2 6 3 7 8 Federal R egister / Vol. 55, No. 124 / W ednesday, June 27 / Rules and Regulations

FEDERAL ELECTION COMMISSION

11 CFR Parts 100,104,114, and 116

[Notice 1990—10]

Debts Owed by Candidates and

Political Committees

a g e n c y : Federal Election Commission. 

ACTION: Final rule; Transmittal of 

Regulations to Congress.

s u m m a r y : The Commission has deleted 

its regulations at 11 CFR 114.10 and has 

prepared new 11 CFR part 116 

concerning the extension of credit and 

settlement of debts owed by candidates 

and political committees. These 

regulations implement sections 433,434, 

439a, 441a, 441b and 451 of the Federal 

Election Campaign Act of 1971, as 

amended (“the Act” or “FECA”), 2 

U.S.C. 431 et seq. In addition, the 

Commission has made several 

corresponding amendments to 11 CFR 

100.7(a), 104.3(d) and 104.11(b) to bring 

those provisions into conformity with 

new 11 CFR part 116. Finally, the 

Commission is preparing a new form to 

facilitate the submission of debt 

settlements, which will be transmitted to 

Congress at a later date. Further 

information on these revisions is 

provided in the supplementary 

information which follows.

EFFECTIVE DATE: Further action, 

including the announcement of an 

effective date, will be taken after these 

regulations have been before Congress 

for 30 legislative days pursuant to 2 

U.S.C. 438(d). A document announcing 

the effective date will be published in 

the Federal Register.

FOR FURTHER INFORMATION CONTACT:

Ms Susan E. Propper, Assistant General 

Counsel, 999 E Street NW., Washington, 

DC 20463, (202) 376-5690 or (800) 424- 

9530.

SUPPLEMENTARY INFORMATION: The 

Commission is publishing today the final 

text of new regulations at 11 CFR part 

116, which concern debts owed by 

candidates and political committees.

The new rules replace current § 114.10, 

which is being removed from 11 CFR. In 

addition, the Commission is publishing 

conforming amendments to § § 100.7, 

104.3 and 104.11 to reflect the new 

provisions in part 116 of the regulations.

On December 6,1988 the Commission 

issued a Notice of Proposed Rulemaking 

(NPRM) is which is sought comments on 

proposed revisions to these regulations 

53 FR 59193. Seven written comments 

were received in response to the Notice. 

A public hearing was held on February 

15 and 16,1989 at which four witnesses

presented testimony on the issues raised 

in the rulemaking.

Section 438(d) of title 2, United States 

Code requires that any rules or 

regulations prescribed by the 

Commission to carry out the provisions 

of title 2 of the United States Code be 

transmitted to the Speaker of the House 

of Representatives and the President of 

the Senate thirty legislative days before 

they are finally promulgated. These 

regulations were transmitted to 

Congress on June 22,1990.

Explanation and Justification

The Commission has extensively 

revised and reorganized its regulations 

regarding debts owed by candidates and 

political committees to ensure that the 

creation and settlement of such debts do 

not result in excessive or prohibited 

contributions to the debtor committees, 

and to promote the timely public 

disclosure of such transactions. During 

the course of this rulemaking, the 

Commission has re-examined several 

fundamental issues regarding debts 

owed by political committees, such as 

which types of committees should be 

permitted to seek debt settlement, 

whether debt settlements should be 

reviewed as agreements are reached or 

only after all creditors have ratified 

settlements, the scope of the 

Commission’s review of debt 

settlements, and the relationship 

between the Commission’s procedures 

and the procedures established by 

Congress in the Federal Bankruptcy 

Code.

The principal areas in which new 11 

CFR part 116 differs from the previous 

language of 11 CFR 114.10 are as 

follows:

(1) Under the new rules, ongoing 

committees will no longer be permitted 

to settle debts (see 11 CFR 116.2).

