly identified non-Federal 
candidate, at least fifty percent of the proceeds of the solicitation 
must be treated as contributions under FECA. See new 11 CFR 
100.57(b)(2). The funds that satisfy the requirement that fifty percent 
of the funds received must be contributions under the FECA under new 
section 100.57(b)(2) must also comply with FECA's amount limitations 
and source prohibitions and must be reported as contributions if the 
recipient is a political committee. Thus, if such a solicitation does 
not yield at least fifty percent in funds that meet the FECA's amount 
limitations and source prohibitions, then the organization must refund 
some of the donations to comply with new section 100.57. For example, a 
political committee might raise a total of $30,000 for its Federal and 
non-Federal accounts with a fundraising event where the invitation 
includes a solicitation that is subject to both new section 100.57 and 
allocation under section 106.6(d). Under new section 100.57(b)(2), the 
political committee must consider at least fifty percent of the 
proceeds to be contributions. If the $30,000 total receipts include 
only $12,000 that are in compliance with FECA's limitations and 
prohibitions, then the committee may retain only $12,000 in non-Federal 
funds. The political committee must then refund $6,000 of donations so 
that fifty percent of the proceeds from this solicitation are 
contributions.
    New section 100.57 does not change the allocation of direct costs 
of fundraising under current 11 CFR 106.6(d) or 106.7(d)(4). These 
costs are subject to allocation according to the funds received method. 
New section 100.57, however, does affect the nature of the funds 
received from a solicitation and requires that either 100% or at least 
50% of the funds received must be contributions. The amount of 
contributions received, in turn, impacts how the funds received method 
operates when the fundraising includes a solicitation that is subject 
to new section 100.57. For example, consider again the situation 
described above

[[Page 68059]]

where a political committee raised $30,000 for its Federal and non-
Federal accounts and spent $2,000 in direct costs of fundraising. After 
the $6,000 refund, the funds received from that event were 50% Federal 
and 50% non-Federal, so the political committee must use at least 
$1,000 in Federal funds to pay for direct costs of fundraising under 
section 106.6(d). In accordance with 11 CFR 106.6(d)(2), the final 
allocation of the direct costs of fundraising must result in the 
Committee using at least $1,000 of Federal funds to pay those costs, 
and prior payments based on an estimated allocation ratio under section 
106.6(d)(1) must be adjusted to match the final allocation ratio.
3. 11 CFR 100.57(c)--Joint Fundraisers
    New section 100.57(c) concerns joint fundraising. It provides that 
funds received in response to solicitations conducted between or among 
the authorized committees of Federal and non-Federal candidates are 
excepted from being treated entirely as contributions under the new 
rule in section 100.57. Nevertheless, when a Federal candidate's 
authorized committee participates in a joint fundraiser, all funds 
solicited are subject to restrictions imposed on Federal candidates by 
BCRA. See 2 U.S.C. 441i(e)(1) and either 11 CFR 300.61 or 300.62. When 
a Federal candidate conducts a joint fundraiser with a State candidate, 
the candidates must divide the receipts according to the written joint 
fundraising agreement under 11 CFR 102.17. All funds raised for the 
Federal candidate are subject to 11 CFR 300.61 and all funds raised for 
the State candidate are subject to 11 CFR 300.62 because of the Federal 
candidate's participation in the joint fundraiser.
    All other joint fundraising pursuant to section 102.17 is subject 
to new section 100.57(a) and (b). Thus, section 100.57 applies to 
solicitations for joint fundraisers involving unauthorized political 
committees or other organizations that are not political committees 
where the solicitations indicate that any portion of the funds received 
will be used to support or oppose the election of a clearly identified 
Federal candidate. If the communication is subject to new section 
100.57(a) or (b)(1), then the entire amount of the proceeds of the 
joint fundraiser must be treated as contributions. Alternatively, if 
the solicitation is subject to new section 100.57(b)(2) (includes at 
least one clearly identified Federal candidate and at least one clearly 
identified non-Federal candidate), then at least fifty percent of the 
proceeds must be treated as FECA contributions, without regard to which 
entity receives those contributions. Any joint fundraising agreement 
must reflect the appropriate division of proceeds and costs in order 
for the joint fundraising entities to comply with new section 100.57 
and in 11 CFR 102.17.
    For example, two political committees, called A and B, each with a 
Federal and non-Federal account, sign a joint fundraising agreement 
stating that A will receive 75% of the proceeds and B will receive 25% 
of the proceeds. In accordance with the agreement, they jointly raise 
$100,000 with a solicitation subject to new section 100.57(b)(2), with 
A receiving $75,000 and B receiving $25,000. The $100,00 raised by the 
two committees must be distributed among their Federal and non-Federal 
accounts in any way that results in at least 50% of the $100,000 total 
proceeds being deposited in the Federal accounts. For example, A may 
deposit one third of its $75,000 in proceeds ($25,000) in its Federal 
account and the remaining two thirds ($50,000) in its non-Federal 
account. B would then treat all of its $25,000 in proceeds as Federal 
funds, deposit $25,000 in its Federal account, and nothing in its non-
Federal account. All funds deposited in Federal accounts must comply 
with the amount limitations, source prohibitions, and reporting 
requirements of the Act. Furthermore, at least 50% of the direct costs 
of fundraising must be paid for with Federal funds.

Allocation

    The Commission is adopting final rules at 11 CFR 106.6 to change 
the allocation regime for SSFs and nonconnected committees. These final 
rules establish a simpler bright-line rule providing that 
administrative expenses, generic voter drives, and certain public 
communications that refer to a political party must be paid for with at 
least 50% Federal funds. Under the previous regulations, SSFs and 
nonconnected committees applied a complex ``funds expended'' formula to 
arrive at a ratio of Federal funds to total Federal and non-Federal 
disbursements and then paid for these expenses with allocated amounts 
from Federal and non-Federal accounts. The previous rules were a source 
of confusion for some SSFs and nonconnected committees and resulted in 
time-consuming reporting.
    These final rules also establish candidate-driven allocation rules 
for voter drives and public communications that refer to clearly 
identified Federal or non-Federal candidates regardless of whether the 
voter drive or public communication refers to a political party. When 
the voter drive or public communication refers to clearly identified 
Federal candidates, but no clearly identified non-Federal candidates, 
the costs must be paid for with 100% Federal funds. Similarly, when the 
voter drive or public communication refers to clearly identified non-
Federal candidates, but no clearly identified Federal candidates, the 
costs may be paid 100% from a non-Federal account. Any voter drives or 
public communications that refer to both clearly identified Federal and 
non-Federal candidates are subject to the time/space method of 
allocation under 11 CFR 106.1. The final rules do not change the 
allocation methods in 11 CFR 106.1, which are based on the benefit 
reasonably expected to be derived by each candidate. Minor changes are 
being made in 11 CFR 102.5 and 104.10 to conform to the changes in 11 
CFR 106.6.

11 CFR 102.5--Organizations Financing Political Activity in Connection 
With Federal and Non-Federal Elections, Other Than Through Transfers 
and Joint Fundraisers: Accounts and Accounting

    Section 102.5(a)(1)(i) regulates how political committees, other 
than national committees, that finance political activity in connection 
with both Federal and non-Federal elections set up accounts and 
transfer monies between Federal and non-Federal accounts to pay for 
these activities. As explained below in the Explanation and 
Justification for revised 11 CFR 106.6, the Commission is revising the 
rules for SSFs and nonconnected committees regarding allocation of 
administrative and generic voter drive expenses, and adding rules 
regarding the payment of costs of certain voter drives and public 
communications. In order to conform to revised 11 CFR 106.6, the 
Commission is revising section 102.5(a)(1)(i) to add references to 
sections 106.6(c) and 106.6(f), which govern transfers from non-Federal 
to Federal accounts under 11 CFR 102.5(a) to pay for allocable 
activities.

