August 2001 Federal Election Commission Volume 27, Number 8

Table of Contents

Court Cases

1 FEC v. Colorado Republican

Federal Campaign Committee

(Colorado II)

3 FEC v. National Rifle Association

4 New Litigation

Election Administration

1 NVRA Report to Congress

6 Voting Systems Standards

6 Advisory Opinions

Outreach

10 FEC Regional Conference in

Denver

11 Index

Compliance Court Cases Election

Administration

NVRA Report to Congress

On June 21, 2001, the Commission unanimously approved a report

to Congress concerning the impact

of the National Voter Registration

Act of 1993 (NVRA) on the administration of federal elections during

the 1999-2000 election cycle. The

FEC is required to submit such a

report to Congress by June 30 of

odd-numbered years.

The NRVA authorizes the FEC to

develop a mail voter registration

application form for federal elections and to consult with state

election officers to prescribe regulations as necessary to comply with

the law. Compiled by the FEC’s

Office of Election Administration,

the report includes a number of

recommendations from state officials, most focusing on technical

procedures for the implementation

of the NRVA. The report includes

four recommendations that were

sufficiently broad to be given to all

states covered by the NRVA:

(continued on page 2) (continued on page 5)

FEC v. Colorado Republican

Federal Campaign

Committee (Colorado II)

On June 25, 2001, the U.S.

Supreme Court, overruling the

Court of Appeals for the 10th

Circuit, held that the coordinated

party expenditure limits at 2 U.S.C.

§441a(d)(3) are constitutional. The

Court ruled that party coordinated

expenditures, unlike party expenditures made independently of any

candidate or campaign, may be

restricted to “minimize circumvention of [individual] contribution

limits.”

Section 441a(d) of the Federal

Election Campaign Act (the Act)

applies to expenditures party

committees make “in cooperation,

consultation, or concert” with a

candidate’s general election campaign. These coordinated expenditures are considered contributions

under the Act, and are subject to

limits calculated by a mathematical

formula set forth in the statute. 2

U.S.C. §441a(d)(3)(A) and (B).

Background

1986 Senate Campaign. This case

involved $15,000 worth of expenditures the Colorado Republican Party

(the Party) made in 1986 for adver-
Federal Election Commission RECORD August 2001

2

Federal Election Commission

999 E Street, NW

Washington, DC 20463

800/424-9530

202/694-1100

202/501-3413 (FEC Faxline)

202/219-3336 (TDD for the

 hearing impaired)

Danny L. McDonald, Chairman

David M. Mason, Vice Chairman

Karl J. Sandstrom, Commissioner

Bradley Smith, Commissioner

Scott E. Thomas, Commissioner

Darryl R. Wold, Commissioner

James A. Pehrkon, Staff Director

Lois G. Lerner, Acting General

 Counsel

Published by the Information

 Division

Greg Scott, Acting Assistant Staff

 Director

Amy Kort, Editor

Phillip Deen, Associate Editor

http://www.fec.gov

Court Cases

(continued from page 1)

tisements critical of Democratic

Senate candidate Timothy Wirth.

The Commission argued that those

ads contained an “electioneering

message” relating to a clearly

identified candidate, and therefore

represented coordinated expenditures by the Party. The Commission

further maintained that these

expenditures, when aggregated with

previous expenditures by the Party,

exceeded the statutory limits of

§441(a)(d). The Party contended

that the ads were not coordinated

with any candidate and did not

contain express advocacy, and thus

they were not subject to the 441a(d)

limits. The Party further argued that

the 441a(d) limits violated its First

Amendment rights.

Colorado I. In the first ruling on

this case, the U.S. District Court for

the District of Colorado concluded

that the ads were not subject to the

441a(d) limits because they did not

contain express advocacy. Having

already ruled in the Party’s favor,

the court did not address the Party’s

constitutional challenge.

On appeal, the Court of Appeals

for the 10th Circuit, agreeing with

the FEC that a 441(a)(d) expenditure need only depict a clearly

identified candidate and convey an

electioneering message, reversed the

district court’s decision. The appeals

court also held that the 441a(d)

limits did not violate the Party’s

First Amendment rights.

On further appeal, the Supreme

Court concluded that the Party’s

expenditures had not been coordinated with a candidate, and were

instead independent expenditures.

The Court also concluded that the

441a(d) limits were unconstitutional

as applied to political parties’

independent expenditures. The

Court did not rule on the constitutionality of the limits on coordinated

party expenditures, but instead

remanded the case to the district

court for further proceedings on that

issue.

Colorado II. On February 23,

1999, the district court ruled that the

coordinated expenditure limits were

unconstitutional. The court concluded the FEC had failed to offer

evidence that there was a compelling need for limits on coordinated

party expenditures. In its opinion,

the court equated coordinated party

expenditures with a candidate’s own

campaign expenditures which, based

on the Supreme Court’s ruling in

Buckley v. Valeo, cannot be limited.

(See the April 1999 Record, p. 1.)

The FEC appealed this decision to

the Court of Appeals for the 10th

Circuit, which affirmed the district

court’s decision on May 5, 2000.

The FEC then appealed the circuit

court’s decision to the Supreme

Court.

Current Decision

In arguments before the Supreme

Court, the Party maintained that

financial support of candidates was

an inherent function of political

parties. Therefore, any limitation of

Party expenditures coordinated with

its candidates would be a serious

infringement of its speech and

associational rights. The Party

argued that such a limitation would

impose a unique First Amendment

burden on the Party, and such a

burden could not be justified by any

benefits gained in preventing

corruption or the appearance of

corruption.