(2) New procedures are included 

regarding situations in which either the 

political committee’s creditors have 

gone out of business (see 11 CFR 116.9) 

or the political committee is essentially 

defunct (see 11 CFR 116.8).

(3) Special provisions have been 

added regarding authorized committees 

(including authorized committees of 

publicly-funded Presidential candidates) 

that wish to settle debts, terminate, or 

assign debts to other committees 

authorized by the same candidate [see

11 CFR 116.2(c)).

(4) New provisions have been added 

which address debts owed to 

unincorporated commercial vendors (see 

11 CFR 116.3 and 116.4), committee 

employees (see 11 CFR 116.6), or other 

individuals who have advanced funds to 

or on behalf of a political committee 

(see l l CFR 116.5).

(5) A more complete explanation of 

the procedures for submitting debt 

settlements for Commission review and 

a more detailed list of the information 

that must be provided have been added, 

(see 11 CFR 116.7).

(6) The treatment and reporting of 

disputed debts is clarified (see 11 CFR 

116.10).

After considering the public 

comments and testimony regarding the 

Commissidn’s role in bankruptcy 

proceedings under chapters 7 and 11 of 

the Federal Bankruptcy Code (11 U.S.C. 

Ch. 7 and 11), the Commission has 

decided to add a provision regarding the 

submission of debt settlement plans by 

terminating committees that have 

obtained releases from debts subject to 

chapter 7 bankruptcies. However, the 

new rules do not specifically address 

chapter 11 proceedings. Nevertheless, as 

explained more fully below, the 

promulgation of the new debt settlement 

rules may afreet such proceedings.

The Commission has also decided to 

continue the current approach of 

permitting committees to file debt 

settlement requests as they reach 

agreements with creditors. Thus, the 

Commission is not adopting the previous 

proposals that would have required 

committees to present all their debt 

settlements at one time in a single 

unified plan for Commission review.

The Commission also notes that 

federal tax questions may arise 

concerning die proper treatment of bad 

debts owed to taxpayers by political 

parties or political committees. The 

reader should consult section 271 of the 

Internal Revenue Code regarding such 

matters. 26 U.S.C. 271.

Section 116.1 Definitions

New § 116.1 sets out definitions for 

the terms "terminating committee,” 

“ongoing committee,” "commercial 

vendor,” "disputed debt,” “extension of 

credit,” and “creditor.”

The previously proposed definition of 

"terminating committee” in paragraph 

(a) has been reworked to exclude 

committees that are continuing to make 

or accept contributions or expenditures 

for purposes other than winding down 

and paying outstanding bills. This is 

consistent with $ 116.7(e)(6), which 

requires committees to demonstrate that 

they qualify as terminating committees. 

They should do so when they file their 

first debt settlement plan. The 

classification of a political committee as 

a terminating committee is of 

significance because only terminating 

committees are permitted to settle debts. 

While the new rules do not require 

terminating committees to terminate
Federal Register / Vol. 55, No. 124 / W ednesday, June 27

within any set amount of time after they 

have settled all their outstanding debts, 

the Commission anticipates that most 

committees will file a termination report 

shortly after the Commission has 

concluded its debt settlement reviews. 

Failure to do so may raise questions 

about the committee’s bona fide intent 

to terminate.

A definition of “commercial vendor” 

has been included in § 110.1(c) to clarify 

that debts owed to commercial vendors 

may be settled under these rules only if 

the vendor’s usual and normal business 

involves providing goods or services of 

the type provided to the candidate or 

political committee. The Commission 

has modified the definition that 

appeared in the NPRM by deleting the 

language indicating that the provision of 

such goods or services must be “for 

profit.” Transactions involving nonprofit 

entities and transactions between 

political committees will be addressed 

on a case-by-case basis. See, e.g.

Advisory Opinion (“AO”) 1989-4.

