68056 Federal Register / Vol. 69, No. 225 / Tuesday, November 23, 2004 / Rules and Regulations 

Parent: Department of Transportation 

Components 

Federal Aviation Administration 

Federal Highway Administration 

Federal Motor Carrier Safety Administration 

(effective January 30, 2003) 

Federal Railroad Administration

Federal Transit Administration 

Maritime Administration 

National Highway Traffic Safety 

Administration 

Saint Lawrence Seaway Development 

Corporation 

Surface Transportation Board (effective May 

16, 1997) 

Transportation Security Administration 

(effective January 30, 2003, expiring 

February 22, 2005.) 

United States Coast Guard (expiring February 

22, 2005.) 

Parent: Department of the Treasury 

Components 

Alcohol and Tobacco Tax and Trade Bureau 

(effective November 23, 2004.) 

Bureau of Alcohol, Tobacco and Firearms 

(expiring February 22, 2005.) 

Bureau of Engraving and Printing 

Bureau of the Mint 

Bureau of the Public Debt 

Comptroller of the Currency 

Federal Law Enforcement Training Center 

(expiring February 22, 2005.) 

Financial Crimes Enforcement Network 

(FinCEN) (effective January 30, 2003) 

Financial Management Service 

Internal Revenue Service 

Office of Thrift Supervision 

United States Custom Service (expiring 

February 22, 2005.) 

United States Secret Service (expiring 

February 22, 2005.)

■ 3. Effective February 22, 2005, 

appendix B to part 2641 is further 

amended by:

■ A. Removing the Immigration and 

Naturalization Service from the listing 

for the Department of Justice;

■ B. Removing the Transportation 

Security Agency and the United States 

Coast Guard from the listing for the 

Department of Transportation; and

■ C. Removing the Bureau of Alcohol, 

Tobacco and Firearms, the Federal Law 

Enforcement Training Center, the United 

States Custom Service and the United 

States Secret Service from the listing for 

the Department of the Treasury.

[FR Doc. 04–25897 Filed 11–22–04; 8:45 am] 

BILLING CODE 6345–02–P

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. 

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. 

Federal Register / Vol. 69, No. 225 / Tuesday, November 23, 2004 / Rules and Regulations 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:

• 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:

• 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 

68058 Federal Register / Vol. 69, No. 225 / Tuesday, November 23, 2004 / Rules and Regulations 

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 MCFLtype 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 nonFederal 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 

Federal Register / Vol. 69, No. 225 / Tuesday, November 23, 2004 / Rules and Regulations 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% nonFederal, 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 nonFederal 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 nonFederal 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 nonFederal account. Any voter drives or 

public communications that refer to 

both clearly identified Federal and nonFederal 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 

68060 Federal Register / Vol. 69, No. 225 / Tuesday, November 23, 2004 / Rules and Regulations 

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 nonFederal 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 

Federal Register / Vol. 69, No. 225 / Tuesday, November 23, 2004 / Rules and Regulations 68061

1For 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.

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 nonFederal 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 candidatespecific 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.

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, 

68062 Federal Register / Vol. 69, No. 225 / Tuesday, November 23, 2004 / Rules and Regulations 

2 ‘‘PASO’’ has emerged as a convenient acronym 

for ‘‘promote, support, attack or oppose.’’

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 nonFederal candidates, then the committee 

should be allowed to use 100% nonFederal 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.

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 nonFederal 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 nonparty 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 

Federal Register / Vol. 69, No. 225 / Tuesday, November 23, 2004 / Rules and Regulations 68063

3Because 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).

4The Commission notes that State law may also 

govern communications referring to non-Federal 

candidates.

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 nonFederal 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 nonFederal 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 nonFederal nature of the political party 

reference is determined by whether the 

clearly identified candidates in the 

communication are Federal or nonFederal. 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

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 nonFederal 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.

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 

68064 Federal Register / Vol. 69, No. 225 / Tuesday, November 23, 2004 / Rules and Regulations 

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 nonelectoral 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 

Federal Register / Vol. 69, No. 225 / Tuesday, November 23, 2004 / Rules and Regulations 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 nonFederal. 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 nonprofit 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 nonFederal 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 nonFederal 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 

68066 Federal Register / Vol. 69, No. 225 / Tuesday, November 23, 2004 / Rules and Regulations 

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.

■ 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)

■ 1. The authority citation for part 100 

continues to read as follows:

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

■ 2. Section 100.57 is added to subpart 

B to read as follows:

§ 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)

■ 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.