11 CFR 104.10--Reporting by Separate Segregated Funds and Nonconnected 
Committees of Expenses Allocated Amount Candidates and Activities

    Section 104.10 specifies how SSFs and nonconnected committees must 
report expenses allocated among candidates and activities pursuant to 
11 CFR 106.1 and 106.6. Previously, section 104.10(b)(1) established 
the reporting requirements for allocation of administrative and generic 
voter drive expenses under the former ``funds

[[Page 68060]]

expended'' method in section 106.6. As explained in greater detail 
below (see Explanation and Justification for revised 11 CFR 106.6), the 
Commission is revising the rules for SSFs and nonconnected committees 
and removing the ``funds expended'' method of allocation. In order to 
conform to the revised 11 CFR 106.6, the Commission is deleting the 
requirements for reporting allocated expenditures and disbursements 
under the ``funds expended'' method in section 104.10(b)(1). Instead, 
revised paragraph (b)(1) states that in each report disclosing a 
disbursement for administrative expenses, generic voter drives, or 
public communications that refer to a political party, but do not refer 
to any clearly identified candidates, the committee shall state the 
allocation ratio used for these categories of expenses under revised 11 
CFR 106.6(c). The committee must report whether it is using the 50% 
minimum Federal funds required under section 106.6(c) or another 
percentage of Federal funds (greater than 50%). Because of the 
simplified approach under the revised allocation provisions of section 
106.6 explained below, the reporting obligations for SSFs and 
nonconnected committees should be easier to meet than the obligations 
under former section 104.10.

11 CFR 106.6--Payment for Administrative Expenses, Voter Drives and 
Certain Public Communications

    This section specifies how SSFs and nonconnected committees must 
pay for certain activities that are in connection with Federal 
elections, non-Federal elections, or both, using Federal and non-
Federal accounts established pursuant to 11 CFR 102.5. As noted in 
section 106.6(a), political committees required to allocate under this 
section do not include party committees and the authorized committees 
of any candidate for Federal election. The NPRM included several 
proposals to amend the allocation provisions in 11 CFR 106.6, which are 
discussed in greater detail below. NPRM at 11753-55 and 11759-60. 
Approximately ten commenters provided substantive comments regarding 
these proposals. In general, the commenters were divided as to the 
impact of the U.S. Supreme Court decision in McConnell v. FEC, 540 U.S. 
93 (2003), on the allocation rules for SSFs and nonconnected 
committees. One commenter argued that McConnell reaffirmed that 
allocation between Federal and non-Federal accounts is appropriate for 
SSFs and nonconnected committees. Other commenters believed that 
McConnell's statements regarding the circumvention of the FECA 
permitted under the former party committee allocation rules could just 
as easily be said of the allocation regime for SSFs and nonconnected 
committees.
    After carefully considering these public comments and examining 
information regarding how the allocation system under former 11 CFR 
106.6 has worked over the past ten years, the Commission adopts the 
following amendments to 11 CFR 106.6: (1) Deleting the ``funds 
expended'' ratio from 11 CFR 106.6(c) and replacing it with a 50% flat 
minimum Federal percentage; (2) applying this new 50% Federal minimum 
to administrative and generic voter drive expenses, as well as to a 
newly added category of allocable expenses--public communications that 
refer to a political party but do not refer to any clearly identified 
Federal or non-Federal candidates; (3) providing for allocation of 
certain voter drives and public communications that may refer to 
political parties and do refer to clearly identified candidates, based 
upon whether the candidates are Federal, non-Federal, or both; and (4) 
directing SSFs and nonconnected committees to use the time/space 
allocation method for certain voter drives and public communications 
that refer to at least one clearly identified Federal candidate, and to 
at least one clearly identified non-Federal candidate, regardless of 
whether there is a reference to a political party. Through these final 
rules, the Commission seeks to enhance compliance with the FECA, to 
simplify the allocation system, and to make it easier for SSFs and 
nonconnected committees to comprehend and for the Commission to 
administer these requirements.
1. 11 CFR 106.6(b)--Payments for Administrative Expenses, Voter Drives 
and Certain Public Communications
    Previous 11 CFR 106.6(b)(1) listed disbursements that must be 
allocated by SSFs, and previous 11 CFR 106.6(b)(2) listed disbursements 
that must be allocated by nonconnected committees. Because the 
allocation method is very similar for both SSFs and nonconnected 
committees, it is unnecessary to create separate lists for them. 
Rather, the distinction in the final rules concerning allocation is 
between the types of disbursements that are subject to allocation and 
the types of disbursements that are not. Thus, revised 11 CFR 
106.6(b)(1) lists the disbursements that SSFs and nonconnected 
committees must allocate in accordance to revised 11 CFR 106.6(c). 
Revised 11 CFR 106.6(b)(2) lists the disbursements that are not subject 
to allocation but must be paid for in accordance with new 11 CFR 
106.6(f).
    Proposed 11 CFR 106.6(b)(1) would have applied the allocation rules 
to public communications that promote or support a political party or 
promote, support, attack or oppose a clearly identified candidate. NPRM 
at 11759. The final rules do not adopt this approach. Rather, revised 
section 106.6(b) lists public communications that refer to a political 
party or a clearly identified candidate. The Commission is adopting the 
standard in the final rules because it is an objective standard that is 
easy to administer.
A. 11 CFR 106.6(b)(1)--Costs To Be Allocated
    The four types of disbursements in revised 11 CFR 106.6(b)(1) that 
are subject to allocation are: administrative expenses, direct costs of 
fundraising, generic voter drives and public communications that refer 
to a political party. The final rules retain the former descriptions of 
administrative expenses, direct costs of fundraising, and generic voter 
drives in new paragraphs (b)(1)(i), (ii) and (iii) in section 106.6, 
respectively. New paragraphs (b)(1)(i) and (ii) still make clear that 
SSFs may have the costs of administrative expenses and fundraising 
programs paid by their connected organization. ``Generic voter drives'' 
is a defined term used prior to BCRA and goes beyond the limited 
activities defined under ``Federal election activity.'' For example, a 
television ad urging the general public to vote for candidates 
associated with a particular issue, without mentioning a specific 
candidate, would be considered allocable as a generic voter drive 
activity under 11 CFR 106.6(b)(1)(iii). The final rules add a fourth 
type of disbursement that must be allocated--public communications, as 
defined in 11 CFR 100.26, that refer to a political party but do not 
refer to any Federal or non-Federal candidate. See 11 CFR 
106.6(b)(1)(iv). To illustrate, public communications that use phrases 
such as ``the Democratic team,'' ``the Minnesota Democratic 
Committee,'' ``the GOP,'' ``Democrats,'' and ``Republicans in 
Congress,'' would fall under new paragraph (b)(1)(iv) of section 106.6 
because they refer to a political party. See also 11 CFR 
106.6.(b)(2)(iii) and (iv) discussed below.
B. 11 CFR 106.6(b)(2)--Costs Not Subject to Allocation
    Revised 11 CFR 106.6(b)(2) lists the four types of disbursements 
that are not