The Commission has also added a 

definition of "extension of credit” See

1 1 CFR 116.1(e). This term includes 

unintended credit which results when 

payment is due upon delivery but the 

political committee simply does not pay, 

as well as situations where the 

committee’s creditor either decides in 

advance to provide goods or services on 

credit, or decides on or after the due 

date to allow more time for payment.

Finally, a new definition of “creditor” 

has been added to ensure that the term 

is correctly read to include both 

commercial vendors and other entities 

or persons, including individuals, to 

whom a debt is owed. See 11 CFR 

116.1(f).

Section 116.2 Debts Owed by

Terminating Committees, Ongoing

Committees and Authorized Committees

The previous debt settlement 

regulations at 11 CFR 114.10 did not 

expressly limit debt settlements to 

political committees that are in the 

process of winding down their activities 

and preparing to terminate, although the 

vast majority of those seeking debt 

settlement are in that posture. Thus, 

questions arose as to the 

appropriateness of permitting ongoing 

committees, including party committees, 

separate segregated funds and 

nonconnected committees, to settle their 

debts for less than the full amount owed, 

particularly since these committees may 

have the ability and intention to 

continue soliciting funds for political 

purposes. Consequently, the NPRM 

sought comments on proposed 

regulatory language limiting debt 

settlements to political committees in

the process of termination, and 

prohibiting ongoing committees from 

settling their previous debts.

The Commission heard testimony 

from one commenter who favored 

continuing to allow ongoing committees 

to seek debt settlements. T ie 

commenter stated that fairness to 

creditors would be promoted if the 

creditors could accept a generous 

settlement immediately, rather than 

being forced to wait substantially longer 

with little aissurance that complete 

payment would be forthcoming. The 

commenter also pointed out that ongoing 

committees may have little choice other 

than to continue to support candidates 

and carry on normal operations while 

they are negotiating timetables for 

payment of previous debts.

The Commission has now decided to 

adopt the proposed language prohibiting 

ongoing committees from settling debts 

for less than the full amount owed. As 

the comment indicates, these 

committees have the intention to 

continue to solicit funds and to engage 

in election-related activities. 

Consequently, tihe settlement of an 

ongoing committee’s debts cannot be 

considered to be commercially 

reasonable given that the committee is 

continuing to receive funds that could be 

used to pay its past debts. Moreover, by 

freeing additional funds for future 

electoral activity, such a practice could 

result in indirect corporate subsidization 

of a political committee’s speech, and 

amplification of such speech beyond the 

committee’s ordinary capacity. Cf FEC

v. Massachusetts Citizens for Life, 479 

U.S. 238, 257-58 (1986) (individual 

contributions to political committees 

“reflect popular support for the political 

positions of the committee,” while 

“corporate spending on political activity 

raises the prospect that resources 

amassed in the economic marketplace 

may be used to provide unfair 

advantage in the political marketplace”). 

Permitting settlement of an ongoing 

committee’s debts is also inconsistent 

with section 433(d)(2) of the A ct That 

section contemplates the orderly 

application of a political committee’s 

assets to reduce its outstanding debts 

only in the situation where the 

committee is insolvent and preparing to 

terminate.

Please note that under the new rules, 

“ongoing committee” includes party 

committees, separate segregated fluids 

and nonconnected committees while 

such committees continue to engage in 

political activities. However, if a party 

committee, separate segregated fund or 

nonconnected committee decides to end 

its election-related activities, it may

/ Rules and Regulations 2 6 3 7 0

settle debts once it has qualified as a 

terminating committee.

Although the Commission has 

concluded that it is inappropriate to 

permit ongoing committees to settle 

debts, the Commission is adopting 

provisions that give ongoing committees 

the necessary flexibility to resolve 

certain concerns. Thus, ongoing 

committees may continue to resolve 

bona fide disputes with creditors 

regarding debts under new § 116.10. 

