July 31, 19'i~.l"ersion 

Calendar No. 402 

0-!ru CoNonESs } SENATE REPORT··. 1,t Se8aiun. { No.·94-409 

DIS.APPUOVING TlVO REGULATIONS PROPOSED BY THE 

· FEDERAL ·ELECTION COlIMISSION 

OcToBEn 6 (legislnti\"e dn.r, SEP'J'E)(BEB 11), 1975.-0rdered ·to be prlllted 

ATr.ACHHENT 3 . 

JC'STIFIC.A TION OF PART 113--0FFICE ACCOUNTS A~D FRANKING ACCOUNT: 

EXCESS CAKP.AIGN CONTRIBUTIONS 

This statement will provide justification for the proposed office account regulation on a section-by-section basis. · . : 

§ 113.S Oontnoutiom and Ea:penditure Limitatio,,u and Prohibition, 

Contributions to and expenditures by an office account are treated as 

political contributions and el:J?enditures subject to the limitations and 

prohibitions. on such transactions. There are two exceptions: Matter 

sent under the frank and monies appropria~d by Cong~ to fulfill 

the functions '?f ~ Member ofCon~e.ss. . . . · : · . · ·. The Comm1ss1on, pursuant to its duty to formulate general pohcy 

with respect to the administration of the Federeal Election Compaign . Act, as amended (the Act) [See 2 U.S.C. § 437d(a).(9) ], and to its 

nuthoritJ under 2 tr.S.C. § 437d(d) (8.), has determined inat expendi- . tures· ana contributions over and above the two exce~tions should be 

treated as political in nature. This determination is_based on recent 1 

leg~slation concerning the frank a.nd the tax treatment· of newsletter Jl 

accounts. . ·· · ·· · · .. · . =congress bas determined that the cost of preparing ·and printing 

frankable matter should not be considered a contribution or an espenditure for the purpose of determining any limitation on e~penditures or contributions. 39 U.S.C. § 3210(f). The Commission has 

follo,ved this precedent in its treatment of frankable matter. Congress­ ·" man Frenzel, in supporting the Federal Election Campaign Act 

.Amendments of 197 4, stated : .. Questions hn.ve been raised as to whether or not congre~ionnl 

newsletters and other similar publications would be considered 

eitpen?itures under the provisions of this bill. The congressional 

franking law passed ]ast sprinl? clearly states that sucli newsletters and other similar publications are legitimo.te expenses and . . co.n be sent under the frank. In general, I believe the Commission 

should follow the following guideline: If an:v item or publication 

can be sent under the frank. it should not be counted as an ex:. 

penditure for the purpose of influencing an election. Hence, congressional newsletters and other similar publications need not be 

c~edited to the contribution or expenditures of congressional . candidntes. 120 Cong. Rec. H 10383 (Daily Ed., October 10.1974) 

It lo~ically follows nt tlie very lenst that n newsletter and.other matter 'not sent under the frank should be considered political ·and there- . S. Res. Bept. 9~09--!? · · 
.• 1,_ 

10 

fore funds contributed and expended to support such ne~Ysletters anll 

other matter should be subje~t to the limitations of ~8 U.S.C. § up8(c). 

Several other laws dealw1th franked matter wluch suggest its use 

should be non-politic!1~· See 30 U.S.q. § 32IO(a) (5) ~C). ]for example, 

no franked mass· mailmgs ar~ 1?e.rn~1tted l~ss ~han 28 days bcf o.r~ nn 

election. Activities such as sohc1tmg contr1buhons and mass ma1hngs 

within four weeks of an election are clearly l)Olitical and funds used 

for these purposes should clearly be treated as expenditures and contributions subject to all limitations in the Federal Election Campaign 

.A.ct. 

