Federal 

Election 

Commission 

Annual Report 1990 

Federal Election Commission 

Washington, DC 20463 
Commissioners 

John Warren McGarry, Chairman 

Joan D. Aikens, Vice Chairman 

Lee Ann Elliott, Commissioner 

Thomas J. Josefiak, Commissioner 

Danny L McDonald, Commissioner 

Scott E. Thomas, Commissioner 

Ex Officio Commissioners 

Walter J. Stewart, Secretary of the Senate 

Donnald K. Anderson, Clerk of the House 

Statutory Officers 

John C. Surina, Staff Director 

Lawrence M. Noble, General Counsel 

Lynne A. McFarland, Inspector General 

The Annual Report 1990 was written and published by the 

Commission's Information Services Division. 
FEDERAL ELECTION COMMISSION 

WASHINGTON, D.C. 20463 

June 1, 1991 

The President of the United States 

The United States Senate 

The United States House of Representatives 

Dear Sirs: 

We are pleased to submit for your information the 16th 

annual report of the Federal Election Commission, as 

required by the Federal Election Campaign Act of 1971, as 

amended. The Annual Report 1990 describes the activities 

performed by the Commission in carrying out its duties under 

the Act. The report also outlines the legislative 

recommendations the Commission adopted and transmitted to 

the Congress for consideration in March 1991. We are 

hopeful that you will find this annual report a useful 

summary of the Commission's efforts to implement the Federal 

Election Campaign Act. 

McGarry 
Table of Contents 

Introduction 1 

Chapter 1 

Presidential Public Funding 3 

Shortfall in Fund by 1992 3 

Audits and Repayments 6 

Rules on Computer Formats for 

Presidential Audits 9 

Presidential Nominating Conventions 9 

Primary and General Election Candidates 9 

Chapter 2 

Administration of the Law 11 

Public Disclosure 11 

Regulations 12 

Advisory Opinions 13 

Assistance and Outreach 14 

Enforcement 15 

Clearinghouse on Election Administration 16 

Chapter 3 

Legallssues 17 

Nonprofit Corporations: MCFL Issues 17 

Foreign-Owned Corporations 18 

Fundraising Via 900-Lihe Telephone Service 19 

Excessive Contributions 20 

Redistricting 22 . 

Transfer from State PAC to Affiliated 

Federal PAC 22 

Newsletter Published by Candidate 23 

Chapter4 . 

Campaign Finance Statistics 25 

Chapter 5 

The Commission 33 

Commissioners 33 

International Delegations 33 

Ethics Training 33 

Personnel and Labor Relations 33 

Inspector General 34 

Administrative Management 34 

The FEC's Budget 34 

ChapterS 

Legislative Recommendations 37 

Legislative Action on Past Recommendations 37 

Public Financing 37 

Contributions and Expenditures 40 

Litigation 43 

Compliance 44 

Disclaimers 46 

Public Disclosure 48 

Registration and Reporting 50 

Agency Funding 53 

Miscellaneous 54 

Appendices 

1. Biographies of Commissioners and Officers 57 

2. Chronology of Events, 1990 61 

3. FEC Organization Chart 65 

4. FEC Offices 67 

5. Statistics on Commission Operations 71 

6. Allocation Regulations 75 

7. Debt Settlement Regulations 79 

8. 1990 Federal Register Notices 85 
Introduction 

The Commission marked its fifteenth year with the 

promulgation of major new regulations and the 

expansion of its on-line computer service to the 

public. New regulations pertaining to the allocation of 

federal and nonfederal expenses and to debt settlement resolved issues that had been pending for 

several years. 

In the area of public funding of Presidential elections, the Commission addressed problems stemming 

from the anticipated shortfall in the Presidential 

Campaign Fund. As the agency responsible for 

administering the public funding program, the Commission alerted the President, the Congress and the 

public to the probable funding shortfall in 1992. The 

Commission also undertook a study on citizen understanding of how the Presidential public funding 

program works and of the $1 tax checkoff, which is 

the sole funding source of that program. Based on 

this research, which revealed that Americans may not 

understand the program, the Commission formulated 

a national public education effort to be launched in 

Spring 1991. Further, the Commission conferred with 

the Department of the Treasury concerning the 

development of Treasury's regulations on the allocation of public matching funds to primary election 

candidates in anticipation of the shortfall expected in 

1992. 

Against this backdrop, the Commission continued 

to carry out its administrative and enforcement 

responsibilities, as described in the succeeding 

chapters. 
3 Chapter 1 

Presidential Public Funding 

The Presidential Election Campaign Fund has been 

the sole source of federal money for every Presiden~ 

tial primary, party convention and general election 

since 1976. The Commission projects, however, that 

the fund will not be sufficient to fully finance the next 

Presidential election. 

Shortfall in Fund by 1992 

The Commission began to express concern about the 

status of the fund in 1988, when projections indicated 

a potential shortfall for the 1996 election. In 1989, the 

Commission sent two letters to the President and 

Congress warning of the projected shortfall for 1996. 

Further, it adopted a formal legislative recommendation urging Congress to enact legislation that would 

ensure the financial viability of the public funding 

program. 1 In February 1990, the Commission sent a 

third letter, alerting the President, Congress and the 

public to the fact that the Presidential Election Campaign Fund might not have sufficient funds to cover 

the 1992 primary matching funds unless Congress 

intervened. In July, the agency notified the Treasury 

of the pending shortfall and urged that agency to 

initiate a rulemaking on how to allocate limited funds 

in the event of a shortfall. 

In November 1990, Commission staff projected that 

the Fund's deficit could occur in the first three months 

of 1992-a critical time for campaigns. Primary 

candidates could be shortchanged by as much as $15 

million, depending on how the U.S. Department of 

Treasury handled disbursements from the Fund. 

The increasing inflation rate and decreasing 

taxpayer participation in the checkoff were the main 

factors in the November projections. While payouts 

from the Fund are adjusted for inflation, the one dollar 

tax checkoff is not. Therefore, as the consumer price 

index increases, the Fund needs more taxpayers to 

designate dollars in order to keep pace with the 

increasing payments to qualified committees. Internal 

Revenue Service (IRS) statistics, however, indicate 

that citizen participation has declined. The percentage 

of tax forms on which the taxpayer checked yes has 

fallen in recent years from a high of 28 percent in 

1980 to 20 percent on 1989 tax returns. 

Research and Public Education Programs. Recognizing that low taxpayer participation might be due to 

a lack of understanding about the tax checkoff, the 

Commission embarked on a research project to learn 

why taxpayers do or do not choose to participate in 

the program. Information gained from this research 

would indicate whether there was a need for a public 

education program explaining the 1040 checkoff and 

the public funding system. 

In the first phase of its research, the Commission 

obtained statistical information about the checkoff 

from an IRS sample survey showing that taxpayers 

left the checkoff box blank on 15 percent of the 1989 

tax returns; they checked yes on 25 percent of the 

returns; and checked no on 60 percent of the returns.2 

Results of focus groups conducted by the IRS 

showed that many taxpayers did not fully understand 

the program. 

During November and December, the Commission 

conducted its own focus groups around the country to 

further assess public understanding of the checkoff 

program.3 The results of these meetings confirmed 

that citizens may not know why the public funding 

program was implemented or how it works. The study 

also revealed, however, that taxpayers would like to 

know more. The report summarizing the focus group 

findings recommended that a public education program address three key points: 

• The purpose of the Presidential public funding 

program; 

1 See Annual Report 1989. 

2 These figures differ somewhat from the taxpayer 

participation statistics discussed earlier ..This may be 

explained by the fact that sample surveys are subject to a 

certain margin of error. 

3 Market Decisions Corporation of Portland, Oregon, 

conducted the focus groups in three cities: Portland, 

Oregon; Fort Lee, New Jersey; and Chatlanooga, Tennessee. 
4 

Presidential Campaign Fund: 

Funds Available and Needed* 

- Actual Funds Available 

- Actual Amounts Needed (Spent) 

Projected Funds Available 

Millions Projected Amounts Needed of Dollars 

$250.-------~--------------------------------------------------

$50 

$0 1976 1980 1988 1992 1996 

Actual Actual Actual Projected Projected 

1984 

Actual 

• The Commission used the following assumptions and estimates in making its projections: (1) a 4.5 percent inflation rate for 

calendar years 1990-1996; (2) a $450,000 decline per year in checkoff receipts beginning in 1990; (3) estimated 1992 election 

cycle payouts to primary candidates based on 1984 figures adjusted for inflation; (4) in 1992, incumbent will not face serious 

challenge from within party; (5) estimated 1996 election cycle payouts to primary candidates based on 1988 figures adjusted 

for inflation; (6) in 1996, no incumbent candidate (wide-open field); (7) in 1992 and 1996, no payouts to independent or third 

party candidates or conventions; (8) repayment estimates based on historical ratio of repayments to payouts (1976-1984 

cycles). 
5 

Presidential Campaign Fund: 

Income Tax Checkoff Amounts by Year * 

Millions of Dollars 

$50 r------------------------------------------------------------

$0 

73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 

* Data provided by U.S. Department of Treasury. Figures for 1973 through 1976 are not verified. 
6 

• How much money is collected and spent on the 

program; and 

• How the public funds are allocated and spent. 

At year's end the Commission was developing 

plans for a media program that would implement 

these recommendations-educating citizens about 

public funding without advocating an affirmative or 

negative vote on the tax checkoff. 

Legislative Remedies. Even with an education 

program, however, the Commission recognized that a 

1996 shortfall was inevitable unless legislative action 

were taken. In a November meeting, the Commission 

discussed several legislative recommendations that 

could alleviate the projected 1996 shortfall, but 

conceded that only an emergency appropriation of 

funds could avert a deficit in 1992. Among the recommendations discussed were: 

• The elimination of the Presidential convention 

committee entitlements, thereby freeing approximately $22.6 million that could be used to finance 

the primaries; 

• The adjustment of the checkoff amount by the 

inflation factor, thereby increasing the total 

amount checked off; and 

• The replacement of the checkoff with an entitlement approach. 

Treasury Regulations. If there is insufficient money 

in the Fund to cover all entitlements, the law requires 

the U.S. Department of Treasury to allocate remaining 

funds, giving first priority to the conventions, second 

priority to the general election and third priority to the 

primaries. 

In the event of a shortfall in 1992, the Treasury will 

have to decide how to disburse matching fund payments to primary candidates. In a Notice of Proposed 

Rulemaking issued December 13, 1990 (55 Fed. Reg. 

51303), the Treasury Department proposed a system 

under which the projected amount needed for the 

conventions and the general election-$112.4 million 

in 1992-would be set aside by January 1 of the 

Presidential election year. The remaining amount in 

the Fund-and additional monthly deposits of checkoff dollars-would then be used for matching payments to primary candidates. 

If a shortfall were to occur-i.e., if the amount of 

matching funds certified by the Commission in one 

month exceeded the total dollars in the Primary 

Account as of the last day of that month-the amount 

paid to each candidate would be reduced.4 The 

difference between the amount certified and the 

amount actually paid to the candidate would be 

carried over to the next month and added to any 

amounts certified to the candidate during that month.5 

Audits and Repayments 

The Audit Process 

The Commission is required by law to audit all Presidential candidates and convention committees 

receiving federal funds to ensure that the funds are 

not misused and that committees have maintained 

proper records and filed accurate reports. In 1990 the 

agency's Audit Division continued to process audit 

reports of several 1988 committees. 

At the conclusion of a fieldwork audit-an on-site 

examination of the committee's financial recordsauditors hold an exit conference to discuss preliminary findings with the committee. Later, these findings 

are incorporated into an interim audit report. (Followup fieldwork may be necessary depending on factors 

4 The candidate would receive a payment equal to the 

amount certified to the candidate during that month multiplied by the following fraction: 

amount in primary account on last day of month 

total certified that month, for all candidates 

5 1n early 1991, the Commission submitted written 

comments and gave oral testimony before the Internal 

Revenue Service on Treasury's proposed rulemaking. The 

Commission's written testimony offered a "partial set-aside" 

alternative to Treasury's proposal. The Commission's plan 

would factor anticipated 1992 receipts into the equation, 

thus affording more funds for the early primary campaigns. 
7 

spelled out in FEC rules.} The committee may dispute 

the findings contained in the interim audit report. 

The Commission releases a final audit report to the 

public after legal review and Commission approval. 

The report may include adjustments to the interim 

report prompted by the committee's response. Moreover, the Commission may add information based on 

subpoenaed documents and responses from third 

parties. The final report may also include an initial 

determination by the Commission that the committee 

repay public funds. (Repayment determinations are 

discussed in the section below.} 

The Commission issues addenda to final audit 

reports based on follow-up fieldwork. Addenda may 

contain additional findings and repayment determinations. 

Repayment Process 

When the Commission issues a final audit report, the 

candidate or convention committee involved may be 

required to repay federal funds to the U.S. Treasury. 

For example, a repayment is required when an audit 

determines that the committee: 

• Received public funds in excess of the amount to 

which it was entitled (e.g., received matching 

funds for contributions that were later determined 

to be nonmatchable); 

• Had surplus funds remaining on the date of 

ineligibility; 

• Earned interest on invested funds; 

• Had stale-dated checks (committee checks that 

were never cashed by the payees}; or 

• Incurred nonqualified campaign expenses by 

spending in excess of the limits, by using public 

funds for expenses not related to the campaign 

or by insufficiently documenting the expenditure 

of public funds. 

Primary campaigns, which receive private contributions as well as public funds, must repay only the 

portion of nonqualified campaign expenses defrayed 

with matching funds. A ratio formula is used to 

determine this amount. 

Unless a committee disputes the Commission's 

initial repayment determination (contained in the final 

audit report}, the determination becomes final, and 

the committee must make the repayment to the U.S. 

Treasury. The repayment date is suspended if the 

committee disputes the initial determination, but the 

committee must submit written arguments to support 

its view. The committee may also request to make an 

oral presentation as part of its response to the final 

audit report. The LaRouche committee made such a 

presentation in 1990 (see below). 

When making its final repayment determination, the 

Commission may take into account the committee's 

written response and its oral presentation. The basis 

for the Commission's final determination is set forth in 

a statement of reasons prepared by the Office of the 

General Counsel. A committee that disputes the initial 

repayment determination must repay the amount 

specified in the final determination. Candidate committees may file a petition for a rehearing by the 

Commission for the purpose of introducing new 

questions or issues that could not be raised earlier. 

The deadline for repayment is suspended until the 

Commission makes a decision on the petition. Finally, 

a committee may petition the U.S. Court of Appeals 

for the District of Columbia to review a final repayment 

determination. The committee must nevertheless 

make the repayment to the Treasury within the 

deadline unless the committee obtains a stay from the 

Commission pending the appeal. 

1988 Presidential Audits 6 

The paragraphs below summarize the final audit 

reports released in 1990 and include the 

Commission's repayment determinations made 

through December 1990 with respect to the audited 

committees. Not included in the summaries are 

findings concerning committee reporting errors that 

were correcte? through amended reports. 

6 Audit reports were summarized in the Commission's 

monthly newsletter, the Record. Full audit reports are 

available to the public at the FEC. 
8 

• Friends of Gary Hart. The Commission made an 

initial determination that the Hart campaign had to 

repay nearly $35,800 to the U.S. Treasury, 

representing: 

• A prorated portion of surplus campaign funds 

that the committee had on hand when Mr. 

Hart withdrew from the Presidential race; 

• Interest earned on surplus funds; and 

• Matching funds received in excess of the 

candidate's entitlement. 

The Committee made the required repayment 

prior to the Commission's adoption of the final 

audit report. 

• Quayle for VIce President and Bentsen for 

Vice President. The Commission approved final 

audit reports for these committees on February 2, 

1990, and March 1, 1990, respectively. No 

repayments were required. 

LaRouche Democratic Campaign. On May 17, 

1990, the Commission approved the final audit 

report on the LaRouche Democratic Campaign, 

the publicly funded committee of Lyndon 

LaRouche, a 1988 Presidential primary candidate. 

Based on the results of the audit, the Commission 

made an initial determination that the campaign 

repay a total of $154,894 in public funds to the 

U.S. Treasury. The campaign requested and 

received an opportunity to make an oral presentation before the Commission contesting the results 

of the audit.7 

• The Arrangements Committee of the Republican National Committee for the 1988 Republi· 

can Nominating Convention. The Commission 

made an initial determination that the committee 

repay $25,066 in interest earned on invested 

public funds. This amount represented total 

interest earned less income tax paid. The final 

report noted that the committee had already made 

this repayment. The Commission also initially 

determined that the committee must repay 

$93,056 to the Treasury, the amount by which the 

committee exceeded the $9.220 million convention spending limit. Based upon the committee's 

response, the Commission made a final repayment determination, and reduced the repayment 

amount to $7,440. The committee made the 

repayment May 30. 

• 1988 Democratic National Convention Committee. The Commission initially determined that 

the committee must repay the estimated $64,390 

it had left over after all expenses had been paid. 

1988 Committee Audits 

Committee Date Report Released 

duPont 

Babbitt 

Haig 

Gore 

RNC Convention 

Fulani 

DNC Convention 

Hart 

Quayle for Vice President 

Bentsen for Vice President 

LaRouche 

Louisiana Host Committee 

The Atlanta 88 Committee 

Robertson 

Kemp 

Gephardt 

Dole 

Dukakis 

Dukakis-Bentsen 

Simon 

Bush 

Bush/Quayle 

Gephardt Committee 

(Joint Fundraiser) 

Jackson 

March 9, 1989 

May 25, 1989 

June 22, 1989 

July 13, 1989 

October 25, 1989 

November 2, 1989 

November 21, 1989 

January 25, 1990 

February 20, 1990 

March 1 , 1990 

May 17, 1990 

September 4, 1990 

September 28, 1990 

Final Report Pending 

Final Report Pending 

Final Report Pending 

Final Report Pending 

Final Report Pending 

Awaiting Response to Interim Report 

Awaiting Response to Interim Report 

Awaiting Response to Interim Report 

Awaiting Response to Interim Report 

Interim Report Pending 

Interim Report Pending 

7 A statement of reasons supporting a final repayment 

determination by the Commission will be issued in 1991. 
9 

However, after replacing estimated figures with 

actual amounts and conducting fieldwork, the final 

repayment was reduced to $57,294. 

Rules on Computer Formats for 

Presidential Audits 

In October, the Commission prescribed rules on the 

production of computerized records maintained by 

publicly funded Presidential candidates. Previously, 

FEC regulations required publicly funded campaigns 

that maintained computerized financial records to 

provide data to the FEC when the agency conducted 

the mandatory audit of the campaign committee. 

During the 1988 election cycle, the Commission 

expended considerable resources reformatting 

computer tapes that had been submitted during the 

audit process but which were not compatible with the 

FEC system. Reformatting the records delayed the 

completion of certain audits and entailed additional 

agency expense. 

To smooth the process for the 1992 Presidential 

election cycle, the revised rules on computer formats 

require that computerized materials be submitted in a 

format compatible with the FEC's computer processing capability. The rules also list the types of information which, if already computerized, must be made 

available by an audited committee. Finally, the rules 

clarify that the committee, not the Commission, must 

pay for the cost of producing the materials in the 

required format. Production costs, however, may be 

treated as exempt compliance costs. 

In connection with the rulemaking, the Commission 

prepared a document, "Computerized Magnetic Media 

Requirements for Title 26 Candidates/Committees 

Receiving Federal Funding," which sets forth the 

technical standards for computerized records submitted to the agency on magnetic tapes or diskettes. 

Presidential Nominating 

Conventions 

In August, the Commission asked for comments on 

proposed changes in the rules governing publicly 

funded Presidential nominating conventions. 

The proposed rules would reorder the regulations 

to track the progression of convention activity from 

registration to audits and repayments. The draft rules 

would also reorganize the current rules by dividing 

them into Subpart A (11 CFR 9008.1-9008.16), 

focusing on convention committees, and Subpart B 

(11 CFR 9008.50-9008.54), governing activity by host 

committees and local governments in convention 

cities. Finally, several proposed changes were made 

to conform with recent revisions to the regulations on 

publicly funded Presidential candidates, outlined 

above. 

Primary and General Election 

Candidates 

On December 18, 1990, the Commission approved a 

Notice of Proposed Rulemaking seeking comments 

on proposed changes to the public financing rules for 

Presidential primary and general election candidates. 8 

The rulemaking notice proposed significant changes 

in two areas that affect primary election candidates: 

• The allocation of expenditures to the state spending limits; and 

• The fundraising exemption from the state spending limits. 

Other changes were proposed in the following 

areas: 

• Candidate agreements; 

• Projected deficiency in the Presidential Election 

Campaign Fund; 

8 The Notice appeared in the Federal Register January 2, 

1991. (56 Fed. Reg. 1 06) 
10 

• High error rates in matching fund submissions; 

• Inclusion of computer tapes or diskettes in 

matching fund submissions, if the committee has 

computerized its contributor records; 

• Matching of redesignated and reattributed contributions; · 

• Application of the 1 0 percent rule in determining a 

primary candidate's date of ineligibility; 

• Contributions received by a candidate who 

continues to campaign after his or her date of. 

ineligibility; 

• Documentation of qualified campaign expenses 

allocated to particular states; 

• Transfers and loans from a candidate's publicly 

funded committee to a committee authorized by 

the candidate for a different election; 

• Reimbursements by media personnel and the 

Secret Service for travel costs; 

• Joint fundraising; 

• Subpoenas issued during Commission audits; 

• Double counting of repayable amounts; 

• Repayment for exceeding both the state and the 

overall spending limits; and 

• Notification of repayment determinations and 

failure to provide needed records. 
11 Chapter 2 

Administration of the Law 

As mandated by Congress, the FEC administers 

public funding of presidential elections, 1 oversees 

campaign finance disclosure, promulgates regulations 

based on the Act, interprets the law through advisory 

opinions, encourages compliance through assistance 

and outreach, reviews reports filed by political committees, enforces the law, and serves as a resource 

for election information. 

Public Disclosure 

Public Records 

The FEC Public Records Office is the hub of the 

agency's disclosure program. More than 15,000 

people visited the office in 1990. 

All campaign reports filed by federal committees 

are available for inspection in the Public Records 

Office within 48 hours of receipt. Reporters, interest 

groups and other interested persons visit the office to 

scrutinize these reports and the computer printouts, 

looking for possible errors and violations of the law. 

Public Records staff offer personalized assistance 

to visitors, helping them locate the documents and 

research tools they need. Using the office's research 

space and copying equipment, visitors have access to 

numerous materials, including: reports and statements filed by the regulated community; standard 

computer indexes, updated daily; FEC Reports on 

Financial Activity, the final statistical studies of an 

election cycle; advisory opinions; enforcement files 

(closed MURs); audit reports; and Commission 

meeting agenda documents. Requests for materials 

are also handled over the phone. Callers ordering 

documents on a regular basis set up running accounts, a convenient way to pay the fees for copying 

and computer services. 

Press Office 

During 1990, the Press Office continued to be the key 

link with the media, responding to more media requests for information and assistance than in any 

other non-Presidential election year. Foreign media 

interest in U.S. election activities continued to grow 

with more than 17,000 telephone queries and personal visits from reporters representing print and 

broadcast media worldwide. 

Immediately following each quarterly report and the 

1 2-day pre-general election report, the Commission 

issued press releases providing timely and detailed 

statistics on campaign finance activities of candidates, 

parties and PACs. This extensive disclosure effort 

replaced the expensive interim reports previously 

produced by the Commission. 

The Press Officer is also the Commission's Freedom of Information Officer. Because most of the 

agency's records are readily available for public 

review, FOI requests have generally become more 

complex. Requests for computer tapes and access to 

the Commission's Direct Access Program are processed under the Freedom of Information Act. 

Data Processing 

The Commission serves the public interest by providing computer access to campaign finance information. 

In 1990, more people used the computer system, and 

obtained information faster than ever before. 