Federal Register / Vol. 69, No. 225 / Tuesday, November 23, 2004 / Rules and Regulations 68067

■ 4. Section 102.5 is amended by 

revising paragraph (a)(1)(i) to read as 

follows:

§ 102.5 Organizations financing political 

activity in connection with Federal and nonFederal 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)

■ 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.

■ 6. Section 104.10 is amended by 

revising the introductory text in 

paragraph (b) and paragraph (b)(1) to 

read as follows:

§ 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 nonFederal 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

■ 7. The authority citation for part 106 

continues to read as follows:

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

441a(g).

■ 8. Section 106.6 is amended by:

■ a. Removing the words ‘‘(c) and (d)’’

from paragraph (a) and adding in their 

place the words ‘‘(c), (d), and (f)’’;

■ b. Removing the words ‘‘or (b)(1)(i)’’

from paragraphs (a) and (e) introductory 

text;

■ 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

■ d. Revising paragraphs (b) and (c) and 

adding paragraph (f) to read as follows:

§ 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 nonFederal 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 nonFederal 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 

68068 Federal Register / Vol. 69, No. 225 / Tuesday, November 23, 2004 / Rules and Regulations 

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 nonFederal 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 nonFederal 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 nonFederal 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

FEDERAL DEPOSIT INSURANCE 

CORPORATION 

12 CFR Part 327 

RIN 3064–AC84 

Deposit Insurance Assessments—

Certified Statements

AGENCY: Federal Deposit Insurance 

Corporation.

ACTION: Final rule.

SUMMARY: The Federal Deposit 

Insurance Corporation (FDIC) is 

modernizing and simplifying its deposit 

insurance assessment regulations 

governing certified statements, to 

provide regulatory burden relief to 

insured depository institutions. Under 

the final rule, insured institutions will 

obtain their certified statements on the 

Internet via the FDIC’s transaction-based 

e-business Web site, FDICconnect. 

Correct certified statements will no 

longer be signed by insured institutions 

or returned to the FDIC, and the 

semiannual certified statement process 

will be synchronized with the quarterly 

invoice process. Two quarterly certified 

statement invoices will comprise the 

semiannual certified statement and 

reflect the semiannual assessment 

amount. If an insured institution agrees 

with its quarterly certified statement 

invoice, it will simply pay the assessed 

amount and retain the invoice in its 

own files. If it disagrees with the 

quarterly certified statement invoice, it 

will either amend its report of condition 

or similar report (to correct data errors) 

or amend its quarterly certified 

statement invoice (to correct calculation 

errors). The FDIC will automatically 

treat either as the insured institution’s 

request for revision of its assessment 

computation, eliminating the 

requirement of a separate filing. In 

addition, the FDIC will provide e-mail 

notification each quarter to let 

depository institutions know when their 

quarterly certified statement invoices 

are available on FDICconnect. An 

institution that lacks Internet access will 

be able request from the FDIC a one-year 

renewable exemption from the use of 

FDICconnect, during which it will 

continue to receive quarterly certified 

statement invoices by mail. With these 

amendments, the time and effort 

required to comply with the certified 

statement process will be reduced, a 

result of the FDIC’s ongoing program 

under the Economic Growth and 

Regulatory Paperwork Reduction Act 

(EGRPRA) to provide regulatory burden 

relief to insured depository institutions.

DATES: This final rule will become 

effective on March 1, 2005.

FOR FURTHER INFORMATION CONTACT:

Steve Wagoner, Senior Assessment 

Specialist, Division of Finance, (202) 

416–7152; Linda A. Abood, Supervisory 

IT Specialist, Division of Information 

Resources Management, (703) 516–1202; 

or Christopher Bellotto, Counsel, Legal 

Division, (202) 898–3801, Federal 

Deposit Insurance Corporation, 550 17th 

Street, NW., Washington, DC 20429.

SUPPLEMENTARY INFORMATION: 

I. Background 

On June 8, 2004, the FDIC published 

in the Federal Register, for a 60-day 

comment period, a notice of proposed 

rulemaking with request for comment 

on the proposed amendments to section 

327.2, the certified statement regulation. 

(69 FR 31922). The comment period 

closed on August 9, 2004. The FDIC 

received 22 comment letters, one from 

a trade organization (Independent 

Community Bankers of America) and 21 

from depository institutions. Seventeen 

of the commenters generally supported 

the proposal and the remaining five 

generally opposed, although in varying