Recent tax legislation reflects the intimate relationship between 

newsletter funds and campaign funds. The co1,ference re1Jort to · the 

Upholstery. Regulator Act states: "Generally newsletter committees · nnd separate funds arc to be treated for tax purposes in the same 

manner as political campaign committees." H. Rept. 03-1642, 03d 

Con"'., 2nd Sess. 22. During the debate ·.on this legislation, se,·crnl 

lien~bers further noted the simila~·ity ~etween these two . types· of · funds: .. . )fr. SCHNEEBELI .. Another change of importance would make 

individual contributions to candidates for public office which nre 

used for newsletters to be eligible for the aboye.;.mentioned income 

tax credit for deductions. - . · . 

··:Mr. ULLMA~. Mr. Speaker these provisions place in the law 

the procedures outlining how we can use funds we 11aYe colJectecl 

·for~ political pu17?oaes, for n_ewslette1~ purJJoses. ll"' c think tl1is· 

aY01ds the ·necessity for haYmg n. separate ne,,sletter fund for 

)!embers who ha~·e a continuing can~p.aign fund ( emphasis 

ndclecl). ( Oongresszonal Record, daily ed1t1011 December 20, 107 4, 

page H12507.) . . .. 

This exchnnge nncl the quoted -report seem to the Commission to be 

a statement of Congressional nwnreness of the political and campaign 

nature of some newsletters. 

The Upholstery Regulator .Act permits individual taxpayers to 

take. a tax deduction or a tax credit for money gh·en to n newsletter 

nccomit. 26 U.S.C. ~§ 41 nnd 218. These sections of the Internal · Revenue Code treat 11ewslctter fund contributions nncl politicnl contributions in the same manner; lumping the two together to allow· 

nn nggre~ate tnx deduction or credit. Following this precedent the 

Commission will treat funds cont.ributecl to support a 11011-frnnknble 

newsletter as a political contribution an<l expenditures made in con1~ection with such newsletter as nn expC'ncliture subject to the limitn- hons of the Act. · 

The Commission is of t11c opinion, howeyer~ t.hnt Con~ressionnl 

npproprintior~s for stnff snl~u:ies, ncw~Jett?,rs, sta!i?1~ery and 'tr,n·el nre 

for presmnptn-c]y non-poht1cnl, leg1sfotn·e nct1v1t1es and therefor<.' 

not subject to the limitations nncl prohibitions of the Act. One ma)! 

n~sume thn_t .Con;ress.hns proYidC'cl or wil p_roYide su~cient funds foi· 

the ]!Orypohhcnl fnn~tions of the )fomhcrslup . .According-1y. acldit.ionn] 

momes not appropriated by Con~r<:ss but rather raised indepenclent.Jy 

Ly ~J~c )fombers the!11scl~-es or t.he11· supporters should be Yiewed as . pohticnl ni!d not lcg1$l:~t!Ye funds. Congress is~ of course, alwnys free 

to npproprrnte any nclchtionnl fmHls deemed necessary to enable Mem-

(~ _· .) 
11 .. . hers to carrv out their legislative functions. Indeed~ the point was 

recently emphasized by the Honornblc "'nyne L. Hnys, wlien he il}­

clicnted that such ndclitional money shonld come from the pu~hc 

treasury and not from contributions to Members or from the Mem

- bers' own pockct.1 . . . 

§ 1 J.'J.3 Deposits of F11,nds into Offece an<l F1·a1zking Acco~u,nta 

This section was drafted to implement 2 U.S.C. 439n. The provision . of separate accounts fnci1itntes reporting so that different accounts. 

nre not commingled. Members of Congress will have the option of 

usin~ a principal cnmpaij?.11 committee or an office account to make 

certam expenditures, questionmure. . such as for a non-franknble newsletter or · · 

§ 113.4 Rep01·ts of Franking Accounts nnd 

§ 113.5 Repo1·ta of Offece Accou-nta . 