The Direct Access Program (DAP), which permits 

subscribers to review disclosure information on their 

own computers, gained further acceptance in 1990. 

Subscribers increased from 200 to 225, and they 

used the system for longer periods of time. 

This increased interest, the Commission believes, 

stemmed from improvements in the system. The Data 

Systems Development Division simplified the program, eliminating the need for subscribers to have 

prior technical knowledge and cutting out unnecessary information. At the same time, data programmers 

added new inquiry reports and adjusted the format to 

a standard size to make the reports easier to read. 

Another refinement enabled users with a focused 

area of interest (e.g., general election candidates in a 

specific state or states) to store their research categories in the FEC's computer. The redesigned DAP 

became available in March. Then, in September, the 

Individual Contributor Search came on-line. This 1 See Chapter 1. 
12 

search program allows subscribers to trace the 

election activity of individual contributors. 

For those who did not subscribe to DAP, the FEC's 

state access program provided on-line access to 

campaign finance data. The general public could 

request printouts of FEC indexes in 22 state offices 

around the country. 

Software improvements also led to faster processing of reports filed at the Commission. For example, 

information from the October 25 pre-general election 

reports was released to the press on November 1 , 

earlier than ever before. 

The Commission coded contributor information for 

all contributions of more than $200. In previous 

election cycles, the threshold had been $500, but 

increased funding and improvements to the system 

permitted expanded coding. 

Direct Access Useage 

by Month in 1990 

---DAP 

-D-States 

Hours per Month 

150~----------------------------

J F M A M J J A S 0 N 0 

Regulations 

FEC regulations explain the statute's requirements in 

detail. The Commission revises its rules to give 

increased guidance to committees. In 1990, the 

agency prescribed a comprehensive set of revised 

regulations on allocation of federal and nonfederal 

expenses ("soft money"), debt settlement, foreign 

nationals and computerized magnetic media. The 

Commission also continued to work on revisions in 

other areas, including election activity of nonprofit and 

foreign-owned corporations. (See Chapter 3) 

Allocation of Federal and Nonfederal Expenses: 

The Soft Money Issue 

Activity that influences federal elections must be 

financed with funds subject to the limits, prohibitions 

and reporting requirements of federal law. When 

activities influence both federal and nonfederal 

elections, committees may finance a portion of the 

expenses from a nonfederal account, which may 

contain funds not permissible under federal law-so 

called "soft money." These nonfederal disbursements 

have generally not been reportable or subject to the 

federal law's limits and prohibitions. 

Questions have arisen, however, as to whether this 

soft money has been used to influence federal 

elections, whether it should be disclosed, to what 

extent it can be regulated under federal law, and 

whether new legislation is needed to monitor its use.2 

The Commission has been concerned with this 

issue for a number of years. In 1986, after conducting 

public hearings, the Commission concluded that 

evidence of improper use of soft money in federal 

elections was insufficient to justify the stringent rules 

suggested in a rulemaking petition submitted by 

Common Cause. The U.S. District Court for the 

District of Columbia upheld the Commission's decision to deny the rule changes requested in the 

petition, but it did order the FEC to clarify its allocation 

regulations. Subsequently, the court directed the 

2 The Commission has asked Congress to consider 

legislative action in this area. 
13 

Commission to report to it, every 90 days, on Commission progress toward adopting new allocation 

rules. 

In June 1990, after evaluating information gathered 

from a questionnaire, from responses to a notice of 

proposed rulemaking and from testimony at hearings,3 

the Commission developed new regulations. The 

Commission sent the rules and new forms to Congress on June 18 and prescribed them on October 3. 

For committees engaged in shared federal and 

nonfederal activity, these revised rules stipulate: 

• Specific allocation methods; 

• Reporting of allocated expenses by political 

committees with two accounts-federal and 

nonfederal; 

• For allocable expenses, payments to vendors 

from the federal account and corresponding 

transfers from the nonfederal account for its 

share, to be made within a 40-day window; 

• A rebuttable presumption that any fundraising 

notice that mentions a federal candidate or 

election is soliciting federally permissible funds for 

the federal account only; and 

• Reporting by national committees of all activity of 

their nonfederal accounts as well as their federal 

accounts. 

The revised rules took effect January 1, 1991, and are 

summarized in Appendix 6. 

New Debt Retirement Rules 

The Commission also promulgated new regulations 

concerning debts owed by candidates and political 

committees. Under the new rules, only "terminating 

committees" are permitted to settle debts for less than 

the amount owed. However, an ongoing committee 

may request that the Commission determine that a 

debt is unpayable because the creditor cannot be 

located or has gone out of business. Further, subject 

to Commission review, a creditor may forgive the 

outstanding balance of a debt owed by an ongoing 

committee if the committee is inactive and unable to 

pay its bills, or if the committee cannot be located. 

The new rules, which went into effect October 3, 

1990, are summarized in Appendix 7. 

Foreign National Rules 

The Commission revised the regulations governing 

election-related activity by foreign nationals. The new 

rule, which took effect April11, 1990, clarifies that 

foreign nationals may not make expenditures in 

connection with federal or nonfederal elections and 

may not participate in the decision-making process of 

other persons (including corporations, labor organizations and political committees} with regard to their 

election-related activity.4 

Rules on Computerized Recordkeeping 

The Commission also prescribed new regulations 

governing technical aspects of FEC audits. The rules 

apply to publicly funded presidential committees that 

maintain computerized records and submit magnetic 

media as part of the FEC's audit. (See Chapter 1} 

Advisory Opinions 

The Commission issued 26 advisory opinions in 1990. 

These opinions, which respond to formal requests 

from anyone involved in activity subject to federal 

election law, clarify the law for the requester and for 

those in the same situation as the requester. In 

addition, requests for advisory opinions sometimes 

bring to light areas of the law that need further clarification, leading eventually to revised regulations. 

Selected advisory opinions issued in 1990 are 

summarized in Chapter 3, Legal Issues. 

3 See 1989 Annual Report for background. 

4 On August 22, 1990, the Commission published a Notice 

of Proposed Rulemaking seeking comments on whether the 

agency should further amend its regulations governing 

foreign nationals to address their role in domestic corporations. (See Chapter 3) 
14 

Assistance and Outreach 

Telephone Assistance 

The Commission has developed a strong outreach 

program to help those who must comply with the 

campaign finance law. The heart of the program is the 

toll-free information line (800-424-9530}. Public affairs 

specialists answer thousands of questions on the tollfree and local lines each year. 

Reporting Assistance 

Reports analysts conduct detailed reviews of all 

reports filed (nearly 35,000 in 1990) and are therefore 

extremely well versed in the complexities of reporting 

and related compliance matters. Any committee is 

free to call the Commission and speak directly to the 

analyst who handles its report. 

If an analyst finds an apparent problem in a 

committee's report, the Commission will send a letter 

(called a request for additional information or RFAI) to 

the committee, offering it an opportunity to correct its 

report voluntarily or to provide further information. A 

committee's cooperation often resolves a problem 

that might otherwise result in an enforcement action 

by the Commission.5 

The FEC goes to great lengths to inform committees about upcoming reporting dates and reporting 

rules. The agency sends each committee treasurer a 

reminder of upcoming deadlines three weeks before 

the due date of a report. More than 44,000 of these 

notices were mailed this year. The FEC's monthly 

newsletter, the Record, also alerts readers to reporting requirements. In 1990, seven of its twelve issues 

contained reporting notices. 

Publications 

The Record, published monthly, is key to staying 

abreast of Commission decisions and activity. In 

addition to detailing the reporting requirements, it 

briefs readers on new advisory opinions, regulations 

and litigation. All treasurers automatically receive the 

Record, but anyone may order a free subscription. 

In 1990 the agency revised the Campaign Guide 

for Party Committees, published a special Record 

Supplement on the new allocation rules and published, for the first time, a compilation of Selected 

Court Case Abstracts pertaining to the federal election law. (Previously, the collection had been available 

only as an internal document.} 

Further, the agency produces and distributes free 

publications and video tapes that explain the law. In 

1990, the Commission updated the Explanation and 

Justification (E&J) for Commission regulations and 

published the fifth edition of the State/Federal Disclosure Directory. 

Conferences and Visits 

Commissioners and staff also conduct conferences 

each year, which include basic as well as more 

advanced workshops on the law. At the 1990 conferences, held in Washington, D.C., and Phoenix, 

Arizona, Internal Revenue Service staff were also 

available to answer questions on tax-related issues. 

In another outreach effort, public affairs specialists 

traveled to three cities to brief staff of political action 

committees, party committees and candidate committees on the requirements of the law. Specialists spent 

two days in each city-Lansing, Nashville and Honolulu-answering questions and reviewing areas of the 

law specific to the needs of the participants. 

Late in the year, several Commissioners and FEC 

staff members began conducting allocation workshops for state party committees and others affected 

by the new regulations (discussed in this chapter). 

Staff traveled to Tallahassee, Miami, Seattle and Los 

Angeles before the year was out. Additional training 

sessions were scheduled for early 1991 in New York, 

Boston, Denver, Des Moines, Austin, Columbus and 

Washington, D.C. 

5 The Commission mailed more than 8,000 RFAI's in 

1990. (See Appendix 5) 
15 

Enforcement 

The Enforcement Process 

The Commission is alerted to possible violations of 

the law through its own internal monitoring procedures, through externally generated complaints and 

by referrals from other law enforcement officials. 

Potential violations become Matters Under Review 

(MURs) and are assigned case numbers. 

All phases of the enforcement process remain 

confidential until a case is closed and put on the 

public record. Respondents are given a reasonable 

opportunity to demonstrate that no action should be 

taken against them. If the Commission decides there 

is "reason to believe" a violation of the law has 

occurred, it investigates the matter. The Commission 

may also issue orders and subpoenas that require 

individuals to answer questions or produce documents. When necessary, the agency may ask a 

federal district court to enforce FEC orders and 

subpoenas. If the Commission believes there is 

sufficient evidence to show "probable cause to 

believe" the respondent violated the law, the agency 

must try to resolve the matter through a conciliation 

agreement. If conciliation fails, the agency may file 

suit against the respondent in a federal district court. 

The accompanying table shows the Commission's 

caseload of MURs from 1985 through 1990. 

Caseloads of MURs 

Enforcement of Civil Penalties 

The Commission explored new methods to secure 

payment of outstanding civil penalties in 1990. The 

agency initiated contempt proceedings against 

several committees and treasurers, resulting in 

additional penalties for many of the committees 

involved.6 The courts imposed fines as large as 

$10,000 plus interest. 

In at least one contempt finding, the court specifically held the committee's treasurer liable. The court 

ruled that because "political committees have a 

tendency to dissolve after an unsuccessful campaign," Congress chose to hold an individual-the 

committee treasurer-responsible for compliance with 

the Federal Election Campaign Act. It therefore 

follows that "an individual will also stand responsible 

for his indiscretions as a treasurer." 7 

6 1990 Contempt cases: FEC v. Augustine; FEC v. 

Dramesi for Congress Committee; FEC v. Weinberg; FEC v. 

Working Names, Inc.; FEC v. Friends of Isaiah Fletcher 

Committee. 

7 FEC v. Dramesi for Congress Committee, Civil Action 

No. 85-4039 (MHC) (D.N.J. 1990). 

1985 1986 1987 1988 1989 1990 

Pending at Beginning of Year 172 137 143 171 220 201 

Opened During Year 257 191 261 236 218 195 

Closed During Year 292 185 233 187 237 159 

Pending at End of Year 137 143 171 220 201 237 
16 

Clearinghouse on Election 

Administration 

The Commission's National Clearinghouse on Election Administration serves as a central exchange for 

research and information on the administration of 

federal elections. This section covers 1990 Clearinghouse activities. 

Advisory Panel 

The Commission confirmed three new members of 

the Clearinghouse Advisory Panel, which is composed of election officials from around the country. 

The appointment of these new members maintains 

the panel's geographic representation and ideological 

balance. · 

At its annual meeting, held in Chicago on December 12-14, the Panel discussed economic issues, the 

1990 census and election-related crimes. 

Publications 

Ballot Access. This four-volume 1990 publication is a 

comprehensive, state-by-state guide to ballot access 

requirements for primary and general elections, both 

Presidential and Congressional. It covers requirements for major, minor, independent and write-in 

candidates. 

Election Case Law 89. This publication contains an 

overview of the laws governing elections as applied 

by state and federal appellate courts. Each chapter 

addresses a separate issue, opening with a comprehensive summary of the current state of the law, 

followed by summaries of leading court cases. Each 

chapter also contains synopses of other selected 

cases and a bibliography of legal literature. 

Contested Elections and Recounts. This two-volume 

report describes methods of processing challenges to 

federal elections and the major policy issues involved. 

It provides a legal background and explains procedures for handling contested elections, and describes 

the procedures followed by each state in contested 

elections and recounts. 

Campaign Finance Law 90. This publication provides 

quick reference charts and detailed state-by-state 

descriptions of state campaign finance report filing 

requirements, contribution and solicitation limitations, 

special tax or public financing provisions, regulatory 

agencies and many other important features of state 

campaign finance laws. 

Voting System Standards 

The Commission officially issued the Clearinghouse's 

Performance and Test Standards for Punchcard, 

Marksense, and Direct Recording Electronic Voting 

Systems in early 1990. This publication, the result of 

long-term research and dialogue, presents voluntary 

performance and test standards that may be used by 

states and voting system vendors to improve the 

accuracy, integrity and reliability of computer-based 

voting systems. 

The Commission issued three advisory plans in 

conjunction with these standards: A Plan for Implementing the FEC Voting System Standards, A System 

Escrow Plan for the Voting System Standards Program and A Process for Evaluating Independent Test 

Authorities. These documents sequentially discuss 

issues that states may wish to consider when implementing the standards, the placement of voting 

system proprietary information in escrow and a 

method of assessing the potential independent 

authorities that are willing to test computer-based 

ballot tabulation systems against the standards. 
17 Chapter 3 

Legal Issues 

This chapter summarizes a number of campaign 

finance issues addressed in the year's litigation, 

advisory opinions and enforcement cases (MURs). 

Nonpro·fit Corporations: MCFL 

Issues 

The extent to which laws may limit election-related 

activity by nonprofit corporations continued to occupy 

the courts, legislatures and executive agencies during 

1990. All three branches explored the application of 

the Supreme Court's 1986 decision in FEC v. Massachusetts Citizens for Life (MCFL}. 1 In that case, the 

Court ruled on the constitutionality of 2 U.S.C. §441 b, 

the provision in the Federal Election Campaign Act 

that prohibits corporate contributions and expenditures. 

Issues 

The MCFL Exception. The Supreme Court concluded in 1986 that "§441 b's restriction of independent spending 2 is unconstitutional as applied to 

MCFL." The Court ruled that "MCFL has three features essential to our holding that it may not constitutionally be bound by §441 b's restriction on independent spending." The three features are: 

1. The organization is a nonprofit ideological corporation formed "for the express purpose of promoting political ideas, and cannot engage in business 

activities." 

2. It has "no shareholders or other persons affiliated 

so as to have a claim to its assets or earnings." 

3. It has not been established by a corporation or 

labor union and has a policy "not to accept 

contributions from such entities." 

Express Advocacy. The Court rejected MCFL's 

argument that its election-related publication did not 

constitute an expenditure under the Act because it did 

not "expressly advocate" the election or defeat of a 

clearly identified candidate. The Court's opinion, 

however, included language indicating that an express advocacy standard was the proper test to 

determine whether or not a publication met the Act's 

expenditure definition. The Commission has contended in subsequent litigation that this language is 

dicta (that is, a statement, but not a binding ruling). 

See, for example, the discussion below of Faucher 

and Maine Right to Life Committee v. FEC. 

Application to 1990 Court Cases 

During 1990, two courts applied these MCFL standards in their decisions. 

Austin v. Michigan Chamber of Commerce. Application of the MCFL exception was central to a 1990 

case involving Michigan state law and activities 

conducted by the Michigan Chamber of Commerce. 

On March 27, the Supreme Court of the United States 

upheld a Michigan statute containing prohibitions 

similar to section 441 b.3 The Court held that the 

Chamber did not qualify for the constitutional exemption from the ban on corporate spending set forth in 

the MCFL case because the Chamber, in effect, did 

not meet the 3-part test explained in MCFL. 

With regard to the first characteristic, the Court 

observed that, unlike MCFL, the Chamber of 

Commerce's activities were not limited to political and 

public educational purposes. 

The Chamber also failed to meet the second of the 

MCFL criteria. The Court concluded, "[W]e are 

persuaded that the Chamber's members are more 

similar to the shareholders of a business corporation 

, 479 u.s. 238 (1986) 

2 An independent expenditure is an expenditure for a 

communication which expressly advocates the election or 

defeat of a clearly identified candidate but which is not 

made in cooperation or consultation with, or at the request 

or suggestion of, or with the prior consent of any candidate 

or his or her authorized committees or campaign agents. 2 

U.S.C.§431 (7) 3 Section 54(1) of the Michigan Campaign Finance Act. 
18 

than to the members of MCFL." Because the Chamber provided its members with several nonpolitical 

benefits and services, members had an economic 

disincentive to withdraw support from the organization 

even if they disagreed with its political views. 

With respect to the third MCFL feature, the Court 

noted that here "the Chamber differs most greatly 

from the Massachusetts organization." While "MCFL 

was not established by, and had a policy of not 

accepting contributions from, business corporations," 

three-fourths of the Chamber's members were 

business corporations, and the organization's treasury 

contained corporate funds in the form of membership 

dues. "Because the Chamber accepts money from 

for-profit corporations, it could, absent application of 

§54(1 ), serve as a conduit for corporate political 

spending," the Court concluded. 

Faucher and Maine Right to Life Committee 

(MRLC) v. FEC. This case involved both the MCFL 

exception and the express advocacy standard. The 

U.S. District Court for the District of Maine employed 

the "express advocacy test" in evaluating the 

Commission's voter guide regulation (11 CFR 

114.4(b)(5)(i)). The regulation permits a corporation to 

publish voter guides for distribution to the general 

public so long as certain nonpartisan criteria are met. 

Among them is a requirement that the voter guide not 

advocate a particular stance on the issues presented. 

The district court's opinion concluded that "the regulation, as currently promulgated with its focus on issue 

advocacy [rather than express advocacy], is contrary 

to the statute as the United States Supreme Court 

has interpreted it...." Faucher v. FEC, No. 90-0112-B, 

slip op.at 10 (D.Me. June 29, 1990). The court 

denied, however, MRLC's claim that it qualified for the 

MCFL exception, because MRLC did not have a 

policy against accepting contributions from corporations and labor organizations. The Commission has 

appealed the court's decision invalidating the voter 

guide regulation. For a summary of the case and the 

court's decision, see the September 1990 Record. 

Request for Comments on MCFL Rulemaking 

On October 3, 1990, the Commission published a 

Notice in the Federal Register (55 Fed. Reg. 40397) 

seeking comments as to whether the Supreme 

Court's decision in Austin, which elaborated on the 

MCFL exception, should be incorporated into Commission regulations. The Notice also sought comments on the district court's application of the express 

advocacy standard in Faucher (MRLC) and in a 1989 

case involving the National Organization for Women.4 

The notice was the third such request for public 

comment. In 1987, the Commission invited comments 

on a rulemaking petition filed by the National Right to 

Work Committee, which wanted the Commission to 

incorporate the express advocacy test set forth in 

MCFL as the standard for judging expenditures. In 

1988, the Commission published an Advance Notice 

of Proposed Rulemaking that sought comments not 

only on the express advocacy issue but also on other 

questions raised by the MCFL decision. The Commission held a hearing later that year, at which two 

witnesses testified concerning these issues. 

In addition to the proposed rulemaking, the Commission has submitted legislative recommendations 

asking Congress to consider addressing these issues 

through statutory revisions.5 

Foreign-Owned Corporations 

Foreign nationals are prohibited from making direct or 

indirect contributions in connection with elections to 

4 ln FEC v. National Organization for Women (NOW), 713 

F. Supp.428 (D.D.C. 1989), decided on May 11, 1989, the 

U.S. District Court for the District of Columbia applied an 

express advocacy standard to determine whether section 

441 b permitted an incorporated membership organization to 

pay for certain letters directed to the general public that 

solicited new members and derogated specific federal 

candidates. The court concluded that the corporation had 

not violated section 441 b because the letters did not go 

beyond the discussion of issues to express advocacy. The 

Commission has filed an appeal in this case. 

5 See Annual Report 1989. 
19 

any public office: state or local as well as federal. The 

definition of foreign national includes a corporation 

organized under the laws of a foreign country or 

having its principal place of business in a foreign 

country. (See 22 U.S.C. §611 (b).) In an advisory 

opinion released in 1990, the Commission permitted 

domestic subsidiaries of foreign companies to establish separate segregated funds subject to certain rules 

(see below). However, the Commission also considered drafting a new regulation that would change the 

definition of foreign national to include any corporation 

that is more than 50 percent foreign owned. If 

adopted, such a change would have the practical 

effect of prohibiting such subsidiaries from establishing SSFs, thus superseding not only the opinion 

discussed here, but also several past Commission 

opinions on the subject. 

Corporation Majority-Owned by Foreign Bank 

In AO 1990-8 CIT Group Holdings, Inc. (CIT), a 

Delaware corporation, was permitted to establish and 

operate a separate segregated fund even though 60 

percent of its stock was owned by a Japanese bank 

and CIT's 1 0-member board included five foreign 

national members. 

The Commission stipulated that foreign nationals 

could not be solicited for contributions and could not 

participate directly or indirectly in the decision-making 

process of CITPAC. To ensure the exclusion of 

foreign nationals from participation in PAC activity, the 

Commission required foreign national board members 

to abstain from voting, not just on matters concerning 

the PAC, but also on the selection of individuals to 

operate the PAC. 

Proposed Rulemaking 

On August 22, 1990, the Commission published a 

Notice of Proposed Rulemaking seeking comments 

on whether the agency should change its regulations 

governing foreign nationals. The proposed rule would 

treat a domestic corporation as a foreign national if 

the corporation's foreign ownership exceeded 50 

percent. 

At public hearings held in October, all but one of 

the thirteen witnesses who testified opposed the rule 

change. Several representatives of affected corporations argued that the new rule would unconstitutionally limit their employees' right to participate in the 

political process, and that any change to the existing 

regulations would have to be initiated through legislation rather than Commission action.6 

Testifying in support of the proposed rule, a 

representative of Senator Lloyd Bentsen argued that 

the proposal was consistent with the intent of the 

statute and that it served the American public's 

interest in keeping questionable money out of U.S. 

elections? 

The Commission also received more than 60 

written comments. Among those submitting comments, the Departments of Treasury, State and 

Commerce opposed the rule, citing a U.S. policy of 

equal treatment for foreign-owned companies. The 

Department of Justice, however, supported the 

proposal as being consistent with the internal security 

objectives of the statute (2 U.S.C. §441 e).8 

Fundraising Via 900-Line Telephone 

Service 

Political committees are beginning to employ new 

technologies in their fundraising efforts. One such 

technology is 900-line telephone service. When a 

caller dials the committee's 900 number, he or she 

may hear a message and/or register an opinion. The 

cost of the call is a contribution from the caller to the 

committee. Typically, the committee contracts with a 

telephone service bureau that provides the 900-line 

program. This service bureau then works with the 

telephone company and its local carriers to get the 

service on-line and to provide for caller billing. 

SThe Commission has, on several occasions, submitted 

legislative recommendations encouraging Congress to 

consider a statutory revision. 

7 For a summary of the hearing, see the December 1990 

Record, p. 2. 

a Copies of written comments are available in the FEC's 

Public Records Office. 
20 

In AOs 1990-1 and 1990-14 the Commission 

approved plans submitted by Digital Corrections 

Corporation (a service bureau) and AT&T (a telephone company), respectively, to provide 900-line 

service to federal candidates and committees for 

fundraising purposes provided that the companies 

met certain conditions ensuring compliance with the 

limitations and prohibitions on contributions and with 

the rules governing fundraising activities. 