[[Page 68061]]

subject to allocation between Federal and non-Federal accounts, but are 
subject to the payment requirements in new paragraph (f) of section 
106.6. Two of the four types of disbursements concern voter drives and 
the other two types concern public communications.
    The Commission recognizes that the allocation regulation for 
generic voter drives in new 11 CFR 106.6(b)(1)(iii) does not apply to 
voter drives that mention a specific Federal or non-Federal candidate. 
Without an additional regulatory clarification, some voter drive 
activity may have fallen into the gap between the regulation of generic 
voter drives in 11 CFR 106.6(b)(1)(iii) and the candidate-specific 
public communications provisions in new 11 CFR 106.6(b)(2)(iii) and 
(iv), discussed below. To prevent such a gap, the Commission is issuing 
new rules for voter drives that refer to a clearly identified Federal 
or non-Federal candidate.
    New paragraph (b)(2)(i) of section 106.6 describes voter drives in 
which the printed materials or scripted messages refer to one or more 
clearly identified Federal candidate, or any voter drives which include 
written instructions that direct the committee's employee or volunteer 
to refer to a clearly identified Federal candidate (including voter 
drives that also generally refer to candidates of a particular party or 
those associated with a particular issue), but do not refer to any 
clearly identified non-Federal candidates. New paragraph (b)(2)(ii) 
also addresses voter drives that similarly refer to one or more clearly 
identified non-Federal candidates, including voter drives that 
generally refer to candidates of a particular party or candidates 
associated with a particular issue, but do not refer to any clearly 
identified Federal candidates.
    In both paragraphs, the reference to the clearly identified 
candidate must be contained in printed materials, scripted messages, or 
written instructions. Only written instructions that direct the 
employee or volunteer to refer to a clearly identified Federal or non-
Federal candidate will satisfy these paragraphs.\1\ The Commission 
included these limitations to avoid converting an allocable generic 
voter drive into an unallocable candidate-specific voter drive based 
solely upon ``off script'' or unauthorized oral comments by an employee 
or volunteer. The regulation seeks to capture only authorized 
statements; an SSF or nonconnected committee is not required to treat 
an otherwise generic voter drive as a candidate-specific one based on 
unauthorized comments by committee employees or volunteers. SSFs and 
nonconnected committees should be maintaining sufficient control over 
their printed materials, scripts and written instructions to be on 
notice whether or not the voter drive would qualify as a candidate-
specific voter drive in new paragraphs (b)(2)(i) or (ii) of section 
106.6.
---------------------------------------------------------------------------

    \1\ For example, a written instruction to the employees or 
volunteers that states ``do not mention or refer to Candidate Y'' 
would not by itself be covered by paragraphs (b)(2)(i) or (ii) of 
section 106.6.
---------------------------------------------------------------------------

    Revised 11 CFR 106.6(b)(2) also includes two types of public 
communications, as defined in 11 CFR 100.26. First, paragraph 
(b)(2)(iii) describes public communications that refer to one or more 
clearly identified Federal candidates, regardless of whether there is 
reference to a political party, but do not refer to any clearly 
identified non-Federal candidates. Second, paragraph (b)(2)(iv) of 
section 106.6 describes public communications that refer to a political 
party and one or more clearly identified non-Federal candidates, but do 
not refer to any clearly identified Federal candidates. References to 
clearly identified Federal or non-Federal candidates that come within 
new 11 CFR 106.6(b)(2)(iii) and (iv) include ``the President,'' ``your 
Senators,'' and ``the Republican candidate for Senate in the State of 
Georgia.'' See also 11 CFR 100.17 (definition of ``clearly 
identified'').
2. 11 CFR 106.6(c)--Method for Allocating Administrative Expenses, 
Costs of Voter Drives and Certain Public Communications
A. Proposals in the NPRM
    In the NPRM, the Commission set forth several proposals to amend 
the allocation regulations in 11 CFR 106.6 that apply to SSFs and 
nonconnected committees other than state and local party committees. 
Those included a number of proposals where minimum Federal percentages 
would be added to the funds expended method. One alternative in the 
proposed rules would have required SSFs and nonconnected committees to 
use the greatest percentage applicable in any of the States in which 
the committee conducted its activities as the minimum Federal 
percentage applied to all allocations under the funds expended method. 
See NPRM at 11754. A competing alternative would have allowed 
committees to choose between allocating costs on a State-by-State basis 
according to the percentage applicable in each State, or using the 
highest applicable percentage across the board. See id.
    The NPRM also discussed other possible minimums including a ``two 
tier'' system where SSFs and nonconnected committees that operate in 
fewer than 10 States would have used a lower minimum Federal percentage 
(such as 25%), while any committees operating in more than 10 States 
would have been subject to a higher percentage (such as 50%). See id. 
The NPRM also proposed the alternative of a fixed minimum Federal 
percentage as a replacement for the ``funds expended'' method. Finally, 
the NPRM also sought comment on eliminating the allocation scheme and 
requiring SSFs and nonconnected committees to use 100% Federal funds 
for partisan voter drives and public communications listed in proposed 
11 CFR 106.6(b).
B. Comments on Allocation Proposals
    Little attention was focused on allocation issues during the public 
comment period. Fewer than 10 comments provided a substantive response 
to the allocation issues raised in the NPRM. One commenter wanted to 
eliminate allocation altogether and require 100% Federal funds for 
almost all activities, and two commenters recommended revamping the 
allocation scheme by eliminating the funds expended method.
    The commenters differed regarding whether it was appropriate to add 
a Federal minimum percentage into the ``funds expended'' method in 
former section 106.6(c). One commenter supported revision of the 
section 106.6 allocation scheme to avoid ``absurd results'' under the 
former system by requiring a ``significant minimum hard money share'' 
for allocated expenses. Another commenter noted that the new 
bookkeeping, reporting, and calculations required for the proposed 
``funds expended method plus a minimum percentage'' approach in the 
NPRM would be burdensome for political committees. Some commenters 
supported 100% Federal funds for certain expenditures, others supported 
a State-by-State approach, one supported a modified ``two tier'' 
approach to minimums, and others expressed concern that any number 
chosen as a minimum would be arbitrary.
    The commenters also differed with regard to the proposals for 
allocation of public communications and voter drives. One commenter 
noted that if a communication promotes, supports,

[[Page 68062]]

attacks, or opposes (``PASOs'') \2\ a Federal candidate, then it should 
be paid for with 100% Federal funds. Likewise, this commenter noted 
that if a communication only includes non-Federal candidates, then the 
committee should be allowed to use 100% non-Federal funds to pay its 
costs. Some commenters supported a minimum Federal percentage for both 
PASO communications and partisan voter drives. One commenter asserted 
that allocation based on the PASO standard would be vague. Another 
commenter argued that adding PASO communications to the ``funds 
expended'' ratio would be unenforceable, arbitrary, and unbalanced. In 
addition, some commenters suggested also revising 11 CFR 106.1 to 
include a minimum Federal percentage under the time/space methodology 
of allocation. The Commission is not able to adopt this latter 
suggestion because the NPRM did not seek public comment on amending 
section 106.1.
---------------------------------------------------------------------------

    \2\ ``PASO'' has emerged as a convenient acronym for ``promote, 
support, attack or oppose.''
---------------------------------------------------------------------------