· 2 U.S.C. 430a provides that contributions to a federal officeholder 

for t.he purpose of support.in~ his or her activit.ies as an officeholder 

nnd expenditures thereof "shall be fullv disclosed in accordnnce with 

rules promulgated bv the C-0mmission. ;, The Commission determined 

that office .accounts, ·since they are. treated for most purposes· as political ( See Section 113~2, attpm), should file in the same manner and 

at the same time ns political committees. Franking accounts are require~ to file less often, twice a year, so as not to oe unduly burdensome to legislators. The times for filing were established so that the 

franking··account reports would be available for public inspection. 

prior.tot.he general elections. 

§ JJJ.6 Excess Oam.1Jaign F·unda 

· · .. ·· This sect.ion has been proposed pursuant to the Commission's rulemaking Authority under 2 U.S.C. 439a. . 
18 

A'lTA.ClDIE~T 3 

Jrs·ru·1cATIOX OF l'AUT 113--0FFICE ACCOUXTS; EXCESS CA)IPAIGX FUXDS 

( .. 1"his stat!'ment will provide justification for the proposed office ac- ·' 

count regulation on a section:..by-section basis. · · · · 

§ 113.! E.rpenditu1·es-Limitations 

. Expenditures bv office accounts are presumed to be campaiin-related 

when made during the calendar year of the usual general election for 

the House of Representath"es and during the year before as well as 

during the calendar year of the affected candidate's election for the 

Senntc. On the bnsis of the record of Commission's hearing held 911 

September 16 nnd 17, 19i5, and in light of comments received from the 

public })nrsunnt to the Notice of Proposed Rulemakiilg published 

August 5, 1975 ( 40 FR 32951), the Commission concludes that the forcgoin~ one ancl two-)·ear presumptions f9r House and Senate candidates 

respecti ,·e]y are fuir and reasonable. The presumption exists for a 

longer, c-ontinuing period for a Senator than ·for a :Member of the 

House of Representatives because Senators generally represent larger 

districts thnn Representatives and their campaigns must normally . commence nt nn earlier t.ime. It may be noted, howe\"'er, that over a sixyear period the presumption operates for o_nly two years with respect 

to a Senator but for three separated years with respect to a Representn~ th·e. · ·· 

The Commission, pursuant to its duty to formulate rneral policy 

with respect to the administration of the Federal Election Campaign 

.Act~ as amended (the Act) [see 2 U.S.C. § 437d(a) (9) ], and to its authority under 2 U.S.C. 437(a) (8), has determined that expenditures · 111:idc during these one and two-year periods respectively should be 

presumed to be campaign related. This determination is based on reC(.\llt le!!islntion concerning the franking·prhilege and, as noted~ comments receh·ed from the public, as well as the testimony submitted nt 

the benrimrs held on Se_ptember 16th and 17th. 

Congress has determined that funds used to pay the costs of preparing nnd printing frankable matter should not be considered an expen­ 0 diture for the purpose of determining any limitation on expenditures. 

ao 'C'.S.C. § 3210(£). The Commission has followed this precedent in· · its treatment of f rnnka.ble matter. Congressman Frenzel, in supporting 

the Feclernl Election Campaign Act .Amendments of 197 4, stated : · · ... Questions hn,·e been raised as to whether or not congressional · newsletters and other similar publications would be considered 

expenditures under the proYisJons of this bill. The congression~l . franking law pas~ec~ Jnst sp~m~. clearly st~tfS. that such news- . letters nntl other smulnr pubhcat1ons nre ]eg1tunate expenses and 

c:.m be sent under the frank. In ~enernl. I belieYe the Commission 

sho111<1 fo11ow the following.guideline: If any item or publicntio}l 

cnn be sent under the frnnk. 1t shon1d not be counted as nn expend1- · tun~ for tl1e purpo~e of influendn~ nn election. Hence~ congressionnl newsletters and other similar publications need not b~ 

credited to t.he contribut.ion or exp<'nditures limits of congressionn 1 candidates. 120 Oong. Rec. H. 1Q333 (Dai]~· Ed., Oct.. 10, 

107-1} 
I 

10 

It logica1ly follows that a newsletter or other matter, not under the 

frank~ nncl sent in re]atfrely dose proximity to an election should be 

considered campnig11-rclnted; and therefore funds cxpcnclecl (within 

tJ1e Jnst full year of n. Rcprcsentnth·c~s term and within the fast two 

full yen rs of a Senator!s term) to support snch ne\\~slctters nud other 

matter shouhl be subject to tl1e limitations of 18 r.s.c. § GOS ( C). 