The Commission argued that

coordinated expenditures should be

limited not only because they are

equivalent to contributions, but also

because unlimited coordinated party

expenditures would allow individuals to evade the contribution limits

applicable to their direct contributions to candidates. Because individuals can give much larger

contributions to parties than to

candidates, if parties’ coordinated

spending were unlimited, individuals would have an incentive to make

large contributions to parties, who

would then be able to spend more of

those contributors’ dollars on a

particular candidate than the individual contribution limits would

allow. This circumstance would

allow individuals and other contributors to circumvent the contribution limits upheld in Buckley v.

Valeo.

In upholding the constitutionality

of coordinated party expenditure

limits, the Court:

• Rejected the Party’s argument that

unrestricted coordinated spending

is essential to the nature of parties,

finding that parties have functioned effectively during the

previous three decades, during

which the coordinated expenditure

limits were in place.

• Rejected the Party’s argument that

parties primarily act to elect

particular candidates, finding that

“parties are [also] necessarily the

instrument of contributors . . .

whose object is not to support the

party’s message or to elect party

candidates, but rather to support a

specific candidate for the sake of a
August 2001 Federal Election Commission RECORD

3

FEC v. NRA (85-1018)

On June 29, 2001, the U.S. Court

of Appeals for the District of

Columbia Circuit ruled that the

National Rifle Association (the

NRA) and its lobbying organization,

the NRA American Institute for

Legal Action (ILA), violated the

Federal Election Campaign Act’s

(the Act) ban on corporate contributions and expenditures during the

1978 and 1982 election cycles. 2

U.S.C. §441b(a). While the district

court had ruled that the NRA also

violated the ban in 1980, the appellate court determined that during

1980 the NRA qualified for a

constitutionally-mandated exemption from the ban. As a result, the

appeals court remanded the case to

the lower court in order to have civil

penalties calculated based on the

1978 and 1982 violations alone.

Background

During the 1978, 1980 and 1982

election cycles, the NRA paid

$37,833 of the Political Victory

Fund’s expenses for federal election

activity, including payments for

newspaper advertisements, direct

mailings and other materials that

supported or opposed individual

candidates. The Political Victory

Fund then distributed some of these

materials to NRA members, firearms dealers and other related

organizations. The Political Victory

Fund later reimbursed the NRA for

these expenses and reported the

disbursements as independent

expenditures on its FEC disclosure

reports.

In 1985, the Commission filed a

civil suit against the NRA, the ILA

and the Political Victory Fund,

claiming that they had violated the

Act’s prohibition on corporate

contributions and expenditures.

In response, the NRA argued that

its payments on behalf of the

Political Victory Fund were for that

committee’s administrative expenses and, thus, permissible under

the Act.1

 The NRA also challenged

the constitutionality of the Act as

applied to its activities, arguing that

the organization should qualify for

the so-called MCFL exemption that

allows certain nonprofit political

corporations to make independent

expenditures.

This exemption is based on the

Supreme Court’s decision in FEC v.

Massachusetts Citizens for Life

(MCFL), 479 U.S. 238 (1986). In

that case, the Court held that the

Act’s general prohibition of corporate-financed independent expenditures could not constitutionally be

applied to nonprofit ideological

corporations that possess three

specified features that preclude them

from presenting the kinds of dangers

at which the prohibition is directed.2

See also Austin v. Michigan Chamber of Commerce, 494 U.S. 652

(1990).

District Court Decision

The district court rejected the

NRA’s argument that its payments

to the Political Victory Fund were

merely for administrative expenses.

The court also concluded that the

NRA, unlike MCFL, did not qualify

for the constitutionally-mandated

exemption from the Act’s prohibition of corporate independent

expenditures. The NRA, the court

stated, had not been formed for the

express purpose of promoting

political ideas and pursued a variety

of activities, many of which were

not political. The court also stated

that the NRA had no policy of

1

 Section 441b(b)(2)(C) permits a

corporation acting as the connected

organization of a political action

committee to pay for the committee’s

“establishment, administration, and

solicitation of contributions.”

2

 The three features set forth in MCFL

are:

1. The organization is a nonprofit

ideological corporation formed “for

the express purpose of promoting

political ideas, and cannot engage

in business activities.”

2. It has “no shareholders or other

persons affiliated so as to have a

claim to its assets or earnings.”

3. It has not been established by a

corporation or labor union and has

a policy “not to accept contributions from such entities.”

(continued on page 4)

position on one, narrow issue, or

even to support any candidate who

will be obliged to contributors.”

• Found that a party is not in a

unique position vis-à-vis other

political spenders, such as wealthy

individuals, PACs and media

executives, all of whom could

coordinate expenditures with a

candidate’s campaign. Instead,

precisely because political parties

can efficiently amplify their

members’ power through aggregating contributions and broadcasting

messages, they are in a position to

be used to circumvent contribution

limits.

Citing testimony provided by

political scientists in friend-of-thecourt briefs, the Court agreed with

the Commission that there was a

serious threat of abuse from unlimited coordinated party expenditures. The Court concluded:

“Despite years of enforcement of

the challenged limits, substantial

evidence demonstrates how candidates, donors, and parties test the

limits of the current law, and it

shows beyond serious doubt how

contribution limits would be eroded

if inducement to circumvent them

were enhanced by declaring parties’

coordinated spending wide open.”