C. Final Rules
    In examining public disclosure reports filed by SSFs and 
nonconnected committees over the past ten years, the Commission 
discovered that very few committees chose to allocate their 
administrative and generic voter drive expenses under former section 
106.6(c). Anecdotal evidence suggested that many committees, including 
those that allocated, were confused as to how the funds expended ratio 
should be calculated and adjusted throughout the two-year election 
cycle. Committees have consistently requested guidance on the proper 
application of the allocation methods under former section 106.6 at 
various Commission conferences, roundtables and education events. Audit 
experience has also shown that some committees were not properly 
allocating under the complicated funds expended method. See Final 
Report of the Audit Division on Volunteer PAC (Sept. 21, 2004) 
(improper application of flat state ballot composition ratio instead of 
calculating ratio under funds expended method in section 106.6) and 
Final Report of the Audit Division on Republicans for Choice PAC (Dec. 
2, 1999) (apparent confusion between calculation of funds received 
ratio and funds expended ratio in section 106.6). In addition, 
calculating and adjusting the funds expended ratio may have posed an 
administrative burden to some committees, particularly those with 
limited resources, because compliance required committees to monitor 
their Federal expenditures and non-Federal disbursements, compare their 
current spending to the ratio reported at the start of the election 
cycle, and then adjust the ratio to reflect their actual behavior. The 
confusion and administrative burden associated with the funds expended 
method may at least partly explain why, historically, SSFs and 
nonconnected committees have not adjusted their allocation ratios 
during an election cycle, or from one election cycle to the next 
election cycle.
    Given the complexity of former section 106.6(c), the confusion 
regarding the proper application of this rule exhibited by some SSFs 
and nonconnected committees, and the administrative burden of 
compliance, the Commission seeks to simplify, not further complicate, 
the allocation system. Thus, the Commission is not retaining the funds 
expended method in any form.
    A flat minimum percentage makes the allocation scheme easier to 
understand and apply, while preserving the overall rationale underlying 
allocation. The flat minimum percentage eliminates the requirement--
and, thus, the accompanying burdens--of calculating the ratio and 
monitoring it continuously for accuracy. Furthermore, the Commission's 
recent experience with State and local party allocation ratios in 11 
CFR 106.7 and 300.33 indicates that flat minimum allocation ratios are 
easier for committees to understand and for the Commission to 
administer. A flat minimum Federal percentage will also result in less 
complex, less intrusive, and speedier enforcement actions, thereby 
enhancing compliance with the law. Finally, SSFs and nonconnected 
committees will retain the flexibility to allocate more than the flat 
minimum percentage of these expenses to their Federal account if they 
wish to do so. Accordingly, the Commission has decided to replace the 
funds expended method of allocation with a flat minimum allocation 
percentage.
    Neither FECA nor any court decision dictates how the Commission 
should determine appropriate allocation ratios. In fact, at least one 
court has recognized that the Commission has the discretion to 
establish the Federal funds percentage it deems best for administrative 
and generic voter drive expenses. See Common Cause v. FEC, 692 F. Supp. 
1391, 1396 (D.D.C. 1987).
    A flat 50% allocation minimum recognizes that SSFs and nonconnected 
committees can be ``dual purpose'' in that they engage in both Federal 
and non-Federal election activities. These committees have registered 
as Federal political committees with the FEC; consistent with that 
status, political committees should not be permitted to pay for 
administrative expenses, generic voter drives and public communications 
that refer to a political party with a greater amount of non-Federal 
funds than Federal funds. However, the 50% figure also recognizes that 
some Federal SSFs and nonconnected committees conduct a significant 
amount of non-Federal activity in addition to their Federal spending. 
The Commission has concluded that this approach is preferable to 
importing percentages used in other contexts for dissimilar entities, 
such as the former national party committee ratios repealed by BCRA or 
the current ratios applicable to State and local party committees, as 
suggested in the NPRM.
    Public communications that refer to a political party without 
referring to any clearly identified Federal or non-Federal candidates 
are subject to the new 50% flat minimum percentage in revised 11 CFR 
106.6(c). Like the administrative expenses and generic voter drives 
(which may refer to a political party), which are also allocated under 
section 106.6(c), these references solely to a political party 
inherently influence both Federal and non-Federal elections. Therefore, 
the 50% Federal funds requirement reflects the dual nature of the 
communication. As with other expenses under revised section 106.6(c), 
an SSF or nonconnected committee may choose to allocate more than 50% 
of the costs of any such public communication to its Federal account, 
if it wishes to do so.
    The past decade of reports filed with the FEC indicate that most 
SSFs and nonconnected committees do not allocate under section 
106.6(c). In fact, fewer than 2% of all registered non-party political 
committees filed H1 and H4 schedules allocating administrative and 
generic voter drive expenses under former section 106.6(c) in each 
election cycle since these regulations were made effective in 1991. Any 
SSF or nonconnected committee that was not allocating under section 
106.6 was presumably already using 100% Federal funds for these 
expenses, except where those expenses were paid by other entities in 
accordance with the Act and Commission regulations, such as an SSF's 
connected organization paying its administrative expenses. Thus, 
removing the funds expended method and replacing it with a flat minimum 
percentage in section 106.6 should only affect a small fraction of all 
SSFs and nonconnected committees.
    Even for those SSFs and nonconnected committees that were

[[Page 68063]]

allocating, the impact of the final rules should not be substantial. A 
review of past reports filed with the FEC shows that almost half of 
these committees were already paying for these expenses with at least 
50% Federal funds under the former system. These committees will not 
need to adjust their payments under the 50% flat percentage method in 
revised 11 CFR 106.6(c). Moreover, the actual dollar amounts of non-
Federal funds that were spent in past cycles on administrative and 
generic voter drive expenses under former section 106.6(c), and which 
will have to be partially replaced with Federal funds under the final 
rules, is relatively low. With the exception of one or two committees 
per election cycle whose spending was out of line with other SSFs and 
nonconnected committees, the final rules affect each committee by 
requiring only a minimal increase in Federal funds expended. 
Additionally, these amounts were not high compared to total 
disbursements from these committees' Federal accounts in an election 
cycle (and would have been even smaller if disbursements from non-
Federal accounts were taken into consideration). Thus, revised 11 CFR 
106.6(c) should not impose a significant fundraising burden on these 
committees.
3. 11 CFR 106.6(f)--Payments for Public Communications and Voter Drives 
That Refer to One or More Clearly Identified Federal or Non-Federal 
Candidates
    The final rules add new paragraph (f) to 11 CFR 106.6 to address 
payments for voter drives that refer to clearly identified Federal or 
non-Federal candidates, as described in new 11 CFR 106.6(b)(2)(i) and 
(ii), and public communications that refer to clearly identified 
Federal or non-Federal candidates, with or without a reference to a 
political party, as described in new 11 CFR 106.6(b)(2)(iii) and (iv). 
The final rules also direct SSFs and nonconnected committees to use the 
time/space allocation method for voter drives and public communications 
that refer to at least one clearly identified Federal candidate and to 
at least one clearly identified non-Federal candidate, without regard 
to any references to a political party.
    The Commission views voter drives and public communications that 
refer to a political party and either Federal or non-Federal 
candidates, but not both, as ``candidate-driven.'' The Federal or non-
Federal nature of the political party reference is determined by 
whether the clearly identified candidates in the communication are 
Federal or non-Federal. Thus, voter drives and public communications 
that refer to a political party and also refer only to clearly 
identified Federal candidates must be paid for with 100% Federal funds 
from the Federal account under new 11 CFR 106.6(f)(1). Permitting these 
voter drives and communications to be paid for with some non-Federal 
funds based on a cursory reference to a political party would invite 
circumvention of the intent of the allocation scheme. Voter drives and 
public communications that refer to clearly identified Federal 
candidates, without any reference to political parties or non-Federal 
candidates, similarly must be paid for with 100% Federal funds from the 
Federal account.\3\
---------------------------------------------------------------------------

    \3\ Because section 106.6 of the Commission's regulations 
applies only to separate segregated funds and non-connected 
committees, the final rules do not apply to the activities of other 
types of political committees, including state and local party 
committees, which are subject to separate allocation rules. See 11 
CFR 300.30 to 300.33 (establishing allocation rules for state and 
local party committees).
---------------------------------------------------------------------------