Ongoing committees, as well as 

terminating committees, will also be 

able to resolve difficulties created when 

their creditors have gone out of 

business. See 11 CFR 116.9. The 

Commission has also encountered the 

opposite situation, where the creditor is 

unable to locate the committee, or the 

committee is essentially defunct. Under 

certain limited conditions, the creditor 

may seek Commission approval of a 

complete forgiveness of the remaining 

debt. See 11 CFR 110.8.

The NPRM observed that there have 

been debt settlement requests in which 

different creditors were offered and 

accepted very different terms and 

payments from the same political 

committee. Thus, the NPRM sought 

suggestions as to whether the 

Commission should encourage political 

committees to pay each creditor 

approximately the same percentage for 

each outstanding debt. It also presented 

the possibility of establishing mandatory 

or suggested priorities for the settlement 

of debts owed to different categories of 

creditors and possibly requiring 

committees to adhere to the priorities 

set out in Federal Bankruptcy Code. See

11 U.S.C. 507. The Commission noted 

that section 433(d)(2) of the FECA refers 

to the Commission’s authority to 

establish procedures to determine the 

insolvency of political committees, to 

liquidate the assets of insolvent 

committees for the reduction of 

outstanding debts, and to terminate 

insolvent committees after liquidation.

The commenters and witnesses at the 

hearing strongly opposed the creation of 

such priorities and pointed out several 

difficulties that the Commission could 

expect to encounter if it sought to 

oversee the liquidation of insolvent 

committees. It was also suggested that 

the Commission lacks the practical 

experience needed to resolve issues 

traditionally handled by the bankruptcy 

courts.

The Commission has now decided not 

to establish mandatory or suggested 

priorities for payment of creditors and 

not to implement new insolvency rules 

or procedures. Instead, the Commission 

will use its limited resources to ensure
2 8 3 8 0 Federal Register / Vol. 55, No. 124 / W ednesday, June 27

that debt settlements presented to the 

Commission do not conceal transactions 

involving the making and acceptance of 

prohibited or excessive contributions.

The NPRM also sought comments on 

the related question of the Commission’s 

role when an insolvent political 

committee files a petition under chapter 

7 or chapter 11 of the Federal 

Bankruptcy Code. See 11 U.S.C. 301. In 

the past, the Commission has concluded 

that where candidates first sought 

release from dischargeable debts under 

chapter 7, the debts were settled for 

purposes of Commission review. E.g.

Debt Settlement Request 87-11. The 

Commission received comments and 

testimony to the effect that the 

Commission should petition Congress to 

amend the Bankruptcy Code to permit 

the Commission to be notified, and if 

appropriate, to become a party in 

interest in bankruptcy cases involving 

political committees so that it could 

ensure compliance with the FECA. The 

comments preferred to let bankruptcy 

courts handle the liquidation or 

reorganization of a political committee’s 

assets to the alternative of Commission 

supervision of insolvency proceedings 

for indebted committees. After further 

consideration, the Commission has 

decided that it should add language to 

the new rules to clarify how a release 

from dischargeable debts under chapter 

7 affects the subsequent filing of a debt 

settlement plan by a terminating 

committee. See discussion below of new 

11 CFR 116.7(gJ.

The reorganization of a political 

committee under chapter 11 presents 

many of the same concerns as are raised 

by the settlement of an ongoing 

committee’s debts. As one federal 

bankruptcy court has acknowledged, 

such chapter 11 reorganizations 

implicate important policy 

considerations, such as the potential for 

the debtor committees to “deceivfe} new 

donors by failing to inform them of the 

pending petition” for reorganization, as 

well as the “unfair advantage of chapter 

11 political committees allowed to 

compromise debts while others may pay 

in full, and the potential for indirect 

corporate subsidization of a political 

committee’s speech.” In Re: Fund for a

Conservative Majority* 100 Bankr. 307, 

309 (Bankr. EJD. Va. 1989). The court 

concluded that some of the 

Commission’s concerns in this area 

could be addressed by providing the 

Commission with an opportunity to 

review the reorganization plan 

submitted by the debtor committee. 