See also the October 2000

Record, p.6, the July 2000 Record,

p. 1.

U.S. Supreme Court, 00-191;

U.S. Court of Appeals for the 10th

Circuit, 99-1211.✦

— Jim Wilson
Federal Election Commission RECORD August 2001

4

refusing contributions from business

corporations. The court fined the

NRA and ILA $25,000 for making

prohibited contributions and expenditures, and it imposed a separate

$25,000 civil penalty against the

Political Victory Fund for receiving

prohibited corporate contributions.

Appeals Court Decision

Statutory Claims. On appeal, the

NRA again argued that its payments

on behalf of the Political Victory

Fund were permissible payments of

administrative expenses. In addition,

the NRA argued that its:

• In-kind contributions of corporate

materials and facilities were

allowable under Commission

regulations that permit persons to

use corporate facilities for election-related activity, so long as

they reimburse the corporation

within a commercially reasonable

time for the market value of the

production of the materials (11

CFR 114.9 (c)); and

• Payments to NRA employees

working for Political Victory Fund

on the campaigns of federal

candidates were permissible

because those payments did not

meet the statutory definition of

“contribution” at 2 U.S.C.

§431(8)(A).

The appeals court, however,

deferred to the Commission’s

interpretation of the definition of

administrative expenses at 11 CFR

114.1(b), which allows corporations

to cover only the overhead and startup costs of their political action

committees. The court also deferred

to the Commission’s interpretation

of 11 CFR 114.9(c), which allows

only stockholders and employees

acting as volunteers to use corporate

facilities to produce materials in

connection with a federal election.3

Finally, relying on FEC Advisory

Opinion 1984-24, the court held that

the NRA’s payments to its employees who were working for the

Political Victory Fund on candidates’ campaigns were prohibited

corporate contributions under the

definition of “contribution” at

section 441b(b)(2), which addresses

corporate activity. The FEC’s

advisory opinions, the court stated,

are entitled to deference. They “not

only reflect the Commission’s

considered judgment made pursuant

to congressionally delegated lawmaking power, but [they] also have

binding legal effect.”

Constitutional Challenge. In its

appeal, the NRA also renewed its

claim that, under the MCFL decision, it was exempt from the ban on

corporate contributions. The NRA

argued that it was “not formed to

amass capital, and its resources

reflect not the ‘economically

motivated decisions of investors and

customers, but rather its popularity

in the political marketplace.’”

The Commission argued that,

unlike MCFL, the NRA does not

have a narrow political focus but

instead performs a wide variety of

nonpolitical services for its members. The Commission also argued

that the NRA’s extensive business

activities and its acceptance of

corporate contributions distinguished it from the kinds of corporations exempted by the Supreme

Court in MCFL.

The appellate court stated that

“the Commission must demonstrate

that the NRA’s political activities

threaten to distort the electoral

process through the use of resources

that, as MCFL put it, reflect the

organization’s ‘success in the

economic marketplace’ rather than

the ‘power of its ideas.’” The court

concluded that the Commission had

“failed to demonstrate that the NRA

resembles a business firm more

closely than a voluntary political

association.”

The court found, however, that

the $7,000 and $39,786 in corporate

contributions that the NRA received

in 1978 and 1982, respectively,

were substantial enough to risk

turning it into a “potential conduit

for the corporate funding of political

activity” during these years. Thus,

the court found no constitutional

barrier to applying the Act’s prohibitions to the NRA for those two

years. In 1980, however, the NRA

received only $1,000 in corporate

contributions, an amount which, in

the court’s view, did not demonstrate that the organization was

acting as a conduit for corporate

contributions. Therefore, the court

held that the NRA was not in

violation of the Act for contributions and expenditures it made to the

Political Victory Fund during that

year.

Penalties

The appeals court ordered that the

case be remanded to the district

court to recalculate penalties against

the NRA, the ILA and the Political

Victory Fund based solely on the

1978 and 1982 violations.

U.S. Court of Appeals for the

District of Columbia Circuit, 00-

5163.✦

—Amy Kort

3

 The individuals must reimburse the

corporation, within a commercially

reasonable time, for the usual market

price for producing the materials.

Court Cases

(continued from page 3)

New Litigation

Jeremiah T. Cunningham v. FEC

On June 22, 2001, the Robert W.

Rock for Congress Committee (the

Committee) and its treasurer,

Jeremiah T. Cunningham, filed suit

against the Federal Election Commission in the U.S. District Court

for the Southern District of Indiana,

Indianapolis Division. The complaint appeals a civil money penalty
August 2001 Federal Election Commission RECORD

5

the Commission assessed against the

committee and its treasurer, and

claims that the Commission’s

assessment of that penalty was

erroneous, excessive and not

warranted.

Background. Mr. Cunningham

alleges that, on December 12, 2000,

he mailed to the Commission the

Committee’s 2000 30-Day Post

General Report, which was due

December 7, 2000. Mr. Cunningham

maintains that in mid-January he

noticed the Committee’s report was

not posted on the Commission’s

Web site, and that he then sent an

additional copy of the report to the

Commission. The Commission

received that report on February 6,

2001.