    On the other hand, voter drives and public communications that 
refer to a political party and also refer only to clearly identified 
non-Federal candidates may be paid for entirely by the non-Federal 
account under new 11 CFR 106.6(f)(2). SSFs and nonconnected committees 
may pay for these communications referring to non-Federal candidates 
partly or entirely with Federal funds, but are not required to do so. 
Finally, voter drives and public communications that refer to both 
Federal and non-Federal candidates, regardless of whether there is also 
a reference to a political party are subject to a time/space allocation 
method in new 11 CFR 106.6(f)(3), which is similar to the method 
outlined in 11 CFR 106.1. See new 11 CFR 106.6(f)(3).\4\ SSFs and 
nonconnected committees must comply with section 106.6(f) when 
allocating public communications and voter drive activities, but must 
comply with 11 CFR 106.1 for allocation of any other expenditures made 
on behalf of more than one clearly identified Federal candidate.
---------------------------------------------------------------------------

    \4\ The Commission notes that State law may also govern 
communications referring to non-Federal candidates.
---------------------------------------------------------------------------

    The final rules are simpler than the approach taken in Advisory 
Opinion 2003-37 and proposed in the NPRM at proposed 11 CFR 106.6(f) 
and (g). These required a combined application of the time/space 
allocation method under 11 CFR 106.1 and the funds expended method 
under former 11 CFR 106.6 for public communications that refer to a 
party and to specific Federal candidates. Advisory Opinion 2003-37 is 
hereby superseded. The candidate-driven approach for these voter drives 
and public communications, coupled with the removal of the funds 
expended method in favor of a flat percentage method, reduces the 
amount of recordkeeping, tracking, and calculating that SSFs and 
nonconnected committees must do to allocate properly administrative 
expenses, and to pay properly for voter drives, and public 
communication costs under 11 CFR 106.6.
    The revised 11 CFR 106.6 allocation regulations should reduce the 
burden of compliance on SSFs and nonconnected committees. Incorporation 
of certain voter drives and public communications into 11 CFR 106.6 
provides more specific guidance to committees that conduct such 
activity. The Commission believes that these final rules best resolve 
the problems with the former allocation scheme revealed through 
reviewing past FEC reports and the issues raised by the commenters on 
the NPRM.

Effective Date

    Many commenters on the NPRM argued that any changes made effective 
before the general election on November 2, 2004 would cause great 
disruption to political committees and other organizations. Taking into 
account the statutorily mandated waiting period before a regulation may 
be effective under the Administrative Procedure Act, these regulations 
could not be effective until after the November 2, 2004 general 
election. To provide an orderly phase-in of the new rules and 
transition from one election cycle to the next election cycle, the 
Commission is establishing January 1, 2005 as the effective date for 
all amendments and additions to 11 CFR parts 100, 102, 104 and 106. 
This effective date allows affected political committees to ``close 
out'' the 2003-2004 election cycle by making final adjustments to their 
section 106.6(c) ratios and any final transfers of money between 
Federal, non-Federal, and allocation accounts. It also provides 
sufficient time for all those affected to make whatever internal 
changes necessary to comply with the new rules.

Other Proposals

    The NPRM proposed several additional new and revised rules, 
including changes to the definitions of ``political committee'' and 
``expenditure.'' Other than the Final Rules that follow, the Commission 
is not promulgating any of the proposed rules. The NPRM also raised 
many issues in the narrative describing the proposed rules. The 
Commission cautions that no

[[Page 68064]]

inferences should be made as to the Commission's position on any of the 
issues that are not discussed in this document or on any of the 
proposed rules that are not adopted as final rules. Discussed below are 
some of the proposals from the NPRM that the Commission did not adopt. 
As noted above, the Commission received many comments on the NPRM. The 
comments related to proposed rules that the Commission did not adopt 
are not specifically described and addressed in this document.

Proposed 11 CFR 100.5--Political Committee (2 U.S.C. 431(4), (5), (6))

    Under current law, any committee, club, association, or other group 
of persons that receives contributions aggregating in excess of $1,000 
or which makes expenditures aggregating in excess of $1,000 during a 
calendar year is a political committee. See 2 U.S.C. 431(4)(A); 11 CFR 
100.5(a). Nearly three decades ago, the Supreme Court narrowed the 
Act's references to ``political committee'' in order to prevent their 
``reach [to] groups engaged purely in issue discussion.'' Buckley v. 
Valeo, 424 U.S. 1, 79 (1976). The Court concluded that ``[t]o fulfill 
the purpose of the Act [the words ``political committee'] need only 
encompass organizations that are under the control of a candidate or 
the major purpose of which is the nomination or election of a 
candidate.'' Id.
    The NPRM proposed four alternatives for revisions to the definition 
of a ``political committee'' in 11 CFR 100.5(a). NPRM at 11743-49 and 
11756-57. The proposed alternatives differed mainly in whether, and if 
so, how, the definition of ``political committee'' should include a 
test to determine an organization's ``major purpose.''
    The Commission received tens of thousands of comments addressing 
these proposals and the various individual components of the proposed 
``major purpose'' tests. Many commenters supported the idea of 
incorporating a major purpose test into the definition of ``political 
committee'' and offered a variety of alternatives for what the test 
should be. In contrast, many other commenters opposed all of the 
proposals set forth in the NPRM and expressed concerns about the 
potential impact of the proposed rules on non-electoral speech. Several 
provisions in BCRA, such as those barring the use of corporate funds 
for electioneering communications but permitting the use of unlimited 
individual funds for that purpose, were cited for the proposition that 
an overly broad rule defining ``political committee'' would conflict 
with the structure Congress established in BCRA.
    Many commenters questioned whether new rules were necessary or 
appropriate at this time and suggested that Buckley's ``major purpose'' 
language might be better addressed by Congress or the Supreme Court. A 
joint comment from hundreds of 501(c) organizations contended that the 
Commission has not obtained access to the types of comprehensive 
reports that Congress has at its disposal, and the Commission is 
therefore poorly positioned at this time to assess properly the 
operations of the variety of organizations that might be affected by 
new regulations.
    Some observed that Congress did not address political committee 
status in BCRA even though Congress appeared to be fully aware that 
some groups were operating outside FECA's registration and reporting 
requirements as well as its limitations and prohibitions. These 
commenters found it significant that Congress had recently focused on 
527 organizations in 2000 and 2002 when it added and revised IRS-based 
reporting requirements for many of these organizations. According to 
the commenters, Congress consciously did not require 527 organizations 
to register with the Commission as political committees.
    There were additional concerns raised about the constitutional and 
practical issues relating to the ``major purpose'' test. Some 
commenters noted that the ``major purpose'' test is not a statutory 
trigger for political committee status, but rather a court-created 
protection to avoid over-reach of the triggers for political committee 
status actually contained in the FECA. Many commenters argued that a 
``major purpose'' test would chill constitutionally protected speech, 
some expressing the view that the boundaries of the test would be 
inherently vague and thus force organizations to curtail permissible 
activities. Other commenters expressed concern about the practical 
difficulties they perceived in implementing a test intended to 
ascertain a group's ``purpose.'' For instance, a number of commenters 
similarly expressed concern that the ``major purpose'' test set out in 
the NPRM might unfairly categorize organizations as political 
committees based on a few statements or organizational documents where 
those statements and documents might not accurately convey the actual 
purpose of the organization. Other commenters also asserted that the 
Commission's determinations of an organization's purpose would often 
result in intrusive investigations into the private internal workings 
of an organization. Another commenter feared that any definition of 
``political committee'' potentially encompassing nonprofit 
organizations would force them to choose between accepting foundation 
funds or corporate donations and advocating ballot questions as a part 
of the organization's overall activity.
    In addition, arguments were made that the Commission would be in a 
better position to address the issue of political committee status 
after monitoring the behavior of various organizations during at least 
one election cycle following the enactment of BCRA. A number of 
commenters asserted that it would be improper for the Commission to add 
a new ``major purpose'' test without sufficient data demonstrating the 
existence of corruption or the appearance of corruption to justify the 
new regulations.
    After evaluating these comments, the Commission considered two 
separate draft Final Rule approaches that would have revised the 
definition of ``political committee.'' Each of these approaches 
incorporated modified portions of the rules proposed in the NPRM. Each 
approach included a ``major purpose'' test, but the tests were 
different in purpose and operation. See draft 11 CFR 100.5(a), Agenda 
Document 04-75, at 37-41, and draft 11 CFR 100.5(a), Agenda Document 
04-75-A, at 2-3 (Aug. 19, 2004 meeting).
    The draft Final Rules in Agenda Document 04-75 would have 
incorporated one construction of the Buckley test into the definition 
of ``political committee'' in 11 CFR 100.5(a) by requiring an 
organization to have ``as its major purpose the nomination or election 
of one or more candidates for Federal office.'' See draft 11 CFR 
100.5(a)(1)(ii) of Agenda Document 04-75 (emphasis added); see also 
Buckley, 424 U.S. at 79. Draft paragraph (a)(2) presented three ways in 
which any organization could have satisfied that test: (1) By publicly 
declaring that the purpose of the group is to influence Federal 
elections; (2) by spending more than 50% of its funds on certain 
specified activities; or (3) by receiving more than 50% of its funding 
through ``contributions,'' as defined in 2 U.S.C. 431(8) and 11 CFR 
Part 100, Subpart B. These draft Final Rules would have also 
established an additional test whereby 527 organizations could satisfy 
the ``major purpose'' test through the application of a broader 50% 
disbursements test.
    The other set of draft Final Rules that the Commission considered, 
but did not