1Vith respect to office accounts. the proposed rcg1Hation creates a 

1·ebuttahle presumption thut~ h1 the cnse of n Se1uitor, for c.:tnmple, 

<'xpen<litures mndc out of such nn account nre uon-cnmpnign-relatcd 

for the first four years of the Senator·s term, bnt are to be rresu1ned 

to he campaign related tlw1·cafter unt.il the close of the Senntor~s 

tPrm. T('stimony presented at the Commission~s hcnrjn~s held on Septemher Ill nncl 17, 1075, fully support this presumption appronch. 

Senator Teel Ste,·cns testified tJrnt the recording studio precedent 

~honlcl be followed (2 U.S.C. ·:134 ( d)). (Trnnscript at p. 39.) Senn tor 

Stcnms lntcr conclnclecl, "" ... e merely ,,·nnt a presumpt.1on * * * thnt 

expens~s from the account arc presumed not to be political but if they 

nre political You~,·e got to charg(' them." (Transcript at p. 41.) 

l\Ir. Roy Gi·eenawny, .Aclministrn.th·e .A.ssistnnt to Senntor Cranston, . · n]so supported the presumption npproach in his testimony .. (Trnnscript · · 

nt p. 156.) :\Ir. Greenawny stat-eel '"Let me make clear, though! thnt 

<lnring the last two years~ once l1c [Senator Cranston] is a canchclate, 

wi~ clon~t charge nny tr:ffcl to the Senate. 1Yc just nssumc that once 

lH!~S a enndiclnte, 11e~s a candidate.'' .. Commissio11er St.neb]cr asked: "Did I gather that in the last two 

yenrs prior to an election the Senn tor regards all of 1iis traye]s ns 

political f' .. ·· · . · . · · )Ir. Greennwny: "Almost nll of it-unless it is clearly not. 1Ye woul<l 

h(\ncl o,·('r bnclrn:arcls to htffe his campaign committee, which has been 

formed. to pnY for his trnYeV'~ (Transcript nt p.158.) · 

· :\Ir. Hohe1t .. Thomson~ Counsel to the Sennte Democratic Cnmpnign 

CommitteC''.' Inter mnde additional comment on tbe practical wisdom of 

l'P!!'n 1·din!!' actiYities cJoscr to an election in a different manner: 

! .... . · ~ Tei me it makes n Jot of sense to nppl)· a time period rule similar 

to t.hnt expressed in my fourth cxnm1)le~ the one thnt. is contained •. in the FEC.A [2 U.S.C. 434( cl)] ns it now exists, appl~·ing th~. 

rc~ulntion simiJnr to as you have writ.ten it so far, during the year ' prior to the ~·enr in which the term expires .. I think on the Senate side there mnY be n. feeling in some quarters thnt. perhaps it is too libernl a rnie; it sl1on]cl jlerhnps extend 

to t l1e two calcncfar yeu rs ,Y11ich precede the :ren r in which the term 

cxp1rC'S. . . I think either of those approaches wonlcl be nrceptnhle. the form<'l· b('in~ prc>ferable from the standpoint of some! un<.l the lntter 

lwinl,!' prefemhle from th(' stnnclpoint of others. . . Th<' testimony nt these henring-s proYiclerl nrnr nn:mimous n~re<'ment 

