December 2002 Federal Election Commission Volume 28, Number 12

Table of Contents

Regulations

1 BCRA Requirements for

Louisiana Runoff Election

8 Final Rules on Contribution

Limitations and Prohibitions

Reports

1 Policy Statement: Interim

Reporting Procedures

12 Hawaii Special Election Reporting

6 Public Appearance

Alternative Dispute Resolution

10 ADR Update

Compliance

10 Nonfilers

Statistics

11 Party and Congressional Financial

Activity, 2002 Election Update

Information

12 Revised Tax Filing Requirements

Court Cases

13 RNC v. FEC

13 New Litigation

15 Advisory Opinions

18 Federal Register

Outreach

18 Roundtables

18 FEC Conferences in 2003

19 Index

Compliance Regulations

Policy Statement: Interim

Reporting Procedures

On November 21, 2002, the

Commission approved the following

policy statement on reporting

requirements during the transition

period following the effective date

of the Bipartisan Campaign Reform

Act of 2002 (BCRA). The Commission intends to exercise its discretion by not pursuing the political

committees and other persons and

entities addressed below for possible

violations of the reporting statutes

and regulations covered by the

instructions set out in this policy

statement if they fully adhere to

those instructions and timely file the

described reports. The limitations

on the scope and duration of the

policy are discussed in detail below.

Policy Statement

Congress established a 90-day

period during which the Commission was required to promulgate

regulations implementing Title I of

BCRA regarding certain national,

state, and local party committee

activities, including reporting of

Federal election activity and certain

allocable expenses. This period

ended on June 25, 2002. Congress

Reports

BCRA Requirements for

Louisiana Runoff Election

On December 7, 2002, Louisiana

will hold a general election runoff

for Senate candidates and House

candidates in the 5th District.

Although the Bipartisan Campaign

Reform Act of 2002 (BCRA) took

effect on November 6, certain

provisions of the law do not apply to

runoff elections resulting from the

2002 elections. The following

information provides guidance on

those provisions that do and do not

apply to the Louisiana runoff.

Provisions that Apply to the

Louisiana Runoff

National Party Committees. The

BCRA bans national party committees from soliciting, receiving,

directing, transferring or spending

nonfederal funds after November 5,

2002. However, in November and

December national party committees

may use nonfederal funds that they

have in their accounts to pay

expenses or retire outstanding

nonfederal debts that were incurred

solely in connection with a 2002

runoff election. After December 31,

national party committees may not

(continued on page 6) (continued on page 2)
Federal Election Commission RECORD December 2002

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)

David M. Mason, Chairman

Karl J. Sandstrom, Vice Chairman

Danny L. McDonald,

 Commissioner

Bradley A. Smith, Commissioner

Scott E. Thomas, Commissioner

Michael E. Toner, Commissioner

James A. Pehrkon, Staff Director

Lawrence H. Norton, General

 Counsel

Published by the Information

 Division

Greg J. Scott, Assistant Staff

 Director

Amy Kort, Editor

http://www.fec.gov

also required the Commission to

complete the remaining BCRA

rulemakings, including those

regarding other reporting requirements, in 270 days—by December

22, 2002. The Commission adopted

final rules implementing Title I on

June 25, 2002. Prohibited and

Excessive Contributions: NonFederal Funds or Soft Money; Final

Rule, 67 FR 49064 (July 29, 2002)

(“Soft Money Final Rules”). The

Commission has also completed

four other rulemakings to implement

BCRA:

1. Final Rules on Electioneering

Communications (67 FR 65190,

published Oct. 23, 2002);

2. Interim Final Rules Regarding

FCC Database on Electioneering

Communications (67 FR 65212,

published Oct. 23, 2002);

3. Final Rules on Reorganization of

Regulations on Contributions

and Expenditures (67 FR 50582,

published Aug. 5, 2002); and

4. Final Rules on Contribution

Limitations and Prohibitions (67

FR 69928, published Nov. 19,

2002).

The Commission notes that other

BCRA-related reporting rules (e.g.

electioneering communications,

independent expenditures) are not

yet finalized, but are expected to be

before December 22, 2002, including the Consolidated Reporting

Rulemaking, which the Commission

is scheduled to complete on December 12, 2002. Issuance of new and

revised reporting forms, software

and instructions is dependent upon

the finalization of all the reporting

rules. However, BCRA’s reporting

requirements became effective on

November 6, 2002. The Commission is in the process of updating its

reporting forms, software, and

instructions to incorporate all the

new regulations, and will need a

period of time after December 22,

2002, to complete this process. In

the interim, filers will continue to

use existing disclosure forms and

software for their December 5th Post

General Election Report, January

31st Year End Report and, for

monthly filers only, the February

Monthly Report, which covers

January 2003.

 BCRA introduced new reporting

responsibilities for political party

committees and other reporting

entities and significantly changed

certain existing requirements.

Among the significant changes

introduced by BCRA are the

reporting by State, district, and local

party committees of Federal election

activities (“FEA”), including the

allocation of some of those activities

between Federal funds and “Levin”

funds, and revisions in those committees’ allocations of payments

between Federal and non-Federal

funds. See 11 CFR 300.2(i), 300.36,

106.7, and 104.17. In addition,

BCRA introduced provisions for

Federal candidates and their committees with respect to candidate

funding of his or her own campaign

in the form of the “millionaires

provision” and provisions for

reporting by individuals and entities

making electioneering communications.” See 2 U.S.C. §§434(a)(6)(B),

434(f), and 441a-1(b).

As new forms are now being

developed to meet the new requirements, the Commission concludes

that a period of transition and

adjustment with respect to reporting

is needed, including allowance for

the continued use of the ballot

composition formula in the PostGeneral and Year End Reports. To

assist filers during this transition

period, the Commission has developed the interim disclosure procedures set forth below.1

 These

procedures address BCRA-related

transactions not contemplated by the

existing reporting forms and filing

software. Questions concerning

these procedures may be directed to

the FEC’s Information Division,

Reports Analysis Division or

Electronic Filing Office, as appropriate.

Hence, the Commission intends

to exercise its discretion by not

pursuing the committees and other

persons and entities addressed

below for possible violations of the

reporting statutes and regulations

covered by the instructions set out in

this policy statement if the filers

fully adhere to those instructions

and timely file the reports.

1 These procedures also apply to filers

involved in special elections held

during this period, including the

November 30 and January 4 special

elections in Hawaii. Those filers

should pay special attention to the

instructions for disclosing “Federal

Election Activity” (defined in 11 CFR

100.24) and “Electioneering Communications” (defined in 11 CFR 100.29),

since both are triggered by proximity to

an election. See 11 CFR 300.33,

300.36, and proposed 104.20.

Reports

(continued from page 1)
December 2002 Federal Election Commission RECORD

3

Interim Reporting Procedures

Interim Disclosure Procedures for

State, District and Local Party

Committees:

1. Reporting allocable administrative and generic voter drive

expenses (that are not Federal

Election Activity (FEA)) for

November and December 2002

For the December 5th Post General

Election report and the January 31st

Year End report only, state, district

and local party committees may

continue to allocate administrative

and generic voter drive expenses

according to the ballot composition

ratio for the 2001-2002 election

cycle. Committees should report

this activity just as they always

have: payments should be disclosed on Schedule H4, and

transfers from the nonfederal

account should appear on Schedule

H3. Committees need not submit a

new Schedule H1.

2. Reporting allocable exempt

activities (that are not FEA) for

November and December 2002

For the December 5th Post General

Election report and the January 31st

Year End report only, state, district

and local party committees may

continue to allocate payments for

exempt activities based on the time

or space devoted to federal candidates, as compared to the time or

space of the entire communication.

Committees should report this

activity just as they always have:

payments should be disclosed on

Schedule H4, and transfers from

the nonfederal account should

appear on Schedule H3.

3. Reporting receipts of “Levin

funds”

Paper Filers

• Using a separate Schedule A,

itemize each receipt (regardless of

amount) as a memo entry. Do not

include these receipts in totals or

on the Detailed Summary Page.

• IMPORTANT: Label the Schedule A “Levin funds.”

• Disclose total “Levin fund”

receipts as a lump sum in a cover

memo attached to the report.

E-Filers

• On a Schedule A, itemize each

receipt (regardless of amount) as a

memo entry. These receipts will

not be included in totals or on the

Detailed Summary Page.

• IMPORTANT: Use the text entry

description field to label the

receipt as “Levin funds.”

• Disclose total “Levin fund”

receipts as a lump sum using a text

record.

Note: During the transition period,

the Commission will allow committees to amend reports to

disclose as Levin funds, receipts

that were not initially disclosed as

such. The Commission plans to

address this issue more broadly

when it finalizes the reporting and

filing procedures for BCRA in

2003.

4. Reporting disbursements for

non-allocable (100% federal)

“Federal Election Activities”

(i.e., public communications

and certain salary payments)

Paper Filers

• Use a separate Schedule B labeled

“FEA-100% Federal” to disclose

each disbursement, regardless of

amount.

• Adjust the totals on the completed

Detailed Summary Page by adding

the total “FEA-100% Federal” to

line 31 “Total Federal Disbursements.”