[[Page 68065]]

adopt, would have incorporated a different construction of Buckley's 
major purpose test into the definition of ``political committee'' in 11 
CFR 100.5(a). This test would have focused on whether an organization's 
major purpose was the ``election of one or more Federal or non-Federal 
candidates.'' See draft 11 CFR 100.5(a)(1)(ii) of Agenda Document 04-
75-A (emphasis added). Coupled with the Commission rule allowing a 
political committee to report only its Federal activity, this was 
designed to prevent groups from avoiding political committee status 
altogether because a majority of the campaign activity is non-Federal. 
The major purpose test would have been satisfied in one of two ways. 
Under draft 11 CFR 100.5(a)(2), an organization described in section 
527 of the Internal Revenue Code (a ``527 organization'') would have 
satisfied the ``major purpose'' test just by virtue of its having 
registered with the Internal Revenue Service under 26 U.S.C. 527, 
unless covered by one of five enumerated exceptions. All other 
organizations would have been subject to the previously existing 
standards for determining their major purpose. See draft 11 CFR 
100.5(a)(4) of Agenda Document 04-75-A.
    The comments raise valid concerns that lead the Commission to 
conclude that incorporating a ``major purpose'' test into the 
definition of ``political committee'' may be inadvisable. Thus, the 
Commission has decided not to adopt any of the foregoing proposals to 
revise the definition of ``political committee.'' As a number of 
commenters noted, the proposed rules might have affected hundreds or 
thousands of groups engaged in non-profit activity in ways that were 
both far-reaching and difficult to predict, and would have entailed a 
degree of regulation that Congress did not elect to undertake itself 
when it increased the reporting obligations of 527 groups in 2000 and 
2002 and when it substantially transformed campaign finance laws 
through BCRA. Furthermore, no change through regulation of the 
definition of ``political committee'' is mandated by BCRA or the 
Supreme Court's decision in McConnell. The ``major purpose'' test is a 
judicial construct that limits the reach of the statutory triggers in 
FECA for political committee status. The Commission has been applying 
this construct for many years without additional regulatory 
definitions, and it will continue to do so in the future.

Proposed 11 CFR 100.34, 100.115, 100.133, 100.149, 114.4--Voter Drive 
Provisions

    The NPRM proposed to define a new term, ``partisan voter drive,'' 
in proposed 11 CFR 100.34, to revise the exemption from the 
``expenditure'' definition for nonpartisan voter drives in proposed 11 
CFR 100.133, and to specify that the costs for partisan voter drives 
are ``expenditures'' in proposed 11 CFR 100.115. Corresponding changes 
were also proposed for 11 CFR 100.149 and 114.4. See NPRM at 11740-41, 
11757, and 11760.
    In its consideration of Final Rules, the Commission considered a 
different version of these rules. Under this proposal, draft 11 CFR 
100.115 would have specified that costs for certain Federal election 
activities would have been ``expenditures'' when incurred by political 
committees or a 527 organization. See draft 11 CFR 100.115, Agenda 
Document No. 04-75-A, at 4 (Aug. 19, 2004 meeting). The exemption from 
the ``expenditure'' definition for nonpartisan voter drives also would 
have been revised to state that voter drives that PASO a Federal 
candidate, a non-Federal candidate, or a political party can not be 
considered ``nonpartisan'' exempt voter drives. See draft 11 CFR 
100.133, Agenda Document No. 04-75-A, at 4-5 (Aug. 19, 2004 meeting). 
The Commission rejected a motion to approve draft 11 CFR 100.115 and 
revisions to current 11 CFR 100.133. The Commission determined that the 
changes and additions to the allocation rules in 11 CFR 106.6 related 
to voter drives that are described above sufficiently address these 
issues at this time, and therefore the new and revised voter drive 
rules in proposed sections 100.34, 100.115, 100.133, 100.149, and 114.4 
are not needed.

Proposed 11 CFR 100.116--Certain Public Communications

    FECA defines ``expenditure'' to include a payment for a 
communication that is ``made * * * for the purpose of influencing any 
election for Federal office.'' 2 U.S.C. 431(9)(A)(i). The NPRM proposed 
to include in the definition of ``expenditure'' payments for 
communications that PASO any candidate for Federal office or that 
promote or oppose any political party. See proposed 11 CFR 100.116, 
NPRM at 11741-42 and 11757.
    In its consideration of Final Rules, the Commission considered and 
rejected two different versions of this rule. One version of this rule 
would have applied to public communications that PASO a clearly 
identified candidate for Federal office or that PASO a political party, 
but only when made by a political committee or 527 organizations. See 
draft 11 CFR 100.116, Agenda Document No. 04-75-A, at 4 (Aug. 19, 2004 
meeting). The second version of this rule would have been limited to 
communications that PASO a clearly identified candidate, but only when 
made by Federal political committees and unregistered groups that meet 
Buckley's ``major purpose'' test, which was the subject of another 
draft rule discussed above. See draft 11 CFR 100.115, Agenda Document 
No. 04-75, at 19-23 and 42 (Aug. 19, 2004 meeting).
    The Commission did not adopt a rule addressing this subject. 
Without the ``major purpose'' rules, the rules addressing PASO 
communications could not have been adopted in the forms considered by 
the Commission.