Since corporations are prohibited from making 

contributions in connection with federal elections, 

political committees had to pay the usual and normal 

charge, and precautions had to be taken to prevent 

service bureaus and telephone companies from · 

absorbing any of the costs of the program, and 

thereby illegally contributing to the political committees. In 1990-1, DCC proposed a deposit from 

committees sufficient to cover the costs of the program, and adequate to cover any losses. Since AT&T 

generally does not contract directly with political· 

committees, it did no~ have to require a deposit, but it 

had to operate according to its normal business 

practices and monitor the program closely. 

To preclude the acceptance of a prohibited contribution from other corporations and ineligible sources, 

DCC had to provide the committees with the identity 

of callers. DCC planned to use existing technology to 

identify callers by telephone number, screening out 

prohibited contributors (foreign, corporate, labor, etc.), 

and facilitating necessary recordkeeping and reporting. 

Subject to these and other conditions, the Commission approved the use of 900-lines to raise funds for 

political committees.9 

Excessive Contributions 

Contributions made in connection with federal elections are subject to the limitations of 2 U.S.C. §441a. 

During 1990, the Commission pursued several 

enforcement cases in which contribution limits were 

exceeded in various ways. Some of special significance are described below. 

Excessive Contribution Received by Candidate 

Committee 

One enforcement action concerned a Congressional 

candidate committee's acceptance of an excessive 

contribution and the committee's failure to disclose 

the contribution correctly. 

In MLIR 2823, a Congressional candidate received 

a $20,000 loan from a supporter, secured with 4,000 

shares of corporate stock from the candidate's 

personal assets. The candidate then passed the 

funds on to his campaign committee. The candidate 

and the supporter ratified their agreement with a 

preprinted promissory note obtained from a bank. 

Although the candidate claimed that the transaction 

constituted a sale, in which the stock was exchanged 

for cash, the Commission said the transaction was a 

loan to the committee. Because the amount exceeded 

the individual $1,000 per election contribution limit, 

the loan was an excessive contribution. 

The Commission entered into conciliation agreements with the candidate, the committee and the 

supporter prior to finding probable cause. The agreements included an admission of knowing and willful 

violation, a civil penalty of $7,750 for the candidate 

and his committee and a penalty of $7,500 for the 

supporter. 

Excessive Contributions Made in the Name of 

Others 

Go/and v. U.S. and FE.C involved the making of 

excessive contributions in the name of others and the 

court's denial of the defendant's claim that the First 

Amendment guaranteed his right to make unlimited 

anonymous contributions to third-party candidates. 

9 ln December, Call Interactive requested an opinion 

concerning its role in providing 900 service to political 

committees. Call Interactive is a service bureau similar to 

DCC (above), but in some respects its procedures differ 

from those of DCC. For example, i.t does not require a 

deposit. The Commission did not issue an opinion in this 

case. 
21 

Criminal Indictments and Trials. On December 14, 

1988, a federal grand jury in Los Angeles indicted Mr. 

Goland for violations of the Federal Election Cam~ 

paign Act and criminal statutes stemming from his 

activities during the 1986 election. According to the 

indictments, he had advanced $120,000 to a media 

company to produce advertisements for a third-party 

Senate candidate. Mr. Goland actually wanted the 

Democratic candidate to win the election and had 

financed the last-minute third-party effort in order to 

divert votes from the Republican candidate. Mr. 

Goland tried to conceal his identity as the donor of the 

$120,000 contribution by funneling the money through 

56 persons, who were later reimbursed by Mr. 

Goland. The third-party campaign, uninformed of the 

true source of the contribution, reported the money as 

contributions from the 56 individuals. 

The federal grand jury charged that Mr. Goland had 

knowingly and willfully caused the treasurer of the 

third party campaign to make false statements to the 

FEC for the purpose of concealing the $120,000 

contribution. Additionally, it charged Mr. Goland with 

violating the Act by exceeding the $1 ,000 per election 

contribution limit and by making a contribution in the 

name of another. 10 

The first criminal trial of Mr. Goland, which concluded on July 1 0, 1989, resulted in a mistrial because of a hung jury. On September 19, 1989, a 

federal grand jury returned a superseding indictment 

charging additional violations of the Act's contribution 

limits and of criminal statutes. The second trial ended 

on May 3, 1990, convicting Mr. Goland of one misdemeanor count of making an excessive contribution. 

He was acquitted on four other counts of conspiracy 

and making false statements. The jury deadlocked on 

one felony count of making false statements. On July 

16, 1990, Mr. Goland received a federal prison 

sentence of 90 days on the one conviction (excessive 

contribution). 

Constitutional Challenges. On March 13, 1989, after 

the December 1988 criminal indictment, Mr. Goland 

filed civil suit in the U.S. District Court for the Central 

District of California seeking immediate certification to 

the en bane court of appeals under 2 U.S.C. §437h of 

three constitutional challenges to the Act. He claimed, 

in essence, that the First Amendment protected his 

right to make unlimited anonymous contributions to a 

third-party candidate. On May 1, 1989, the court 

dismissed the suit with prejudice, concluding that the 

constitutional claims were frivolous under Buckley v. 

Valeo. Mr. Goland immediately filed an appeal. 

In its opinion of May 21, 1990, the appeals court 

affirmed the district court's judgment, denying 

appellant's constitutional challenges and dismissing ~e~~ . 

Earmarked Contributions Result in Excessive 

Contributions 

In FEC v. National Republican Senatorial Committee, 

the Commission asked the district court to find that 

the National Republican Senatorial Committee 

(NRSC) (1) exceeded contribution limits by over $2.6 

million 11 and (2) failed to report approximately $2.7 

million in contributions made by NRSC because 

contributions it had solicited and passed on to candi~ 

dates had not been effectively earmarked for the 

candidates, and because NRSC had exercised 

"direction or control" over the choice of recipients of 

the contributions. (See FEC v. NRSC below) 

Original Complaint. In 1986, Common Cause filed 

an administrative complaint (MUR 2282) alleging that 

NRSC had made excessive contributions to 12 

10 2 U.S.C. §441f prohibits a person from making a 

contribution in the name of another, allowing his/her name 

to be used for such a contribution, and from knowingly 

accepting such a contribution. 

11 National party committees may contribute up to $5,000 

per election to a federal candidate, and $5,000 per calendar 

year to other political committees. In addition, a national 

party committee and its Senate campaign committee share 

a special limit for Senate candidates: $17,500 per candidate 

for the entire campaign period. 2 U.S.C. §441 a 
22 

Senate candidates, the result of a series of direct mail 

solicitations in which NRSC asked contributors to 

write checks payable to NRSC to be used to benefit 

1986 Republican Senate candidates in four states. 

The solicitation letter said that the amount an individual contributed would be divided equally among 

the four campaigns mentioned in the letter. 

Commission regulations provide that earmarked 

contributions are attributable to both the original 

contributor and the conduit organization if the conduit 

exercises "direction or control" over the choice of the 

recipient candidate(s). 11 CFR §11 0.6 

The Commission's General Counsel recommended 

that the Commission conclude that the contributions 

had been properly earmarked for the recipient candidates, and that it find probable cause to believe that 

NRSC should have considered the $2.7 million paid to 

the 12 candidates as contributions from NRSC 

because NRSC had exerted "direction or control" over 

the choice of the recipient candidates. 

The Commission voted 3-3 on the "direction or 

control" issue, and therefore dismissed this part of the 

complaint. (The Commission did find probable cause 

to believe that there were other violations, including 

excessive contributions totaling $545,249, and in 

December 1988 it voted to accept a conciliation 

agreement with NRSC and its treasurer. The agreement included a $20,000 civil penalty.) 

Common Cause v. FEC. In February 1989, Common 

Cause filed suit requesting that the U.S. District Court 

for the District of Columbia declare that the 

Commission's dismissal of the "earmarking" and 

"direction or control" charges in its complaint was 

arbitrary, capricious and contrary to law. The court, on 

January 24, 1990, made such a ruling, specifically 

concluding that (1) the contributions had not been 

properly earmarked for the recipient candidates and 

(2) the NRSC had exercised "direction or control" over 

the contributions in question. The court remanded the 

case to the FEC with instructions to conform with the 

court's declaration within 30 days. 

FEC v. NRSC. By a 3-3 vote, the Commission decided not to appeal the district court's decision, and 

on February 15, 1990, reopened enforcement proceedings. Consistent with the court's decision, the 

Commission found probable cause to believe that 

NRSC and its treasurer had violated FEC regulations 

by failing to report, as contributions from NRSC, over 

$2.7 million in payments it made to the 12 Senate 

candidates. The Commission also found probable 

cause to believe that defendants had exceeded the 

limits on contributions to the candidates by over $2.6 

million. However, the Commission could not reach a 

conciliation agreement with defendants and therefore 

authorized a lawsuit on August 24. 12 

Redistricting 

As results from the 1990 Census become final, many 

states will need to redraw district lines to account for 

changes in Congressional representation. Candidate 

efforts to raise funds to influence redistricting was the 

subject of AO 1990-23. 

In this advisory opinion the Commission said that 

Representative Martin Frost could not set up a 

"separate segregated" account within his principal 

campaign committee to receive funds prohibited 

under the Federal Election Campaign Act to cover 

expenses related to redistricting and reapportionment 

matters. However, Mr. Frost could himself set up a 

reapportionment fund that was independent of his 

authorized committee; such a fund would not be 

subject to the requirements of the Act. Further, the 

committee could use its funds to pay reapportionment 

expenses and report them as committee disbursements. 

Transfer from State PAC to 

Affiliated Federal PAC 

Commission regulations permit affiliated committees 

to make unlimited transfers between each other. 

Generally, political committees are considered to be 

12 The case was pending in the U.S. District Court for the 

District of Columbia at the end of 1990. 
23 

affiliated if they are established, financed, maintained 

or controlled by the same person. 11 CFR §1 00.5(g) 

Applying this provision in advisory opinion 1990-16, 

the Commission concluded that Illinois Governor 

James R. Thompson's nonfederal committee, Citizens 

for Thompson (CFT), and America 2000, a federal 

committee also controlled by Governor Thompson, 

were affiliated. As such, CFT could transfer funds to 

America 2000, subject to certain conditions set forth 

in the opinion, without such transfers being considered contributions. 11 CFR §1 02.6(a)(1) 

In order to include funds in the transfer, CFT had to 

notify the contributors that their contributions would 

now be subject to the Act's limits and prohibitions. 

See 11 CFR 1 02.5(a)(2). To ensure that donors did 

not exceed the $5,000 per year limit on contributions 

to a PAC, CFT had to aggregate contributions regardless of whether they were made in the year of the 

transfer or in previous years. Additionally, because 

CFT and America 2000 were affiliated, contributions 

transferred to America 2000 counted against each 

contributor's $5,000 limit for America 2000. 

Newsletter Published by Candidate 

In advisory opinion 1990-9, the Commission said that 

House candidate Margaret R. Mueller, as an 

unincorporated sole proprietor, could use unlimited 

personal funds to publish a newsletter. Funds received and payments made to publish the newsletter 

would result in contributions and expenditures if the 

publication contained campaign-related material. 

In a previous advisory opinion also issued to Ms. 

Mueller (1990-5), the Commission concluded that, 

given the circumstances presented, the publication of 

a newsletter by a corporation owned by Ms. Mueller 

would result in expenditures to influence her election 

if: 

• The newsletter directly or indirectly referred to the 

candidacy, campaign or qualifications for public 

office of Ms. Mueller or her opponent; 

• The newsletter contained articles or editorials that 

referred to her views, or those of her opponent, 

on public policy issues, or referred to issues 

raised in the campaign; or 

• The distribution of the newsletter were expanded 

beyond its present audience or in any manner 

that would indicate its use as a campaign communication.13 

13 See the June 1990 Record for a summary of AO 

1990-5. 
25 

Number 

ofPACs 

2000 .--------------------------------------------------------------

0 

Chapter 4 

Campaign Finance

Statistics 

PAC Growth, 1975-90 1 0 Corporate 

e Nonconnected 

.A. Trade/Membership/Health 

~Labor 

• Other 2 

1 For the years 1974 through 1976, numbers are not available for Nonconnected PACs, Trade/Membership/Health PACs 

and PACs in the "Other" category. 

2 "0ther" category includes PACs formed by corporations without capital stock and PACs formed by incorporated 

cooperatives. 
26 

PAC Support of Candidates 

By Election Cycle 1 

- Independent Expenditures 

- Contributions to Candidates 

Millions of Dollars 

78 80 82 84 86 88 90 78 80 82 84 86 88 90 78 80 82 84 86 88 90 78 80 82 84 86 88 90 

Corporate Labor Nonconnected Trade/Membership/ 

Health 

1 Chart does not include activity by PACs of cooperatives and corporations without capital stock. 
27 

Contributions to Candidates 

By Top 50 PACs 1 

January 1989 - December 1990 

Comparison of Top 50 PACs with All PACs 

- Contributions by All PACs 

- Contributions by Top 50 PACs 

Millions of Dollars 

Corporate Labor 

Number 1,965 372 

of PACs 

Number 1,533 233 

Contributing 

Nonconnected Trade/Member- Other 2 

ship/Health 

1,337 796 211 

510 603 165 

0 

1 Ranked according to total amount contributed to candidates between January 1 , 1989, and December 31 , 1990. 

2 "0ther" category consists of PACs formed by corporations without capital stock and PACs formed by cooperatives. 
28 

Receipts and Disbursements of 1990 

House and Senate Candidates 

(January 1, 1989, through December 31, 1990) 

-Receipts 

-Disbursements 

House Candidates 

Millions of Dollars 

Incumbents Challengers Open Seat 

Candidates 

No. of Candidates 409 863 313 

Senate Candidates 

Millions of Dollars 

Incumbents Challengers Open Seat 

Candidates 

No. of Candidates 32 103 16 
House Candidates' 

Sources of Receipts: 

Full24 Months of Election Cycle 

Contributions from Individuals 

Contributions from PACs 

- Contributions and Loans from Candidate 

- Other Loans 

- Other Receipts 1 

29 Incumbents 

Millions of Dollars 

200 

175 

150 

125 

100 

75 

50 

25 

0 

1986 1988 1990 

No. of Candidates 397 413 409 

Challengers 

Millions of Dollars 2 

1986 1988 1990 

No. of candidates 750 714 691 

Open Seat Candidates 

Millions of Dollars 2 

1986 1988 1990

No. of Candidates 297 241 274 

1 Other receipts consist of contributions from party committees, transfers (such as joint fundraising proceeds but not funds 

transferred from committees authorized by the candidate for the current campaign), refunds and rebates, and interest income. 

2 Note change in scale between chart for Incumbents and those for Challengers and Open Seat Candidates. 
Senate Candidates' 

Sources of Receipts: 

Full24 Months of Election Cycle 

Contributions from Individuals 

- Contributions from PACs 

- Contributions and Loans from Candidate 

-Other loans 

- Other Receipts 1 

1988 

37 

Open Seat Candidates 

Millions of Dollars 2 

75 

1986 1990 

No. of Candidates 71 16 

Challengers 

Millions of Dollars 2 

1986 1988 

No. of Candidates 121 94 

1990 

103 

Incumbents 

Millions of Dollars 

200 

175 

150 

125 

100 

75 

50 

25 

0 

1986 1988 1990 

No. of Candidates 27 27 ·32 

1 Other receipts consist of contributions from party committees, transfers (such as joint fundraising proceeds but not funds 

transferred from committees authorized by the candidate for the current campaign), refunds and rebates, and interest income. 

2 Note change in scale between chart for Incumbents and those for Challengers and Open Seat Candidates. 
Candidate Median Activity 1 

(January 1, 1989, through December 31, 1990) 

-Receipts 

- Disbursements 

3.0 

Senate Republican Candidates 

Millions of Dollars 

0.5 

0.4 

0.3 

0.2 

0.1 

0 

Incumbents Challengers Open Seat 

Candidates 

No. of Candidates 15 15 3 

Senate Democratic Candidates 

Millions of Dollars 

3.0.------------------

2.

2.

1.

1.

51-----

01-----

51-----

01--~---

0.5 

0.4 

0.3 

0.2 

0.1 

Open Seat 

Candidates 

0 

Incumbents Challengers 

No. of Candidates 17 14 3 

31 

House Republican Candidates 

Millions of Dollars 

0.6

0.51---------------===---- 0.41----­

o.3~---~­

o.2t----- 0~11----

0'------

Incumbents Challengers Open Seat 

Candidates 

No. of Candidates 159 143 29 

House Democratic Candidates 

Millions of Dollars 

0.6 

0.51-------------- 0.41----- 0.31----- 0.21----- 0.11----- 0'------

Incumbents Challengers Open Seat 

Candidates 

No. of Candidates 249 100 30 

1 Median activity means that an equal number of candidates had activity above and below the amounts shown. Note that 

only candidates who raised over $5,000 are included in these charts. See the definition of candidate at 2 U.S.C. §431 (2) and 

11 CFR 1 00.3(a). 
National Party Committee Activity: 

Full24 Months of Election Cycle 1 

Receipts 

Millions of Dollars 

1986 1988 1990

Republican 

Millions of Dollars 

1986 1988 1990 

Democratic 

Contributions to Candidates 

Millions of Dollars 

3~------------------------------

2 

1 

0 

1986 1988 1990 

Republican 

Millions of Dollars 

3.-------------------------------

1 

0 

1986 1988 1990 

Democratic 

Transfers to State and Local Party 

Committees 2 

Millions of Dollars 

9 

6 

3 I I I

0 I I I

1986 1988 1990 

Republican 

Millions of Dollars 

9.-------------------------------

1986 1988 1990 

Democratic 

1 Graphs show the aggregate activity of the three national committees of each major party: the national party committee, the 

Senatorial campaign committee and the Congressional campaign committee. 

2 Limited to transfers made for federal election activity. 
33 Chapter 5 

The Commission 

Commissioners 

Commission officers during 1990 were Chairman Lee 

Ann Elliott and Vice Chairman John Warren McGarry. 

In December 1990, the Commission elected the 1991 

officers: Chairman John Warren McGarry and Vice 

Chairman Joan D. Aikens. 

Biographies of the Commissioners, the Staff 

Director, General Counsel and Inspector General 

appear in Appendix 1. 

International Delegations 

As nations throughout the world began to implement 

democratic electoral systems, the FEC served as a 

global resource on the workings of such a system. 

Visitors from a broad scope of nations asked the 

Commission to explain the mechanics of the American electoral process. The Commission briefed 

visitors from the USSR, Poland, Yugoslavia, Bulgaria, 

Mexico, Argentina, Hong Kong and more than 50 

other countries. Most noteworthy among the FEC's 

international contacts were the exchange visits 

between the Soviet Union's Central Electoral Commission and the FEC. 

The exchange program began in 1989 when an 

FEC delegation visited the USSR in June; members 

of the Soviet Central Electoral Commission came to 

the U.S. in November. The trips included talks between American and Soviet election officials at all 

levels of government and covered such topics as 

election administration and campaign finance reform. 

In March 1990 Chairman Lee Ann Elliott continued 

the exchange program, leading a delegation of 

American federal and state election officials to the 

Soviet Union. The delegation met with election 

officials and observed republic-level elections in the 

Russian and Kazak Republics. 

Then in November 1990 a six-member delegation 

from the Central Electoral Commission (CEC) visited 

the United States. The delegation, headed by Vladimir 

P. Orlov, Chairman of the CEC, observed elections in 

Chicago and New York, and attended a seminar at 

the FEC focusing on two aspects of the United States 

electoral system: private sector involvement in 

elections and the role of the courts in campaigns and 

elections. 

All of the Soviet exchange visits were funded by 

the International Foundation for Electoral Systems, a 

nonprofit organization designed to promote worldwide 

understanding of democratic processes and elections. 

Ethics Training 

The FEC's General Counsel, who serves as the 

Designated Agency Ethics Official, directed his staff to 

conduct intraagency ethics training sessions in 1990. 

These sessions, mandated by a 1989 Executive 

Order, 1 briefed agency staff on the the Ethics Reform 

Act of 1989, the Hatch Act and the FEC Standards of 

Conduct. The ethics staff plans to begin publishing an 

intraagency newsletter to further advise the staff on 

matters of conduct. 

Personnel and Labor Relations 

Labor-Management Relations 

The Commission and the National Treasury Employees Union entered into a new labor-management 

agreement on November 6, 1989. In 1990, supervisors attended orientation sessions to learn about 

changes from the previous contract. 

Equal Employment Opportunity Program 

In 1990, the Commission approved an overall EEO 

program, an affirmative employment plan for 1990-91, 

and a plan for preventing sexual harassment. The 

EEO officer manages these programs and special 

emphasis programs for minorities and women. The 

officer also files annual statistical reports on discrimination and the Commission's workforce with the 

Equal Employment Opportunity Commission and 

status reports on the Disabled Veterans Affirmative 

Action Plan with the Office of Personnel and Management. 

In 1990 the Office of Equal Employment Opportunity Programs (OEEOP) made recommendations on 

1 Executive Order #12674 - April 12, 1989. 
34 

recruitment, participated in the Commission's orientation program and assisted the Personnel Office in 

developing the Commission's first comprehensive inhouse training course for supervisors. The OEEOP 

also published a bimonthly newsletter, EEO Focus, 

for Commission staff, provided counseling for those 

with equal employment concerns and sponsored 

several workshops on how to tackle personal issues. 

Recruitment 

Like other federal agencies, the Commission has had 

difficulty recruiting secretaries, auditors and attorneys. 

The federal government payscale and the high cost of 

living in the Washington, D.C., area discourage many 

qualified candidates from applying for and accepting 

these positions. To supplement in-house efforts to 

recruit auditors, the FEC has continued its arrangement with the General Accounting Office (GAO} that 

allows the Commission to take advantage of GAO's 

extensive recruitment program. In addition, the Office 

of General Counsel continued efforts to attract 

qualified attorneys by conducting on-campus interviews at various law schools and consortia around the 

country. 

Inspector General 

In compliance with the 1988 amendments to the 

Inspector General Act of 1978, the Commission 

appointed the agency's first permanent Inspector 

General in February 1990. 

Charged with conducting audits and investigations 

to detect fraud, waste and abuse within the agency, 

the Office of the Inspector General (OIG} reports 

directly to the Commission. The OIG also advises the 

Commissioners on ways to improve the economy and 

efficiency of agency operations. 

The new OIG established a hotline and implemented other procedures for employees to report 

instances of waste and abuse. Additionally, it developed procedures for audits and investigations and for 

the preparation of staff responses to audit reports. 

The OIG is required to submit to Congress semiannual reports which summarize the activities of the 

office during the preceding six-month period. These 

reports must include, but need not be limited to, a 

description of significant problems, abuses or deficiencies in agency operations, and a description of 

corrective action taken (or recommended by OIG but 

not taken) by management. 

Administrative Management 

The Commission continued to expand its new computer system and instruct staff on its use. Nearly 

every division had access to the VAX system, and 

many of those currently without access will come online soon. The Data Systems division conducted staff 

training and introduced an intraagency newsletter 

providing helpful hints on the system's many functions. 

The FEC's Budget 

Fiscal Year 1990 

The final appropriation for FY 1990 was $15.330 

million, the full amount requested. However, to cover 

the cost of the 3.6 percent payraise ($274,000} in 

January 1990, the agency had to cut nonpersonnel 

costs and reduce the FY 1990 staffing level by 

attrition from the 253 full-time equivalent (FTE} 

positions authorized by the budget to 248 FTE. This 

represented a slight reduction from the 1989 average 

of 251.3 FTE, but an increase over the 243 FTE level 

at the end of the 1989 fiscal year. 

Nevertheless, as a result of a personnel shortage 

and savings on some nonpersonnel costs, there was 

a $97,000 surplus for the 1990 fiscal year. The 

Commission was able to reallocate funds for improve~ 

ment and expansion of the agency's computer system 

and for educational programs on the new allocation 

regulations and the public funding tax checkoff. 