In March 2000, the Commission

found reason to believe that the

Committee and Mr. Cunningham

had violated 2 U.S.C. §434(a),

which requires the timely filing of

reports by political committees. The

Commission sent Mr. Cunningham

and the Committee a “reason to

believe” notice, which included a

civil money penalty, assessed under

the Administrative Fine regulations,

of $4,500 for failing to file the

report.1

 11 CFR 111.43. The notice

informed Mr. Cunningham and the

Committee that they had 40 days to

either pay the civil money penalty or

challenge the Commission’s finding.

Mr. Cunningham claims that he did

not receive the notice because he

ceased to receive mail at the address

he had given the Commission.

In May 2001, the Commission

made a final determination that the

1

 Under the Administrative Fine

regulations, reports that are received

more than 30 days after the filing date

are considered to be nonfiled. Election

sensitive reports that are received less

than 4 days before an election are

considered to be nonfiled. A 30-day

post general report is not an election

sensitive report.

• States should develop and implement an on-going, periodic training program for relevant motor

vehicle and agency personnel

regarding their duties and responsibilities under the NVRA as

implemented by state law.

• States should require motor vehicle

and agency offices to promptly

transmit information regarding

voter registration applicants

electronically to the appropriate

election office with the documentation to follow.

• States should devise a procedure

whereby voters may cast a provisional ballot at the polls on election day under circumstances

prescribed by state law.

• States should adopt the practice of

mailing a forwardable notice to all

persons who are removed from the

voter registration list whose mail

has not previously been returned as

undeliverable.✦

—Phillip Deen

Election Administration

(continued from page 1)

PACronyms, Other

PAC Publications

Available

 The Commission annually

publishes PACronyms, an

alphabetical listing of acronyms,

abbreviations and common names

of political action committees

(PACs).

 For each PAC listed, the index

provides the full name of the

PAC, its city, state, FEC

identification number and, if not

identifiable from the full name,

its connected, sponsoring or

affiliated organization.

 The index is helpful in identifying PACs that are not readily

identified in their reports and

statements on file with the FEC.

 To order a free copy of

PACronyms, call the FEC’s

Disclosure Division at 800/424-

9530 (press 3) or 202/694-1120.

PACronyms also is available on

diskette for $1 and can be

accessed free under the “Using

FEC Services” icon at the FEC’s

web site—http://www.fec.gov.

Other PAC indexes, described

below, may be ordered from the

Disclosure Division. Prepayment

is required.

• An alphabetical list of all

 registered PACs showing each

 PAC’s identification number,

 address, treasurer and

 connected organization ($13.25).

• A list of registered PACs

 arranged by state providing the

 same information as above

 ($13.25).

• An alphabetical list of

 organizations sponsoring PACs

 showing the PAC’s name and

 identification number ($7.50).

 The Disclosure Division can

also conduct database research to

locate federal political committees

when only part of the committee

name is known. Call the telephone

numbers above for assistance or

visit the Public Records Office in

Washington at 999 E St., NW.

Committee and Mr. Cunningham

violated 2 U.S.C. §434(a) and

assessed a $4,500 civil money

penalty for the violation. Plaintiffs

filed suit against the Commission on

June 22, 2001.

Relief. The plaintiffs ask that the

court set aside or modify the determination and civil money penalty

imposed by the Commission.

U.S. District Court for the

Southern District of Indiana,

Indianapolis Division, (P01-0897 C

BS).✦

 —Amy Kort

(continued on page 6)
Federal Election Commission RECORD August 2001

6

Advisory

Opinions

AO 2001-7

Nonaffiliation of Limited

Liability Company PAC

with PACs of Its Five

Corporate Owners

For the purposes of the Federal

Election Campaign Act (the Act)

and Commission regulations, the

Nuclear Management Company,

LLC (NMC) is not affiliated with

any of its five owner corporations

because ownership, control and

decision-making authority over

NMC is equally divided among the

corporations. As a result, NMC’s

Political Action Committee

(NMCPAC) is not affiliated with the

PACs of its owner companies.

Moreover, since NMC functions as

a partnership under the Act and is

not affiliated with any of its owner

corporations, it cannot act as the

connected organization of

NMCPAC.

Back Issues of the

Record Available on

the Internet

This issue of the Record and all

other issues of the Record starting

with January 1996 are available

through the Internet as PDF files.

Visit the FEC’s World Wide Web

site at http://www.fec.gov and

click on “What’s New” for this

issue. Click “Campaign Finance

Law Resources” to see back issues. Future Record issues will be

posted on the web as well. You

will need Adobe® Acrobat®

Reader software to view the publication. The FEC’s web site has

a link that will take you to Adobe’s

web site, where you can download

the latest version of the software

for free.

Affiliation

Under the Act and Commission

regulations, committees established

by the same corporation, person or

group—including any parent,

subsidiary, branch, division, department or local unit of a given entity—are affiliated. 2 U.S.C.

§441a(a)(5) and 11 CFR 100.5(g)(2)

and 110.3(a)(1)(ii). Entities other

than corporations, such as partnerships and limited liability companies, may also be affiliates. See

AOs 2000-36, 1997-11 and 1992-

17; see also AO 1996-38.

In cases where one entity is not

an acknowledged subsidiary of

another, Commission regulations

provide for an examination of

various factors, considered in the

context of an overall relationship, in

order to determine whether the

entities are affiliated and, thus,

whether their respective PACs are

affiliated. Relevant factors include:

• A controlling interest in voting

stock;

Election Administration

(continued from page 5)

Voting System Standards

On June 21, 2001, the Commission approved for public comment

a draft of Volume I of the voluntary voting system standards (VSS).