Proposed 11 CFR 100.155--Allocated Amounts

    The NPRM proposed a new regulation that would have specifically 
stated that when costs are properly allocable between a Federal account 
and a non-Federal account, the costs that must be paid by a Federal 
account are ``expenditures'' under FECA, and the costs that may and in 
fact are paid by a non-Federal account are not ``expenditures'' under 
FECA. The proposed regulation was linked to proposed 11 CFR 100.115 and 
100.116 regarding PASO communications and voter drives. See NPRM at 
11757. The Commission considered a version of this regulation that was 
broader than the version in the NPRM, in that it would have extended 
this principle to any non-Federal funds disbursed pursuant to 
allocation rules at 11 CFR 106.1, 106.6, 106.7, or 300.33. See draft 11 
CFR 100.155, Agenda Document No. 04-75-A, at 5 (Aug. 19, 2004 meeting). 
For the reasons that the Commission did not adopt draft 11 CFR 100.115 
and 100.116 in Agenda Document No. 04-75-A, it also did not adopt draft 
11 CFR 100.155.

Proposed 11 CFR Part 102, Subpart A--Conversion Rules

    The NPRM included proposed rules to address how organizations that 
become political committees after operating for some time as non-
political committee organizations would demonstrate that they used 
Federally permissible funds to pay for expenditures made before 
becoming political committees. The proposed rules would have included a 
new subpart A in 11 CFR part 102. See NPRM at 11749-53, 11757-59. The

[[Page 68066]]

proposed rules would have required a new political committee to convert 
funds received during the two years prior to the time the organization 
became a political committee into Federal funds in an amount equal to 
the amount of its expenditures during the same time period. To do so, 
the new political committee would have been required to contact recent 
donors, make certain disclosures, and seek the donors' consent to use 
the funds for the purpose of influencing Federal elections. See NPRM at 
11757-59.
    The Commission received numerous comments in response to these 
proposed changes. Although one commenter supported the proposed rules, 
most commenters who addressed this topic expressed broad opposition to 
the proposals. Several commenters especially disagreed with the 
proposed rules that would have required political committees to look 
back at past activity and repay debts of Federal money for activities 
completed up to two years before the organizations became political 
committees. Some commenters also opposed the specific two-step 
conversion process in the proposed rules, including the requirement to 
contact and obtain permission from past donors and the 60-day deadline 
for converting funds to Federal funds.
    In response to these comments and the Commission's further 
consideration of the issued raised by the proposed rules, the 
Commission has decided not to promulgate final rules establishing 
subpart A of 11 CFR part 102.

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

    The Commission certifies that the final rules do not have a 
significant economic impact on a substantial number of small entities.
    The final rules amend the Commission's definition of 
``contribution'' to include funds received in response to certain 
communications that are not expressly included in the Commission's 
prior definition of ``contribution.'' For political committees, whether 
a receipt qualifies as a ``contribution'' determines whether it is 
subject to amount limitations and source prohibitions for Federal funds 
imposed by FECA. For organizations that are not political committees, 
whether a receipt is a ``contribution'' may affect whether the 
organization is a political committee. New section 100.57 does not, 
however, limit the overall amount of money that may be raised or spent 
on electoral activity. The rule in new section 100.57 is carefully 
tailored to reach communications that seek funds ``for the purpose of 
influencing Federal elections,'' and includes a limited exception for 
communications that refer to a non-Federal candidate, and a complete 
exception for joint fundraising efforts between or among authorized 
committees of Federal and non-Federal candidates. Therefore, any 
economic impact on Federal and non-Federal candidate committees, some 
of which might qualify as small entities, is not significant.
    The final rules also revise the Commission's rules regarding the 
allocation of certain disbursements between a political committee's 
Federal account and non-Federal account. Thus, these revisions affect 
only some political committees. As discussed in the Explanation and 
Justification for revised 11 CFR 106.6(c), a review of the past ten 
years of public disclosure reports filed with the FEC revealed that few 
current political committees allocate their administrative expenses and 
generic voter drives under former 11 CFR 106.6, and among those 
political committees, many already use 50% or more as their Federal 
allocation ratio. Although the new section 106.6(f) requires Federal 
funds be used for certain public communications and voter drive 
activities by political committees, the final rule does not limit the 
overall amount of money that political committees may raise and spend 
on such activity. Consequently, the final rules' changes are unlikely 
to have a significant economic impact on substantial number of small 
entities.

List of Subjects

11 CFR Part 100

    Elections.

11 CFR Part 102

    Political committees and parties, Reporting and recordkeeping 
requirements.

11 CFR Part 104

    Campaign funds, Political committees and parties, Reporting and 
recordkeeping requirements.

11 CFR Part 106

    Campaign funds, Political committees and parties, Reporting and 
recordkeeping requirements.


0
For the reasons set out in the preamble, the Federal Election 
Commission amends subchapter A of chapter 1 of title 11 of the Code of 
Federal Regulations as follows:

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

0
1. The authority citation for part 100 continues to read as follows:

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


0
2. Section 100.57 is added to subpart B to read as follows:


Sec.  100.57  Funds received in response to solicitations.

    (a) Treatment as contributions. A gift, subscription, loan, 
advance, or deposit of money or anything of value made by any person in 
response to any communication is a contribution to the person making 
the communication if the communication indicates that any portion of 
the funds received will be used to support or oppose the election of a 
clearly identified Federal candidate.
    (b) Certain allocable solicitations. If the costs of a solicitation 
described in paragraph (a) of this section are allocable under 11 CFR 
106.1, 106.6 or 106.7 (consistent with 11 CFR 300.33(c)(3)) as a direct 
cost of fundraising, the funds received in response to the solicitation 
shall be contributions as follows:
    (1) If the solicitation does not refer to any clearly identified 
non-Federal candidates, but does refer to a political party, in 
addition to the clearly identified Federal candidate described in 
paragraph (a) of this section, one hundred percent (100%) of the total 
funds received are contributions.
    (2) If the solicitation refers to one or more clearly identified 
non-Federal candidates, in addition to the clearly identified Federal 
candidate described in paragraph (a) of this section, at least fifty 
percent (50%) of the total funds received are contributions, whether or 
not the solicitation refers to a political party.
    (c) Joint fundraisers. Joint fundraising conducted under 11 CFR 
102.17 shall comply with the requirements of paragraphs (a) and (b) of 
this section except that joint fundraising between or among authorized 
committees of Federal candidates and campaign organizations of non-
Federal candidates is not subject to paragraph (a) or (b) of this 
section.

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

0
3. The authority citation for part 102 continues to read as follows:

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

[[Page 68067]]


0
4. Section 102.5 is amended by revising paragraph (a)(1)(i) to read as 
follows:


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

    (a) * * *
    (1) * * *
    (i) Establish a separate Federal account in a depository in 
accordance with 11 CFR part 103. Such account shall be treated as a 
separate Federal political committee that must comply with the 
requirements of the Act including the registration and reporting 
requirements of 11 CFR parts 102 and 104. Only funds subject to the 
prohibitions and limitations of the Act shall be deposited in such 
separate Federal account. See 11 CFR 103.3. All disbursements, 
contributions, expenditures, and transfers by the committee in 
connection with any Federal election shall be made from its Federal 
account, except as otherwise permitted for State, district and local 
party committees by 11 CFR part 300 and paragraph (a)(5) of this 
section. No transfers may be made to such Federal account from any 
other account(s) maintained by such organization for the purpose of 
financing activity in connection with non-Federal elections, except as 
provided by 11 CFR 300.33, 300.34, 106.6(c), 106.6(f), and 106.7(f). 
Administrative expenses for political committees other than party 
committees shall be allocated pursuant to 11 CFR 106.6(c) between such 
Federal account and any other account maintained by such committee for 
the purpose for financing activity in connection with non-Federal 
elections. Administrative expenses for State, district, and local party 
committees are subject to 11 CFR 106.7 and 11 CFR part 300; or
* * * * *

PART 104--REPORTS BY POLITICAL COMMITTEES AND OTHER PERSONS (2 
U.S.C. 434)

0
5. The authority citation for part 104 continues to read as follows:

    Authority: 2 U.S.C. 431(1), 431(8), 431(9), 432(i), 434, 
438(a)(8) and (b), 439a, 441a, and 36 U.S.C. 510.