E-Filers

• Using Schedule B as a model,

submit a Form 99 (miscellaneous

text submission) labeled “FEA100% Federal” disclosing for each

disbursement, regardless of

amount:

• the name of the committee;

BCRA on the FEC’s

Web Site

 The Commission has added a

new section to its web site

(www.fec.gov) devoted to the

Bipartisan Campaign Reform Act

of 2002 (BCRA).

The new page provides links to:

• The Federal Election Campaign

 Act, as amended by the BCRA;

• Summaries of major BCRA-

 related changes to the federal

 campaign finance law;

• Summaries of current litigation

 involving challenges to the new

 law;

• Federal Register notices

announcing new and revised

Commission regulations that

 implement the BCRA; and

• Information on educational

 outreach offered by the

Commission, including

upcoming Roundtable sessions

 and the Commission’s tentative

2003 conference schedule.

 The new section also allows

individuals to view the

Commission’s calendar for

rulemakings, including projected

dates for the Notices of Proposed

Rulemaking, public hearings,

final rules and effective dates for

regulations concerning:

• Soft money;

• Electioneering Communications;

• Contribution Limitations and

 Prohibitions;

• Coordinated and Independent

 Expenditures;

• The Millionaires’ Amendment;

• Consolidated Reporting rules;

 and

• Other provisions of the BCRA.

 The BCRA section of the web

site will be continuously updated.

Visit www.fec.gov and click on

the BCRA icon.

(continued on page 4)
Federal Election Commission RECORD December 2002

4

• the name, mailing address,

 city, state and zip code for

 each payee;

• the date and amount; and

• the purpose of the

 disbursement.

• To account for these disbursements

on your regular report (e.g., 2002

Year End Report), adjust the cash

on hand figure on line 8 of the

Summary Page.

Examples of these transactions in

FECFile are available on the

Commission’s BCRA web page at

http://www.fec.gov/pages/bcra/

bcra_update.htm.

5. Reporting the allocation

formula for paying allocable

“Federal Election Activities,” if

any, conducted in 2002

Use the table below to determine

the appropriate formula for allocating “Federal Election Activities,”

if any, conducted between November 6, 2002, and December 31,

2002.

Paper Filers

• Attach a cover letter, labeled “H1-

FEA,” to disclose the applicable

federal percentage for allocable

“federal election activity.”

E-Filers

• Add a text record, labeled “H1-

FEA,” to disclose the applicable

federal percentage for allocable

“federal election activity.”

6. Reporting the allocation

formula used for paying

allocable “Federal Election

Activities” and for administrative expenses and the cost of

generic voter drives, as of

January 1, 2003

Use the table on page 5 to determine the appropriate allocation

formula to use on or after January

1, 2003. On the first report disclosing 2003 activity (e.g., February

20th Monthly Report):

Paper Filers

• Attach a cover letter, labeled “H1-

FEA,” to disclose the applicable

federal percentage for allocable

“federal election activity.”

• Do not use the current version of

Schedule H-1.

E-Filers

• Add a text record, labeled “H1-

FEA,” to disclose the applicable

federal percentage for allocable

“federal election activity.”

7. Reporting disbursements for

“Federal Election Activities”

allocated between federal

funds and “Levin funds”

Paper Filers

• Using Schedule H4 as a model,

submit a cover letter labeled “H6-

Shared FEA,” disclosing:

• the name of the committee;

• the name, mailing address,

 city, state and zip code for

 each payee;

• the date of each transaction;

• the category of federal

 election activity (e.g., voter

 registration);

• the year-to-date total for the

 activity;

• the purpose of disbursement;

• the federal share of each

 expense;

• the “Levin fund” share of

 each expense; and

• the combined federal/Levin

 total for each entry.

• As on Schedule H4, multiple

entries may appear on each page,

and should be subtotaled by page

and totaled on the last page.

• Adjust the totals on the completed

Detailed Summary Page by:

• Adding the combined federal

 and Levin fund total from the

 last page to the total for line

 30 “Total Disbursements;”

 and

• Adding the total federal share

 from the last page to the total

 for line 31 “Total Federal

 Disbursements.”

E-Filers

• Using Schedule H4 as a model,

submit a Form 99 (miscellaneous

text submission) labeled “H6-

Shared FEA,” disclosing:

• the name of the committee;

• the report to which the

 activity relates (e.g., 2002

 Year End Report);

• the name, mailing address,

 city, state and zip code for

 each payee;

• the date of each transaction;

• the category of federal

 election activity (e.g., voter

 registration);

• the year-to-date total for the

 activity;

Reports

(continued from page 3)

15% Federal

21% Federal

2002 Races on General Election Ballot Federal Percentage

A Senate candidate was on the ballot

in my state in the 2002 General

election

A Senate candidate was not on the

ballot in my state in the 2002 General

election

Formula for Allocating “Federal Election Activities” in 2002
December 2002 Federal Election Commission RECORD

5

• the purpose of disbursement;

• the federal share of each

 expense;

• the “Levin fund” share of

 each expense; and

• the combined federal/Levin

 total for each entry.

• As on Schedule H4, multiple

entries may appear on each page of

the H6, and should be subtotaled

by page and totaled on the last

page.

• To account for these disbursements

on your regular report (e.g., 2002

Year End Report), adjust the cash

on hand figure on line 8 of the

Summary Page.

• Examples of these transactions in

FECFile are available on the

Commission’s BCRA web page at

http://www.fec.gov/pages/bcra/

bcra_update.htm.

8. Reporting transfers of “Levin

funds” into the federal account

for shared “Federal Election

Activity”

Paper Filers

• Using Schedule H3 as a model,

submit a cover letter labeled “H5-

Transfers of Levin Funds for

Shared FEA,” disclosing:

• the name of the committee;

• the name of the account (i.e.,

 “Levin”);

• the date of the transfer; and

• the categorical breakdown of

 the transfer received on that

 date (e.g., total voter

 registration, total GOTV,

 etc.).

• As on Schedule H3, transfers must

be segregated by date on the H5. It

is permissible, however, to include

transfers occurring on multiple

dates on each page, as long as they

are segregated by date.

• Aggregate transfers by category

should appear at the bottom of the

last page of H5.

• Adjust the totals on the completed

Detailed Summary Page by adding

the combined Levin fund transfers

to the total for line 19 “Total

Receipts.”

• Do not adjust the total for line 20

“Total Federal Receipts.”

E-Filers

• Using Schedule H3 as a model,

submit a Form 99 (miscellaneous

text submission) labeled “H5-

Transfers of Levin Funds for

Shared FEA,” disclosing:

• the name of the committee;

• the name of the account (i.e.,

 “Levin”);

• the report to which the

 activity relates (e.g., 2002

 Year End Report);

• the date of the transfer; and

• the categorical breakdown of

 the transfer received on that

 date (e.g., total voter

 registration, total GOTV,

 etc.).

• As on Schedule H3, transfers must

be grouped by date on the H5.

However, unlike H3, it is permissible to include transfers occurring

on multiple dates on a single page,

so long as the transfers remain

grouped by date.

• Total Levin fund transfers by

category should appear at the

bottom of the last page of H5.

• To account for these receipts on

your regular report (e.g., 2002

Year End Report), adjust the cash

on hand figure on line 8 of the

Summary Page.

• Examples of these transactions in

FECFile are available on the

Commission’s BCRA web page at

http://www.fec.gov/pages/bcra/

bcra_update.htm.

Interim Disclosure Procedures for

Federal Candidates and

Campaign Committees

1. Additional registration information pursuant to the “millionaires provision”

All candidates seeking election to

federal office on/after January 1,

2003, must provide an e-mail

address, a fax number and a

declaration of intent to expend

personal funds.

Paper Filers

• Attach a cover memo to FEC Form

2, Statement of Candidacy, disclosing an e-mail address, a fax

number and a declaration of intent

to expend personal funds.

28% Federal

36% Federal

2004 Races on General Election Ballot Federal Percentage

Presidential and Senate candidates

will both be on the ballot in my state

in the next regular federal general

election

A Presidential candidate, but not a

Senate candidate, will be on the ballot

in my state in the next regular federal

general election

Formula for Allocating “Federal Election Activities” as of

January 1, 2003

(continued on page 6)
Federal Election Commission RECORD December 2002

6

• The declaration should read:

 “With respect to this election,

 I intend to expend personal

 funds totaling [fill in

 amount].”

E-Filers

• Include with Form 2, Statement of

Candidacy, a text record disclosing

an e-mail address, a fax number

and a declaration of intent to

expend personal funds.

• The declaration should read:

 “With respect to this election,

 I intend to expend personal

 funds totaling [fill in

 amount].”