The FY 1990 management plan called for a 

gradual return to an Audit Division staffing level 

comparable to that of the 1980 Presidential cycle (42 

FTE positions). After 1980, budget constraints and 

legislative limits on non-Presidential audits led the 

Commission to reduce Audit staff to a core of 24 FTE, 

supplemented in Presidential years by temporary staff 

and GAO staff (detailed on a nonreimbursable basis) 
35 

to help with the public funding program. During the 

1988 Presidential cycle, however, the Commission 

experienced problems created by a shortage of 

experienced Audit staff. With the planned increase in 

Audit staff, supplemented by GAO employees, the 

agency will have sufficient trained staff in place for the 

1992 Presidential elections. 

Fiscal Year 1991 

The final appropriation for FY 1991 was $17.150 

million, which represents the full amount requested. 

The Commission anticipated cuts, however, of 

$88,000 in nonpersonnel expenses and $439,500 in 

personnel costs to cover larger-than-anticipated pay 

increases for executives and staff. The personnel 

savings will be achieved through a projected lapse of 

about 1 0 positions, reducing the 1991 staffing level 

from 266 FTE, as originally expected, to 254.5 FTE. 

The nonpersonnel reductions include cuts in training, 

equipment purchases and contracts. 

A comparison of the allocation of budget resources 

for FYs 1990 and 1991 appears in the table and the 

graphs below. 

Functional Allocation of Budget 

FY 1990 FY 1991 

Personnel $10,983,100 $12,148,000 

Travel 146,000 205,000 

Motor Pool 5,000 7,500 

Commercial Space 17,900 21,000 

GSA Space 1,671,400 1,753,000 

Equipment Rental 231,500 300,000 

Equipment Purchase 220,900 138,000 

Printing 303,800 370,000 

Support Contracts 632,800 844,000 

Administrative Expenses 143,500 164,000 

Supplies and Materials 222,100 260,000 

Publications 134,200 150,000 

Telephone/Telegraph 319,900 334,500 

Postage 116,500 105,000 

Training 53,700 113,000 

GSA Services, Other I 

127,700 237,000

Total $15,330,000 $17,150,000 
Allocation of Staff t 0 5 10 15 20 25 

Percent 

30 

*Commissioners 

Staff Director 

Office of General Counsel 

Administration 

Audit 

Clearinghouse 

Data Systems Development 

Information Services 

Public Disclosure 

Reports Analysis 

36 

Divisional Allocation - Fiscal Year 1990 

- Fiscal Year 1991 

Percent 

Allocation of Budget 0 5 10 15 20 25 30 

*Commissioners 

Staff Director 

Office of General Counsel 

Administration 

Audit 

Clearinghouse 

Data Systems Development 

Information Services 

Public Disclosure 

Reports Analysis 

*Includes Inspector General's Office. 

tThe Commission averaQed 241.7 full-time equivalent positions (FTE) in FY 1990 and projected 254.5 FTE for FY 1991. 
37 Chapter 6 

Legislative 

Recommendations 

Legislative Action on Past 

Recommendations 

Campaign finance reform legislation saw a lot of 

activity during the 101 st Congress. By the end of the 

second session, over 125 bills had been introduced 

that would change in some fashion, the way Congressional campaigns are currently financed. Both the 

United States Senate and the House of Representatives passed their own versions of a reform bill, S. 137 

and H.R. 5400 respectively. Both of these bills, 

though never enacted into law, contained several of 

the Commission's technical legislative recommendations. For example, both the Senate and House bills 

contained the Commission's legislative recommendation which deals with the fraudulent solicitation of 

funds. This recommendation would prohibit any 

person from fraudulently soliciting contributions. (See 

page 48.) 

The House bill contained the Commission's recommendation to eliminate the state-by-state limitations 

on expenditures for publicly financed Presidential 

primary candidates. The Commission has made this 

recommendation in order to eliminate some rather 

cumbersome requirements of the Federal Election 

Campaign Act that have become a burden for all 

campaigns to follow, as well as for the Commission to 

track and enforce; yet the limitations could be removed with no significant impact on the process. 

(See page 40.) 

These two bills, as well as other proposals introduced during the 101 st Congress, contained other 

discrete legislative recommendations that have been 

propounded by the Commission, such as those 

dealing with the Commission's authority over the 

allocation and disclosure of nonfederal ("soft money") 

accounts, random audits, seeking injunctions in 

enforcement cases, disclaimer notices, fundraising 

projects operated by unauthorized committees, 

Commission as sole point of entry for disclosure 

documents, campaign cycle reporting, monthly 

reporting for Congressional candidates, and the 

budget reimbursement fund. 

The following recommendations are offered in 1991 

to further the goal of efficiently administering and 

enforcing the campaign finance laws. 

Public Financing 

Presidential Election Campaign Fund (revised 

1991) 

Section: 26 U.S.C. §6096 

Recommendation: Congress should amend the 

Revenue Act to ensure that sufficient funds will be in 

the Presidential Election Campaign Fund to cover the 

outlays anticipated in 1992 and prevent future imbalances between the Fund's receipts and the Fund's 

payouts to Presidential candidates and party convention committees. Among the alternative remedies for 

this imbalance, Congress should consider: 

• Periodically adjusting the amount designated on 

the income tax return to correspond to the index 

for payments from the Fund; 

• Changing the system to an entitlement program 

wherein the amount of payments would be 

determined solely by the statutory eligibility 

criteria; 

• Changing the system to a traditional appropriated 

account or, should the check-off system be 

retained, permitting special appropriations to 

compensate for a projected shortfall; or 

• Reducing disbursements from the Fund, for 

example by matching a smaller amount of money 

in the primaries or by not increasing the convention and general election payouts by the full 

inflation rate. 

Explanation: The present system, wherein a nonindexed, $1 tax check-off mechanism must fund 

inflation-indexed payments, is approaching insolvency. Since 1974 (the index year for payments), 

inflation has increased payments by over 250 percent. 

As previously reported, unless the system is changed, 

the Fund balance is likely to be inadequate to meet 

the entitlements of candidates for the 1992 Presiden-
38 

tial election. Even if a shortfall is avoided in the '92 

cycle, a deficiency in the Fund is a certainty by the 

1996 elections. 

If Congress wishes to retain the check-off mechanism, it should index the tax check-off to correspond 

to the index on Fund payments to Presidential candidates. Automatic indexing could be simplified to 

require a change on tax form 1040 (individual income 

tax return} only when inflation warranted an increase 

of a full or a half dollar. This would preclude annual 

changes and prevent absurdly precise amounts from 

being printed on the form. 

Enforcement of Nonwillful Violations 

Section: 26 U.S.C. §§9012, 9042 

Recommendation: Congress should amend the 

Presidential Election Campaign Fund Act and the 

Presidential Primary Matching Payment Account Act 

to make it clear that the Commission has authority for 

civil enforcement of nonwillful violations of the public 

funding provisions. 

·Explanation: Section 9012 of the Presidential Election 

Campaign Fund Act and section 9042 of the Presidential Primary Matching Payment Account Act 

provide only for "criminal penalties" for knowing and 

willful violations of the spending and contribution 

provisions and the failure of publicly funded candidates to furnish all records requested by the Commission. The lack of a specific reference to nonwillful 

violations of these provisions has raised questions 

regarding the Commission's ability to enforce these 

provisions through the civil enforcement process. 

In some limited areas, the Commission has invoked other statutes and other provisions in Title 26 

to carry out its civil enforcement of the public funding 

provisions. It has relied, for example, on 2 U.S.C. 

§441 a(b} to enforce the Presidential spending limits. 

Similarly, the Commission has used the candidate 

agreement and certification processes provided in 26 

U.S.C. §§9003 and 9033 to enforce the spending 

limits, the ban on private contributions, and the 

requirement to furnish records. Congress may wish to 

consider revising the public financing statutes to 

provide explicit authority for civil enforcement of these 

provisions. 

Eligibility for Public Financing (revised 1991) 

Section: 26 U.S.C. §§9003, 9033 

Recommendation: Congress should reexamine the 

eligibility requirements for publicly funded Presidential 

candidates. In particular, two areas merit special 

attention: (1} the need to raise the threshold amount 

of matchable contributions required to qualify for 

Presidential primary matching funds; and (2) the need 

to ensure that candidates who have willfully violated 

laws related to the public funding process will not be 

eligible for public funding. 

Explanation: Congress should consider raising the 

threshold amount required to qualify for primary 

matching payments. The Federal Election Commission has administered the public funding provisions in 

four Presidential elections. The statute provides for a 

cost-of-living adjustment (COLA} on the overall 

primary spending limitation, which has more than 

doubled since 1976. There is, however, no corresponding adjustment to the threshold requirement. It 

remains exactly the same as it was in 1976. An 

adjustment to the threshold requirement would ensure 

that funds continue to be given only to candidates 

who demonstrate broad national support. To reach 

this higher threshold, Congress could increase the 

number of states in which the candidate must raise 

the qualifying amount of matchable contributions; and/ 

or increase the total amount of qualifying matchable 

contributions that must be raised in each of the states. 

With regard to the candidate's past experience with 

the public funding process, neither of the Presidential 

public financing statutes places any limitation on 

eligibility for funding based upon a candidate's prior 

violations of law, no matter how severe. Public 

confidence in the integrity of the public financing 

system could be eroded if the Commission were 

compelled to provide public funds to candidates who 

have been convicted of felonies related to the public 

funding process. For example, if a candidate has 

been convicted of fraud with respect to raising funds 
39 

for a campaign that was publicly financed, the Commission should not be required to certify funds for 

future campaigns. Congress may wish to add a 

requirement that an individual seeking public funds 

may not have been convicted of crimes related to the 

public financing process. Similarly, the Commission 

should not be required to certify funds to candidates 

who, in connection with past Presidential campaigns, 

have failed to make repayments or who have willfully 

disregarded the statute or regulations. Congress 

should amend the eligibility requirements to ensure 

that such candidates do not receive public financing 

for their Presidential campaigns. 

Contributions to Presidential Nominees Who 

Receive Public funds in the General Election 

(1991) 1 

Section: 26 U.S.C. §9003 

Recommendation: Congress may wish to clarify that 

the public financing statutes prohibit the making and 

acceptance of contributions (either direct or in-kind) to 

Presidential candidates who receive public funds in 

the general election. 

Explanation: The Presidential Election Campaign 

Fund Act prohibits a publicly financed general election 

candidate from accepting private contributions to 

defray qualified campaign expenses. 26 U.S.C. 

§9003(b)(2). The Act does not, however, contain a 

parallel prohibition against the making of these 

contributions. Congress should consider adding a 

section to 2 U.S.C. §441 a to clarify that individuals 

and committees are prohibited from making these 

contributions. 

Fundraising Limitation for Publicly Financed 

Presidential Primary Campaigns (revised 1991) 

Section: 2 U.S.C. §§431 (9)(A)(vi) and 441 a 

Recommendation: The Commission recommends that 

the separate fundraising limitation provided to publicly 

financed Presidential primary campaigns be combined with the overall limit. Thus, instead of a 

candidate's having a $10 million (plus COLA 2) limit for 

campaign expenditures and a $2 million (plus COLA) 

limit for fund raising (20 percent of overall limit), each 

candidate would have one $12 million (plus COLA) 

limit for all campaign expenditures. 

Explanation: Campaigns that have sufficient funds to 

spend up to the overall limit usually allocate some of 

their expenditures to the fundraising category. These 

campaigns come close to spending the maximum 

permitted under both their overall limit and their 

special fundraising limit. Hence, by combining the two 

limits, Congress would not substantially alter spending amounts or patterns. For those campaigns which 

do not spend up to the overall expenditure limit, the 

separate fundraising limit is meaningless. Many 

smaller campaigns do not even bother to use it, 

except in one or two states where the expenditure 

limit is low, e.g., Iowa and New Hampshire. Assuming 

that the state limitations are eliminated or appropriately adjusted, this recommendation would have little 

impact on the election process. 

The advantages of the recommendation, however, 

are substantial. They include a reduction in accounting 

burdens and a simplification in reporting requirements 

for campaigns, and a reduction in the Commission's 

auditing task. For example, the Commission would no 

longer have to ensure compliance with the 28-day rule, 

i.e., the rule prohibiting committees from allocating 

expenditures as exempt fundraising expenditures 

within 28 days of the primary held within the state 

where the expenditure was made. 

1 The date "1991" indicates that the recommendation was 

adopted for the first time in 1991. Recommendations 

without the date were initially adopted in previous years and 

reaffirmed by the Commission in 1991. 

2 Spending limits are increased by the cost-of-living 

adjustment (COLA), which the Department of Labor 

calculates annually. 
40 

State Expenditure Limits for Publicly Financed 

Presidential Primary Campaigns (revised 1991) 

Section: 2 U.S.C. §441 a 

Recommendation: The Commission recommends that 

the state-by-state limitations on expenditures for 

publicly financed Presidential primary candidates be 

eliminated. 

Explanation: The Commission has now administered 

the public funding program in four Presidential elections. Based on our experience, we believe that the 

limitations could be removed with no material impact 

on the process. 

Our experience has shown that the limitations have 

little impact on campaign spending in a given state, 

with the exception of Iowa and New Hampshire. In 

most other states, campaigns are unable or do not 

wish to expend an amount equal to the limitation. In 

effect, then, the administration of the entire program 

results in limiting disbursements in these two primaries alone. 

If the limitations were removed, the level of disbursements in these states would obviously increase. 

With an increasing number of primaries vying for a 

campaign's limited resources, however, it would not 

be possible to spend very large amounts in these 

early primaries and still have adequate funds available for the later primaries. Thus, the overall national 

limit would serve as a constraint on state spending, 

even in the early primaries. At the same time, candidates would have broader discretion in the running of 

their campaigns. 

Our experience has also shown that the limitations 

have been only partially successful in limiting expenditures in the early primary states. The use of the 

fundraising limitation, the compliance cost exemption, 

the volunteer service provisions, the unreimbursed 

personal travel expense provisions, the use of a 

personal residence in volunteer activity exemption, 

and a complex series of allocation schemes have 

developed into an art which when skillfully practiced 

can partially circumvent the state limitations. 

In addition, experience has shown that one of the 

Congressional concerns motivating the adoption of 

state expenditure limits is no longer an issue. Congress adopted the state limits, in part, as a way of 

discouraging candidates from relying heavily on the 

outcome of big state primaries. The concern was that 

candidates might wish to spend heavily in such states 

as a way of securing their party's nomination. In fact, 

however, under the public funding system, this has 

not proven to be an issue. Rather than spending 

heavily in large states, candidates have spent large 

amounts in the early primaries, for example, in Iowa 

and New Hampshire. 

Finally, the allocation of expenditures to the states 

has proven a significant accounting burden for 

campaigns and an equally difficult audit and enforcement task for the Commission. 

Given our experience to date, we believe that this 

change to the Act would be of substantial benefit to all 

parties concerned. 

Deposit of Repayments 

Section: 26 U.S.C. §9007(d) 

Recommendation: Congress should revise the law to 

state that: All payments received by the Secretary of 

the Treasury under subsection (b) shall be deposited 

by him or her in the Presidential Election Campaign 

Fund established by section 9006(a). 

Explanation: This change would allow the Fund to 

recapture monies repaid by convention-related 

committees of national major and minor parties, as 

well as by general election grant recipients. Currently 

the Fund recaptures only repayments made by 

primary matching fund recipients. 

Contributions and Expenditures 

Independent Expenditures by Principal Campaign 

Committees (1991) 

Section: 2 U.S.C. §432(e)(3) 

Recommendation: Congress should consider amending the definition of principal campaign committee to 

clarify whether these committees may make indepen-
41 

dent expenditures on behalf of other principal campaign committees. 

Explanation: A principal campaign committee is 

defined as an authorized committee which has not 

supported more than one federal candidate. It is not 

clear, however, whether the term "support" is intended 

to include both contributions and independent expenditures or whether it refers to contributions alone. The 

same section states that the term "support" does not 

include a contribution by any authorized committee to 

another authorized committee of $1 ,000 or less 

(2 U.S.C. §432(e)(3)(B)), but it is silent on the question of independent expenditures. The current language does not clearly indicate whether authorized 

committees can make independent expenditures on 

behalf of other committees, or whether Congress 

intended to preclude authorized committees from 

making independent expenditures. 

Contributions and Expenditures to Influence 

Federal and Nonfederal Elections (revised 1991) 

Section: 2 U.S.C. §§441 and 434 

Recommendation: Congress may wish to consider 

whether new legislation is needed to monitor political 

committees that engage in activities that influence 

both federal and nonfederal elections. 

Explanation: The law requires that all funds spent to 

influence federal elections come from sources that 

are permissible under the limitations and prohibitions 

of the Act. Problems arise with the application of this 

provision when committees engage in activities that 

support both federal and nonfederal candidates. In 

this regard, the Commission has recently promulgated 

new rules on allocating disbursements between 

federal and nonfederal election activity. These rules, 

which went into effect on January 1, 1991, also added 

new disclosure requirements for allocated activities. 

The District Court for the District of Columbia, in 

Common Cause v. FEC, confirmed the Commission's 

long-standing view that allocation is the appropriate 

way to reconcile its mandate (to monitor excessive 

and prohibited funds) and the limits on its jurisdiction 

(to regulate money influencing federal elections but 

not state or local). Notwithstanding the Commission's 

regulatory efforts, public attention continues to be 

focused on the perceived impact of so-called "soft 

money" on federal elections. In light of this public 

concern, Congress may wish to reevaluate the 

Commission's role in regulating political committees 

that support both federal and nonfederal candidates. 

Nonprofit Corporations 

Section: 2 U.S.C. §441b 

Recommendation: In light of the decision of the U.S. 

Supreme Court in Federal Election Commission v. 

Massachusetts Citizens for Life, Inc. (MCFL), Congress may wish to amend the provision prohibiting 

corporate and labor spending in connection with 

federal elections in order to incorporate in the statute 

the text of the Court's decision. 

Explanation: In the Court's decision of December 15, 

1986, the Court held that the Act's prohibition on 

corporate political expenditures was unconstitutional 

as applied to independent expenditures made by a 

narrowly defined type of nonprofit corporation. Since 

that time, the Commission has published an Advance 

Notice of Proposed Rulemaking and has conducted 

hearings on whether regulatory changes are needed · 

as a result of the Court's decision. Congress may 

wish to consider whether statutory changes are 

required as well. 

The Court found that certain nonprofit corporations 

were not subject to the prohibitions of 2 U.S.C. §441 b. 

The Court determined, however, that these nonprofit 

corporations had to disclose some aspect of their 

financial activity-in particular, independent expenditures exceeding $250 and identification of persons 

who contribute over $200 to help fund these expenditures. The Court further ruled that spending for 

political activity could, at some point, become a major 

purpose of the corporation, and the organization 

would then become a political committee. 
42 

Certification of Voting Age Population Figures and 

Cost-of-Living Adjustment 

Section: 2 U.S.C. §§441a(c) and (e) 

Recommendation: Congress should consider removing the requirement that the Secretary of Commerce 

certify to the Commission the voting age population of 

each Congressional district. At the same time, Congress should establish a deadline of February 15 for 

supplying the Commission with the remaining information concerning the voting age population for the 

nation as a whole and for each state. In addition, the 

same deadline should apply to the Secretary of Labor, 

who is required under the Act to provide the Commission with figures on the annual adjustment to the costof-living index. 

Explanation: In order for the Commission to compute 

the coordinated party expenditure limits and the stateby-state expenditure limits for Presidential candidates, 

the Secretary of Commerce certifies the voting age 

population of the United States and of each state. 

2 U.S.C. §441 a( e). The certification for each Congressional district, also required under this provision, is 

not needed. 

In addition, under 2 U.S.C. §441 a( c), the Secretary 

of Labor is required to certify the annual adjustment in 

the cost-of-living index. In both instances, the timely 

receipt of these figures would enable the Commission 

to inform political committees of their spending limits 

early in the campaign cycle. Under present circumstances, where no deadline exists, the Commission 

has sometimes been unable to release the spending 

limit figures before June. 

Election Period Limitations 

Section: 2 U.S.C. §441a 

Recommendation: The Commission recommends that 

limits on contributions to candidates be placed on an 

election-cycle basis, rather than the current perelection basis. 

Explanation: The contribution limitations affecting 

contributions to candidates are structured on a "perelection" basis, thus necessitating dual bookkeeping 

or the adoption of some other method to distinguish 

between primary and general election contributions. 

The Act could be simplified by changing the contribution limitations from a "per-election" basis to an 

"election-cycle" basis. Thus, multicandidate committees could give up to $10,000 and all other persons 

could give up to $2,000 to an authorized committee at 

any point during the election cycle. 

Application of Contribution Limitations to Family 

Members (revised 1991) 

Section: 2 U.S.C. §441 a 

Recommendation: The Commission recommends that 

Congress examine the application of the contribution 

limitations to immediate family members. 

Explanation: Under the current posture of the law, a 

family member is limited to contributing $1 ,000 per 

election to a candidate. This limitation applies to 

spouses and parents, as well as other immediate 

family members. (SeeS. Cont. Rep. No. 93-1237, 

93rd Cong., 2nd Sess., 58 (1974) and Buckley v. 

Valeo, 424 U.S. 1, 51 (footnote 57)(1976).) This 

limitation has caused the Commission substantial 

problems in attempting to implement and enforce the 

contribution limitations.3 

Problems have arisen in enforcing the limitations 

where a candidate uses assets belonging to a parent. 

In some cases, a parent has made a substantial gift to 

his or her candidate-child while cautioning the candidate that this may well decrease the amount which 

the candidate would otherwise inherit upon the death 

of the parent. 

Problems have also occurred in situations where 

the candidate uses assets held jointly with a spouse. 

When the candidate uses more than one-half of the 

3 While the Commission has attempted through regulations to present an equitable solution to some of these 

problems (see 48 Fed. Reg. 19019 (April27, 1983) as 

prescribed by the Commission on July 1, 1983), statutory 

resolution is required in this area. 
43 

value of the asset held commonly with the spouse (for 

example, offering property as collateral for a loan), the 

amount over one-half represents a contribution from 

the spouse. If that amount exceeds $1,000, it becomes an excessive contribution from the spouse. 

The Commission recommends that Congress 

consider the difficulties arising from application of the 

contribution limitations to immediate family members. 

Acceptance of Cash Contributions 

Section: 2 U.S.C. §441g 

Recommendation: Congress may wish to modify the 

statute to make the treatment of 2 U.S.C. §441g, 

concerning cash contributions, consistent with other 

provisions of the Act. As currently drafted, 2 U.S.C. 

§441 g prohibits only the making of cash contributions 

which, in the aggregate, exceed $1 00 per candidate, 

per election. It does not address the issue of accepting cash contributions. Moreover, the current statutory language does not plainly prohibit cash contributions in excess of $1 00 to political committees other 

than authorized committees of a candidate. 

Explanation: Currently this provision focuses only on 

persons making the cash contributions. However, 

these cases generally come to light when a committee has accepted these funds. Yet the Commission 

has no recourse with respect to the committee in such 

cases. This can be a problem, particularly where 

primary matching funds are received on the basis of 

such contributions. 

While the Commission, in its regulations at 11 CFR 

11 0.4(c)(2), has included a provision requiring a 

committee receiving such a cash contribution to 

promptly return the excess over $100, the statute 

does not explicitly make acceptance of these cash 

contributions a violation. The other sections of the Act 

dealing with prohibited contributions {i.e., Sections 

441 b on corporate and labor union contributions, 441 c 

on contributions by government contractors, 441 e on 

contributions by foreign nationals, and 441 f on 

contributions in the name of another) all prohibit both 

the making and accepting of such contributions. 

Secondly, the statutory text seems to suggest that 

the prohibition contained in §441 g applies only to 

those contributions given to candidate committees. 