The primary goal of the VSS is to

provide a means for state and local

election officials to assure the

integrity of computer-based election

systems. Independent testing

laboratories use these standards to

test voting system hardware and

software. This draft is an expanded

and revised set of standards for

computer-based voting systems

written in response to field experience and technological developments not predicted by the 1990

standards.

The Commission seeks comments

on the revised standards, including

proposed criteria to:

• Expand existing provisions for

offering direct feedback to the

voter, indicating contests where an

under-vote or over-vote is detected;

• Further enable voters with disabilities to cast ballots and election

officials with disabilities to operate

systems without assistance;

• Assure that Internet voting systems

are as accurate, reliable and secure

as other forms of voting systems;

• Expand the reporting responsibilities of the voting system vendor to

ensure system quality; and

• Address recordkeeping, auditing

and reporting activities with

respect to the configuration of the

voting system.

This report does not discuss

administrative or management

functions, nor does it address the

problems of determining what

constitutes a vote or remedying the

lack of uniform recount procedures,

such as those encountered in Florida

during the recent elections.

Comments on the standards in

this draft must be received no later

than 60 days after notice has been

published in the Federal Register.

Copies of the proposed standards

may be found on the FEC Web site

at www.fec.gov/elections.html, or

may be requested by contacting the

Office of Election Administration at

202-694-1095. All comments should

be addressed to Penelope Bonsall,

Director, Office of Election Administration, Federal Election Commission, 999 E Street NW.,

Washington, DC 20463 and must be

submitted in either electronic or

written form. E-mail comments

should be sent to VSS@fec.gov.

Those sending their comments by email must include their full name, email address and postal address or

the comments will not be

considered.✦

—Phillip Deen
August 2001 Federal Election Commission RECORD

7

• The ability of one sponsoring

organization or committee to

participate in the governance of

another sponsoring organization or

committee through formal rules or

through formal or informal practices;

• The authority or ability to hire,

appoint, demote or otherwise

control the decision-making agents

of another sponsoring organization

or committee;

• An overlap of officers or employees in a manner that indicates a

formal or ongoing relationship

between the organizations or

committees;

• The provision of, or arrangement

for, funds or goods in a significant

amount or ongoing basis to another

sponsoring organization or committee;

• An active or significant role in the

formation of another sponsoring

organization or committee; and

• A shared pattern of contributions

or contributors indicating a formal

or ongoing relationship (11 CFR

110.3(a)(3)(ii)).

Contributions made to or by

affiliated committees are considered

to have been made to or by a single

committee for the purposes of the

Act’s contribution limits. 2 U.S.C.

§441(a)(5) and 11 CFR 100.5(g)(2),

110.3(a)(1) and 110.3(a)(1)(ii).

Additionally, a corporation may

solicit contributions to its PAC from

the restricted class of its subsidiaries

or other affiliates. 2 U.S.C.

§441b(b)(4)(A)(i) and 11 CFR

114.5(g)(1).

Nonaffiliation of NMCPAC

NMC is a joint venture limited

liability company that has not

elected to be treated as a corporation

by the IRS.1

 Each of five member

corporations owns an equal share of

NMC. Each owner company has its

own separate segregated fund (SSF).

NMCPAC has not received any

financial support from NMC, the

owner companies or their SSFs.

Even though some of the circumstances described in the affiliation

factors are present in NMC’s

relationship to its member corporations, ownership and control of

NMC are sufficiently divided and

diffuse among the five owning

members that none is affiliated with

the joint venture.2

 In the case of

NMC, each corporation owns a 20

percent interest, giving no single

owner a controlling interest. Each

owner company has equal representation on the board of directors, and

most actions by NMC require a

majority of the entire board, with a

few matters requiring a three-fourths

majority or unanimity. Therefore,

except when unanimity is required,

no one company can prevent an

action by the board. Additionally,

although each owner company,

through its representation on the

NMC’s board of directors, has the

ability to participate in the governance of NMC and to participate in

the hiring and the exercise of

authority over its officers, no

company has substantially more

authority than any other.

Moreover, aside from the owner

companies’ representatives on the

NMC board of directors, no officers

or employees have employment

both through NMC and any owner

company.3

 A substantial number of

NMC’s officers and employees were

formerly employed by the member

companies, which suggests a formal

or ongoing relationship between the

owner companies and NMC. The

former officers or employees of no

one company, however, constitute

1

 A multi-member limited liability

company that does not have publicly

traded shares and does not elect to be

treated as a corporation by the IRS is

treated as a partnership for the

purposes of the Act. 11 CFR

110.1(g)(2) and (3).

2

 The Commission has in the past

concluded that the members of a joint

venture company were affiliated with

that company, based upon the control

each member had over the company.

When two companies owned equal

shares and shared control equally, they

were both affiliates of the joint venture.

When only one had a controlling

interest, only this company was

affiliated with the joint venture.

3

 One exception was a vice president

from one of the member corporations

who was a “loaned executive” at NMC

and who, as of July 1, 2001, was an

officer only of NMC.

Campaign Guides

Available

 For each type of committee, a

Campaign Guide explains, in

clear English, the complex

regulations regarding the activity

of political committees. It shows

readers, for example, how to fill

out FEC reports and illustrates

how the law applies to practical

situations.

 The FEC publishes four

Campaign Guides, each for a

different type of committee, and

we are happy to mail your

committee as many copies as you

need, free of charge. We

encourage you to view them on

our Web site (go to www.fec.gov,

then click on “Campaign Finance

Law Resources” and then scroll

down to “Publications”).