Interim Disclosure Procedures for

Other Types of Filers

1. 24-Hour Notice of “Electioneering Communications”

• E-mail or fax a report to the FEC

disclosing:

• Name, address, occupation

 and name of employer or

 principal place of business of

 the individual or person

 making the communication;

• Name, address, occupation

 and name of employer or

 principal place of business of

 any person sharing or

 exercising control over the

 person making the

 communication;

• Name, address, occupation

 and name of employer or

 principal place of business of

 the custodian of the books

 and accounts from which the

 disbursements for the

 communication was made;

• If the person making the

 communication pays for it

 exclusively from a segregated

 bank account, the name and

 address of persons who

 donate $1,000 or more to that

 account, including the date

 and amount of those

 donations;

• If the person making the

 communication does not pay

 for it exclusively from a

 segregated bank account, the

 name and address of persons

 who donate $1,000 or more

 to the person making the

 communication (regardless of

 whether those funds are used

 to finance the communication),

 including the date and

 amount of those donations;

• Disbursements of more than

 $200, including the name and

 address of the payee, date,

 amount and purpose of the

 disbursement, the name of the

 federal candidate, and the

 election identified in the

 communication;

• Total donations received and

 disbursements made in this

 report;

• Aggregate disbursements

 year-to-date;

• The disclosure date (i.e., the

 date when the communication

 was first publicly distributed);

 and

• The following statement:

 “Under penalty of perjury, I

 certify that this report is true,

 correct and complete.”

 followed by the name

 signature of the person

 making that statement and the

 date.2

✦

2 Submission of false, erroneous or

incomplete information may subject the

person signing this report to the

penalties of 2 U.S.C. §437g.

Reports

(continued from page 5)

Regulations

(continued from page 1)

spend nonfederal funds for any

purpose. 2 U.S.C. §441i and 11 CFR

300.12. As in the past, these funds

may not be used to pay for any

expense that is an expenditure under

2 U.S.C. §431(9).1

State Candidates and Officeholders. Under the BCRA, state candidates and officeholders must use

federal funds for a public communication that promotes, supports,

attacks or opposes a federal candidate, regardless of whether the

communication expressly advocates

a vote for or against a federal

candidate. This provision applies to

activity in connection to the Louisiana runoff. 2 U.S.C. §441i(f)(1) and

11 CFR 300.71.

Federal Candidates and Officeholders. The BCRA also restricts

certain spending and fundraising

activities by federal candidates and

officeholders. Under the BCRA and

Commission regulations, federal

candidates and officeholders can

only solicit, receive, direct, transfer,

spend or disburse federal funds in

connection with a federal election. 2

U.S.C. §441i(e)(1)(A) and 11 CFR

300.61.

Additionally, federal candidates

and officeholders can only solicit,

receive, direct, transfer, spend or

disburse funds in connection with a

nonfederal election in amounts and

from sources that are consistent with

both state law and with the Act’s

limits and prohibitions. However, if

a federal candidate or officeholder is

also a candidate for state or local

1 Additionally, while national party

committees cannot raise nonfederal

funds after November 5, they may use

these funds until January 1, 2003, to

retire outstanding debts or obligations

that were incurred solely in connection

with an election held prior to November

6, including any runoff election,

recount or election contest. 2 U.S.C.

§§441i(a)(1) and 431 note.

Public Appearance

December 4, 2002

American University

Washington, D.C.

Michelle Ryan
December 2002 Federal Election Commission RECORD

7

office, then he or she may raise and

spend nonfederal funds that only

comply with state law, so long as

the solicitation, receipt and spending

of funds refers only to the state or

local candidate and/or another state

or local candidate. Individuals

simultaneously running for federal

and nonfederal office may only raise

and spend federal funds for the

federal election. 11 CFR 300.62 and

300.63.

Finally, a federal candidate or

officeholder may attend, speak or be

a featured guest at a fundraising

event for a state, district or local

committee of a political party. The

committees may advertise, announce or otherwise publicize that a

federal candidate or officeholder

will attend, speak or be a featured

guest at the fundraising event.

Candidates and federal officeholders

may speak at such an event without

restriction or regulation. 11 CFR

300.64.

Tax-Exempt Organizations.

Because the BCRA permits limited

solicitations by federal candidates

and officeholders only for the

specific federal election activities

listed below, these individuals must

not make any solicitations on behalf

of a 501(c) organization, or an

organization that has applied for this

tax status, for other types of election

activities, such as public communications promoting or supporting

federal candidates.

A federal candidate or officeholder may make a general solicitation on behalf of a tax-exempt

organization, without limits on the

source or amount of funds, if the

organization does not make expenditures or disbursements in connection with federal elections, including

the federal election activities listed

below. Moreover, a candidate or

office holder may make a general

solicitation on behalf of an organization that conducts activities in

connection with an election if:

• The organization’s principal

purpose is not to conduct election

activities, including the federal

election activities listed below; and

• The solicitation is not to obtain

funds for election activities in

connection with a federal election,

including federal election activities. 11 CFR 300.65(a) and (c).

Under certain circumstances, a

federal candidate or officeholder

may also make a specific solicitation explicitly to obtain funds to pay

for federal election activities

conducted by a tax-exempt organization whose principal purpose is to

undertake such activities. The

federal election activities for which

such a specific solicitation may be

made are:

• Voter registration activity during

the period that begins 120 days

before the date of a regularlyscheduled federal election and

ends on the day of that election;

and

• Voter identification, get-out-the

vote or generic campaign activity

conducted in connection with an

election in which a federal candidate appears on the ballot (regardless of whether a state or local

candidate also appears on the

ballot). 11 CFR 300.65(c).

Such solicitations are permissible, however, only if they are

made solely to individuals and the

amount solicited from any individual does not exceed $20,000

during any calendar year. 11 CFR

300.65(b) and (c).

Other Provisions. Additional

BCRA provisions apply to the

Louisiana runoff that:

• Strengthen the Act’s prohibitions

on contributions, expenditures,

independent expenditures and

disbursements for electioneering

communications by foreign

nationals (2 U.S.C. §441e);

• Codify several aspects of the

current regulatory test for the

permissible use of campaign funds

by candidates and officeholders (2

U.S.C. §439a);

• Increase the civil penalties for

violations of the ban on contributions in the name of another and

expand the prohibition on fraudulent misrepresentation (2 U.S.C.

§§437g and 441h).

Provisions that Do Not Apply to

the Louisiana Runoff

The following BCRA provisions

do not apply to the Louisiana runoff:

• Increases in contributions limits;2

• Prohibition of contributions by

minors;

• New rules on disclaimers;

• New rules on coordinated and

independent expenditures;

• Requirements for the funding and

reporting of Electioneering Communications;

• New rules affecting state and local

parties defining and governing

Federal Election Activity.

Additional Information

The FEC web site (www.fec.gov)

now has a BCRA section, which

provides links to:

• The Federal Election Campaign

Act, as amended by the BCRA;

• Summaries of major BCRA-related

changes to the federal campaign

finance law;

• Summaries of current litigation

involving challenges to the new

law;

• Federal Register notices announcing new and revised Commission

regulations that implement the

BCRA, including Notices of

Proposed Rulemaking;

2 The increased contribution limits do

not take effect until January 1, 2003,

and thus do not apply to this December

7, 2002, runoff election. See related

article, page 8.

(continued on page 8)
Federal Election Commission RECORD December 2002

8

Regulations

(continued from page 7)

• Information on educational

outreach offered by the Commission; and

• The Commission’s calendar for

rulemakings.

Visit www.fec.gov and click on

the BCRA icon.

—George Smaragdis

and Amy Kort

Final Rules on Contribution

Limitations and Prohibitions

On October 31, 2002, the Commission approved final rules to

implement provisions of the Bipartisan Campaign Reform Act of 2002

(BCRA) that:

• Increase the contribution limits for

individuals and political committees;

• Modify recordkeeping requirements for political committee

treasurers;

• Prohibit certain contributions and

donations by minors; and

• Strengthen the current statutory

prohibitions on contributions and

donations by foreign nationals.

The final rules and their Explanation and Justification were published

in the November 19, 2002, Federal

Register (67 FR 69928) and are

available on the FEC web site at

www.fec.gov/pages/bcra/

rulemakings/part_110_rules.htm.

These rules take effect January 1,

2003.

Contribution Limits Increased

Beginning on January 1, 2003, a

number of the contribution limits

will increase and some of the limits

will be indexed for inflation.

Contributions to candidates and

political party committees. The

limits on contributions made by

individuals and non-multicandidate

committees will increase to $2,000

per election to federal candidates

and $25,000 per year to national

party committees. 11 CFR

110.1(b)(1) and 110.1(c)(1). These

limits will be indexed for inflation.

Aggregate bi-annual contribution

limitations for individuals. The

former $25,000 annual limit for

individuals has been replaced by a

new bi-annual limit of $95,000.

This limit includes up to $37,500 in

contributions to candidate committees and up to $57,500 in contributions to any other committees. The

$57,500 portion of the bi-annual

limit contains a further restriction, in

that no more than $37,500 of this

amount may be given to committees

that are not national party committees. 11 CFR 110.5(b)(1).1

 The biannual limit will be indexed for

inflation.

Special contribution limit to

Senate candidates. The limit on

contributions made to Senate

candidates by the Republican and

Democratic Senatorial campaign

committees or the national committees of a political party, or any

combination of these committees,

will increase to $35,000 per six-year

cycle. 11 CFR 110.2(e)(1). This

special limit will also be indexed for

inflation.