This language is at apparent odds with the 

Commission's understanding of the Congressional 

purpose to prohibit any cash contributions which 

exceed $100 in federal elections. 

Litigation 

Independent Authority of FEC in All Court 

Proceedings 

Section: 2 U.S.C. §437c{f)(4) 

Recommendation: Congress has granted the Commission authority to conduct its own litigation independent of the Department of Justice. This independence 

is an important component of the statutory structure 

designed to ensure nonpartisan administration and 

enforcement of the campaign financing statutes. Two 

clarifications would help solidify that structure: 

1. Congress should amend the Act to specify that 

local counsel rules (requiring district court litigants 

to be represented by counsel located within the 

district) cannot be applied to the Commission. 

2. Congress should give the Commission explicit 

authorization to appear as an amicus curiae in 

cases that affect the administration of the Act, but 

do not arise under it. 

Explanation: With regard to the first of these recommendations, most district courts have rules requiring 

that all litigants be represented by counsel located 

within the district. The Commission, which conducts 

all of its litigation nationwide from its offices in Washington, D.C., is unable to comply with those rules 

without compromising its independence by engaging 

the local United States Attorney to assist in representing it in courts outside of Washington, D.C. Although 

most judges have been willing to waive applying 

these local counsel rules to the Commission, some 

have insisted that the Commission obtain local 

representation. An amendment to the statute specify-
44 

ing that such local counsel rules cannot be applied to 

the Commission would eliminate this problem. 

Concerning the second recommendation, the 

FECA explicitly authorizes the Commission to "appear 

in and defend against any action instituted under this 

Act," 2 U.S.C. §437c(f)(4), and to "initiate ... , defend 

... or appeal any civil action ... to enforce the provisions of this Act and chapter 95 and chapter 96 of 

title 26," 2 U.S.C. §437d(a)(6). These provisions do 

not explicitly cover instances in which the Commission 

appears as an amicus curiae in cases that affect the 

administration of the Act, but do not arise under it. A 

clarification of the Commission's role as an amicus 

curiae would remove any questions concerning the 

Commission's authority to represent itself in this 

capacity. 

Compliance 

Protection for Those Who File Complaint or Give 

Testimony 

Section: 2 U.S.C. §437g 

Recommendation: The Act should be amended to 

make it unlawful to improperly discriminate against 

employees or union members solely for filing charges 

or giving testimony under the statute. 

Explanation: The Act requires that the identity of 

anyone filing a complaint with the Commission be 

provided to the respondent. In many cases, this may 

put complainants at risk of reprisals from the respondent, particularly if an employee or union member files 

a complaint against his or her employer or union. This 

risk may well deter many people from filing complaints, particularly under section 441 b. See, e.g., 

NLRB v. Robbins Tire & Rubber Company, 437 U.S. 

214,240 (1978); Brennan v. Engineered Products, 

Inc., 506 F.2d 299, 302 (8th Cir. 1974); Texas Industries, Inc. v. NLRB, 336 F.2d 128, 134 (5th Cir. 1964). 

In other statutes relating to the employment relationship, Congress has made it unlawful to discriminate 

against employees for filing charges or giving testimony under the statute. See, e.g., 29 U.S.C. 

§158(a)(4) (National Labor Relations Act); 29 U.S.C. 

§215(3) (Fair Labor Standards Act); 42 U.S.C. 

§2000e-3(a) (Equal Employment Opportunities Act). 

Congress should consider including a similar provision in the FECA. 

Random Audits 

Section: 2 U.S.C. §438(b) 

Recommendation: Congress should consider legislation that would permit the Commission to randomly 

audit political committees in an effort to promote 

voluntary compliance with the election law and ensure 

public confidence in the election process. 

Explanation: In 1979, Congress amended the FECA 

to eliminate the Commission's explicit authority to 

conduct random audits. The Commission is concerned that this change has weakened its ability to 

deter abuse of the election law. Random audits can 

be an effective tool for promoting voluntary compliance with the Act and, at the same time, reassuring 

the public that committees are complying with the law. 

Random audits performed by IRS offer a good model. 

As a result of random tax audits, most taxpayers try to 

file accurate returns on time. Tax audits have also 

helped create the public perception that tax laws are 

enforced. 

There are many ways to select committees for a 

random audit. One way would be to randomly select 

committees from a pool of all types of political committees identified by certain threshold criteria such as the 

amount of campaign receipts and, in the case of 

candidate committees, the percentage of votes won. 

With this approach, audits might be conducted in 

many states throughout the country. 

Another approach would be to randomly select 

several Congressional districts and audit all political 

committees in those districts, for a given election 

cycle. This system might result in concentrating audits 

in fewer geographical areas. 

Regardless of how random selections were made, 

it would be essential to include all types of political 

committees-PACs, party committees and candidate 

committees-and to ensure an impartial, evenhanded 

selection process. 
45 

Modifying "Reason to Believe" Finding 

Section: 2 U.S.C. §437g 

Recommendation: Congress should consider modifying the language pertaining to "reason to believe," 

contained in 2 U.S.C. §437g, in order to reduce the 

confusion sometimes experienced by respondents, 

the press and the public. One possible approach 

would be to change the statutory language from "the 

Commission finds reason to believe a violation of the 

Act has occurred" to "the Commission finds reason to 

believe a violation of the Act may have occurred." Or 

Congress may wish to use some other less invidious 

language. 

Explanation: Under the present statute, the Commission is required to make a finding that there is "reason 

to believe a violation has occurred" before it may 

investigate. Only then may the Commission request 

specific information from a respondent to determine 

whether, in fact, a violation has occurred. The statutory phrase "reason to believe" is misleading and 

does a disservice to both the Commission and the 

respondent. It implies that the Commission has 

evaluated the evidence and concluded that the 

respondent has violated the Act. In fact, however, a 

"reason to believe" finding simply means that the 

Commission believes a violation may have occurred if 

the facts as described in the complaint are true. An 

investigation permits the Commission to evaluate the 

validity of the facts as alleged. 

If the problem is, in part, one of semantics, it would 

be helpful to substitute words that sound less accusatory and that more accurately reflect what, in fact, the 

Commission is doing at this early phase of enforcement. 

In order to avoid perpetuating the erroneous 

conclusion that the Commission believes a respondent has violated the law every time it finds "reason to 

believe," the statute should be amended. 

Seeking Injunctions in Enforcement Cases 

Section: 2 U.S.C. §437g(a)(1) 

Recommendation: 4 Congress should amend the 

enforcement procedures set forth in the statute so as 

to empower the Commission to promptly initiate a civil 

suit for injunctive relief in order to preserve the status 

quo when there is clear and convincing evidence that 

a substantial violation of the Act is about to occur. 

Under criteria expressly stated, the Commission 

should be authorized to initiate such civil action in a 

4 Commissioner Elliott filed the following dissent: 

The Act presently enables the Commission to seek 

injunctive relief after the administrative process has been 

completed and this is more than sufficient. (See 2 U.S.C. 

§437g{a)(6)(A).) 

I am unaware of any complaint filed with the Commission 

which, in my opinion, would meet the four standards set 

forth in the legislative recommendation. Assuming a case 

was submitted which met these standards, I believe it would 

be inappropriate for the Commission to seek injunctive relief 

prior to a probable cause finding. 

First, the very ability of the Commission to seek an 

injunction, especially during the "heat of the campaign," 

opens the door to allegations of an arbitrary and politically 

motivated enforcement action by the Commission. The 

Commission's decision to seek an injunction in one case 

while refusing to do so in another could easily be seen by 

candidates and respondents as politicizing the enforcement 

process. 

Second, the Commission might easily be flooded with 

requests for injunctive relief for issues such as failure to file 

an October quarterly or a 12-day pre-general report. 

Although the Commission would have the discretion to deny 

all these requests for injunctive relief, in making that 

decision the Commission would bear the administrative 

burden of an immediate review of the factual issues. 

Third, although the courts would be the final arbiter as to 

whether or not to grant an injunction, the mere decision by 

the Commission to seek an injunction during the final weeks 

of a campaign would cause a diversion of time and money 

and adverse publicity for a candidate during the most 

important period of the campaign. 

For these reasons, I disagree with the recommendation to 

expand the power of the Commission to seek injunctive 

relief except as presently provided for in the Act. 
46 

United States district court without awaiting expiration 

of the 15-day period for responding to a complaint or 

the other administrative steps enumerated in the 

statute. The person against whom the Commission 

brought the action would enjoy the procedural protections afforded by the courts. 

Explanation: On certain occasions in the heat of the 

campaign period, the Commission has been provided 

with information indicating that a violation of the Act is 

about to occur (or be repeated) and yet, because of 

the administrative steps set forth in the statute, has 

been unable to act swiftly and effectively in order to 

prevent the violation from occurring. In some instances the evidence of a violation has been clear-cut 

and the potential for an impact on a campaign or 

campaigns has been substantial. The Commission 

has felt constrained from seeking immediate judicial 

action by the requirements of the statute which 

mandate that a person be given 15 days to respond to 

a complaint, that a General Counsel's brief be issued, 

that there be an opportunity to respond to such brief, 

and that conciliation be attempted before court action 

may be initiated. The courts have indicated that the 

Commission has little if any discretion to deviate from 

the administrative procedures of the statute. In re 

Carter-Mondale Reelection Committee, Inc., 642 F.2d 

538 (D.C. Cir. 1980); Common Cause v. Schmitt, 512 

F. Supp. 489 (D.D.C. 1980), aff'd by an equally 

divided court, 455 U.S. 129 (1982); Durkin for U.S. 

Senate v. FEC, 2 Fed. Elec. Camp. Fin. Guide (CCH) 

para. 9147 (D.N.H. 1980). The Commission suggests 

that the standards that should govern whether it may 

seek prompt injunctive relief (which could be set forth 

in the statute itself) are: 

1. There is a substantial likelihood that the facts set 

forth a potential violation of the Act; 

2. Failure of the Commission to act expeditiously will 

result in irreparable harm to a party affected by 

the potential violation; 

3. Expeditious action will not result in undue harm or 

prejudice to the interests of other persons; and 

4. The public interest would be served by expeditious handling of the matter. 

Disclaimers 

Disclaimer Notices 

Section: 2 U.S.C. §441 d 

Recommendation: Congress should revise the statute 

to require registered political committees to display 

the appropriate disclaimer notice (when practicable) in 

any communication issued to the general public, 

regardless of its purpose or how it is distributed. 

Explanation: Under 2 U.S.C. §441d, a disclaimer 

notice is only required when "expenditures" are made 

for two types of communications made through "public 

political advertising": (1) communications that solicit 

contributions and (2) communications that "expressly 

advocate" the election or defeat of a clearly identified 

candidate. The Commission has encountered a 

number of problems with respect to this requirement. 

First, the statutory language requiring the disclaimer notice refers specifically to "expenditures," 

suggesting that the requirement does not apply to 

disbursements that are exempt from the definition of 

"expenditure" such as "exempt activities" conducted 

by local and state party committees under, for example, 2 U.S.C. §431 (9)(B)(viii). This proposal would 

make clear that all types of communications to the 

public would carry a disclaimer. 

Second, the Commission has encountered difficulties in interpreting "public political advertising," 

particularly when volunteers have been involved with 

the preparation or distribution of the communication. 

Third, the Commission has devoted considerable 

time to determining whether a given communication in 

fact contains "express advocacy" or "solicitation" 

language. The recommendation here would erase this 

need. 

Most of these problems would be eliminated if the 

language of 2 U.S.C. §441 d were simplified to require 

a registered committee to display a disclaimer notice 

whenever it communicated to the public, regardless of 
47 

the purpose of the communication and the means of 

preparing and distributing it. The Commission would 

no longer have to examine the content of communications or the manner in which they were disseminated 

to determine whether a disclaimer was required. 

This proposal is not intended to eliminate exemptions for communications appearing in places where it 

is inconvenient or impracticable to display a disclaimer. 

Contributions to Unauthorized Committees (1991) 

Section: 2 U.S.C. §432{e) 

Recommendation: Congress should consider amending the statute to require that contributions solicited by 

unauthorized committees be made payable to the 

name of the committee. 

Explanation: Unauthorized committees are not 

permitted to use the name of a federal candidate in 

their name. 2 U.S.C. §432(e)(4). These committees, 

with names like "Pro-World PAC," frequently feature 

the name of candidates in their fundraising projects, 

such as "Citizens for Smith." Contributors may be 

confused, believing that they are contributing to the 

candidate's authorized committee when they make 

checks payable to these project names. This confusion sometimes leads to requests for refunds, allegations of coordination and inadequate disclaimers, and 

inability to monitor contributor limits. Contributor 

awareness might be enhanced if the statute required 

that all checks intended for an unauthorized committee be made payable to the registered name of the 

unauthorized committee and if the statute prohibited 

unauthorized committees from accepting checks 

payable to these project names. 

Fundraising Projects Operated by Unauthorized 

Committees 

Section: 2 U.S.C. §432(e)(4) 

Recommendation: 5 Congress may wish to consider 

amending the statute at 2 U.S.C. §432(e)(4) to clarify 

that a political committee that is not an authorized 

committee of any candidate may not use the name of 

a candidate in the name of any "project" or other 

fundraising activity of such committee. 

Explanation: The statute now reads that a political 

committee that is not an authorized committee "shall 

not include the name of any candidate in its name 

[emphasis added]." In certain situations presented to 

the Commission the political committee in question 

5 Commissioner Elliott filed the following dissent: 

I support the policy underlying this legislative recommendation and recognize the seriousness of this problem. The 

scope of the recommendation, however, is far too broad 

and inflexible given the traditional fundraising events held 

by political parties and some unauthorized political committees. 

Because party committees are not authorized committees, they would come under the general prohibitions 

included in the recommendation, precluding the use of a 

candidate's name for any activity of a party committee. 

Oftentimes, however, fundraising events conducted by a 

party committee incorporate the name of a well-known 

Member of Congress as a fundraising tool. Typically, the 

fundraising contributions are made in the form of checks 

made payable to the name of the event, e.g., "Happy 

Birthday, Senator Smith"; "Mike's Annual Barbecue"; "Sail 

With Senator Sanford"; "Roast Roberts." I do not believe 

Congress intends to preclude the use of the candidates' 

names in such activities, especially when the candidate is 

not only aware that his/her name is being used but approves and is actively participating in the event. 

I would propose that the candidate be entitled to authorize the use of his or her name for such an event or activity 

provided the authorization is written. Again, I recognize the 

seriousness and the need to address this issue; however, 

Congress should not exclude fundraising tools which have 

been traditionally used by political committees. 

Further, the impact of this recommendation has not been 

evaluated in the context of our joint fundraising regulations. 
48 

has not included the name of any candidate in its 

official name as registered with the Commission, but 

has nonetheless carried out "projects" in support of a 

particular candidate using the name of the candidate 

in the letterhead and text of its materials. The likely 

result has been that recipients of communications 

from such political committees were led to believe that 

the committees were in fact authorized by the candidate whose name was used. The requirement that 

committees include a disclaimer regarding 

nonauthorization (2 U.S.C. §441d) has not proven 

adequate under these circumstances. 

The Commission believes that the intent behind the 

current provision is circumvented by the foregoing 

practice. Accordingly, the statute should be revised to 

clarify that the use of the name of a candidate in the 

name of any "project" is also prohibited. 

Fraudulent Solicitation of Funds 

Section: 2 U.S.C. §441h 

Recommendation: The current §441 h prohibits 

fraudulent misrepresentation such as speaking, 

writing or acting on behalf of a candidate or committee on a matter which is damaging to such candidate 

or committee. It does not, however, prohibit persons 

from fraudulently soliciting contributions. A provision 

should be added to this section prohibiting persons 

from fraudulently misrepresenting themselves as 

representatives of candidates or political parties for 

the purpose of soliciting contributions which are not 

forwarded to or used by or on behalf of the candidate 

or party. 

Explanation: The Commission has received a number 

of complaints that substantial amounts of money were 

raised fraudulently by persons or committees purporting to act on behalf of candidates. Candidates have 

complained that contributions which people believed 

were going for the benefit of the candidate were 

diverted for other purposes. Both the candidates and 

the contributors were harmed by such diversion. The 

candidates received less money because people 

desirous of contributing believed they had already 

done so, and the contributors' funds had been misused in a manner in which they did not intend. The 

Commission has been unable to take any action on 

these matters because the statute gives it no authority 

in this area. 

Public Disclosure 

Commission as Sole Point of Entry for Disclosure 

Documents 

Section: 2 U.S.C. §432(g) 

Recommendation: The Commission recommends that 

it be the sole point of entry for all disclosure documents filed by federal candidates and political committees. 

Explanation: A single point of entry for all disclosure 

documents filed by political committees would eliminate any confusion about where candidates and 

committees are to file their reports. It would assist 

committee treasurers by having one office where they 

would file reports, address correspondence and ask 

questions. At present, conflicts may arise when more 

than one office sends out materials, makes requests 

for additional information and answers questions 

relating to the interpretation of the law. A single point 

of entry would also reduce the costs to the federal 

government of maintaining three different offices, 

especially in the areas of personnel, equipment and 

data processing. 

The Commission has authority to prepare and 

publish lists of nonfilers. It is extremely difficult to 

ascertain who has and who has not filed when reports 

may have been filed at or are in transit between two 

different offices. Separate points of entry also make it 

difficult for the Commission to track responses to 

compliance notices. Many responses and/or amendments may not be received by the Commission in a 

timely manner, even though they were sent on time 

by the candidate or committee. The delay in transmittal between two offices sometimes leads the Commission to believe that candidates and committees are 

not in compliance. A single point of entry would 

eliminate this confusion. 
49 

Finally, a single point of entry would enhance 

disclosure. Often the public and FEC staff have 

difficulty deciphering information from reports filed 

with the Clerk of the House and the Secretary of the 

Senate because these reports have been photocopied several times. A single point of entry would reduce 

the number of times a report had to be photocopied, 

thereby rendering it more legible and ensuring the 

placement of more accurate information on the public 

record. 

If the Commission received all documents, it would 

transmit on a daily basis file copies to the Secretary 

and the Clerk, as appropriate. The Commission notes 

that the report of the Institute of Politics of the John F. 

Kennedy School of Government at Harvard University, An Analysis of the Impact of the Federal Election 

Campaign Act, 1972-78, prepared for the House 

Administration Committee, recommends that all 

reports be filed directly with the Commission (Committee Print, 96th Cong., 1st Sess., at 122 (1979). 

Public Disclosure at State Level 

Section: 2 U.S.C. §439 

Recommendation: Congress should consider relieving 

both political committees (other than candidate 

committees) and state election offices of the burdens 

inherent in the current requirement that political 

committees file copies of their reports with the Secretaries of State. One way this could be accomplished is 

by providing a system whereby the Secretary of State 

(or equivalent state officer) would tie into the Federal 

Election Commission's computerized disclosure data 

base. 

Explanation: At the present time, multicandidate 

political committees are required to file copies of their 

reports (or portions thereof) with the Secretary of 

State in each of the states in which they support a 

candidate. State election offices carry a burden for 

storing and maintaining files of these reports. At the 

same time, political committees are burdened with the 

responsibility of making multiple copies of their reports 

and mailing them to the Secretaries of State. 

With advances in computer technology, it is now 

possible to facilitate disclosure at the state level 

without requiring duplicate filing. Instead, state 

election offices would tie into the FEC's computer 

data base. The local press and public could access 

reports of local political committees through a computer hookup housed in their state election offices. All 

parties would benefit: political committees would no 

longer have to file duplicate reports with state offices; 

state offices would no longer have to provide storage 

and maintain files; and the FEC could maximize the 

cost effectiveness of its existing data base and 

computer system. 

Such a system has already been tested in a pilot 

program and proven inexpensive and effective. 

Initially, we would propose that candidate committees 

and in-state party committees continue to file their 

reports both in Washington, D.C., and in their home 

states, in response to the high local demand for this 

information. Later, perhaps with improvements in 

information technology, the computerized system 

could embrace these committees as well. 

State Filing for Presidential Candidate 

Committees 

Section: 2 U.S.C. §439 

Recommendation: Congress should consider clarifying the state filing provisions for Presidential candidate committees to specify which particular parts of 

the reports filed by such committees with the FEC 

should also be filed with states in which the committees make expenditures. Consideration should be 

given to both the benefits and the costs of state 

disclosure. 

Explanation: Both states and committees have 

inquired about the specific requirements for Presidential candidate committees when filing reports with the 

states. The statute requires that a copy of the FEC 

reports shall be filed with all states in which a Presidential candidate committee makes expenditures. The 

question has arisen as to whether the full report 

should be filed with the state, or only those portions 
50 

that disclose financial transactions in the state where 

the report is filed. 

The Commission has considered two alternative 

solutions. The first alternative is to have Presidential 

candidate committees file, with each state in which 

they have made expenditures, a copy of the entire 

report filed with the FEC. This alternative enables 

local citizens to examine complete reports filed by 

candidates campaigning in a state. It also avoids 

reporting dilemmas for candidates whose expenditures in one state might influence a primary election in 

another. 

The second alternative is to require that reports 

filed with the states contain all summary pages and 

only those receipts and disbursements schedules that 

show transactions pertaining to the state in which a 

report is filed. This alternative would reduce filing and 

storage burdens on Presidential candidate committees and states. It would also make state filing requirements for Presidential candidate committees 

similar to those for unauthorized political committees. 

Under this approach, any person still interested in 

obtaining copies of a full report could do so by contacting the Public Disclosure Division of the FEC. 

Registration and Reporting 

False Contributor Information 

Section: 2 U.S.C. §434 

Recommendation: Congress may wish to amend the 

Act to make it unlawful to knowingly provide false 

contributor information to a political committee. 

Explanation: Under 2 U.S.C. §434, political committees are required to report certain information about 

their contributors to the Commission for public disclosure. Political committees usually must depend upon 

their contributors to provide truthful information for 

reporting to the Commission, yet no provision of the 

Act makes it unlawful for contributors to provide false 

information to the political committee. A statutory 

change would protect political committees that 

attempt to disclose campaign information accurately. 

Insolvency of Political Committees 

Section: 2 U.S.C. §433(d) 

Recommendation: The Commission requests that 

Congress clarify its intention as to whether the 

Commission has a role in the determination of insolvency and liquidation of insolvent political committees. 

2 U.S.C. §433(d) was amended in 1980 to read: 

"Nothing in this subsection may be construed to 

eliminate or limit the authority of the Commission to 

establish procedures for-(A) the determination of 

insolvency with respect to any political committee; (B) 

the orderly liquidation of an insolvent political committee, and the orderly application of its assets for the 

reduction of outstanding debts; and (G) the termination of an insolvent political committee after such 

liquidation and application of assets." The phrasing of 

this provision ("Nothing... may be construed to ...limit") 

suggests that the Commission has such authority in 

some other provision of the Act, but the Act contains 

no such provision. If Congress intended the Commission to have a role in determining the insolvency of 

political committees and the liquidation of their assets, 

Congress should clarify the nature and scope of this 

authority. 

Explanation: Under 2 U.S.C. §433(d)(1), a political 

committee may terminate only when it certifies in 

writing that it will no longer receive any contributions 

or make any disbursements and that the committee 

has no outstanding debts or obligations. The Act's 

1979 Amendments added a provision to the law 

(2 U.S.C. §433(d)(2)) possibly permitting the Commission to establish procedures for determining insolvency with respect to political committees, as well as 

the orderly liquidation and termination of insolvent 

committees. In 1980, the Commission promulgated 

the "administrative termination" regulations at 11 CFR 

102.4 after enactment of the 1979 Amendments, in 

response to 2 U.S.C. §433(d)(2). However, these 

procedures do not concern liquidation or application 

of assets of insolvent political committees. 