 If you would like to place an

order for paper copies of the

Campaign Guides, please call

800-424-9530, press 1, then 3.

(continued on page 8)
Federal Election Commission RECORD August 2001

8

4

 If the structure and operations of

NMC remain essentially the same, each

company in the expanded ownership

group will have no greater share of the

ownership and management than an

owner company presently holds. Thus,

these new companies would also not be

affiliates of NMC. NMCPAC currently

erroneously lists the Wisconsin Public

Service Corporation PAC as an affiliate

and must amend its Statement of

Organization to delete this reference.

6

 Additionally, because none of the

corporations is NMCPAC’s connected

organization, NMCPAC does not need

to include the names of its owner

companies in the name of its PAC.

5

 A connected organization is that

corporation which may use its general

treasury funds to pay for the costs of

establishing, administering or soliciting

contributions for an SSF, without that

activity resulting in a contribution or

expenditure. 2 U.S.C. §441b(b)(2)(C)

and §431(7) and 11 CFR 100.6(a).

Need FEC Material

in a Hurry?

 Use FEC Faxline to obtain FEC

material fast. It operates 24 hours

a day, 7 days a week. More than

300 FEC documents—reporting

forms, brochures, FEC

regulations—can be faxed almost

immediately.

 Use a touch tone phone to dial

202/501-3413 and follow the

instructions. To order a complete

menu of Faxline documents, enter

document number 411 at the

prompt.

the dominant part—or anywhere

near a substantial plurality—of the

officers or employees of NMC.

NMC and its owner companies

exchange a significant amount of

funds as part of their business

arrangement; however, they exchange these funds as part of an

arrangement of payment for services, and no owner provides the

dominant or substantial plurality of

funds for NMC’s operations. See

11 CFR 110.3(a)(3)(ii)(G). Although four of the five owning

members of NMC founded the

company and thus took a significant

role in its formation, the significance of this fact is reduced because

of the number of founders.

Finally, neither the owner

companies nor their PACs have

given NMCPAC administrative or

“material financial” support, nor

have they directed or encouraged

the provision of funds to or by

NMCPAC. NMCPAC does not have

a formal or ongoing relationship

with any of the PACs of these

owner companies, and NMCPAC

does not share officers in common

with any of these PACs. See 11

CFR 110.3(a)(3)(ii)(E).

As a result of all of these factors,

NMC is not affiliated with any of its

owner companies, and NMCPAC is

not affiliated with the PACs of any

of the member companies for the

purposes of the Act and Commission regulations.

Consequences of Nonaffiliation

NMCPAC does not share contribution limits with any of the owner

corporations’ PACs and does not

need to apportion to them any part

of contributions it makes. NMCPAC

does not need to list any of these

PACs on its Statement of Organization, nor does it need to amend its

Statement of Organization as new

owners become members of the

joint venture.4

Connected Organization

As noted above, a multi-member

limited liability company that does

not elect to be treated as a corporation by the IRS, as NMC has not, is

considered a partnership under

Commission regulations. 11 CFR

110.1(g)(2) and (3). Typically,

partnerships cannot act as the

connected organization of a PAC.5

AO 1991-1 and 1990-20. In the past,

the Commission has treated joint

venture partnerships differently as a

result of those partnerships’ ownership by, and affiliation with, corporations. See AOs 1996-49, 1994-11

and 1992-17; see also AO 1997-13.

If corporations comprise the entire

ownership of a partnership, the

partnership may act as the connected organization of its PAC, so

long as the partnership is affiliated

with at least one of the corporations.

See AO 1997-13, 1996-49 and

1994-11.

Because NMC is not affiliated

with any of its owner corporations

for the purposes of the Act, however, it cannot act as a connected

organization for NMCPAC. Thus, if

NMC paid any of NMCPAC’s

expenses, these payments would be

contributions to NMCPAC. NMC

cannot make contributions to

NMCPAC because such contributions would be attributed not just to

NMC, but also to its members, the

owner companies, all of which are

corporations. 6 11 CFR 110.1(g)(2),

110.1(e)(1) and (2).

General Guidance on Services and

Materials for NMCPAC

In past advisory opinions, the

Commission explained how an

incorporated entity might provide

services and materials to a

nonconnected PAC that the

corporation’s personnel (acting as

individuals) established, organized

and directed. See AO 2000-20,

1997-26 and 1997-15. Following

these guidelines, NMC may give

some assistance to NMCPAC

without being considered a connected organization under 2 U.S.C.

§431(7) and 11 CFR 100.6 and

without making a prohibited corporate contribution:

Advisory Opinions

(continued from page 7)
August 2001 Federal Election Commission RECORD

9

7

 Although the requester did not provide

details or ask about proposed future

arrangements where NMCPAC would

not be a separate segregated fund, the

Commission provided this advice as

general guidance based on Commission

regulations and the AOs listed above.

The FEC Takes Visa

and Mastercard

 FEC customers can pay for FEC

materials with Visa or

Mastercard. Most FEC materials

are available free of charge, but

some are sold, including financial

statistical reports ($10 each),

candidate indexes ($10) and PAC

directories ($13.25). The FEC

also has a 5¢ per page copying

charge for paper documents and a

15¢ per page copying charge for

microfilmed documents.