Indexing. Currently, the coordinated party expenditure and Presidential candidate expenditure limits

are indexed for inflation. The new

rules extend the inflation indexing

to contributions to candidates and

national party committees by

individuals and non-multicandidate

committees, the bi-annual aggregate

contribution limit for individuals

and the limit on contributions to

Senate candidates by certain national party committees. 11 CFR

110.17(a) and (b).

For the “per election” limit on

contributions to candidates, the

indexing changes will take effect on

the day after the general election

and remain in effect through the day

of the next regularly-scheduled

general election. 11 CFR

110.1(b)(1)(ii). For example, an

increase in the limit made in January

2005 would be effective from

November 3, 2004, to November 7,

2006, and would only affect elections held after November 3, 2004.

On the other hand, the indexing

changes for the calendar-year-based

limits will affect the calendar-based

period that follows, or from January

1 of the odd-numbered year through

December 31 of the next evennumbered year. 11 CFR 110.1(c)(ii),

110.2(e)(2) and 110.5(b)(3). The

Commission will announce the

amount of the adjusted expenditure

and contribution limits in the

Federal Register and on the FEC

web site at www.fec.gov. These

indexing provisions will first be

applied in 2005. 11 CFR 110.17(e).

The applicable expenditure and

contribution limits will be adjusted

according to the Consumer Price

Index (CPI). The limits will be

adjusted in odd-numbered years,

and will be increased by the percentage difference between the CPI

during the 12 months preceding the

beginning of that calendar year and

the CPI during the base year, which

is 2001. The rules contain a rounding provision so that the inflationadjusted amount will be rounded to

the nearest multiple of $100. 11

CFR 110.17(c) and (d).

Redesignations and

Reattributions

The Commission has streamlined

its rules for designating contributions to a particular election. When

an individual or non-multicandidate

committee makes an excessive

1 Under the so-called millionaires

amendment, individual limits to

Congressional candidates increase if

the candidate’s opponent makes

expenditures from his or her personal

funds above a certain threshold.

Contributions made under this provision will not be subject to the overall

bi-annual limit. The Commission will

address the millionaires amendment in

greater detail in a future rulemaking.
December 2002 Federal Election Commission RECORD

9

contribution to a candidate’s authorized committee, the committee may

automatically redesignate excessive

contributions to the general election

if the contribution:

• Is received before that candidate’s

primary election;

• Is not designated in writing for a

particular election;

• Would be excessive if treated as a

primary election contribution; and

• As redesignated, does not cause

the contributor to exceed any other

contribution limit. 11 CFR

110.1(b)(5)(ii)(B)(1)-(4).

In the case of an authorized

committee of a Presidential candidate who accepts public funding for

the general election, this presumption is available only to the extent

that the candidate is permitted to

accept contributions to a general

election legal and accounting

compliance (GELAC) fund.

The redesignation presumption

also includes a backward-looking

provision where an undesignated,

excessive contribution received after

the primary, but before the general

election, may be automatically

applied to the primary if the campaign committee has more net debts

outstanding from the primary than

the excessive portion of the contribution. The redesignation, of

course, may not cause the contributor to exceed any contribution

limits. 11 CFR 110.1(b)(5)(ii)(C).

The candidate committee is

required to notify the contributor of

the redesignation by paper mail, email, fax or other written method

within 60 days of the treasurer’s

receipt of the contribution. Also, at

the time of notification, the contributor must be given the opportunity to request a refund. 11 CFR

110.1(b)(5)(ii)(B)(5)-(6) and

110.1(b)(5)(ii)(C)(6)-(7).

Similarly, the Commission has

also updated its rules regarding

reattributions. When an excessive

contribution is made via a written

instrument with more than one

individual’s name imprinted on it,

but only has one signature, the

permissible portion will be attributed to the signer and the excessive

portion may now be attributed to the

other individual whose name is

imprinted on the written instrument,

without obtaining a second signature, so long as the reattribution

does not cause the contributor to

exceed any other contribution limit.

11 CFR 110.1(k)(3)(ii)(B)(1).

Political committees employing

this presumption must notify all

contributors in writing or via e-mail

within 60 days of the committee

treasurer’s receipt of the check. At

the time of notification, the committee must offer the contributor who

signed the check a refund of the

excessive portion. 11 CFR

110.1(k)(3)(ii)(B)(2) and (3).

Recordkeeping. To facilitate

audits that determine compliance

with the contribution limits, political

committee treasurers are now

required to maintain either a fullsize photograph or a digital image of

each check or written instrument by

which a contribution of $50 or more

is made. 11 CFR 102.9(a)(4).

Under a new section added to the

rule outlining the explicit standard

for acceptable accounting methods,

the committee’s records must

demonstrate that, prior to the

primary election, recorded cash on

hand was at all times equal to or in

excess of the sum of general election contributions received minus

the sum of general election disbursements made. 11 CFR

102.9(e)(2). In addition, for the

political committee redesignations

or reattributions to be effective, any

signed writings from contributors

that accompany the contribution and

the committee’s notices must be

retained.

Prohibition on Contributions and

Donations by Minors

Under the new regulations,

individuals who are under 18 years

old are prohibited from making

contributions to federal candidates

and contributions or donations to

committees of political parties 11

CFR 110.19(a) and (b). By including the term “donation” in this

regulation, the prohibition encompasses both federal and nonfederal

accounts of political party committees. Thus, this provision preempts

state law to the extent that state law

may permit minors to make donations to state, district and local party

committees. In the Explanation and

Justification for this rule, the

Commission indicated that prohibiting donations by minors to all

committees of state, district and

local parties has a federal purpose

because donations of nonfederal

funds to state parties could otherwise be used, in part, to finance

“federal election activities.”2

The final rules make clear that

individuals under 18 may, however,

participate in volunteer work for

federal candidates and political

party committees and may continue

to make contributions to unauthorized committees that are not

political party committees, such as

PACs, under certain conditions. See

11 CFR 110.19(c).

Prohibition on Contributions,

Donations, Expenditures,

Disbursements by Foreign

Nationals

New section 11 CFR 110.20

implements BCRA’s prohibition on

contributions, donations, expenditures and disbursements solicited,3

2 For the definition of “federal election

activity,” see the Federal Register

Notice at 67 FR 49110 and the September 2002 Record, page 1.

3 The term “solicit” at section 11 CFR

110.20 has the same meaning as in

section 11 CFR 300.2(m), “to ask

another person to make a contribution

or donation, or transfer of funds, or to

provide anything of value, including

through a conduit or intermediary.”

(continued on page 10)
Federal Election Commission RECORD December 2002

10

accepted, received or made directly

or indirectly by or from foreign

nationals in connection with state

and local elections as well as federal

elections. This ban also applies to:

• Contributions and donations to

political party committees;

• Contributions and donations to

party committee building funds;

• Disbursements for electioneering

communications;4 and

• Expenditures, independent expenditures, and disbursements in

connection with any election.5

The Commission has included a

knowledge requirement and knowledge standards with regard to the

solicitation, acceptance or receipt of

foreign national contributions or

donations, determining that this

would produce a less harsh result

than a strict liability standard.

Knowledge. The final rules

contain in the definition of “knowingly” three standards of knowledge

that focus on the sources of funds

received. Meeting any one of these

standards would satisfy the knowledge requirements of this rule.

The first standard is actual

knowledge that funds have come

from a foreign source. The second

is an awareness on the part of the

person soliciting, accepting or

receiving the contribution or donation of certain facts that would lead

a reasonable person to conclude that

there is a substantial probability that

the contribution or donation is

coming from a foreign source. The

third standard is an awareness on the

part of the person soliciting,

accepting or receiving a contribution

or donation of facts that should have

prompted a reasonable inquiry into

whether the source of the funds is a

foreign national, but the person

neglected to undertake such an

inquiry. 11 CFR 110.20(a)(4)(i)-

(iv).

The rule further outlines the types

of information that should lead a

recipient to question the origin of a

contribution or donation under this

section. They are:

• Use by a contributor or donor of a

foreign passport or passport

number;

• Use by a contributor or donor of a

foreign address;

• A check or other written instrument is drawn on an account or a

wire transfer from a foreign bank;

or

• Contributors or donors live abroad.

11 CFR 110.20(a)(5)(i)-(iv).

Knowledge safe harbor. The

Commission has adopted a narrowly-tailored safe harbor for the

knowledge standards. A person

shall be deemed to have conducted a

reasonable inquiry into a possible

foreign national contribution if he or

she seeks and obtains copies of

current and valid U.S. passport

papers for U.S. citizens who are

contributors or donors and to whom

any of the above four types of

information are applicable . 11 CFR

110.20(a)(7).

Assisting foreign national

contributions or donations. The

foreign national prohibition applies

to a person who knowingly provides

substantial assistance to foreign

nationals in the making of contributions, donations, expenditures,

independent expenditures and

disbursements in connection with

federal and nonfederal elections.

This prohibition covers, but is not

limited to, acting as a conduit or

intermediary for foreign national

contributions and donations. 11

CFR 110.20(g).✦

—Elizabeth Kurland

4 For the definition of electioneering

communication, see the Federal

Register Notice at 67 FR 65190 and the

November 2002 Record, page 3.