Prior to 1980, the Commission adopted "Debt 

Settlement Procedures" under which the Commission 

reviews proposed debt settlements in order to deter-
51 

mine whether the settlement will result in a potential 

violation of the Act. If it does not appear that such a 

violation will occur, the Commission permits the 

committee to cease reporting that debt once the 

settlement and payment are reported. The Commission believes this authority derives from 2 U.S.C. 

§434 and from its authority to correct and prevent 

violations of the Act, but it does not appear as a grant 

of authority beyond a review of the specific debt 

settlement request, to order application of committee 

assets. 

It has been suggested that review by the Commission of the settlement of debts owed by political 

committees at less than face value may lead to the 

circumvention of the limitations on contributions 

specified by 2 U.S.C. §§441a and 441b. The amounts 

involved are frequently substantial, and the creditors 

are often corporate entities. Concern has also been 

expressed regarding the possibility that committees 

could incur further debts after settling some, or that a 

committee could pay off one creditor at less than the 

dollar value owed and subsequently raise additional 

funds to pay off a "friendly" creditor at full value. 

When clarifying the nature and scope of the 

Commission's authority to determine the insolvency of 

political committees, Congress should consider the 

impact on the Commission's operations. An expanded 

role in this area might increase the Commission's 

workload, thus requiring additional staff and funds. 

Waiver Authority 

Section: 2 U.S.C. §434 

Recommendation: Congress should give the Commission authority to grant general waivers or exemptions 

from the reporting requirements of the Act for classifications and categories of political committees. 

Explanation: In cases where reporting requirements 

are excessive or unnecessary, it would be helpful if 

the Commission had authority to suspend the reporting requirements of the Act. For example, the Commission has encountered several problems relating to 

the reporting requirements of authorized committees 

whose respective candidates were not on the election 

ballot. The Commission had to consider whether the 

election-year reporting requirements were fully 

applicable to candidate committees operating under 

one of the following circumstances: 

• The candidate withdraws from nomination prior to 

having his or her name placed on the ballot. 

• The candidate loses the primary and therefore is 

not on the general election ballot. 

• The candidate is unchallenged and his or her 

name does not appear on the election ballot. 

Moreover, a Presidential primary candidate who 

has triggered the $100,000 threshold but who is no 

longer actively seeking nomination should be able to 

reduce reporting from a monthly to a quarterly schedule. 

In some instances, the reporting problems reflect 

the unique features of certain state election procedures. A waiver authority would enable the Commission to respond flexibly and fairly in these situations. 

In the 1979 Amendments to the Act, Congress 

repealed 2 U.S.C. §436, which had provided the 

Commission with a limited waiver authority. There 

remains, however, a need for a waiver authority. It 

would enable the Commission to reduce needlessly 

burdensome disclosure requirements. 

Campaign-Cycle Reporting 

Section: 2 U.S.C. §434 

Recommendation: Congress should revise the law to 

require authorized candidate committees to report on 

a campaign-to-date basis, rather than a calendar year 

cycle, as is now required. 

Explanation: Under the current law, a reporter or 

researcher must compile the total figures from several 

year-end reports in order to determine the true costs 

of~ committee. In the case of Senate campaigns, 

wh1ch may extend over a six-year period, this change 

would be particularly helpful. 
52 

Monthly Reporting for Congressional Candidates 

Section: 2 U.S.C. §434(a)(2) 

Recommendation: The principal campaign committee 

of a Congressional candidate should have the option 

of filing monthly reports in lieu of quarterly reports. 

Explanation: Political committees, other than principal 

campaign committees, may choose under the Act to 

file either monthly or quarterly reports during an 

election year. Committees choose the monthly option 

when they have a high volume of activity. Under those 

circumstances, accounting and reporting are easier 

on a monthly basis because fewer transactions have 

taken place during that time. Consequently, the 

committee's reports will be more accurate. 

Principal campaign committees can also have a 

large volume of receipts and expenditures. This is 

particularly true with Senatorial campaigns. These 

committees should be able to choose a more frequent 

filing schedule so that their reporting covers less 

activity and is easier to do. 

Monthly Reports 

Section: 2 U.S.C. §434(a)(3)(8) and (4)(8) 

Recommendation: Congress should change the 

reporting deadline for monthly filers from the twentieth 

to the fifteenth of the month. 

Explanation: Committees filing monthly reports are 

now required to file reports disclosing each month's 

activity by the twentieth day of the following month. 

Particularly in the fast-paced Presidential primary 

period, this 20-day lag does not meet the public's 

need for timely disclosure. In light of the increased 

use of computerized recordkeeping by political 

committees, imposing a monthly filing deadline of the 

fifteenth of the month would not be unduly burdensome and would ensure timely disclosure of crucial 

financial data. 

Reporting Payments to Persons Providing Goods 

and Services 

Section: 2 U.S.C. §434(b)(5)(A), (6)(A) and (6)(8) 

Recommendation: The current statute requires 

reporting "the name and address of each...person to 

whom an expenditure in an aggregate amount or 

value in excess of $200 within the calendar year is 

made by the reporting committee to meet a candidate 

or committee operating expense, together with the 

date, amount, and purpose of such operating expenditure." Congress should clarify whether this is meant, 

in all instances, to require reporting committees to 

disclose only the payments made by the committee or 

whether, in some instances, 1) the reporting committees must require initial payees to report, to the 

committees, their payments to secondary payees, and 

2) the reporting committees, in turn, must maintain 

this information and disclose it to the public by 

amending their reports through memo entries. 

Explanation: The Commission has encountered on 

several occasions the question of just how detailed a 

committee's reporting of disbursements must be. See, 

e.g., Advisory Opinion 1983-25, 1 Fed. Election 

Camp. Fin. Guide (CCH), para. 5742 (Dec. 22, 1983) 

(Presidential candidate's committee not required to 

disclose the names, addresses, dates or amounts of 

payments made by a general media consultant 

retained by the committee); Advisory Opinion 1984-8, 

1 Fed. Election Camp. Fin. Guide (CCH), para. 5756 

(Apr. 20, 1984) (House candidate's committee only 

required to itemize payments made to the candidate 

for travel and subsistence, not the payments made by 

the candidate to the actual providers of services); 

Financial Control and Compliance Manual for General 

Election Candidates Receiving Public Financing, 

Federal Election Commission, pp. IV 39-44 (1984) 

(Distinguishing committee advances or reimbursements to campaign staff for travel and subsistence 

from other advances or reimbursements to such staff 

and requiring itemization of payments made by 

campaign staff only as to the latter). Congressional 

intent in the area is not expressly stated, and the 

Commission believes that statutory clarification would 
53 

be beneficial. In the area of Presidential public 

financing, where the Commission is responsible for 

monitoring whether candidate disbursements are for 

qualified campaign expenses (see 26 U.S.C. 

§§9004(c) and 9038(b)(2)}, guidance would be 

particularly useful. 

Verifying Multicandidate Committee Status 

Section: 2 U.S.C. §§438(a}(6}(C), 441 a(a}(2) and 

(a)(4) 

Recommendation: Congress should consider modifying those provisions of the Act relating to 

multicandidate committees in order to reduce the 

problems encountered by contributor committees in 

reporting their multicandidate committee status, and 

by candidate committees and the Commission in 

verifying the multicandidate committee status of 

contributor committees. In this regard, Congress 

might consider requiring political committees to notify 

the Commission once they have satisfied the three 

criteria for becoming a multicandidate committee, 

namely, once a political committee has been registered for not less than 6 months, has received contributions from more than 50 persons and has contributed to at least 5 candidates for federal office. 

Explanation: Under the current statute, political 

committees may not contribute more than $1 ,000 to 

each candidate, per election, until they qualify as a 

multicandidate committee, at which point they may 

contribute up to $5,000 per candidate, per election. 

To qualify for this special status, a committee must 

meet three standards: 

• Support 5 or more federal candidates; 

• Receive contributions from more than 50 contributors; and 

• Have been registered as a political committee for 

at least 6 months. 

The Commission is statutorily responsible for 

maintaining an index of committees that have qualified as multicandidate committees. The index enables 

recipient candidate committees to determine whether 

a given contributor has in fact qualified as a 

multicandidate committee and therefore is entitled to 

contribute up to the higher limit. The Commission's 

Multicandidate Index, however, is not current because 

it depends upon information filed periodically by 

political committees. Committees inform the Commission that they have qualified as multicandidate 

committees by checking the appropriate box on their 

regularly scheduled report. If, however, they qualify 

shortly after they have filed their report, several 

months may elapse before they disclose their new 

status on the next report. With semiannual reporting 

in a nonelection year, for example, a committee may 

become a multicandidate committee in August, but 

the Commission's Index will not reveal this until after 

the January 31 report has been filed, coded and 

entered into the Commission's computer. 

Because candidate committees cannot totally rely 

on the Commission's Multicandidate Index for current 

information, they sometimes ask the contributing 

committee directly whether the committee is a 

multicandidate committee. 

Contributing committees, however, are not always 

clear as to what it means to be a multicandidate 

committee. Some committees erroneously believe 

that they qualify as a multicandidate committee 

merely because they have contributed to more than 

one federal candidate. They are not aware that they 

must have contributed to 5 or more federal candidates 

and also have more than 50 contributors and have 

been registered for at least 6 months. 

Agency Funding 

Statutory Gift Acceptance Authority 

Section: 2 U.S.C. §437c 

Recommendation: Congress should give the Commission authority to accept funds and services from 

private sources to enable the Commission to provide 

guidance and conduct research on election administration and campaign finance issues. 

Explanation: The Commission has been very restricted in the sources of private funds it may accept 
54 

to finance topical research, studies, and joint projects 

with other entities because it does not have statutory 

gift acceptance authority. In view of the Commission's 

expanding role in this area, Congress should consider 

amending the Act to provide the Commission with 

authority to accept gifts from private sources. Permitting the Commission to obtain funding from a broader 

range of private organizations would allow the Commission to have more control in structuring and 

conducting these activities and avoid the expenditure 

of government funds for these activities. If this proposal were adopted, however, the Commission would 

not accept funds from organizations that are regulated 

by or have financial relations with the Commission. 

Budget Reimbursement Fund (revised 1990) 

Section: 2 U.S.C. §438 

Recommendation: The Commission recommends that 

Congress establish a reimbursement account for the 

Commission so that expenses incurred in preparing 

copies of documents, publications and computer 

tapes sold to the public are recovered by the Commission. Similarly, costs awarded to the Commission in 

litigation (e.g., printing, but not civil penalties) and 

payments for Commission expenses incurred in 

responding to Freedom of Information Act requests 

should be payable to the reimbursement fund. The 

Commission should be able to use such reimbursements to cover its costs for these services, without 

fiscal year limitation, and without a reduction in the 

Commission's appropriation. 

Explanation: At the present time, copies of reports, 

microfilm, and computer tapes are sold to the public 

at the Commission's cost. However, instead of the 

funds being used to reimburse the Commission for its 

expenses in producing the materials, they are credited to the U.S. Treasury. The effect on the Commission of selling materials is thus the same as if the 

materials had been given away. The Commission 

absorbs the entire cost. In FY 1989, in return for 

services and materials it offered the public, the FEC 

collected and transferred $113,466 in miscellaneous 

receipts to the Treasury. During the first three months 

of FY 1990, $25,703 was transferred to the Treasury. 

Establishment of a reimbursement fund, into which 

fees for such materials would be paid, would permit 

this money to be applied to further dissemination of 

information. Note, however, that a reimbursement 

fund would not be applied to the distribution of FEC 

informational materials to candidates and registered 

political committees. They would continue to receive 

free publications that help them comply with the 

federal election laws. 

There should be no restriction on the use of 

reimbursed funds in a particular year to avoid the 

possibility of having funds lapse. 

Miscellaneous 

Draft Committees 

Section: 2 U.S.C. §§431 (8)(A)(i) and (9)(A)(i), 

441a(a)(1) and 441b(b) 

Recommendation: Congress should consider the 

following amendments to the Act in order to prevent a 

proliferation of "draft" committees and to reaffirm 

Congressional intent that draft committees are 

"political committees" subject to the Act's provisions. 

1. Bring Funds Raised and Spent for Undeclared but 

Clearly Identified Candidates Within the Act's 

Purview. Section 431 (8)(A)(i) should be amended 

to include in the definition of "contribution" funds 

contributed by persons ''for the purpose of influencing a clearly identified individual to seek 

nomination for election or election to Federal 

office .... " Section 431 (9)(A)(i) should be similarly 

amended to include within the definition of 

"expenditure" funds expended by persons on 

behalf of such "a clearly identified individual." 

2. Restrict Corporate and Labor Organization 

Support for Undeclared but Clearly Identified 

Candidates. Section 441 b(b) should be revised to 

expressly state that corporations, labor organizations and national banks are prohibited from 

making contributions or expenditures "for the 
55 

purpose of influencing a clearly identified individual to seek nomination for election or election ... " to federal office. 

3. Limit Contributions to Draft Committees. The law 

should include explicit language stating that no 

person shall make contributions to any committee 

(including a draft committee) established to 

influence the nomination or election of a clearly 

identified individual for any federal office which, 

in the aggregate, exceed that person's contribution limit, per candidate, per election. 

Explanation: These proposed amendments were 

prompted by the decisions of the U.S. Court of 

Appeals for the District of Columbia Circuit in FEC v. 

Machinists Non-Partisan Political League and FEC v. 

Citizens for Democratic Alternatives in 1980 and the 

U.S. Court of Appeals for the Eleventh Circuit in FEC 

v. Florida for Kennedy Committee. The District of 

Columbia Circuit held that the Act, as amended in 

1979, regulated only the reporting requirements of 

draft committees. The Commission sought review of 

this decision by the Supreme Court, but the Court 

declined to hear the case. Similarly, the Eleventh 

Circuit found that "committees organized to 'draft' a 

person for federal office" are not "political committees" 

within the Commission's investigative authority. The 

Commission believes that the appeals court rulings 

create a serious imbalance in the election law and the 

political process because a nonauthorized group 

organized to support someone who has not yet 

become a candidate may operate completely outside 

the strictures of the Federal Election Campaign Act. 

However, any group organized to support someone 

who has in fact become a candidate is subject to the 

Act's registration and reporting requirements and 

contribution limitations. Therefore, the potential exists 

for funneling large aggregations of money, both 

corporate and private, into the federal electoral 

process through unlimited contributions made to 

nonauthorized draft committees that support a person 

who has not yet become a candidate. These recommendations seek to avert that possibility. 

Honoraria 

Section: 2 U.S.C. §§431 (8)(B)(xiv) and 441 i 

Recommendation: The Commission offers two 

suggestions concerning honoraria: 

1. Section 441 i should be placed under the Ethics in 

Government Act. 

2. As technical amendments, Sections 441 i(c) and 

(d), which pertain to the annual limit on receiving 

honoraria (now repealed), should be repealed. 

Additionally, 2 U.S.C. §431 (8)(B)(xiv), which 

refers to the definition of honorarium in Section 

441 i, should be modified to contain the definition 

itself. 

Explanation: In the Ethics Reform Act of 1989, 

Congress prohibited the receipt of honoraria by 

Members of the House of Representatives and 

officers and employees of the federal government. To 

conform with this new prohibition, Section 441 i was 

amended to apply only to Senators and officers and 

employees of the United States Senate. However, 

Congress had previously eliminated the $25,000 

annual limit on the amount of honoraria that could be 

accepted, but it did not take out two sections, which 

only apply to the $25,000 limit. This clarification would 

eliminate confusion and thereby help the Commission 

in its administration of the Act. 
57 Appendix 1 

Biographies of 

Commissioners and 

Officers 

Commissioners 

Lee Ann Elliott, Chairman 

April30, 1993 

President Reagan reappointed Mrs. Elliott to her 

second term as Commissioner in 1987. Before her 

first appointment in 1981, Chairman Elliott was vice 

president of a political consulting firm in Washington, 

D.C., Bishop, Bryant & Associates, Inc. She spent 

several years as associate executive director of the 

American Medical Political Action Committee, having 

previously served as assistant director. Chairman 

Elliott was also on the board of directors of the 

American Association of Political Consultants and on 

the board of the Chicago Area Public Affairs Group, of 

which she is a past president. She was also a member of the Public Affairs Committee of the U.S. 

Chamber of Commerce. In 1979, she received the 

Award for Excellence in Serving Corporate Public 

Affairs from the National Association of Manufacturers. 

A native of St. Louis, Chairman Elliott graduated 

from the University of Illinois. She also completed 

Northwestern University's Medical Association 

Management Executive Program and is a Certified 

Association Executive. She also served as Commission Chairman in 1984. 

John Warren McGarry, Vice Chairman 

April 30, 1995 

First appointed to the Commission in 1978, Mr. 

McGarry was reappointed in 1983 and 1989, serving 

as FEC Chairman in 1981 and 1985. Before his 1978 

Commission appointment, Mr. McGarry served as 

special counsel on elections to the House Administration Committee. He previously combined private law 

practice with service as chief counsel to the House 

Special Committee to Investigate Campaign Expenditures, a special committee established by Congress 

every election year through 1972. Before his work 

with Congress, Mr. McGarry was the Massachusetts 

assistant attorney general. 

After graduating cum laude from Holy Cross 

College, Mr. McGarry did graduate work at Boston 

University and earned a ,J.D. degree from 

Georgetown University Law School. 

Joan D. Aikens 

April 30, 1995 

One of the original members of the Commission, Mrs. 

Aikens was first appointed in 1975. Following the 

reconstitution of the FEC that resulted from the 

Supreme Court's Buckley v. Valeo decision, President 

Ford reappointed her to a five-year term. In 1981, 

President Reagan named Mrs. Aikens to complete a 

term left open because of a resignation and, in 1983, 

once again reappointed her to a full six-year term. 

Most recently, Mrs. Aikens was reappointed by 

President Bush in 1990. She served as FEC Chairman in 1978 and 1986. 

Before her 1975 appointment, Mrs. Aikens was an 

executive with Lew Hodges Communications, a public 

relations firm in Valley Forge, Pennsylvania. She was 

also a member of the Pennsylvania Republican State 

Committee, president of the Pennsylvania Council of 

Republican Women and on the board of directors of 

the National Federation of Republican Women. A 

native of Delaware County, Pennsylvania, Mrs. 

Aikens has been active in a variety of volunteer 

organizations and is currently a member of the 

Commonwealth Board of the Medical College of 

Pennsylvania. She is also a member of the board of 

directors of Ursinus College, where she received her 

B.A. degree and an honorary Doctor of Law degree. 

Thomas J. Josefiak 

April 30, 1991 

Mr. Josefiak was appointed to the Commission in 

1985 and was the 1988 FEC Chairman. He previously 

served at the Commission as Special Deputy to the 

Secretary of the Senate. Before assuming that post in 

1981, he was legal counsel to the National Republican Congressional Committee. His past experience 

also includes positions held at the U.S. House of 

Representatives. He was minority special counsel for 

federal election law to the Committee on House 

Administration and served as legislative assistant to 

the late Congressman Silvio 0. Conte. 
58 

A native of Massachusetts, Mr. Josefiak graduated 

from Fairfield University, Connecticut, and holds a 

J.D. degree from the Georgetown University Law 

Center. 

Danny L. McDonald 

April 30, 1993 

Now serving his second term as Commissioner, Mr. 

McDonald was first appointed to the Commission in 

1981 and was reappointed in 1987. Before his original 

appointment, he managed 1 0 regulatory divisions as 

the general administrator of the Oklahoma Corporation Commission. He had previously served as 

secretary of the Tulsa County Election Board and as 

chief clerk of the board. He was also a member of the 

Advisory Panel to the FEC's National Clearinghouse 

on Election Administration. 

A native of Sand Springs, Oklahoma, Mr. 

McDonald graduated from Oklahoma State University 

and attended the John F. Kennedy School of Government at Harvard University. He served as FEC 

Chairman in 1983 and 1989. 

Scott E. Thomas 

April 30, 1991 

Mr. Thomas was appointed to the Commission in 

1986 and was the 1987 Chairman. He previously 

served as executive assistant to former Commissioner 

Thomas E. Harris and succeeded him as Commissioner. Joining the FEC as a legal intern in 1975, Mr. 

Thomas eventually became the Assistant General 

Counsel for Enforcement. 

A Wyoming native, Mr. Thomas graduated from 

Stanford University and holds a J.D. degree from 

Georgetown University Law Center. He is a member 

of the bars for the District of Columbia, the U.S. Court 

of Appeals for the Ninth Circuit and the U.S. Supreme 

Court. 

Ex Officio Commissioners 

Donnald K. Anderson 

Mr. Anderson was appointed Clerk of the House of 

Representatives in 1987. Before his appointment, he 

was Majority Floor Manager under Speakers Carl 

Albert and Thomas P. O'Neill, Jr. A native of California, he began his career as a page in the 86th Congress. He was appointed assistant enrolling clerk and 

clerk in the Finance Office by Representative Hale 

Boggs. Speaker John W. McCormack later appointed 

him assistant manager of the Democratic Cloakroom. 

Douglas Patton, attorney and Special Deputy to the 

Clerk of the House, continues to represent Mr. 

Anderson at the Commission. 

Walter J. Stewart 

Mr. Stewart was appointed Secretary of the Senate in 

1987. He was previously employed by Sonat, Inc., as 

vice president of government affairs. Before that, he 

served as Secretary for the Minority of the U.S. 

Senate and as executive director of the Senate 

Steering Committee. Other Senate offices held by Mr. 

Stewart include: counsel to the Senate Appropriations 

Committee; director of legislative affairs for the 

Majority Whip; administrative assistant to the Majority 

Leader for Senate Operations; and chief of staff for 

Senatorial and Presidential delegations traveling to 

China, Russia and the Middle East. A native of 

Georgia, Mr. Stewart graduated from George Washington University and received an LL.B. from American University. He is a member of the District of 

Columbia Bar. 

David G. Gartner, attorney and Special Deputy to 

the Secretary of the Senate, continues to represent 

Mr. Stewart at the Commission. 

Statutory Officers 

John C. Surina, Staff Director 

Before joining the Commission in 1983, Mr. Surina 

was assistant managing director of the Interstate 

Commerce Commission, where he was detailed to the 

"Reform 88" program at the Office of Management 

and Budget. In that role, he worked on projects to 

reform administrative management within the federal 

government. He was also an expert-consultant to the 

Office of Control and Operations, EOP-Cost of Living 

Council-Pay Board and on the technical staff of the 

Computer Sciences Corporation. During his Army 

service, Mr. Surina was executive officer of the 
59 

Special Security Office, where he supported senior 

U.S. delegates to NATO's civil headquarters in 

Brussels. At its 1990 annual conference, the Council 

on Government and Ethics Laws (GOGEL) elected 

Mr. Surina to be its 1991 chairman. 

A native of Alexandria, Virginia, Mr. Surina holds a 

degree in Foreign Service from Georgetown University. He also attended East Carolina University and 

American University. 

Lawrence M. Noble, General Counsel 

Mr. Noble became General Counsel in 1987, after 

serving as Acting General Counsel. He joined the 

Commission in 1977, becoming the Deputy General 

Counsel in 1983. He previously served as Assistant 

General Counsel for Litigation and as a litigation 

attorney. Before his FEC service, he was an attorney 

with the Aviation Consumers Action Project. 

A native of New York, Mr. Noble holds a degree in 

Political Science from Syracuse University and a J.D. 

degree from the National Law Center at George 

Washington University. He is a member of the bars for 

the U.S. Supreme Court, the U.S. Court of Appeals 

for the D.C. Circuit and the District of Columbia. He is 

also a member of the American and District of Columbia Bar Associations. 

Lynne McFarland, Inspector General 

Ms. McFarland became the FEC's first permanent 

Inspector General in February 1990. She came to the 

Commission in 1976, first as a reports analyst and 

then as a program analyst in the Office of Planning 

and Management. 

A Maryland native, Ms. McFarland holds a sociology degree from Frostburg State College. 
61 Appendix 2 

Chronology 

of Events, 1990 

January 

1-Chairman Lee Ann Elliott and Vice Chairman John Warren McGarry begin one-year 

terms as officers. 