Unfortunately, the types of information 

needed to determine whether FECA 

violations have occurred may not be

available in a committee’s 

reorganization plan. While the new part 

116 regulations prohibit ongoing 

committees from settling debts absent 

special circumstances, the new rules do 

not specifically address chapter 11 

reorganizations involving political 

committees. Nevertheless, the 

Commission may seek to participate in 

bankruptcy cases presenting FECA 

questions and will continue to examine 

chapter 11 reorganizations of ongoing 

committees for evidence of FECA 

violations.

The NPRM also contained draft 

language that would have required 

terminating committees to submit all 

debt settlements as part of a single 

unified debt settlement package. This 

was intended to facilitate a more 

orderly review by the Commission of 

debt settlements and to enable the 

Commission to ascertain how the 

terminating committee plans to dispose 

of its remaining debts. This is a concern 

m situations where the committee had 

substantially more debts and obligations 

than cash on hand, and only limited 

fundraising prospects.

One commenter expressed the 

concern that the proposal for submission 

of all debt settlements in a single 

document would substantially delay 

creditors who reach settlements quickly 

from receiving any payments for lengthy 

periods of time while the political 

committee is negotiating agreements 

with all its other creditors.

In light of this concern, the 

Commission has revised §§ 118.2(a) and

118.7 so that the submission of all debt 

settlements in a single unified plan is 

not required. Thus, terminating 

committees may submit debt settlement 

plans in which agreements have been 

reached with some creditors but not 

others. However, the debtor committees 

will be required to include in their 

submissions summaries of their overall 

financial situation, including their plans 

for settling or resolving all remaining 

debts. This information is needed to 

enable the Commission to evaluate the 

commercial reasonableness of the debt 

settlements presented. In many cases, 

this approach will ensure that the 

details of a committee’s earlier debt 

settlements will be placed on the public 

record more quickly than if the 

settlements were delayed until every 

creditor has signed an agreement to 

settle. Further information on submitting 

debt settlement plans and the scope of 

Commission review are explained below 

in 11 CFR 116.7.

New § 116.2(c)(1) prohibits authorized 

committees from settling debts if the 

candidate has another authorized

/ Rules and Regulations

committee with permissible funds 

available to pay part or all of the 

amount owed. This language also 

prohibits authorized committees from 

terminating if they have funds or assets 

to pay the outstanding debts of another 

authorized committee that cannot meet 

its own obligations.

The Commission received no public 

comments on proposed language in 

another section that expressly stated 

that the availability of funds to transfer 

from one authorized committee to 

another is a factor the Commission 

would consider in reviewing debt 

settlements. Such language has now 

been deleted since new § 116.2(c)(1) 

addresses this situation. Another 

comment expressed concern that new 

part 116 could well permit candidates to 

eliminate their previous campaign debts 

and then form new committees that 

would receive substantial extensions of 

credit from the same incorporated 

vendors, thereby allowing these 

candidates to put impermissible 

corporate contributions behind them. 

The language in new § 116.2(c) should 

alleviate such concerns. Moreover, the 

debt settlement review procedures set 

out in new $ 116.7 will enable the 

Commission to question whether 

vendors have engaged in this type of 

activity with selected candidates, and to 

initiate enforcement actions in 

appropriate cases.

The new language in § 116.2(c)(1) 

regarding authorized committees 

parallels the provisions prohibiting 

ongoing committees from settling debts. 

The Commission notes that many 

candidates form a new principal 

campaign committee for each election 

cycle rather than simply rolling over 

their previous committee. Thus, a series 

of principal campaign committees is in 

many respects equivalent to an ongoing 

committee. The Commission has 

determined that the reasons for not 

permitting ongoing committees to settle 

debts should also prevent principal 

campaign committees from settling 

debts in situations where the candidate 

has another campaign committee 

capable of paying the amount owed.

For the same reasons, paragraph (c)(2) 

has been added to prohibit transfers of 

funds between a candidate’s authorized 

committees for different elections if the 

transferor committee has net debts 

outstanding.