5 An additional ban on foreign national

donations to Presidential inaugural

committees will be addressed in a later

rulemaking.

Nonfilers

The campaign committees of the

candidates listed in the chart on

page 11 failed to file required

campaign finance reports. The

Federal Election Campaign Act

requires the Commission to publish

the names of principal campaign

committees if they fail to file 12 day

pre-election reports or the quarterly

report due before the candidate’s

election. 2 U.S.C. §§437g(b) and

438(a)(7). The agency may also

pursue enforcement actions against

nonfilers and late filers under the

Administrative Fine program on a

case-by-case basis.✦

—Amy Kort

Compliance

Alternative

Dispute

Resolution

ADR Program Update

The Commission’s Alternative

Dispute Resolution Office recently

resolved an additional case, reaching agreement with the Gejdenson

Reelection Committee and its

treasurer, Sally Cini. In response to

the Commission’s audit finding that

the committee and its treasurer

accepted excessive contributions,

the respondents agreed to pay a

$3,000 civil penalty and to terminate

the committee. See the April 2002

Record, page 8. (ADR 069)✦

—Amy Kort

Regulations

(continued from page 9)
December 2002 Federal Election Commission RECORD

11

Party and Congressional

Financial Activity, 2002

Election Update

During the 2002 election cycle,

financial activity by national parties

increased while Congressional

activity decreased, compared to

recent election cycles. The Commission compiled the following statistics based on political committees’

financial disclosure reports covering

the period between January 1, 2001,

and October 16, 2002.

Party Activity

The national parties raised $416.5

million in federal funds, representing a 43 percent increase over the

1997-98 campaign. The parties

spent $409.9 million in federal

funds, up 45 percent since 1998.

The Republican National Committee, National Republican Senatorial Committee and National

Republican Congressional Committee raised and spent more than their

Democratic counterparts, continuing

a long-standing pattern. Republicans

raised a total of $289 million in

federal funds, just over twice the

Democratic Party total of $127.4

million.

Nonfederal (or “soft money”)

activity by the national parties has

been greater in the 2002 campaign

than during the 2000 Presidential

cycle. Republican committees

reported soft money receipts of

$221.7 million, up 5 percent over

their 2000 efforts and more than

twice the soft money receipts for

these committees during the 1998

campaign.

Democrats raised $199.6 million,

slightly more than their 2000 total

and 2 1/2 times their comparable

1998 soft money receipts. The

Senatorial and Congressional

campaign committees of both

Statistics

Ada, Joseph F.1 GU/00 Pre-General

Anderson, Roger C. OH/05 Pre-General

Baker, Biff L. CO/05 Pre-General

Behrens-Benedict, Heidi2 WA/08 October Quarterly

Bordallo, Madeleine Z. GU/00 Pre-General

Camacho, Randy R. AZ/02 Pre-General

Christian-Christensen, Donna1 VI/00 Pre-General

Clark, Steven J. OH/04 Pre-General

Coleman, Aumua A. AS/00 October Quarterly

Coleman, Aumua A. AS/00 Pre-General

Crawford, Russell C. TX/31 Pre-General

Cripe, Kevin H. CA/18 October Quarterly

Cripe, Kevin H. CA/18 Pre-General

Daugherty, Ronald T.1 NC/10 October Quarterly

Daugherty, Ronald T.1 NC/10 Pre-General

Dority, Greg NC/01 Pre-General

Ellen, Joseph L. NC/02 Pre-General

Glick, Ted NJ Senate Pre-General

Hooper, Don MI/01 October Quarterly

Hooper, Don MI/01 Pre-General

Hornberger, Jacob G., Jr VA Senate Pre-General

Langkilde, Fagafaga Daniel AS/00 Pre-Runoff

Lapere, David G. CA/21 Pre-General

Laurie, Charles L. III FL/23 October Quarterly

Laurie, Charles L. III FL/23 Pre-General

Lawrence, Robert I. WA/06 October Quarterly

Levy, Robert M. CA/27 Pre-General

Mattsson, Arne NY/13 Pre-General

Mcleod, Gary M. SC/06 Pre-General

Meek, Kendrick FL/17 October Quarterly

Meeks, Gregory W. NY/06 Pre-General

Miller, Michael C. Sr DE/00 October Quarterly

Miller, Michael C. Sr DE/00 Pre-General

Monica, Monica L.1 LA/01 Pre-General

Moore, James R. C. MN Senate Pre-General

Petersen, John S. TX/31 Pre-General

Raczkowski, Andrew E. MI Senate Pre-General

Rosenstein, Charles B. NY/21 Pre-General

Smith, Mark C. MA/06 October Quarterly

Snyder, Victor F. AR/02 Pre-General

Stevens, John VA/10 Pre-General

Van Auken, Cynthia L.1 GA/04 Pre-General

Velasco, Oscar A. CA/37 Pre-General

Woodside, Nancy J. UT/03 Pre-General

Xuna, John “Juan” FL/22 Pre-General

Candidate Office Sought Report Not Filed

1 A paper copy of the report has been filed. However, the candidate’s

committee was required to file electronically.

2 Summary and Detailed Summary pages were submitted without supporting

schedules.

(continued on page 12)

Nonfilers
Federal Election Commission RECORD December 2002

12

1Reports filed electronically must be submitted by midnight on the filing

date. A committee required to file electronically that instead files on paper

reporting forms will be considered a nonfiler. Reports filed on paper and

sent by registered or certified mail must be postmarked by the mailing date;

reports sent by any other means (including reports sent via first class mail

and overnight delivery) must be received by the Commission’s close of

business on the filing date.

2 The reporting period for the Post-General Election report spans two

election cycles. For this report only, candidate committees should use the

Post-Election Detailed Summary Page (FEC Form 3, Pages 5-8) instead of

the normal Detailed Summary Page.

Hawaii Special Election Reporting

 The Special General Election to fill the U.S. House seat in the Second

Congressional District, won in the November 5 election by the late

Representative Patsy T. Mink, will be held on January 4, 2003. Authorized

committees that receive contributions of $1,000 or more between December

16 and January 1 must file 48-hour notices to disclose these contributions.

Committees (including PACs) involved in this election must follow the

reporting schedule below.1 Please note that the 2002 Year-End report is

waived for committees that file on this schedule.

Committees Involved in the Special General Must File:

Close of Reg./Cert. Filing

Books Mail Date Date

Pre-General Report December 15 December 20 December 23

Year-End Report —Waived—

Post-General Report 2 January 24 February 3 February 3

April Quarterly Report March 31 April 15 April 15

Information

Revised Tax Filing

Requirements

Congress passed new legislation,

Pub. L. 107-276, November 2, 2002,

that scales back the tax law filing

requirements for political committees. These requirements, originally

enacted two years ago, principally

affect nonfederal committees and

organizations that do not otherwise

disclose contributions and expenditures. While the most significant

changes relate to state and local

political organizations, the new law

also limits filings required for

federal political committees that file

under the Federal Election Campaign Act (FECA).

Effective retroactive to the

original enactment in 2000, political

committees need not file an income

tax return (Form 1120-POL, U.S.

Income Tax Return for Certain

Political Organizations), unless they

have taxable income in a year (after

taking into account allowable

deductions, including the $100

specific deduction). The new law

also provides that neither the IRS

nor the committee filing this form is

required to disclose it to the public.

This revision effectively repeals a

provision enacted in 2000. In

addition, federal political commitparties have shown the largest

increases.

Congressional Activity

Congressional candidates running

in 2002 raised $727.9 million and

spent $617.4 million, representing a

decline of 9 percent in receipts and

10 percent in disbursements over the

comparable period in 2000.

Senate candidates raised $257.6

million and spent $225.9 million.

These totals represent declines of 21

percent in receipts and 24 percent in

spending since 2000, despite the

intense competition between the two

major parties for control of the

Senate. In contrast to the 2000

elections, competitive Senate

campaigns in this cycle tended to be

in smaller-population states, and

specific campaigns did not attain the

extraordinary levels of spending

reached by some candidates in 2000.

The financial activity of House

candidates is little changed overall

from the 2000 election cycle, with

general election candidates raising

$470.3 million (less than 1 percent

below 2000 totals) and spending

$391.5 million (2 percent higher

than in 2000). Increases were

limited to the 45 open seat races.

Additional Information

Press releases dated November 1,

2002, provide detailed information

about the financial activity of the

Democratic and Republican parties

and Congressional candidates. The

press releases are available:

• On the FEC web site at

www.fec.gov/news.html;

• From the Public Records office

(800/424-9530, press 3) and the

Press Office (800/424-9530, press

2); and

• By fax (call the FEC Faxline at

202/501-3413 and request documents 615 and 616).✦

—Amy Kort

Statistics

(continued from page 11)
December 2002 Federal Election Commission RECORD

13

tees required to report under the

FECA will not have to file an

annual information return (Form

990, Return of Organization Exempt

from Income Tax), effective retroactive to the original enactment in

2000.