17-FEC conducts election law conference in 

Washington, D.C. for corporations, labor 

organizations and trade associations. 

-FEC reports decrease in PAC registrations 

in 1989. 

24-ln Common Cause v. FEC (89-0524}, 

district court finds FEC's partial dismissal of 

Common Cause complaint against NRSC 

arbitrary, capricious and contrary to law, 

and remands matter to FEC. 

-In FEC v. Life Amendment PAC, Inc., 

district court orders PAC to pay $125,000 in 

civil penalties for recordkeeping and 

reporting violations. 

25--FEC releases final audit report on 1988 

Hart campaign. 

-FEC approves voluntary standards for 

voting systems. 

31-1989 year-end report due. 

February 

1-FEC publishes revised Party Guide. 

2-FEC releases campaign finance figures on 

1989 Special Elections. 

6-FEC releases party finance statistics. 

9-FEC appoints Inspector General. 

12-FEC notifies Congress, the President and 

the Secretary of the Treasury that the 

Presidential Election Campaign Fund will 

likely be insufficient to finance the 1992 

campaigns. 

20-FEC releases final audit report on Quayle 

for Vice President - 1988. 

21-FEC testifies at budget hearings before 

Senate Appropriations Subcommittee on 

Treasury, Postal Service and General 

Government. 

26-FEC releases 1990 Senate candidate 

spending figures. 

28-FEC releases PAC finance statistics. 

March 

1-FEC releases final audit report on Bentsen 

for Vice President - '88. 

8-FEC conducts regional conference in 

Scottsdale, fl:l for candidates, campaign 

workers and PACs. 

16-Chairman Lee Ann Elliott leads delegation 

of American election officials on 1 0-day visit 

to Soviet Union. 

20-New York special elections to fill two vacant 

House seats. 

21-FEC submits legislative recommendations 

to Congress and President. 

27-Supreme Court upholds Michigan law 

prohibiting independent expenditures by 

corporations (Austin v. Michigan Chamber 

of Commerce}. 

30-FEC conducts conference in Washington, 

D.C. for candidates. 

April 

4-FEC publishes Notice of Proposed Rulemaking on computerized magnetic media 

for Presidential audits. 

11-Effective date for revised regulation governing election-related activity by foreign 

nationals. 

15--Quarterly report due. 

16-FEC releases statistical report on homestate and out-of-state contributions to 

Senate candidates. 

17-ln FEC v. New York State Conservative 

Party State Committee/1984 Victory Fund, 

district court finds defendant made excessive contributions. 
62 

26-FEC adopts new procedures for informal 

investigation. 

May 

1-Ciearinghouse publishes four-volume 

series, Ballot Access. 

4-President Bush signs amendments to 

Ethics Reform Act of 1989, which include 

honoraria restrictions. 

a-Commission releases 15-month Congressional election figures. 

10-FEC testifies at budget hearings before 

Senate Rules Committee. 

-District court finds Working Names, Inc. in 

contempt for failing to pay civil penalties. 

18-District court orders Friends of Isaiah 

Fletcher and treasurer to pay civil penalties. 

21-ln Go/and v. U.S. and FEC, court of appeals affirms district court's dismissal of 

constitutional challenges to Federal Election Campaign Act. 

23-FEC releases final audit report on 

LaRouche Democratic Campaign. 

25-FEC releases statistics on finances of 

political parties. 

27-FEC releases statistics on PAC contributions to Congressional campaigns. 

31-Ciearinghouse publishes Election Case 

Law89. 

June 

1-FEC publishes Annual Report 1989. 

5-New Jersey special primary election for 

vacant 1st Congressional District seat. 

18-FEC sends revised allocation regulations to 

Congress. 

19-ln Common Cause v. FEC (89-5231 }, court 

of appeals reverses district court decision 

and holds that FEC failed to adequately 

analyze affiliation issue and remands to 

district court with instructions to return to 

FEC for reconsideration. 

22-FEC sends revised debt settlement regulations to Congress. 

-FEC sends revised rules on computer 

formats for Presidential audits to Congress. 

28-FEC initiates foreign national rulemaking. 

29-ln Faucher and Maine Right to Life Committee, Inc. v. FEC, district court finds FEC 

regulation on corporate voter guides invalid 

to the extent that it restricts "issue advocacy." 

July 

1Q-In FEC v. AFSCME-PQ, district court rules 

that the PAC violated election law by failing 

to report in-kind contributions in timely 

fashion. 

11 FEC asks Treasury to write rules to handle 

shortfall in Presidential Election Campaign 

Fund. 

15-Quarterly report due. 

25-FEC releases mid-year PAC count. 

August 

5-FEC releases statistics on 18-month 

candidate spending. 

15-District court finds Mark R. Weinberg in 

contempt for failing to pay civil penalties. 

16-FEC releases 18-month party spending 

figures. 

22-FEC publishes Notice of Proposed Rulemaking on foreign nationals. 

-FEC publishes Notice of Proposed Rulemaking on Presidential Conventions. 

27-ln Democratic Senatorial Campaign Committee v. FEC, district court rules that FEC 

did not act contrary to law in dismissing part 

of a complaint filed by DSCC. 

31-FEC releases statistics on PAC contributions to Congressional candidates. 
63 

September 

4-FEC releases final audit report on Louisiana Host Committee 1988, Inc. 

5-District court finds John A. Dramesi for 

Congress Committee in contempt for failing 

to pay civil penalties. 

22-Hawaii special primary to fill vacant Senate 

seat. 

-Hawaii special election to fill 2nd Congressional District seat. 

28-FEC releases final audit report on Atlanta 

'88 Committee, Inc. 

October 

1-FEC publishes Selected Court Case 

Abstracts. 

3-Effective date of Debt Settlement rules and 

Magnetic Media rules. 

-FEC announces Allocation rules effective 

January 1, 1991. 

-FEC publishes request for comments on 

nonprofit corporation (MCFL) rulemaking. 

-LaRouche committee makes oral presentation contesting FEC audit report. 

15-Quarterly report due. 

30-FEC holds hearings on proposed foreign 

national rules. 

November 

1-FEC releases statistics on party spending. 

-Clearinghouse publishes Contested Elections and Recounts. 

-FEC publishes Record Supplement on 

Allocation rules. 

2-Soviet delegation visits FEC. 

-Commission releases statistics on incumbent spending. 

6-General election. 

-Hawaii special election to fill vacant Senate 

seat. 

13-ln Common Cause v. FEC(90-5317), court 

of appeals upholds district court's denial of 

National Republican Senatorial Committee's motion to intervene. 

December 

4-6-FEC conducts allocation workshops in 

Seattle and Los Angeles. 

13-Treasury publishes Notice of Proposed 

Rulemaking on rules to handle shortfall in 

Presidential Election Campaign Fund. 

18-Commission elects John Warren McGarry 

as 1991 Chairman and Joan D. Aikens as 

1991 Vice Chairman. 
The Commissioners 

Lee Ann Elliott, Chairman 1 

John Warren McGarry, Vice Chairman 2 

Joan D. Aikens, Commissioner 

Thomas J. Josefiak, Commissioner 

Danny L. McDonald, Commissioner 

Scott E. Thomas, Commissioner 

Walter J. Stewart, Ex Officio/Senate 

Donnald K. Anderson, Ex Officio/House 

I 

General Counsel Staff Director 

Public Financing 3 

and Ethics 

Policy 4 

Enforcement 

Litigation 

!-

~ 

~ 

!-

I 

Deputy Staff Director 

for Management 

Administration 

Data Systems 

Development 

Planning and 

Management 

-

~ -

!- ~ 

~ -

-

I 

Audit 

Clearinghouse 

Information 

Services 

Public Disclosure 

Reports 

Analysis 

I 

Inspector General 

-

-

-

-

Commission 

Secretary 

Congressional 

Affairs 

Personnel 

Labor/Management 

Press Office 

1 John Warren McGarry was elected 1991 Chairman. 

2 Joan D. Aikens was elected 1991 Vice Chairman. 

3 Public financing covers presidential campaign funding laws and special projects in the Office of the General Counsel. 

4 Policy covers regulations, advisory opinions, legal review and administrative law. 

65 Appendix 3 

FEC Organization Chart 
67 Appendix 4 

FEC Offices 

This appendix briefly describes the offices within the 

Commission, located at 999 E Street, NW, Washington, D.C. 20463. The offices are listed alphabetically, 

with local telephone numbers given for offices that 

provide services to the public. Commission offices 

can also be reached toll-free on 800-424-9530 and 

locally on 202-376-5140. 

Administration 

The Administration Division is the Commission's 

"housekeeping" unit and is responsible for accounting, 

procurement and contracting, space management, 

payroll, travel and supplies. In addition, several 

support functions are centralized in the office such as 

printing, document reproduction and mail services. 

The division also handles records management, 

inventory control and building security and maintenance. 

Audit 

Many of the Audit Division's responsibilities concern 

the Presidential public funding program. The division 

evaluates the matching fund submissions of Presidential primary candidates and determines the amount of 

contributions that may be matched with federal funds. 

As required by law, the division audits all public 

funding recipients. 

In addition, the division audits those committees 

which, according to FEC determinations, have not 

met the threshold requirements for substantial compliance with the law. Audit Division resources are also 

used in the Commission's investigations of complaints. 

Clearinghouse 

The National Clearinghouse on Election Administration, located on the seventh floor, assists state and 

local election officials by responding to inquiries, 

publishing research and conducting workshops on all 

matters related to election administration. Additionally, 

the Clearinghouse answers questions from the public 

and briefs foreign delegations on the U.S. election 

process. Localphone:376-5670. 

Commission Secretary 

The Secretary to the Commission handles all administrative matters relating to Commission meetings, 

including agenda documents, Sunshine Act notices, 

minutes and certification of Commission votes. The 

office also circulates and tracks numerous materials 

not related to meetings, and records the Commissioners' tally votes on these matters. 

Commissioners 

The six Commissioners-three Democrats and three 

Republicans-are appointed by the President and 

confirmed by the Senate. Two ex officio Commissioners, the Secretary of the Senate and the Clerk of the 

House of Representatives, are nonvoting members. 

They appoint special deputies to represent them at 

the Commission. 

The six voting Commissioners serve full time and 

are responsible for administering and enforcing the 

Federal Election Campaign Act. They generally meet 

twice a week, once in closed session to discuss 

matters that, by law, must remain confidential, and 

once in a meeting open to the public. At these meetings, they formulate policy and vote on significant 

legal and administrative matters. 

Congressional, Legislative and Intergovernmental 

Affairs 

This office serves as primary liaison with Congress 

and Executive Branch agencies. The office is responsible for keeping Members of Congress informed 

about Commission decisions and, in turn, for keeping 

the agency up to date on legislative developments. 

Data Systems Development 

This division provides computer support for the entire 

Commission. Its responsibilities are divided into two 

general areas. 

In the area of campaign finance disclosure, the 

Data Systems Development Division enters into the 

FEC data base information from all reports filed by 

political committees and other entities. The division is 

also responsible for the computer programs that sort 

and organize campaign finance data into indexes. 

These indexes permit a detailed analysis of campaign 
68 

finance activity and, additionally, provide a tool for 

monitoring contribution limitations. The division 

publishes the Reports on Financial Activity series of 

periodic studies on campaign finance and generates 

statistics for other publications. 

The division also provides internal computer 

support for the agency's automation system (VAX) 

and for administrative functions such as management 

information, document tracking, personnel and payroll 

systems. 

General Counsel 

The General Counsel directs the agency's enforcement activities and represents and advises the 

Commission in any legal actions brought against it 

and serves as the Designated Agency Ethics Official. 

The Office of General Counsel handles all civil 

litigation, including several cases that have come 

before the Supreme Court. The office also drafts, for 

Commission consideration, advisory opinions and 

regulations as well as other legal memoranda interpreting the federal campaign finance law. 

Information Services 

In an effort to promote voluntary compliance with the 

law, the Information Services Division provides 

technical assistance to candidates, committees and 

others involved in elections. Responding to phone 

and written inquiries, members of the staff conduct 

research based on the statute, FEC regulations, 

advisory opinions and court cases. Staff also direct 

workshops on the law and produce guides, pamphlets 

and videos on how to comply with the law. Located on 

the second floor, the division is open to the public. 

Local phone: 376-3120; toll-free phone: 800-424-

9530. 

Inspector General 

The FEC's Inspector General (IG) has two major 

responsibilities: to conduct internal audits and investigations to detect fraud, waste and abuse within the 

agency and to improve the economy and effectiveness of agency operations. The IG files reports 

notifying Congress of any serious problems or deficiencies in agency operations and of any corrective 

steps taken by the agency. 

Law Library 

The Commission law library, part of the Office of 

General Counsel, is located on the eighth floor and is 

open to the public. The collection includes basic legal 

research tools and materials dealing with political 

campaign finance, corporate and labor political 

activity and campaign finance reform. The library staff 

prepares indexes to advisory opinions and Matters 

Under Review (MURs) as well as a Campaign Finance and Federal Election Law Bibliography, all 

available for purchase at the Public Records Office. 

Localphone:376-5312. 

Personnel and Labor/Management Relations 

This office handles employment, position classification, training and employee benefits. It also provides 

policy guidance on awards and discipline matters and 

administers a comprehensive labor relations program 

including contract negotiations and resolution of 

disputes before third parties. 

Planning and Management 

This office develops the Commission's budget and, 

each fiscal year, prepares a management plan 

determining the allocation and use of resources 

throughout the agency. Planning and Management 

monitors adherence to the plan, providing monthly 

reports measuring the progress of each division in 

achieving the plan's objectives. 

Press Office 

Staff of the Press Office are the Commission's official 

media spokespersons. In addition to publicizing 

Commission actions and releasing statistics on 

campaign finance, they respond to all questions from 

representatives of the print and broadcast media. 

Located on the first floor, the office also handles 

requests under the Freedom of Information Act. Local 

phone: 376-3155. 
69 

Public Records 

Staff from the Public Records Office provide information on the campaign finance activities of political 

committees and candidates involved in federal 

elections. Located on the first floor, the office is a 

library facility with ample work space and a knowledgeable staff to help researchers locate documents 

and computer data. The FEC encourages the public 

to review the many resources available, including 

committee reports, computer indexes, advisory 

opinions and closed MURs. Local phone: 376-3140. 

Reports Analysis 

Reports analysts assist committee officials in complying with reporting requirements and conduct detailed 

examinations of the campaign finance reports filed by 

political committees. If an error, omission or prohibited 

activity (e.g., an excessive contribution) is discovered 

in the course of reviewing a report, the analyst sends 

the committee a letter which requests that the committee either amend its reports or provide further information concerning a particular problem. By sending 

these letters (RFAis), the Commission seeks to 

ensure full disclosure and to encourage the 

committee's voluntary compliance with the law. 

Analysts also provide frequent telephone assistance 

to committee officials and encourage them to call the 

division with reporting questions or compliance 

problems. Local phone: 376-2480. 

Staff Director and Deputy Staff Director 

The Staff Director carries the responsibilities of 

appointing staff, with the approval of the Commission, 

and implementing Commission policy. The Staff 

Director oversees the Commission's public disclosure 

activities, outreach efforts, review of reports and the 

audit program, as well as the administration of the 

agency. 

The Deputy Staff Director has broad responsibility 

for assisting in this supervision, particularly in the 

areas of budget, administration and computer systems. 
71 Appendix 5 

Statistics on Commission 

Operations 

Summary of Disclosure Files 

Total 

Filers 

Existing in 

1990 

Filers 

Terminated 

asot 

12/31/90 

Continuing 

Filers 

as of 

12/31/90 

Number of 

Reports 

and 

Statements 

in 1990 

Gross Receipts 

in 1990 

Gross 

Expenditures 

in 1990 

I 

I 

Presidential Candidate 299 21 278 465 $1,223,717 $2,124,615 

Committees 

Senate Candidate Committees 537 71 466 2,385 $139,864,965 $164,291 ,484 

House Candidate Committees 2,806 432 2,374 14,614 $209,214,786 $215,034,450 

Party Committees 502 79 423 3,042 $250,444,011 $268,630,252 

Delegate Committees 83 5 78 0 $0 $0 

Nonparty Committees 4,681 509 4,172 34,254 $194,801 ,959 $222,377,868 

Labor committees 372 26 346 3,074 $44,093,743 $52,707,008 

Corporate committees 1,965 170 1,795 16,062 $54,379,249 $60,837,208 

Membership, trade and other 2,344 313 2,031 15,118 $96,328,967 $108,833,652 

committees 

Communication Cost Filers 182 0 182 112 $0 $1,414,862 

I 

I 

Independent Expenditures by 157 19 138 56 $0 $576,330 

Persons Other Than Political 

Committees 
72 

Divisional Statistics for Calendar Year 1990 

Total 

Reports Analysis Division 

Documents processed 57,982 

Reports reviewed 34,726 

Telephone assistance and meetings 8,456 

Requests for additional information (RFAis) 6,450 

Second RFAis 2,222 

Data coding and entry of RFAis and 

miscellaneous documents 13,912 

Names of candidate committees 

published for failure to file reports 33 

Compliance matters referred to Office 

of General Counsel or Audit Division 88 

Data Systems Development Division 

Documents receiving Pass I coding • 55,012 

Documents receiving Pass Ill coding* 43,006 

Documents receiving Pass I entry 48,509 

Documents receiving Pass Ill entry 42,864 

Transactions receiving Pass Ill entry 

• In-house 82,354 

·Contract 455,758 

Public Records Office 

Campaign finance material processed 

(total pages) 1,134,974 

Requests for campaign finance reports 8,698 

Visitors 15,458 

Total people served 24,156 

Information telephone calls 20,015 

Computer printouts provided 76,833 

Total income (transmitted to U.S. Treasury) $97,410 

Cumulative total pages of documents 

available for review 9,350,695 

Contacts with state election offices 3,199 

Notices of failure to file with state 

election offices 309 

*Computer coding and entry of campaign finance 

information occur in two phases. In the first phase, Pass I, 

summary information is coded and entered into the computer within 48 hours of the Commission's receipt of the 

report. During the second phase, Pass Ill, itemized information is coded and entered. 

Total 

Administrative Division 

Contracting and procurement transactions 1,555 

Pieces of outgoing mail processed 255,370 

Publications prepared for print 50 

Pages of photocopying 7,365,458 

Information Services Division 

Telephone inquiries 70,942 

Information letters 79 

Distribution of FEC materials 8,386 

Prior notices (sent to inform filers 

of reporting deadlines) 44,278 

Other mailings 27,631 

Record mailings 171,152 

Visitors 107 

Public appearances by Commissioners 

and staff 230 

State workshops 3 

Publications 29 

Press Office 

Press releases 132 

Telephone inquiries from press 13,817 

Visitors to Press Office 3,783 

Freedom of Information Act 

(FOIA) requests 193 

Fees for materials requested under FOIA 

(transmitted to U.S. Treasury) $24,658 

Clearinghouse on Election Administration 

Telephone inquiries 2,394 

Information letters 75 

Visitors 46 

State workshops 27 

Publications 8 

Project conferences 17 

Foreign briefings 64 
73 

Total 

Office of General Counsel 

Advisory opinions 

Requests pending at beginning of 1990 3 

Requests received 30 

Issued, closed or withdrawn • 28 

Pending at end of 1990 5 

Compliance cases (MURs) 

Pending at beginning of 1990 201 

Opened 195 

Closed 159 

Pending at end of 1990 237 

Litigation 

Cases pending at beginning of 1990 41 

Cases opened 24 

Cases closed 16 

Cases pending at end of 1990 49 

Cases won 13 

Cases lost 1 

Cases voluntarily dismissed 2 

Cases dismissed as moot 0 

Law Library 

Telephone inquiries 1,893 

Visitors served 988 

Audits Completed by Audit Division, 1975·1990 

Presidential 66 

Presidential Joint Fundraising 8 

Senate 13 

House 118 

Party (National) 46 

Party (Other) 110 

Nonparty (PACs) 71 

Total 432 

• Twenty-six opinions were issiJed; two opinion requet?ts , 

were closed without issuance of an opinion. · 
75 Appendix 6 

Allocation Regulations 

Revised Allocation Rules: Summary 

Who Must Allocate 

New Sections 106.5(a)(1) and 106.6(a) explain that 

the allocation rules apply both to: 

• Political committees that maintain separate 

accounts for federal and nonfederal activity (as 

opposed to political committees that conduct 

mixed activity from one federal account); and 

• Committees that are not "political committees" as 

defined under the Federal Election Campaign Act 

but that make disbursements for both federal and 

nonfederal activity. 

The rules specify that the following types of committees must allocate federal!nonfederal expenses, 

whether or not they are "political committees" under 

the Act: 

• National party committees; 

• The House and Senate campaign committees of 

national parties; 

• State and local party committees; 

• Separate segregated funds; and 

• Nonconnected committees. 

(The revised rules at 11 CFR 106.6(a) define a 

nonconnected committee as a committee that is not a 

party committee, a separate segregated fund or an 

authorized committee of a candidate.) 

What Costs Must Be Allocated 

The revisions provide committees with significantly 

more guidance than current rules on how to allocate 

expenses. The revised rules at 11 CFR 106.1 (a), 

1 06.5(a)(2) and 106.6(b) describe several categories 

of joint federal/nonfederal activity subject to allocation: 

• Administrative expenses (e.g., rent, utilities, office 

supplies, salaries); 

• Generic voter drive activities (e.g., voter-identification, voter-registration and get-out-the-vote 

drives that do not mention specific candidates); 

• Fundraising programs or events through which 

one committee collects both federal and 

nonfederal funds; 

• "Exempt party activities" conducted by state and 

local party committees in conjunction with 

nonfederal election activity;1 and 

• Direct support of specific federal and nonfederal 

candidates, and fundraising on behalf of specific 

federal and nonfederal candidates. (Direct 

support and fundraising on behalf of specific 

federal candidates result in in-kind contributions, 

independent expenditures or coordinated party 

expenditures (2 U.S.C. §441 a(d); 11 CFR 

106.1 (a)(1 ).) 

Allocation Methods 

The revised rules contain several allocation methods: 

• Fixed or minimum percentage; 

• Funds expended ratio; 

• Funds received ratio; 

• Time or space (communication) ratio; and 

• Ballot composition ratio. 

As explained in the paragraphs below, the specific 

method used to allocate an expense depends on the 

category of activity and the type of committee conducting the activity. 

Administrative Expenses/Generic Voter Drives 

National Party Committees. The revised rules 

provide that, in Presidential election years, national 

party committees must allocate to their federal 

1 Exempt party activities are certain election-related 

activities conducted by state and local party committees that 

are not considered contributions or expenditures on behalf 

of the federal candidates benefiting from the activity. The 

three types of exempt activities are: slate cards, campaign 

materials and Presidential voter drives. 11 CFR 100. 7(b)(9), 

(15) and (17) and 1 00.8(b)(1 0), (16) and (18). 
76 

accounts at least 65 percent of administrative expenses and costs for generic voter drives. In other 

years, they must allocate at least 60 percent of such 

costs to their federal accounts. These are fixed 

percentages. 11 CFR 106.5(b)(2). 

House and Senate Campaign Committees of 

National Parties. Under the revised rules, these 

committees allocate administrative expenses and 

costs. for generic voter drives according to the funds 

expended method, but at least 65 percent of such 

costs must be allocated to the federal account. (This 

is a minimum percentage.) Under the funds expended 

method, expenses are allocated based on the ratio of 

federal expenditures to total federal and nonfederal 

disbursements made during a two-year federal 

election cycle. In calculating the ratio, the committee 

uses only amounts spent on behalf of specific federal 

and nonfederal candidates, excluding overhead and 

other generic costs. 