New paragraph (c)(3) has been added 

to assist authorized committees that 

would like to terminate but are unable 

to do so because they have outstanding 

debts which they are unable to pay. It 

permits indebted authorized committees 

to assign their debts to other authorized
Federal Register / Vol. 55, No. 124 / W ednesday, June 27 / Rules and Regulations 26381

committees of the same candidate and 

then terminate. Such assignments may 

not be made until after the election has 

been held, to-prevent the formation of a 

new committee solely for the purpose of 

avoiding payment of debts. However, if 

either committee is an authorized 

committee of a Presidential candidate 

receiving public funding, the assignment 

may not take place until after the audit, 

repayment and enforcement processes 

have ended. The original committee 

must notify the creditors of the debt 

assignment. The authorized committee 

receiving the assigned debts must accept 

the obligation to pay the amount owed 

and must assume the reporting 

responsibilities for the assigned debts. 

This committee should report financial 

activity related to such debts and 

contributions received for their payment 

on a separate FEC Schedule A and 

Schedule D, but should include these 

figures in the totals reported on the 

committee’s summary page. The 

Commission notes -that contributions 

designated to pay the previous debts 

would be subject to the contribution 

limits for the previous election, rather 

than the upcoming election, under the 

net debts outstanding rules set forth in 

11 CFR 110.1(b)(3). Thus, a separate 

schedule will assist the committee and 

the Commission in tracking these 

separate limits.

The concept of assigning debts is 

based in part on proposed activity 

approved by the Commission in AOs 

1980-43 and 1977-52. One witness 

indicated that this approach would 

serve a useful disclosure function. 

Another commenter expressed the 

concern that the ability of the creditors 

of the committee accepting the assigned 

debts to obtain payment could be 

jeopardized by the committee’s 

increased indebtedness. In practice, the 

Commission has not encountered such 

difficulties in the time since this 

approach was originally approved in 

AOs 1977-52 and 1980-43.

Another issue on which the NPRM 

sought comments was whether publiclyfunded committees of Presidential 

candidates should be permitted to settle 

debts, and if so, whether higher 

standards should be used to evaluate 

their debt settlements. The NPRM also 

questioned whether such settlements 

should be submitted for Commission 

review as soon as practical, or whether 

the campaign committees should be 

permitted to wait until the Commission’s 

audit process has been completed.

The Commission heard testimony 

from one commenter who proposed an 

alternative approach under which the 

contribution limits would be removed

for Presidential candidates who are 

defeated and do not run again for 

President in the succeeding election. 

This would enable such indebted 

Presidential committees to seek 

additional contributions from those who 

have already given the maximum 

amount permitted under the Act. 

However, another commenter opposed 

this suggestion and argued that it would 

encourage more liberal campaign 

spending radier than responsibility and 

accountability. The Commission is not 

adopting the proposal regarding waiving 

the contribution limitations because this 

would be contrary to the plain wording 

of the statute as well as some of the 

basic principles underlying the FECA 

and the public financing statutes.

The Commission has now concluded 

that debts owed by publicly-funded 

Presidential committees should not be 

treated differently than debts owed by 

authorized committees of 

nonpresidential candidates. Thus, new 

§ 116.2(c) of the Commission's 

regulations allows publicly-funded 

Presidential committees to settle debts if 

no other committee authorized by the 

same candidate has permissible funds 

available to pay the amounts 

outstanding. The indebted Presidential 

campaign committee is subject to the 

same requirements and procedures as 

other political committees eligible to 

settle debts. Furthermore, the original 

amounts of their debts will continue to 

be counted against their spending limits 

under 11 CFR 9035.1(a)(2). Under current 

11 CFR 9038.2(b)(l)(v), the settlement of 

debts also reduces the indebted 

Presidential campaign committee’s 

remaining entitlement to matching funds 

on its statement of net outstanding 

campaign obligations, which could 

affect the committee’s repayment 

obligations. The new provisions in 

§ 116.2(c) will not change this.