The new law contains a provision

that may impact federal officeholders’ and candidates’ involvement in

activities conducted by state and

local political organizations. Most

state and local political organizations are now exempt from certain

federal tax filing requirements. This

exemption does not apply, however,

if a federal officeholder or candidate:

• Controls or participates in directing the organization;

• Solicits more than de minimis

contributions for the organization;

or

• Directs disbursements by the

organization.

For more information, see:

• IRS web site: www.irs.gov;

• Information on filing requirements

and downloading forms:

www.irs.gov/polorgs; and

• IRS toll free number: 1-877-829-

5500. Staff at this number answer

questions about tax law filing

requirements for political committees, and are available from 8:00

a.m. to 6:30 p.m., Eastern time,

Monday through Friday.✦

—Submitted by the Internal

Revenue Service

Court Cases

RNC v. FEC (98-CV-1207)

On August 27, 2002, in light of

the recent enactment of the Bipartisan Campaign Reform Act of 2000

(BCRA), the plaintiffs and defendants agreed to the dismissal of this

case. The Republican National

Committee (RNC) had asked the

U.S. District Court for the District

of Columbia to enjoin the Commission from applying its allocation

regulation at 11 CFR 106.5 to the

RNC’s “issue ads.” The RNC

claimed that the regulation was

unconstitutional because it required

party committees to allocate expenses between their federal and

nonfederal accounts for communications that did not expressly advocate

the election or defeat of a clearlyidentified candidate.

The BCRA bars national party

committees from raising and

spending nonfederal funds. As a

result, the Commission has promulgated a new regulation at 11 CFR

106.5, which states how national

party committees may spend

nonfederal funds for limited purposes during the transition period

between November 6, 2002, when

the BCRA took effect, and December 31, 2002, after which national

party committees may no longer

spend nonfederal funds.1

 See the

January 1999 Record, p. 2.

U.S. District Court for the

District of Columbia, 98-CV-1207

(WBB) and U.S. Court of Appeals

for the District of Columbia Circuit,

98-5263.✦

—Amy Kort

1 The Commission’s new regulations,

“Prohibited and Excessive Contributions: Non-Federal Funds or Soft

Money,” were published in the July 29,

2002, Federal Register (67 FR 49064).

See the September 2002 Record, p. 1,

for a summary.

New Litigation

Cannon v. FEC

On September 24, 2002, Peter J.

Cannon, the treasurer for the Joe

Grimaud for Congress Committee

(the Committee), filed a complaint

in the U.S. District Court for the

District of South Carolina.

The complaint appeals a $5,500

civil money penalty the Commission

imposed on the Committee and Mr.

Cannon for failure to file the

Committee’s 2001 Year-End

Report. Although the Committee

filed the report on paper, they were

required to file electronically. 11

CFR 104.18(a)(1)-(2). Therefore,

the report was not considered to

have been filed. Mr. Cannon alleges

that the Committee’s computer

system was infected with a virus,

destroying their records and preventing them from filing electronically.

U.S. District Court for the

District of South Carolina, Civil

Action 02-MC-165.✦

—Phillip Deen

Shays and Meehan v. FEC

On October 8, 2002, Representatives Christopher Shays and Martin

Meehan filed a complaint in the

U.S. District Court for the District

of Columbia challenging Commission regulations that implement the

“soft money” provisions of the

Bipartisan Campaign Reform Act of

2002 (BCRA).

The complaint charges that the

FEC regulations “contravene the

language” of the BCRA and “will

frustrate the purpose and intent of

the BCRA by allowing soft money

to continue to flow into federal

elections and into the federal

political process.” The plaintiffs ask

that the court invalidate the FEC

regulations on the grounds that they

are:

• Arbitrary and capricious;

• An abuse of discretion;

• In excess of the FEC’s statutory

jurisdiction or authority; and

• Otherwise not in accordance with

law.

Court Complaint. On May 20,

2002, the FEC published for public

comment draft regulations implementing Title I of the BCRA, which

contains the statutory ban on soft

money. The final rules were pub-

(continued on page 14)
Federal Election Commission RECORD December 2002

14

lished in the July 29, 2002, Federal

Register (67 FR 49064). The

plaintiffs allege that these rules

contain amendments that were not

made available for public comment

and that “undermined the letter and

[the] purpose of the BCRA.” The

plaintiffs contend that these regulations contravene the BCRA’s soft

money ban in each of the three areas

that, according to the complaint,

Congress legislated to address:

• The activities of the national

parties;

• The activities of the state parties;

and

• The activities of federal candidates

and officeholders.

“Sham Party Entities.” The

BCRA prohibits national party

committees and any entity “directly

or indirectly established, financed,

maintained or controlled” by a

national party committee from

raising or spending soft money. 2

U.S.C. §323(a)(1) and (2). The

plaintiffs charge that “without any

basis” the Commission created a

“grandfather” provision in its

regulations. According to the

plaintiffs, the “grandfather” or “safe

harbor” provision in the regulations

will take into account the relationship between the party committee

and other entities only after November 6, 2002. The plaintiffs claim that

this provision will permit the

creation of “sham party entities”

that can raise and spend soft money

after the effective date of the

BCRA, notwithstanding their

establishment by, and affiliation

with, the national party committee

prior to that date.

Definitions of “Solicit and

Direct” and “State Party”

Fundraisers. The BCRA prohibits

federal candidates and officeholders

from soliciting, directing or receiving soft money. 2 U.S.C.§323(a)

and (e). According to the complaint, Commission regulations

narrow the definitions for the terms

“solicit” and “direct” to mean “ask.”

11 CFR 300.2(m). These definitions, the plaintiffs allege, will

permit federal candidates and

officeholders, as well as the national

party officials, to continue to solicit

and direct soft money as long as

they do not explicitly “ask” for soft

money contributions. The plaintiffs

further contend that the FEC

regulations allow federal candidates

and officeholders to explicitly solicit

and direct soft money at state

fundraising events “without regulation or restriction,” contrary to the

intent of the BCRA. 11 CFR 300.64.

Definition of Agent. The BCRA

prohibits any “agent” acting on

behalf of a national party committee

or federal candidate or officeholder

from raising or spending soft

money. The complaint describes

FEC regulations as limiting the

definition of “agent” to those who

have “actual” authority to act on

behalf of the party, and excluding

those who have “apparent” authority. 11 CFR 300.2(b). The plaintiffs

argue that the regulation creates the

opportunity to circumvent the

BCRA by allowing national or state

party agents, or agents of a federal

candidate or officeholder, with

apparent authority to engage in

activities that are otherwise prohibited under BCRA.

Leadership PACs. The BCRA

prohibits any entity “directly or

indirectly” controlled by a federal

candidate or officeholder from

raising or spending soft money. The

plaintiffs claim that this prohibition

was intended to prohibit “Leadership PACs” from raising and

spending soft money. According to

the complaint, the FEC has adopted

regulations, contrary to the intent of

the law, that allow Leadership PACs

established and controlled by federal

officeholders to continue raising and

spending soft money. 11 CFR

300.2(c)(2).

Definition of “Federal Election

Activity.” Under the BCRA, state

parties are prohibited from using

soft money for “federal election

activities.” The plaintiffs argue that

FEC regulations constrict the

definition of “federal election

activity” to allow the continued

spending of soft money. The

complaint contends that the FEC

departed significantly from its past

regulatory definitions of “get-outthe-vote activity,” “voter identification,” “generic campaign activity,”

“voter registration” and other key

terms to allow activities that influence federal elections to be paid for

with soft money.

Other Provisions. The plaintiffs

additionally allege, among other

things, that FEC regulations:

• Allow the solicitation costs for

raising so-called “Levin funds” to

be paid with those funds, while the

BCRA stipulates that those costs

must be paid with federal funds;

• Extend the use of state party

building funds to office equipment

and furniture, while the BCRA

meant to limit the use of such

funds to the purchase or construction of an office building; and

• Improperly define “state,” “district” or “local” party committees

by requiring that such committees

be part of “the official party

structure.” 11 CFR 100.14.

Relief. The plaintiffs ask the court

to declare the referenced soft money

regulations contrary to law, arbitrary

and capricious and otherwise

unlawful, and to enjoin the Commission from enforcing them.

U.S. District Court for the

District of Columbia,

1:02CV01984.✦

—Gary Mullen

Court Cases

(continued from page 13)
December 2002 Federal Election Commission RECORD

15

Advisory

Opinions

AO 2002-7

Political Fundraising

Services Provided by

Internet Service Provider

Careau & Co. and Moher Communications (the Companies) may

require Internet service provider

(ISP) subscribers to pay a monthly

service fee that includes up to $2.00

per month in contributions to

political committees or donations to

charities. This activity will not result

in prohibited contributions to

recipient political committees

because:

• The corporations providing

services will receive a commercially-reasonable payment;

• The contributions will be forwarded to the political committees

through a separate merchant

account rather than through the

Companies’ corporate treasury

funds; and

• The contributors will be screened

to ensure that they may permissibly contribute to federal political

committees. 2 U.S.C. §441b(a).

Background

The Companies, both of which

are incorporated, operate an Internet

site and propose allowing visitors to

the site to subscribe to an ISP

service they will provide. To receive

the service, subscribers must use

their debit or credit cards (or other

electronic means) to make two types

of monthly payments:

• One for the cost of the ISP service

($15.76) ; and

• Another in the form of a contribution to a federal political committee or a donation to a charity (up to

$2.00 divided among as many as

five political committees and/or

charities).