 Paying by credit card has its

advantages. For instance, since

the FEC will not fill an order

until payment is received, using a

credit card speeds delivery by

four to five days.

 Visitors to the FEC’s Public

Records Office may make

payments by credit card. Regular

visitors, such as researchers and

reporters, who in the past have

paid for FEC materials out of

their own pockets, may make

payments with a company credit

card.

 The credit card payment system

also reduces costs and paperwork

associated with check processing,

enabling FEC staff to better serve

the walk-in visitor.

1

 The distribution of the books may be

viewed as an expression of thanks to

contributors for supporting past

campaigns and an incentive to provide

support for the Senator’s reelection

campaign.

• NMC may provide legal and

accounting services to NMCPAC

without charge so long as such

services are rendered by a regular

employee of NMC and are provided solely to ensure compliance

with the Act. 2 U.S.C.

§§431(8)(B)(ix)(II) and

(9)(B)(vii)(II); 11 CFR

100.7(b)(14) and 100.8(b)(15).

• NMCPAC may pay NMC the

usual and normal charge within a

commercially reasonable time for

the use of office facilities such as

telephones. See AO 1979-22.

• If NMC or its employees provide

other goods and services, these

(continued on page 10)

A0 2001-8

Use of Campaign Funds to

Purchase Candidate

Autobiography for

Distribution to Contributors

Senator Arlen Specter’s principal

campaign committee, Citizens for

Arlen Specter (the Committee), may

use campaign funds to purchase

copies of the Senator’s autobiography to distribute to campaign

contributors. The purchase would

not result in a conversion of campaign funds to personal use by the

Senator; nor would the purchasing

arrangement between the Committee

and the book publisher result in a

prohibited corporate contribution

from the publisher to the Committee.

Background

The Committee plans to purchase

copies of Senator Specter’s autobiography in bulk from the publisher

and give copies to donors who have

given $1,000 to the campaign.

The Committee will pay the

standard bulk rate made available by

publishers to large purchasers.

Senator Specter will not receive any

royalties as a result of the

Committee’s purchase. The publisher will give the royalties attributable to the sale to charity.

Personal Use of Campaign Funds

Under the Federal Election

Campaign Act (the Act) and Commission regulations, a candidate and

the candidate’s committee have

wide discretion in making expenditures to influence the candidate’s

election, but may not convert excess

campaign funds to the personal use

of the candidate or any other person.

2 U.S.C. §§431(9) and 439a; 11

CFR 113.1(g) and 113.2(d); see also

Advisory Opinions 2001-03, 2000-

40, 2000-12 and 2000-02.

Commission regulations define

“personal use” of campaign funds as

“any use of funds in a campaign

account of a present or former

candidate to fulfill a commitment,

obligation or expense of any person

that would exist irrespective of the

candidate’s campaign or duties as a

Federal officeholder.” 11 CFR

113.1(g). Commission regulations

list a number of purposes that would

constitute personal use. 11 CFR

113.1(g)(1)(i). Where a specific use

is not listed as personal use, the

Commission makes a determination

on a case-by-case basis. 11 CFR

113.1(g)(1)(ii).

In this case, Committee funds

will be used to defray an expense

that would not exist irrespective of

the Senator’s campaign, given that:

• The books will be used solely for

distribution to the contributors.1

• The quantity purchased by the

Committee will not exceed the

number needed for the described

distribution.

• The Senator will receive no

royalties or income and will

declare no tax deductions as a

must be paid for in advance. See 2

U.S.C. §431)8)(A) and 11 CFR

100.7(a)(1). See also AOs 1997-26

and 1997-15; 11 CFR 114.2(f) and

116.3.7

Date Issued: June 8, 2001;

Length: 12 pages.✦

 —Amy Kort
Federal Election Commission RECORD August 2001

10

FEC Regional Conference in

Denver for Candidates,

Parties and PACs

This October, the Federal Election Commission will hold a comprehensive, two and one-half day

regional conference in Denver. This

conference is designed to help

federal political committees and

candidates understand and comply

with the federal campaign finance

law. The conference will provide an

overview of the basic provisions of

the federal election law and discuss

specific requirements that apply to

candidates, political parties and

corporate, labor and trade association PACs (as well as their sponsoring organizations).

The conference will consist of a

series of workshops presented by

Commissioners and experienced

FEC staff, and a representative from

the Internal Revenue Service will be

available to answer election-related

tax questions.

The conference will be held

October 2-4, 2001, at the Westin

Westminster, 10600 Westminster

Blvd., Westminster, Colorado

(Denver metro area). The registration fee for the conference is $360,

which covers the cost of the conference, reception, materials and

meals. The registration fee and the

registration form, which is available

by mail and on line, must be received by August 31. A late registration fee of $10 will be added as of

September 1. A full refund will be

made for all cancellations made

before that date.

A room rate of $158 single or

double is available for hotel reservations made by August 31. Call (303)

410-5000 or (800) 937-8461 and

specify the Federal Election Commission room block. After August

31, room rates are based on availability. Free parking is located

across from the hotel.

Outreach Advisory Opinions

(continued from page 9)

result of the sale of these books to

the Committee.

• The sales will not increase the

Senator’s opportunity to receive

future royalties.2

Possible In-Kind Corporate

Contributions

The Committee’s bulk purchase

of the books at a discounted rate

raises the issue of whether the

publisher is making a prohibited inkind corporate contribution. See 2

U.S.C. §441b(a); 11 CFR 114.2(b).