tlwt the time pcriod/presmnption approach is rea~onnble. Diff<'renccs 

of opinion ns to the length of the time period Wl'rc cxpress~d. S<'nators 

SteYCll!=; :md .Tohnston supported n one-year pre~muption. (Transcript 

nt. pp. 1n, ati.) Tioy Greenaway stateclthnt n 8<'nnt01··s cn.mpnign starts 

two m· thr<'Py('ars before the ~xpimt:on of his 01· lwr t<'rm. (Transcript 

nt p. Hil.) Fred ,v ertl1<'inH·r tr.stifled 011 b('lrn lf of Comp1ou Cause thnt 
20 

tlie presum~ al1ould apply for all ab years of a &mton t_... and . for all of a Re.presentath·•!• term. (Tramcript, at. .pp! 'i6. ii.) Louile 

Wides, teetifJin2 on behalf of the Center for · Palilic l'in1ucms of 

Election.~ said tliit a ~wo-year presumption .for the ~te ~ be ff' 

appropnAte. (Tnnacn~ at pp. H tT.)•.The Comm1•on ~ 

that this proLJem may be re10h-;J in dift'erent wars, bot has eoncl~dcd thAt the t~o-year/one-yeor presumption approorb is eminently fn1r a11d n1ost rnsonable. · . 

§ 113.3 Ctmt,-il,11tion1-Prolu1Jition1 and_ Limitation, 

(a} The Commission ~s bearings 011 office· accounts weft ma rkl'<l b,l' 

ummimo,is a~ment on tl1e point tbnt coun-ibntious to oftlre atcounts 

from union and corporate treDS11ries should be prohibited. (Tr.111- script nt pp. 52, 87, 90, lai, 181, 182, 1g.2, 193.) Smee tl1~ regulation 

crea.tes :i. n1ere presumption tbat expenditures from an oOice a.ccount · du1·ing the first four years o~ a Senator's term and the first ,·ea1· of a 

Representath·e's term a1-e not campaign related, it is wholly ~ible. 

that funds fO contributed may be used to influence an election; and the·· 

presilDlption can acco1·clingly be rebuttt'd. To clearh- seppte co1·- . porate and union funcls from tliese potentinlly campa1gn-re1atcd u~c:;. 

conti·ibntions from · corpor:ite :mcl union h-ensuries ~re prohibit~cl. 

Similarly, go,·ermnent contrr.ctorsJmd foreign nntionnls :u-e not pcrmiUed to contribute funds to office accounts. 

(b) The limitations on contributions contained in the Fetlernl Election Campaign . ..\ct of 19;'1. ns amenclecl~ nre npplied to nil rontribntions 

to an office account. Since it is possib]e th:it office accounts ll"ill ~ used · for campaign p111·~ses nt an,· time during tl1e term of a llemoor of 

Congress, contributions to 111rh an account should be subject to the . Appropriate campaign limitat.ions throughout the entire t!rm· llowover, under recent Intemal Bevenu Code amendmmta m the t:p­ bolster\9 Regulator • .\ct. ~ontn1mtions to oflice accounts nn fl"l'ate,1 ns 

~liticil contn1>ntions. The legis]ath-e hi.45tory of this • .\ti nifteds ·the 

mtimate rel~ionship between office funds and campaign fun,u. The . conference n~ff to the Ad llates: IIQenera]]y ne1rlletter fOIIIJDitte.s 

(and Rparate fnnds) are to be treat..a for tax ~rposu in the snmt- ,· · manner as ~litirnl e.,m~gn ~mmittees." H. Bept. 93-1612. D.ircl <./ 

O>n:r .• !.?nd ~~ 22. Dnring the debntta on this l~lntion. &el9crn1 

)[cmJ;ers further noted tbe simiJnrity between tbesc t.l\·o types of 

funds: · . lir. Scit~'"EERF.T..t. Another chan~ of im~rhmce \'\"ould mnke · inclivid,1.111 N>ntrihntions to can,Udat~&: for public oftit-t' wl:ich ftt? 