The Commission notes that questions 

were raised in Advisory Opinion 1988-5 

as to whether a current publicly-funded 

Presidential committee may contribute 

or transfer funds to another publiclyfunded committee of the same candidate 

for a previous election cycle to pay 

debts from the earlier campaign. The 

opinion concluded that such transfers or 

contributions are not qualified campaign 

expenses under 11 CFR 9034.4 and are 

not includable in the candidate’s 

statement of net outstanding campaign 

obligations under 11 CFR 9034.5. 

However, such payments could be made 

from excess campaign funds once the 

audit process is concluded and any 

repayment or possible penalty 

obligations have been satisfied. Nothing

in neW 11 CFR part 116 would alter this 

conclusion.

Section 116.3 Extensions o f Credit by

Commercial Vendors

This new section generally follows 

previous § 114.10 by setting forth the 

standards for the extension of credit by 

corporations in the ordinary course of 

their business as commercial vendors. 

As under the previous rules, the failure 

to meet these standards results in an 

impermissible corporate contribution. 

New § 116.3 also adds corresponding 

standards for unincorporated 

commercial vendors who extend credit 

to candidates or political committees. 

An unincorporated vendor’s failure to 

comply with these standards results in 

the making of a contribution subject to 

the dollar limits set forth in 11 CFR 

110.1.

Paragraph (c) of § 116.3 lists the 

factors the Commission will consider in 

determining whether credit was 

extended in the ordinary course of 

business. These factors are intended to 

provide guidance so that commercial 

vendors and political committees may 

avoid situations resulting in the making 

or acceptance of excessive or prohibited 

contributions. The factors need not be 

accorded equal weight and in some 

cases a single factor may not be 

dispositive. In determining whether the 

ordinary course of business standard 

has been met, the Commission will also 

consider compliance or noncompliance 

with regulations issued by other Federal 

agencies.

One comment suggested that, instead 

of relying on these factors, the 

Commission adopt a presumption that a 

commercial vendor’s credit 

arrangements reflect sound business 

judgment and that the presumption may 

be overcome with compelling evidence 

of a noncommercial motivation. The 

Commission has decided not to adopt 

this approach because it would provide 

committees and their creditors with 

little, if any, guidance as to what types 

of evidence would be evaluated or 

would be considered compelling.

Another witness at the public hearing 

suggested that it would be preferable for 

the Commission to rely upon judicial 

interpretations of the Federal 

Bankruptcy Code and the Internal 

Revenue Code regarding the meaning of 

“ordinary course of business,’’ as well 

as the meaning of “commercially 

reasonable," a term which is used in 

§ 116.4. Although the Commission will 

take these judicial interpretations into 

account in an appropriate case, these 

terms must be interpreted in light of the 

special focus of the FECA.
2 6 3 8 2 Federal Register / Vol. 55, No. 124 / W ednesday, June 27 / Rules and Regulations

Section 116.4 Forgiveness or

Settlement o f Debts Owed to

Commercial Vendors

Section 118.4 addresses the 

forgiveness or settlement of a political 

committee’s debts owed to both 

incorporated and unincorporated 

commercial vendors. Previously,

1 114.10 covered debts owed to 

corporations, but did not address debts 

owed to unincorporated commercial 

vendors. The forgiveness or settlement 

of such debts will result in the making of 

a prohibited corporate contribution or 

possibly an excessive contribution by an 

unincorporated vendor unless the debt 

settlement is commercially reasonable 

or unless the amount is not treated as a 

contribution under 1 1 CFR 100.7(b). In 

determining whether a debt settlement 

is commercially reasonable, the 

Commission will evaluate both the 

political committee’s efforts to satisfy 

the debt and the creditor’s efforts to 

obtain payment. However, the rules do 

not require the creditor or the debtor to 

undertake particular activities that are 

not likely to result in the reduction of the 

debt For example, the commercial 

vendor is not required to go beyond its 

usual efforts to collect debts of similar 

amount from non-political entities.