Under the Act and Commission

regulations, the term “contribution”

includes giving “anything of value”

for the purpose of influencing an

election. 2 U.S.C. §§431(8)(A)(i)

and 441b(b)(2); 11 CFR 100.7(a)(1)

and 114.1(a)(1). The term “anything

of value” includes the provision of

goods or services at less than the

usual and normal charge. 11 CFR

100.7(a)(1)(iii)(A) and

100.7(a)(1)(iii)(B). In the past, the

Commission has concluded that the

purchase of goods or services at a

discount does not result in a contribution when the discounted items

are made available in the ordinary

course of business and on the same

terms and conditions to the vendor’s

other customers that are not political

organizations or committees. See

Advisory Opinions 1996-2, 1995-46

and 1994-10.

Since the Committee would pay

the usual and normal charge for this

type of bulk purchase, it will not

receive an in-kind corporate contribution from the publisher.

Date Issued: June 25, 2000;

Length: 4 pages.✦

—Jim Wilson

2

 In addition, no royalties will result

from the distribution of the books

because the Committee does not plan to

sell the books.

Registration

Conference registrations will be

accepted on a first-come, firstserved basis. Attendance is limited,

and other FEC conferences have

sold out this year, so please register

early.

For registration information, call

Sylvester Management Corporation

at (800) 246-7277 or send an e-mail

to toni@sylvestermanagement.com.

To fill out a conference registration

form on line, visit www.fec.gov/

pages/infosvc.htm#Conferences.

For specific program information about this conference, call the

Federal Election Commission’s

Information Division at (800)424-

9530 (press 1, then 3) or (202)694-

1100 or view the program at the

FEC Web address listed above.✦

—Phillip Deen
August 2001 Federal Election Commission RECORD

11

The first number in each citation

refers to the “number” (month) of

the 2001 Record issue in which the

article appeared. The second

number, following the colon,

indicates the page number in that

issue. For example, “1:4” means

that the article is in the January

issue on page 4.

Advisory Opinions

Alternative disposition of 2001-5,

5:6

2000-24: Preemption of state

election law mandating fixed

allocation ratio for administrative

and voter drive expenses, 2:2

2000-27: Status of party as state

committee, 3:6

2000-28: Disaffiliation of trade

associations and their PACs, 2:3

2000-30: Nonconnected PAC’s

receipt and use of securities, 5:1

2000-32: Reporting uncollectable

loan, 1:9

2000-34: Name and acronym of

SSF, 2:5

2000-35: Status of party as state

committee, 1:10

2000-36: Disaffiliation of

nonconnected PACs, 2:5

2000-37: Use of campaign funds to

purchase and present Liberty

Medals, 2:6

2000-38: Registration of party

committee due to delegate

expenses, 2:7

2000-39: Status of party as state

committee, 2:8

2000-40: Donations to legal defense

fund of Member of Congress, 3:7

2001-1: Use of political party’s

office building fund to pay

building renovation costs and

fundraising expenses of building

fund, 4:5

2001-2: Status of party as state

committee, 4:6

2001-3: Use of campaign funds to

purchase an automobile for

campaign purposes, 5:5

2001-4: Use of electronic signatures

Index for PAC contributions by payroll

deduction, 6:6

2001-6: Status of party as state

committee, 6:7

2001-7: Nonaffiliation of LLC PAC

with SSFs of member companies

of the LLC, 8:6

2001-8: Campaign committee’s

purchase of candidate’s book for

distribution to contributors, 8:9

Compliance

Committees fined under Administrative Fines Program, 2:6, 4:7, 5:7,

6:5, 7:8

MUR 4594: Prohibited Foreign

National Contributions, 6:8

MUR 4762: Prohibited union

contributions and other violations,

2:9

MUR 5029: Contributions in the

name of another made by corporation and government contractor,

2:10

Court Cases

_____ v. FEC

– Beaumont, 2:8, 3:2, 5:6, 6:9

– Buchanan, 1:10

– Cunningham, 8:4

– DNC, 2:8. 3:2

– Dole, 5:6

– Kieffer, 7:7

– Miles for Senate, 3:3

– Nader, 4:8, 6:9

– Natural Law Party of the United

States of America, 1:10, 2:8, 3:2

FEC v. _____

– Colorado Republican Federal

Campaign Committee, 8:1

– Friends for Fasi, 6:8

– NRA, 8:3

– Toledano, 7:8

Other

– Hooker v. All Campaign Contributors, 1:10

– Hooker v. Sundquist, 4:8

Regulations

Advanced Notice of Proposed

Rulemaking on definition of

“political committee,” 4:1

Notice of Proposed Rulemaking on

reporting of independent expenditures and last-minute contributions, 6:1

Final rules for general public

political communications coordinated with candidates and party

committees; independent expenditures, 1:2, 6:3

Reports

Amendments to Statements of

Organization, 2:1

Arizona state filing waiver, 6:10

California special election, 3:5

Committees required to file tax

returns, 3:4

Florida special election, 7:4

July reporting reminder, 7:1

Massachusetts special election, 7:6

Nevada state filing waiver, 2:2

Pennsylvania special election, 4:5

Reports due in 2001, 1:4

Virginia special election, 5:6
FEDERAL ELECTION COMMISSION

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Washington, DC 20463

Official Business

Penalty for Private Use, $300

Presorted Standard

Postage and Fees Paid

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Printed on recycled paper

Federal Election Commission RECORD August 2001