n~cl for n,w~l<'tfe~ to he eli~ihle for t11e alx)\·e-mt'ntionr,1 inrnmr 

tn~ rt1'<1it fnr clPclnrtion~. .. · . :\Ir. r,.,.)r.,-x. )fr. s1~:1kC'r thC'~(' prot'i~ior.s pfoc-e in tl1r ]n,"" 

th~ prt-.rram·r~ nnt1inh1~ 110w wr ran rn=~ fun,l~ wc1 h:n·~ rn11r<'tNl. 

ior poli:irn1 1,m·pn~P• • .fm· ne1r.,1ctlrr p111•pt;1e.,. ,,e think tJ1i~ 

:n-oicls tl1r n~<'~~ih· for l1n,·in~ n SPpnrnte nrn-c:fottt'r fnnd fnr 

lff)ml~,-s "·1,n hn,·!' n rontiJ,.nin~ · c·:impni~1 fnncl · f<'mp1rn~i::; 

:ultlf'rl). ( f'nr.grn.;iiu11,1l Ccr·o1·1l! c.lnil~~ etlition Dec,·mher 20, lOi 4~ 

pn'!~Hl:?5!>7.\ . . '. . Thr rnl10l~f('J'\9 R<'!!Ulnt'>r . .\t-t pC'rmit~ in,lh·iclnnl tn~n:,ri'r.:; to t:tk<' 

n 1 :1 x ,lrchu·tinn ;r n t:i~= <'111,lit for mollP)· ~in'il to!\ new~lPttE'r :iccount. 

~r, C.~.r. §~ 4-11 an<l :?]~. Th<'~C' ~('rt!OllS of th!' Tntrrnn1 R<'n"'!me Coclt, 
i1 

treat newsletter fuml contrib,1tions and politicn] contribution·s in the 

snme manner; lumping the two together to allow an aggregate tnx 

cleduction · or credit. It is consistent, therefore, for the Commission to 

h'<'at funds contributed to support a nonfrankable newsletter ns politil":tl contributions· ·subject to the limitnt.ions of the Act: It should an-nin . ht' noted thnt the limitations do not applv to contributions earma~ked . for an accon11t wl1~ch is usc<l exclusivclj'~ to pny for the preparation 

.of fr:mknble materials. _ . 

§ 11.1.4 · Deposits of F·lfnds Oontrib.lttc<l to a Bolder of Federal Office 

This section wns drafted to implement 2 U.S.C. 430a .. The provision 

for separate accounts forestalls any confusing commingling of funds 

d.eclicated to different functions, and facilities accurate disclosure 

of the relevant transactions. :Members of Congress will have the option 

of n~ing a principal campaign committee or an office account to make 

ccrtni.n expenditures, such as for a non-frnnkab]e newsletter or 

'l neshonnn.ire. . . 

§ 113.5 Ezcesa Oa,mpaign Funds 

This sec.tion has been proposed pttrsuant to the Commission's rule- mnkin~ authority under 2 U.S.C. 430a. · . 

§ Jl.J.6 Report8 of § 113-4(b) .A.ccounts ancl-

§ 113.7 Reports of § 119.4(c) Accounts-Offe-cc Accounts·. 

2 U.S.C. 439a. provides that contributions t.o a Federal officeholder . · for the purpose of supporting his or her acth·ities as an officeholder 

n.nd exp_~nd1tures thereof "shnll 1?c !uU)· ~isclosed iJ! a~cordan~e ~ith ·.· · ru]es promulgntcd by t~e Comm1ss1on:' 1h~ Comm1ES1on cletermmed 

thnt oflke accounts may be used for cnmpa1gn-related purposes (See 

Section 113.2. and 113.3: supra), and therefore, should file in the same 

manner nncl at the same time ns political committees. § 113.4 (b) accounts are required to file less. often, t,vice _a j·ear, ,vhich should not · · . be unduly burdensome to legislators. The times for filing ''"ere estnb- · Jishecl so thnt the § ll!l.4(b) account reports would be available for 

public inspection prior to the general election. · ·· .