The federal committees that will

receive contributions will be determined by where the subscriber lives.

The political committees participating in the plan, called the America

Plan, will direct their supporters to

the registration web site in the hopes

that they will both sign up for the

ISP service and choose the option of

making a contribution to political

committees. Additionally, in order

to subscribe, individuals must

answer a series of questions intended to ensure that those who

participate in that part of the program can make contributions to

federal committees.

When a subscriber makes his or

her monthly payments, the funds

representing payment for the ISP

services will be transferred directly

to the Companies, and any amount

representing the contribution to a

political committee will go directly

to a separate merchant account.

Following the deduction of the usual

and normal service charges of the

credit card issuers and other processing expenses, the political

committee will receive the contributions. Moreover, a portion of these

contributions will also go to the

Companies as payment for services

to the political committees participating in the America Plan.

Analysis

The Federal Election Campaign

Act (the Act) and Commission

regulations ban corporations from

making contributions and expenditures in connection with any federal

election and ban federal candidates

and committees from accepting such

contributions. 2 U.S.C. §441b(a). In

several past advisory opinions, the

Commission has permitted transactions involving a bona fide commercial relationship between political

committees and service providers,

so long as the vendor receives the

usual and normal charge for its

services, including an adequate

profit. These arrangements do not

result in contributions from the

service providers to the political

committees. AOs 1999-22, 1995-

33, 1994-33 and 1990-14.

The Companies’ proposal closely

follows these commercially-reasonable relationships. First, no corporate contributions will result from

the transactions—vendors providing

processing services will be compensated with contributed funds and the

Companies will be compensated by

the federal political committees for

creating the web site and arranging

for the processing services. Second,

the funds contributed will be

forwarded, minus processing fees, to

the political committees or charities

through the use of a merchant

account and, thus, will not become

corporate treasury funds of the

Companies. Finally, the screening

procedure for the electronic payment of contributions is well within

the “safe harbor” for determining

whether individuals can contribute

to federal political committees, as

discussed in previous advisory

opinions. AOs 1999-9 and 1999-22.

Thus, the Companies’ proposed

activity is permissible under the Act

and Commission regulations.

Length: 9 pages; Date Issued:

October 10, 2002.✦

—Amy Kort

AO 2002-11

Nonaffiliation of Trade

Association SSFs

The Mortgage Bankers Association of America Political Action

Committee (MBAA PAC) and the

Texas Mortgage Bankers Association Political Action Committee

(TMBA PAC) are not affiliated for

the purposes of the Federal Election

Campaign Act (the Act). The

Mortgage Bankers Association

(MBAA), a national trade association, and its member state associations, including the Texas Mortgage

Bankers Association (TMBA), do

not have an overall relationship that

(continued on page 16)
Federal Election Commission RECORD December 2002

16

Advisory Opinions

(continued from page 15)

• Has the authority to hire, appoint,

demote or otherwise control the

officers or other decision making

employees or members of another

sponsoring organization or committee;

• Has a common or overlapping

membership with another sponsoring organization or committee that

indicates a formal or ongoing

relationship;

• Has a common or overlapping

officers or employees with another

sponsoring organization or committee that indicates a formal or

ongoing relationship;

• Provides funds or goods in a

significant amount or on an

ongoing basis to another sponsoring organization or committee;

• Causes or arranges for funds to be

provided in a significant amount or

on an ongoing basis to another

sponsoring organization or committee;

• Had an active or significant role in

the formation of another sponsoring organization or committee; and

• Has a pattern of contributions or

contributors similar to that of

another sponsoring organization or

committee indicating a formal or

ongoing relationship. 11 CFR

100.5(g)(4)(ii) and 11 CFR

110.3(a)(3)(ii)(B), (C), (E), (G),

(H), (I) and (J).

MBAA as a Federation of Trade

Associations

MBAA does not have the traditional features of a federated

structure, such as multi-tiered

membership, dues collection, board

representations or prescription of

major bylaws. TMBA bylaws also

make no reference to MBAA.

Additionally, the organizations do

not have other connections that have

led the Commission to determine in

past advisory opinions that a

national association is a federation.

For example, MBAA’s board is not

organized on the basis of any state

division, and its board members do

not act as liaisons between MBAA

indicates that they are affiliated. As

a result, MBAA PAC and TMBA

PAC do not need to aggregate their

contributions for the purposes of the

Act’s limits. 2 U.S.C. §441a.

Background

MBAA is a trade association that

represents the real estate finance

industry. It is composed of 2,174

“Regular Members” and “Associate

Members,” which are business

organizations and financial institutions. It also has “Adjunct Members,” which include state mortgage

bankers associations such as

TMBA. These 46 state association

members pay annual dues but do not

have voting power, including the

power to elect the chairman, vice

chairman and chairman-elect of the

MBAA.

Commission Regulations

Federation of trade associations.

Commission regulations define a

federation of trade associations as

“an organization representing trade

associations involved in the same or

allied line of commerce.” 11 CFR

114.8(g)(1). In past advisory

opinions, the Commission has

determined that certain national

trade associations with component

state organizations were federations

of trade associations. Typically,

these national associations have

component state organizations that

are officially recognized as such

through the national association’s

interconnections with each state

association. For example, a federation of state associations might

entail:

• A significant portion of the

national association’s board

consisting of representatives of the

state association;

• Membership in the local or state

entity as either a requirement for

membership in the national

association or providing automatic

membership in the national

association;

• Dues for the higher level of the

organization that are collected at

the lower level; or

• Prescription by the national

association of major portions of a

state association’s bylaws (AOs

1998-19, 1995-17, 1994-19 and

1991-24).

When a national trade association

has these features or other close

connections to the state associations,

the Commission has considered

these features when determining

both federation status and whether

there is affiliation between the

organizations. Features that lead the

Commission to conclude that an

association is a federation of trade

associations will very likely lead to

a conclusion that the national and

state or local organizations are

affiliated under Commission

regulations. A federation’s ability to

solicit the restricted class of the

corporate members of a state trade

association is dependent on whether

the federation’s PAC is affiliated

with that of the state association.

See 11 CFR 114.8(g) and

100.5(g)(4).

Affiliation. Committees that are

affiliated are considered a single

committee under the Act and must

share contribution limits. Certain

groups are considered per se

affiliated under Commission

regulations. 11 CFR 100.5(g)(3) and

110.3(a)(2). When entities are not

per se affiliated, the regulations

provide for an examination of

various factors, considered in the

context of an overall relationship, to

determine affiliation. In this case,

the relevant factors to be examined

are whether the sponsoring organization or committee:

• Has the authority or ability to

direct or participate in the governance of another sponsoring

organization or committee through

provisions of constitutions, bylaws, contracts or other rules;
December 2002 Federal Election Commission RECORD

17

and the state associations. See AO

1995-12.

MBAA may represent the state

associations to a certain extent with

respect to the policy interests of

those associations before governmental entities, and it also has a

number of other contacts with the

state associations.1

 In the sense that

MBAA is a representative of the

state trade associations and has a

relationship with these organizations, it may be construed as a

federation of trade associations.

Nevertheless, the Commission’s

conclusion that MBAA is a loose

federation of trade associations does

not answer the question of whether

MBAA and TMBA are affiliated

under 11 CFR 100.5.

Affiliation of MBAA and TMBA

TMBA is not affiliated with

MBAA under Commission regulations. Although the state associations as a group have a seat on the

MBAA Board of Directors, this seat

constitutes only one of 20 directors.

Also, state association bylaws do

not provide for other official links

between the national board and the

state association boards, such as

state association board seats held by

national board members. MBAA’s

Boards of Governors, which are the

subordinate governing bodies, do

not include official representation of

the state associations. Moreover,

there is a lack of overlap of directors, governors, officers and employees between MBAA and

TMBA. Significantly, the membership overlap is also small between

the national and state organizations.

See, for comparison, AO 1995-12.

The conclusion that the national

and state associations are not

affiliated is further supported by:

• The lack of a more traditional

federated structure (11 CFR

110.3(a)(3)(ii)(B), (C), (D) and

(E));

• The lack of dues consolidation2

 (11

CFR 110.3(a)(3)(ii)(G), (H);

• The fact that neither MBAA nor

MBAA PAC were involved in the

formation of the state associations

or any state association PACs; and

• The lack of personnel overlap or

control between MBAA PAC and

the state associations’ PACs, and

the PACs’ lack of shared discussion about their activities on a

federal or nonfederal level. (11

CFR 100.5(g)(4)(ii) and

110.3(a)(3)(ii)(I) and (J)).