State and LocaJ Party Committees. The revised 

rules provide that state and local party committees 

must allocate their administrative and generic voter 

drive expenses using the ballot composition method: 

the ratio of federal offices to total federal and 

nonfederal offices expected to be on the ballot in the 

next general election to be held in the committee's 

state or geographic area. The ratio is determined by 

the number of categories of offices on the ballot. The 

revised rules specify the categories to be included 

and the number of offices that may be counted in 

each category. 

In states that do not hold federal and nonfederal 

elections in the same year, state and local party 

committees allocate the costs of generic voter drives 

using the ballot composition method {described 

above) calculated for the current calendar year. 

These committees allocate their administrative 

expenses using the ballot composition method 

calculated for the two-year federal .election cycle. 

11 CFR 106.5{d). 

Separate Segregated Funds and Nonconnected 

Committees. Under the revised rules, these committees allocate their administrative and generic voter 

drive expenses using the funds expended method. (A 

separate segregated fund must allocate administrative expenses only if they are not paid by the connected organization.) Under this method, expenses 

are allocated based on the ratio of federal expenditures to total federal and nonfederal disbursements 

made during the two-year federal election cycle. In 

calculating the ratio, the committee uses only 

amounts spent on behalf of specific federal and 

nonfederal candidates, excluding overhead and other 

generic costs. {This is the same method used by party 

House and Senate campaign committees; however, 

separate segregated funds and nonconnected 

committees are not required to allocate a minimum 

federal percentage.) 11 CFR 106.6{c). 

Exempt Activities: State and Local Party 

Committees 

The revised rules provide that expenses for exempt 

party activities must be allocated according to the 

proportion of a communication's time or space that is 

devoted to federal elections as compared with the 

entire communication. In the case of a publication, 

committees apply the ratio to the space. In the case of 

a phone bank, committees apply the ratio to the 

number of questions or statements. 11 CFR 106.5(e). 

Fundraising Expenses: All Committees 

A committee must allocate the direct costs of each 

fundraising program or event in which the committee 

collects federal and nonfederal funds. (In the case of 

a separate segregated fund, fundraising costs must 

be allocated only if they are not paid by the connected 

organization.) Fundraising costs must be allocated 

according to the funds received method: the ratio of 

federal funds received to total receipts for the program or event. 11 CFR 106.5{f) and 106.6{d). 

Expenses for Direct Support of Specific 

Candldat~s: All Committees 

Under the revised rules, committees must allocate 

payments involving both expenditures on behalf of 

one or more specific federal candidates and disbursements on behalf of one or more specific nonfederal 
77 

candidates according to the benefit reasonably 

expected to be derived. For example, in the case of a 

communication, the costs must be allocated in 

proportion to the time or space devoted to federal 

candidates compared with the total time or space 

devoted to all candidates. In the case of a fundraising 

program in which funds are collected by the committee for specific federal and nonfederal candidates, the 

allocation is based on the proportion of funds received 

by federal candidates compared with the total receipts 

of all candidates.2 11 CFR 106.1 (a). 

Note that expenditures on behalf of federal candidates result in in-kind contributions, independent 

expenditures or coordinated party expenditures 

(2 U.S.C. §441 a(d)). 11 CFR 106.1 (a)(1 ). 

Payment of Allocated Expenses 

Payment Options. Under the revised rules, committees that have established separate federal and 

nonfederal accounts (whether or not they are "political 

committees" under federal law) may choose one of 

two methods to pay for joint federal and nonfederal 

activities. Under the first method, a committee pays 

the entire amount from its federal account, transfer· 

ring funds from the nonfederal account to cover the 

nonfederal share of an allocable expense. The 

second method allows a committee to establish a 

separate allocation account solely for the purpose of 

paying allocable expenses. In this case, the commit" 

tee transfers funds from the federal and nonfederal 

accounts to the allocation account in amounts propor· 

tionate to the federal and nonfederal share of each 

allocable expense. The allocation account is considered a federal account, subject to federal reporting 

requirements. 11 CFR 106.5{g)(1) and 106.6(e)(1 ). 

The revised rules amend 11 CFR 102.5{a)(1 ){i), 

which currently prohibits committees from transferring 

funds from a nonfederal account to a federal account. 

The revision permits committees to make such 

transfers for the limited purpose of paying the 

nonfederal share of allocated expenses. 

Timing of Transfers. As a general rule, transfers to 

pay for allocable expenses (either from a nonfederal 

account to a federal account or from both the federal 

and nonfederal accounts to the allocation account) 

must be made after the final cost of the activity is 

determined. Transfers may be made in advance of 

this determination only if advance payment is required 

by the vendor and if the payment is a reasonable 

estimate of the activity's final cost, as determined by 

the committee and the vendor. 

In any event, transfers must be made within a 40-

day time period: no more than 10 days before or 30 

days after the payment for which the funds are 

designated is made. 11 CFR 106.5{g){2) and 

106.6(e)(2). 

Reporting Federal and Nonfederal Activity 

The new reporting requirements for allocable expenses apply only to committees that qualify as 

federal "political committees" and that have established separate federal and nonfederal accounts. The 

revised rules at section 104.1 oset out procedures for 

reporting allocation ratios and for reporting transfers 

and disbursements made to pay for allocable expenses. 

Committees will report this information on the 

revised Form 3X and new Schedule H. 

Additional Reporting Rules for National Party 

Committees 

Under the revised rules, national party committees 

must disclose information on their nonfederal accounts and building fund accounts, as well as their 

federal accounts, applying the same itemization 

thresholds to all three types of accounts. Transfers 

from a national party committee's nonfederal account 

to the nonfederal accounts of state and local party 

committees are also reportable. The revised reporting 

rules for national party committees are located at 

11 CFR 104.8(e) and {f) and 104.9(c)-{d). 

2 These allocation methods (used to allocate disbursements between federal and nonfederal candidates} are also 

used to allocate expenditures made on behalf of federal 

candidates only. 
78 

National party committees will use new Schedule I 

to summarize the information that they have reported 

on each of their nonfederal accounts and building 

fund accounts. 

Party Committee Solicitations 

Revised section 1 02.5(a)(3) creates the presumption 

that funds resulting from party committee solicitations 

that refer to a federal candidate or a federal election 

are raised for the purpose of influencing a federal 

election and are thus subject to the limits and prohibitions of the Federal Election Campaign Act. This 

presumption may be rebutted by demonstrating that 

the funds were solicited with express notice that they 

would not be used for federal election purposes. 
79 Appendix 7 

Debt Settlement 

Regulations 

New Debt Settlement Rules: 

Summary 

Eligibility for Settling Debts 

Under the new rules, only "terminating committees" 

are permitted to settle their debts for less than the 

amount owed. A terminating committee is a political 

committee which has debts and which receives 

contributions and makes expenditures only for the 

purpose of retiring its debts and paying winding down 

costs. 11 CFR 116.1 (a) and 116.2(a). 

An "ongoing committee"-a political committee that 

does not qualify as a terminating committee-is not 

permitted to settle debts for less than the amount 

owed. 11 CFR 116.1 (b) and 116.2(b). However, under 

sections 116.9 and 116.10, an ongoing committee 

may request a Commission determination that a debt 

is not payable and may resolve disputed debts. 

Further, a creditor may forgive the outstanding 

balance of a debt owed by an ongoing committee if 

the committee is essentially defunct and unable to 

pay its bills or if the committee cannot be located. 

Authorized Committees: Special Rules 

Settlement of Debts. The new rules include provisions that address debts owed by authorized committees of candidates. The rules prohibit an authorized 

committee from: 

• Settling debts, if an affiliated authorized committee for a previous or future election has funds 

available to pay part or all of the debts; 

• Terminating, if the committee can help pay the 

debts of an affiliated authorized committee that is 

unable to pay its debts; or 

• Transferring funds to an affiliated authorized 

committee, if the transferring committee has net 

debts outstanding. (See 11 CFR 110.1 (b)(3)(ii).) 

11 CFR 116.2(c)(1) and (2). 

Assigning Debts to Another Committee. Under the 

new rules, a terminating authorized committee may 

assign its debts to an authorized committee of the 

same candidate only if the assigning committee: 

• Has no cash on hand or assets to pay any part of 

the debts; and 

• Was not organized to further the candidate's 

campaign in a future election. 

The new rules provide an additional requirement 

for Presidential candidate committees receiving public 

funds: a publicly funded committee may neither 

assign debts nor receive assigned debts until after the 

committee has made all repayments of public funds 

and has paid all civil penalties. 

An authorized committee that has assigned its 

debts to another committee may terminate provided: 

• It notifies each creditor in writing of the name and 

address of the committee that will receive the 

debts no later than 30 days before the assignment takes effect; and 

• The committee that receives the assigned debts 

notifies the Commission in writing that it has 

assumed the obligation to pay the debts and to 

report both the debts and contributions received 

to retire them. 11 CFR 116.2(c)(3). 

Extensions of Credit by Commercial Vendors 

New section 116.3 generally follows previous section 

114.10, which listed factors for determining the 

permissible extension of credit by corporations to 

political committees. The new section adds corresponding standards for unincorporated commercial 

vendors. Failure to meet these standards results in a 

contribution-prohibited in the case of a corporation 

and possibly excessive in the case of a noncorporate 

vendor. 

Under the new rules, an extension of credit by 

either a corporate or noncorporate vendor is not 

considered a contribution to a candidate or political 

committee if: 

• The credit is extended in the ordinary course of 

business; and 
80 

• The terms are substantially the same as extensions of credit of similar amounts to nonpolitical 

debtors of similar risk. 11 CFR 116.3(a) and (b). 

The new rules at 116.3(c) list factors the Commission will consider in determining whether credit was 

extended in the ordinary course of business: 

• Whether the commercial vendor followed established procedures and past practice in approving 

the credit; 

• Whether, in the past, the commercial vendor 

received prompt payment from the same candidate or political committee; and 

• Whether the extension of credit conformed to the 

usual and normal practice in the vendor's trade or 

industry. 

The Commission may also consider regulations 

prescribed by other federal agencies in determining 

whether extensions of credit are made in the ordinary 

course of business. 11 CFR 116.3{d). 

Settlement of Debts Owed to Commercial Vendors 

New section 116.4 addresses the forgiveness or 

settlement of committee debts owed to incorporated 

and unincorporated vendors. (Previous section 

114.10 covered only debts owed to corporations.) The 

forgiveness or settlement of such debts will not result 

in a contribution provided that: 

• The debt settlement is "commercially reasonable" 

and the parties have complied with the rules 

governing debt settlement plans {116.7) or debt 

forgiveness requests {116.8), as appropriate; or 

• The amount forgiven is exempted from the 

definition of contribution (e.g., a legal or accounting service under 11 CFR 100.7{b){13) or {14)). 

11 CFR 116.4(a} and {b). 

Commercially Reasonable Debt Settlement. A debt 

settlement is commercially reasonable if it satisfies 

three criteria: 

• Initial Extension of Credit. Credit was initially 

extended in accordance with the standards of 

11 CFR 116.3 (see above}. 11 CFR 116.4(d}(1 ). 

• Committee's Efforts to Repay. The candidate or 

political committee undertook all reasonable 

efforts to satisfy the outstanding debt, such as 

fundraising, reducing overhead costs or liquidating assets. 11 CFR 116.4(c)(2} and (d)(2). 

• Creditor's Efforts to Collect. The commercial 

vendor made the same efforts to collect the debt 

as those made to collect from a nonpolitical 

debtor in similar circumstances. Remedies mlght 

include, for example, late fee charges, referral to 

a debt collection agency or litigation. 11 CFR 

116.4(d)(3). 

Vendor's Rights. Commercial vendors, however, are 

not required to forgive or settle debts owed by candidates and committees. Moreover, the explanation and 

justification to the new rules states that a creditor is 

not required to pursue activities that are unlikely to 

result in the reduction of the debt. 

Advances to Committees by Staff and Other 

Individuals 

New section 116.5 clarifies that payments by individuals using personal funds or personal credit cards to 

obtain goods or services for a political committee 

generally result in in-kind contributions to that committee unless the payment is a travel or subsistence 

expense covered by one of the exceptions explained 

below. For example, an in-kind contribution results if 

an individual pays for the transportation or subsistence expenses of others or pays for nontravel 

expenses. If the committee intends to reimburse the 

individual for such payments, the obligation must be 

treated and reported as a debt. 11 CFR 116.5(c) and 

(e). Reimbursements are treated as refunds of 

contributions. 

Note that, in all cases, the exceptions described 

below do not apply to individuals who are acting as 

commercial vendors since they are covered by the 

commercial vendor rules previously discussed. 

Exception: Exempt Travel and Subsistence 

Payments. Under 11 CFR 100.7(b){B), payments 

made from an individual's personal funds for his or 
81 

her transportation expenses incurred while traveling 

on behalf of a candidate or political party committee 

are not contributions if they do not exceed $1 ,000 per 

candidate, per election, or $2,000 per year for travel 

on behalf of a party committee. Section 100.7(b)(8) 

also exempts all payments by volunteers for subsistence expenses incidental to volunteer activity. 

Exception: Reimbursed Travel and Subsistence 

Payments. Under the new rule at 11 CFR 116.5(b), 

transportation and subsistence expenses which are 

incurred and paid for by an individual while traveling 

on behalf of a candidate or party committee and 

which are not covered under the 100.7(b)(8) exemption are not considered contributions as long as the 

committee reimburses the individual within certain 

time periods. 1 In the case of a credit card payment, 

the committee must reimburse the individual within 60 

days after the closing date of the billing statement on 

which the charges first appear. In all other cases, the 

committee must reimburse the individual within 30 

days after the expenses were incurred. 

Salary Payments Owed to Employees 

New section 116.6 clarifies that unpaid salaries owed 

to committee staff are not contributions. If a political 

committee does not pay an employee in accordance 

with an agreement, the unpaid amount may be 

treated either as volunteer services, which are exempt 

from the definition of contribution under 11 CFR 

100.7(b)(3), or as a debt. The services may be 

converted to volunteer activity only if the employee 

signs a statement agreeing to be considered a 

volunteer. If the unpaid amount is treated as a debt, 

the amount owed must be reported as such and may 

be settled. 

Debt Settlement Plans Filed by Terminating 

Committees 

New section 116.7 contains guidelines concerning 

debt settlement plans submitted by terminating 

committees on new FEC Form 8. (Unlike previous 

section 114.1 0, the new rules do not provide for the 

filing of debt settlements by creditors.) Terminating 

committees may file debt settlement plans once they 

have reached agreement with their creditors, although 

not all creditors need be included in one plan. The 

committee must postpone payment until the Commission has reviewed the debt settlement plan. 

Debts Subject to Settlement. The types of debts 

that are subject to debt settlement requirements 

include: 

• Amounts owed to commercial vendors; 

• Debts arising from advances by individuals; 

• Salary owed to committee employees; and 

• Loans owed to political committees or individuals, 

including candidates. 11 CFR 116.7(b). 

Debts Not Subject to Settlement. The debt settlement rules do not apply to public funding repayments, 

which may not be settled, or to disputed debts, which 

are covered by other rules. 11 CFR 116.7(c). More· 

over, the explanation and justification to the rules 

indicates that the debt settlement rules would not 

apply to bank loans. Guidance on the treatment of 

bank loans may be provided in a separate 

rulemaking. 

Content of Debt Settlement Plan. For each debt 

covered by a debt settlement plan, the committee 

must include the information listed below on FEC 

Form8.11 CFR 116.7{e). 

• The terms of the initial extension of credit and the 

terms of similar amounts of credit extended to 

nonpolitical debtors of similar risk; 

• The comr:nittee's efforts to pay tne debt; 1 This exception applies to the subsistence expenses of 

paid campaign staff since a volunteer's subsistence 

expenses are covered under the 100.7(b)(8) exemption. 
82 

• The remedies pursued by the creditor to obtain 

· payment compared with the remedies customarily 

pursued in similar circumstances involving 

nonpolitical debtors; . 

• A comparison between the terms of the settlement and debt settlement terms involving 

nonpolitical debtors; 

• A signed statement from the creditor agreeing 

with the terms of the settlement; 

• A statement as to whether the terminating committee has sufficient cash to pay the amount 

indicated in the plan or, if not, the steps the 

committee will take to obtain the funds; and 

• A demonstration that the committee qualifies as a 

terminating committee and the date the committee expects to file a termination report. 

If the plan does not include settlements for all of 

the committee's outstanding debts, the plan must 

additionally provide the following information: 

• A list of the committee's remaining debts; 

• Whether the committee intends to pay the entire 

amount of the remaining debts or to settle them, 

and, if settlement is contemplated, the terms 

offered to the creditors; and 

• Whether the terminating committee has sufficient 

cash to pay the remaining debts, and, if not, what 

steps the committee will take to obtain the funds. 

Commission Review of Plan. The new rules list 

factors the Commission will examine in reviewing debt 

settlement plans. 11 CFR 116.7(f). 

Reporting Debts Undergoing Settlement. A terminating committee must continue to report each debt or 

obligation included in a debt settlement plan until the 

Commission has completed a review of the plan. 

11 CFR 116.4(f); 116.5(e); 116.6(c); and 116.7(d). 

Debts Discharged In Bankruptcy. If a committee is 

released from debts through a bankruptcy court 

decree pursuant to 11 U.S.C. Chapter 7, the committee must include the court order in its debt settlement 

plan as well as a list of the obligations from which the 

committee is released. 11 CFR 116.7(g). The Commission will treat an authorized committee's debts as 

settled for purposes of the Federal Election Campaign 

Act if the candidate received a Chapter 7 discharge 

that applies to the committee's debts. 

Creditor's Forgiveness of Debts Owed by Ongoing 

Committees 

Under section 116.8, creditors may completely forgive 

the outstanding balance of debts owed by ongoing 

committees that cannot be located or that are clearly 

unable to pay their bills, provided that: 

• The debt has been outstanding for at least two 

years; 

• The committee has insufficient cash to pay the 

debt; 

• The committee's receipts and disbursements over 

the past two years each total less than $1 ,000; 

and 

• The committee's debts are so large that the 

creditor could reasonably conclude that the debt 

will not be paid. 

Under these circumstances, a creditor must submit 

for the Commission's review a letter of intent that 

provides the following information: 

• The terms of the initial extension of credit; 

• The committee's efforts to satisfy the debt; 

• The remedies pursued by the creditor to collect 

on the debt; and 

• A description of how the creditor has pursued and 

forgiven similar debts involving nonpolitical 

debtors. 

Unpayable Debts 

Section 116.9 sets forth procedures that allow a 

terminating committee or an ongoing committee to 

obtain a Commission determination that a debt is 

unpayable for purposes of the Act because the 

creditor cannot be located or has gone out of busi-
83 

ness. The committee must demonstrate that it made 

the necessary efforts to locate the creditor and must 

continue to report the debt until the Commission 

determines that the debt is unpayable. 

Reporting Disputed Debts 

The new rules at 11 CFR 116.1 (d) define a disputed 

debt as a bona fide disagreement between the 

creditor and the committee as to the existence of a 

debt or the amount owed by the committee. Under 

section 116.1 0, until the creditor and committee 

resolve the dispute (and if the creditor did provide 

something of value), the committee must disclose the 

amount the committee admits it owes, the amount the 

creditor claims is owed and any amounts the committee has paid the creditor. 

When filing a debt settlement plan, a committee 

must describe any disputed debts and the 

committee's efforts to resolve them. 

Continuous Reporting of Debts 

Several revisions have been made to 11 CFR 104.11 (b), which concerns the continuous reporting of 

debts and obligations. The revised rule clarifies that 

debts exceeding $500 must be reported as of the date 

the debts are incurred. (The previous language said 

"as of the time of the transaction.") The revisions also 

clarify that periodic administrative costs (e.g., rent, 

staff salaries) need not be reported as debts if payment is not due before the end of the reporting period. 

However, if payment is not made on the due date, the 

amount outstanding must be reported as a debt. 

Finally, new language incorporates current policy that 

if the exact amount of a debt is not known, a committee must report the estimated amount of the debt and 

then either amend the report or include the correct 

figure in a later report when the exact amount is 

known. 
85 Appendix 8 

1990 Federal 

Register Notices 

1990-1 

Voluntary Standards for Computerized Voting Systems: Notice of Final Standards (55 Fed. Reg. 3764, February 

5, 1990) 

1990-2 

Filing Dates for New York Special Elections (55 Fed. Reg. 7027, February 28, 1990) 

1990-3 

11 CFR Parts 106, 9003, 9007, 9033, 9035 and 9038: Presidential Primary and General Election Candidates: 

Technical Requirements for Computerized Magnetic Media (55 Fed. Reg. 12499, April 4, 1990) 

1990-4 

11 CFR Part 110: Contributions and Expenditures: Prohibited Contributions (Foreign Nationals) (55 Fed. Reg. 

13507, April11, 1990) 

1990-5 

Filing Dates for the New Jersey Special Elections (55 Fed. Reg. 18388, May 2, 1990) 

1990-6 

11 CFR Parts 102, 104 and 106: Methods of Allocation Between Federal and Nonfederal Accounts; Payments; 

Reporting; Transmittal of Final Rule to Congress (55 Fed. Reg. 26058, June 26, 1990) 

1990-7 

Filing Dates for the Hawaii Congressional Special Elections (55 Fed. Reg. 25880, June 25, 1990) 

1990-8 

Filing Dates for the Hawaii Special Senate Elections (55 Fed. Reg. 25881, June 25, 1990) 

1990-9 

11 CFR Parts 106, 9003, 9007, 9033, 9035 and 9038: Presidential Primary and General Election Candidates; 

Technical Requirements for Computerized Magnetic Media; Transmittal of Final Rule to Congress (55 Fed. Reg. 

26392, June 27, 1990) 

1990-10 

11 CFR Parts 100, 104, 114 and 116: Debts Owed by Candidates and Political Committees; Transmittal of Final 

Rule to Congress (55 Fed. Reg. 26378, June 27, 1990) 

1990-11 

11 CFR Part 110: Domestic Subsidiaries of Foreign Nationals; Notice of Proposed Rulemaking (55 Fed. Reg. 

34280,August22, 1990) 

1990-12 

11 CFR Parts 107, 114 and 9008: Presidential Election Campaign Fund and Federal Financing of Presidential 

Nominating Conventions; Notice of Proposed Rulemaking (55 Fed. Reg. 34267, August 22, 1990) 
86 

1990-13 

11 CFR Parts 1 02, 1 04 and 1 06: Methods of Allocation Between Federal and Nonfederal Accounts; Payments; 

Reporting; Final Rule, Announcement of Effective Date (55 Fed. Reg. 40377, October 3, 1990) 

1990-14 

11 CFR Parts 109 and 114: Corporate and Labor Organization Expenditures (MCFL issues); Additional Request 

for Comments (55 Fed. Reg. 40397, October 3, 1990) 

1990-15 

11 CFR Parts 106, 9003, 9007, 9033, 9035 and 9038: Presidential Primary and General Election Candidates; 

Technical Requirements for Computerized Magnetic Media; Final Rule; Announcement of Effective Date (55 Fed. 

Reg. 40377, October 3, 1990) 

1990-16 

11 CFR Parts 100, 104, 114 and 116: Debts Owed by Candidates and Political Committees; Final Rule; Announcement of Effective Date (55 Fed. Reg. 40376, October 3, 1990) 

1990-17 

11 CFR Part 11 0: Domestic Subsidiaries of Foreign Nationals; Announcement of Additional Public Hearing on 

October 30 (in addition to previously scheduled hearing, October 31.) (55 Fed. Reg. 41100, October 9, 1990) 

1990-18 

11 CFR Parts 109 and 114: Corporate and Labor Organization Expenditures (MCFL issues); Extension of Comment Period to November 30, 1990 (55 Fed. Reg. 45809, October 31, 1990) 

1990-19 

11 CFR Parts 100, 106, 110, 9001-9007, 9012 and 9031-9039: Public Financing of Presidential Primary and 

General Election Candidates Notice of Proposed Rulemaking. (56 Fed. Reg. 106, January 2, 1991)