0
6. Section 104.10 is amended by revising the introductory text in 
paragraph (b) and paragraph (b)(1) to read as follows:


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

* * * * *
    (b) Expenses allocated among activities. A political committee that 
is a separate segregated fund or a nonconnected committee and that has 
established separate Federal and non-Federal accounts under 11 CFR 
102.5(a)(1)(i) shall allocate between those accounts its administrative 
expenses and its costs for fundraising, generic voter drives, and 
certain public communications according to 11 CFR 106.6, and shall 
report those allocations according to paragraphs (b)(1) through (5) of 
this section, as follows:
    (1) Reporting of allocation of administrative expenses and costs of 
generic voter drives and public communications that refer to any 
political party. In each report disclosing a disbursement for 
administrative expenses, generic voter drives, or public communications 
that refer to any political party, but do not refer to any clearly 
identified candidates, as described in 11 CFR 106.6(b)(1)(i), 
(b)(1)(iii) and (b)(1)(iv), as applicable, the committee shall state 
the allocation ratio to be applied to each category of activity 
according to 11 CFR 106.6(c).
* * * * *

PART 106--ALLOCATIONS OF CANDIDATE AND COMMITTEE ACTIVITIES

0
7. The authority citation for part 106 continues to read as follows:

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


0
8. Section 106.6 is amended by:
0
a. Removing the words ``(c) and (d)'' from paragraph (a) and adding in 
their place the words ``(c), (d), and (f)'';
0
b. Removing the words ``or (b)(1)(i)'' from paragraphs (a) and (e) 
introductory text;
0
c. Removing the citation ``102.5(b)(1)(ii)'' from paragraph (a) and 
adding in its place the citation ``102.5(a)(1)(ii)''; and
0
d. Revising paragraphs (b) and (c) and adding paragraph (f) to read as 
follows:


Sec.  106.6  Allocation of expenses between federal and non-federal 
activities by separate segregated funds and nonconnected committees.

* * * * *
    (b) Payments for administrative expenses, voter drives and certain 
public communications.
    (1) Costs to be allocated. Separate segregated funds and 
nonconnected committees that make disbursements in connection with 
Federal and non-Federal elections shall allocate expenses for the 
following categories of activity in accordance with paragraphs (c) or 
(d) of this section:
    (i) Administrative expenses including rent, utilities, office 
supplies, and salaries not attributable to a clearly identified 
candidate, except that for a separate segregated fund such expenses may 
be paid instead by its connected organization;
    (ii) The direct costs of a fundraising program or event including 
disbursements for solicitation of funds and for planning and 
administration of actual fundraising events, where Federal and non-
Federal funds are collected through such program or event, except that 
for a separate segregated fund such expenses may be paid instead by its 
connected organization;
    (iii) Generic voter drives including voter identification, voter 
registration, and get-out-the-vote drives, or any other activities that 
urge the general public to register, vote or support candidates of a 
particular party or associated with a particular issue, without 
mentioning a specific candidate; and
    (iv) Public communications that refer to a political party, but do 
not refer to any clearly identified Federal or non-Federal candidate;
    (2) Costs not subject to allocation. Separate segregated funds and 
nonconnected committees that make disbursements for the following 
categories of activity shall pay for those activities in accordance 
with paragraph (f) of this section:
    (i) Voter drives, including voter identification, voter 
registration, and get-out-the-vote drives, in which the printed 
materials or scripted messages refer to, or the written instructions 
direct the separate segregated fund's or nonconnected committee's 
employee or volunteer to refer to:
    (A) One or more clearly identified Federal candidates, but do not 
refer to any clearly identified non-Federal candidates; or
    (B) One or more clearly identified Federal candidates and also 
refer to candidates of a particular party or associated with a 
particular issue, but do not refer to any clearly identified non-
Federal candidates;
    (ii) Voter drives, including voter identification, voter 
registration, and get-out-the-vote drives, in which the printed 
materials or scripted messages refer to, or the written instructions 
direct the separate segregated fund's or nonconnected committee's 
employee or volunteer to refer to:
    (A) One or more clearly identified non-Federal candidates, but do 
not refer

[[Page 68068]]

to any clearly identified Federal candidates; or
    (B) One or more clearly identified non-Federal candidates and also 
refer to candidates of a particular party or associated with a 
particular issue, but do not refer to any clearly identified Federal 
candidates;
    (iii) Public communications that refer to one or more clearly 
identified Federal candidates, regardless of whether there is reference 
to a political party, but do not refer to any clearly identified non-
Federal candidates; and
    (iv) Public communications that refer to a political party, and 
refer to one or more clearly identified non-Federal candidates, but do 
not refer to any clearly identified Federal candidates.
    (c) Method for allocating administrative expenses, costs of generic 
voter drives, and certain public communications. Nonconnected 
committees and separate segregated funds shall pay their administrative 
expenses, costs of generic voter drives, and costs of public 
communications that refer to any political party, as described in 
paragraphs (b)(1)(i), (b)(1)(iii) or (b)(1)(iv) of this section, with 
at least 50 percent Federal funds, as defined in 11 CFR 300.2(g).
* * * * *
    (f) Payments for public communications and voter drives that refer 
to one or more clearly identified Federal or non-Federal candidates. 
Nonconnected committees and separate segregated funds shall pay for the 
costs of all public communications that refer to one or more clearly 
identified candidates, and voter drives that refer to one or more 
clearly identified candidates, as described in paragraphs (b)(2)(i) and 
(b)(2)(ii) of this section, as follows:
    (1) The following shall be paid 100 percent from the Federal 
account of the nonconnected committee or separate segregated fund:
    (i) Public communications that refer to one or more clearly 
identified Federal candidates, regardless of whether there is reference 
to a political party, but do not refer to any clearly identified non-
Federal candidates, as described in paragraph (b)(2)(iii) of this 
section; and
    (ii) Voter drives described in paragraph (b)(2)(i) of this section.
    (2) The following may be paid 100 percent from the non-Federal 
account of the nonconnected committee or separate segregated fund:
    (i) Public communications that refer to a political party and one 
or more clearly identified non-Federal candidates, but do not refer to 
any clearly identified Federal candidates, as described in paragraph 
(b)(2)(iv) of this section; and
    (ii) Voter drives described in paragraph (b)(2)(ii) of this 
section.
    (3) Notwithstanding 11 CFR 106.1(a)(i), public communications and 
voter drives that refer to one or more clearly identified Federal 
candidates and one or more clearly identified non-Federal candidates, 
regardless of whether there is a reference to a political party, 
including those that are expenditures, independent expenditures or in-
kind contributions, shall be allocated as follows:
    (i) Public communications and voter drives, other than phone banks, 
shall be allocated based on the proportion of space or time devoted to 
each clearly identified Federal candidate as compared to the total 
space or time devoted to all clearly identified candidates, or
    (ii) Public communications and voter drives that are conducted 
through phone banks shall be allocated based on the number of questions 
or statements devoted to each clearly identified Federal candidate as 
compared to the total number of questions or statements devoted to all 
clearly identified candidates.

    Dated: November 18, 2004.
Bradley A. Smith,
Chairman, Federal Election Commission.
[FR Doc. 04-25946 Filed 11-22-04; 8:45 am]
BILLING CODE 6715-01-P