Based on all of these factors,

considered in the context of the

overall relationship between MBAA

and TMBA (and the relationship

between their PACs), TMBA is not

an affiliate of MBAA under Commission regulations, and MBAA

PAC and TMBA PAC are not

affiliated. As a result, the two PACs

do not share contribution limits.2

U.S.C. §441a. Additionally,

TMBA’s corporate members may

not give prior approval to MBAA to

solicit their restricted class, and

MBAA PAC may not solicit the

restricted class of TMBA’s corporate members, unless those corporate members are also members of

MBAA in their own right and have

given prior approval. 11 CFR

114.(c) and (d). Similarly, the

restricted class of MBAA’s corpo1 According to the requesters, groups of

other MBAA members (for example

businesses) have similar types of

contacts and interactions with MBAA,

and cooperation between the state

associations and MBAA is voluntary

and may, at times, not occur because of

disagreements.

2 According to the advisory opinion

request, MBAA has a program that

involves some arrangement for state

associations to receive finds from

MBAA disbursements, but these

amounts are an insignificant portion of

the budgets of the associations involved.

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 at www.fec.gov/

pages/pacronym.htm.

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.

(continued on page 18)
Federal Election Commission RECORD December 2002

18

rate members may not be solicited

for contributions to TMBA PAC,

unless they are members of TMBA

in their own right and have given

TMBA prior approval.

Date Issued: October 10, 2002;

Length: 16 pages.✦

—Amy Kort

Advisory Opinion Requests

AOR 2002-13

Financing 2002 election recounts

under Bipartisan Campaign Reform

Act of 2002 and its implementing

regulations (Democratic Senatorial

Campaign Committee, Democratic

Congressional Committee, National

Republican Senatorial Campaign

Committee and National Republican

Congressional Committee, October

31, 2002)

The committees withdrew this

request on November 13, 2002.

AOR 2002-14

Permissibility of national party

committee commercial revenue

under the Bipartisan Campaign

Reform Act of 2002 (Libertarian

National Committee, Inc., October

25, 2002)✦

FEC Roundtables

On January 8, 2003, the Commission will host a roundtable session

on the FEC’s new regulations

governing contribution limits and

prohibitions. This roundtable is

limited to 35 participants, and will

be conducted at the FEC’s headquarters in Washington, DC. The

roundtable will begin at 9:30 a.m.

and last until 11:00. Please arrive no

later than 9:15, in order to allow for

security screening.

Registration is $25 and will be

accepted on a first-come, firstserved basis. Please call the FEC

before registering or sending money

to be sure that openings remain in

the session. Prepayment is required.

The registration form is available at

the FEC’s web site at http://

www.fec.gov/pages/infosvc.htm and

from Faxline, the FEC’s automated

fax system (202/501-3413, request

document 590). For more information, call 800/424-9530 (press 1,

then 3) or 202/694-1100.✦

Outreach

Federal Register

Federal Register notices are

available from the FEC’s Public

Records Office, on the FEC web

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

register.htm and from the FEC

faxline, 202/501-3413.

Notice 2002-22

Final Rules on Contribution

Limitations and Prohibitions (67

FR 69928, November 19, 2002).

Date Subject Intended Audience

Roundtable Schedule

January 8 Contribution Limits and • Individuals

Prohibitions • Treasurers

9:30 - 11 a.m. • Increased limits for individuals • Political committees

and political committees • Attorneys and

• Reattributions and consultants to

redesignations above

• Recordkeeping requirements

• Prohibitions on contributions

by minors

• Prohibitions on contributions

and expenditures by foreign

nationals

FEC Conferences in 2003

The Commission will hold a

conference March 12-13, 2003, for

candidates and party committees,

and a conference April 29-30, 2003,

for corporations and their political

action committees (PACs). Both

conferences will be in Washington,

DC. These conferences will consist

of a series of interactive workshops

presented by Commissioners and

FEC staff, who will explain how the

requirements of the federal campaign finance law apply to federal

candidates and officeholders, House

and Senate campaigns and political

party committees, at the March

conference, and to corporations and

their PACs at the April conference.

Many workshops will specifically

focus on new requirements under

the recently-enacted Bipartisan

Campaign Reform Act of 2002

(BCRA).

Details about these conferences,

including registration information,

will be available in the January issue

of the Record. For more information

about FEC conferences, please visit

the FEC web site at http://

www.fec.gov/pages/

infosvc.htm#Conferences.✦

Advisory Opinions

(continued from page 17)
December 2002 Federal Election Commission RECORD

19

Index 2002-9: Disclaimer exception

applied to political ads sent via

short messaging service, 10:8

2002-10: State committee status,

9:14

2002-11: Nonaffiliation of trade

association SSFs, 12:15

Compliance

Administrative Fine program

extended, 1:13

Alternative Dispute Resolution

program made permanent, 11:10

Cases resolved under Alternative

Dispute Resolution program, 7:6;

9:16; 10:9; 11:12; 12:10

Committees fined under Administrative Fine program, 1:13; 2:7;

3:11; 5:5, 6:10; 8:6; 9:18; 11:14

MUR 4530, et al.: Foreign National

Contributions in 1996 Election,

11:8

MUR 5041: Contribution in the

name of another made by corporation, 8:5

Nonfilers, 6:5; 7:7; 10:9; 12:10

Court Cases

_____ v. FEC

– AFL-CIO, 2:3; 3:5

– Alliance for Democracy, 5:3

– Baker, 4:3

– Beaumont, 3:4

– Cannon, 12:13

– Common Cause and Democracy

21, 2:4

– Echols, 5:3; 6:4

– Friends for Houghton, 9:15

– Graham, 7:5

– Judicial Watch, Inc., and Peter F.

Paul, 3:3

– McConnell, 5:3; 6:4

– Miles for Senate, 3:1

– NRA, 5:3

– RNC, 12:13

– Schaefer, 9:16

– Shays and Meehan, 12:13

– Stevens, 10:7

– Wertheimer, 1:12

FEC v. _____

– Democratic Party of New Mexico,

7:5

– Freedom’s Heritage Forum, 8:2

– Specter ’96, 5:3

– Triad Management Services, 8:4

The first number in each citation

refers to the “number” (month) of

the 2002 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 2001-15,

3:9; 2001-20, 3:9

2001-13: National committee status

of party committee, 1:11

2001-16: Extension of 70-day

window for transferring funds for

allocable expenses after suspension of party fundraising due to

national emergency, 2:1

2001-17: Reporting contributions

made via single check split

between federal and nonfederal

accounts, 3:5

2001-18: Affiliation between LLC

PAC and PACs of corporate

owners in 60-40 joint venture, 3:7

2001-19: Non-preemption of state

law prohibiting political

committee’s bingo license, 3:8

2002-1: Coalition of minor parties

supporting candidate(s) who

together gain five percent of vote

not eligible for Presidential public

funding, 4:3

2002-2: Preemption of state law

barring lobbyist from fundraising

for Congressional candidate who

is member of Maryland General

Assembly, 4:4

2002-3: State committee status, 6:6

2002-4: Name and Abbreviation of

SSF, 6:7

2002-6: State committee status, 7:4

2002-7: Political fundraising

services provided by Internet

service provider, 12:15

2002-8: Return of federal funds

from nonfederal account to

federal account, 9:13

Regulations

Administrative fines, Notice of

Proposed Rulemaking, 6:2

Allocation of candidate travel

expenses, interpretation, 3:2

BCRA requirements for Louisiana

runoff election, 12:1

BCRA reporting, Notice of Proposed Rulemaking, 11:6

BCRA takes effect, 11:1

Brokerage loans and lines of credit,

final rules, 7:2

Candidate debates, petition for

rulemaking, 6:4

Civil penalties, no increase, 3:2

Contribution and expenditure

definitions, Notice of Proposed

Rulemaking, 7:3; final rules, 9:9

Contribution limitations and prohibitions, Notice of Proposed

Rulemaking, 9:11; final rules,

12:8

Coordinated and independent

expenditures, Notice of Proposed

Rulemaking, 10:4

Disclaimers, fraudulent solicitation,

civil penalties and personal use of

campaign funds, Notice of

Proposed Rulemaking, 10:1

“Electioneering Communications,”

Notice of Proposed Rulemaking,

9:10; final rules, 11:3

Independent expenditure reporting,

final rules, 5:2; effective date, 7:1

Soft money rules, Notice of Proposed Rulemaking, 6:1; final

rules, 9:1

Use of Internet, public hearing, 3:1

Reports

Alaska and Iowa certified for state

filing waiver, 7:1

April reporting reminder, 4:1

Georgia runoff election, 11:12

Hawaii special election, 11:5; 12:12

Independent expenditure reporting,

new forms, 6:9; effective date 7:1

Iowa convention reporting, 7:4

IRS filing requirements, 1:11; 6:8

Louisiana primary, 8:1

North Carolina primary, 8:2

October reporting reminder, 10:1

(continued on page 20)
FEDERAL ELECTION COMMISSION

999 E Street, NW

Washington, DC 20463

Official Business

Penalty for Private Use, $300

Presorted Standard

Postage and Fees Paid

Federal Election Commission

Permit Number G-31

Printed on recycled paper

Federal Election Commission RECORD December 2002

Policy statement: interim reporting

procedures, 12:1

Post-General reporting reminder,

11:1

Massachusetts state filing waiver,

11:2

Reports due in 2002, 1:2

Virginia convention reporting, 5:6

48-hour notice periods for 2002

primaries, 3:10

Index

(continued from page 19)