One commenter questioned the 

validity of comparisons to non-political 

debtors and suggested instead that the 

Commission should focus on whether 

the vendor’s actions were motivated by 

commercial or political considerations. 

The Commission recognizes that there 

are significant differences between 

political committees and other entities 

seeking to do business on credit, but 

believes that the standard suggested by 

the commenter is too subjective. Thus, 

reliance upon the "ordinary course of 

business” and "commercially 

reasonable” standards found in both the 

new rules and the previous regulations 

provides clearer guidelines for 

determining whether a commercial 

vendor’s actions comply with the FECA 

than would be provided if the 

commenter’s suggestion were adopted.

The Commission has revised the 

language of the previously proposed 

rules to clarify the political committee’s 

obligations to make reasonable efforts 

to pay the debt and to comply with the 

debt settlement procedures specified in 

11 CFR 116.7 and 116.8, including 

Commission review. See 11 CFR 116.4(c). 

Paragraph (d)(2) of § 116.4 fists the types 

of actions that die debtor committee 

may undertake to satisfy the reasonable 

efforts requirement

Although the proposed rules had 

stated that a debt setdement would be 

considered commercially reasonable if

the initial extension of credit was made 

in accordance with regulations issued 

by other agencies pursuant to 2 U.S.C. 

451, this language has now been deleted 

to avoid creating the appearance that 

noncompliance with rules regarding 

such matters as reporting requirements 

of other agencies would automatically 

be viewed as not commercially 

reasonable. Nonetheless, regulations 

issued under section 451 may be used by 

the Commission as guidance in 

determining whether the activity in 

question was commercially reasonable 

under the FECA.

New paragraph (e) indicates that the 

Commission’s regulations are not 

intended to force a commercial vendor 

to forgive or settie a political debt if the 

vendor does not wish to do so. This is 

consistent with the previous 

Commission practice of examining debt 

settlement statements for indications 

that creditors have agreed to the terms 

of the settlements. See Federal Election 

Commission Directive No. 3, Agenda 

Document #82-110 (effective July 22, 

1S82). Please note that a sentence has 

been deleted from the previously 

published version of paragraph (e) 

which merely restated the idea that 

committees and their vendors could 

agree to debt settlement or debt 

forgiveness.

In 11 CFR 116.4, new paragraph (f) has 

been added to clarify that the reporting 

obligations continue until the debt is 

paid, or until Commission review of the 

settlement or forgiveness is completed. 

This language parallels the 

corresponding reporting provisions in 

§ § 116.5 and 116.6, and is consistent 

with the continuous reporting 

requirements set out at current 11 CFR 

104.11.

Section 116.5 Advances by Committee

Staff and Other Individuals

New § 116.5 has been prepared to 

clarify the Commission’s treatment of 

payments by individuals, including 

campaign staff, from personal funds and 

personal credit cards to purchase 

various goods or services for political 

committees with the expectation of 

subsequent reimbursement The 

Commission has encountered situations, 

for example, where individuals have 

used, or sought to use, personal funds to 

purchase airfare, rental cars, meals, 

lodging, postage, office supplies, 

messenger services and a variety of 

other election-related items on behalf of 

political committees. See, e.g., MUR 1349 

and AO 1984-37. Although many 

campaign workers may only be able to 

advance relatively small amounts, 

individuals with sizable resources may 

have the ability to circumvent the

contribution limitations by paying 

committee expenses and not expecting 

reimbursement for substantial periods of 

time. The Commission is concerned that 

this could occur during critical periods 

in a campaign when a candidate’s 

authorized committee may be 

experiencing financial difficulties.

Under current § 100.7(b)(8), payments 

for personal transportation expenses 

incurred by individuals while traveling 

on behalf of candidates or political 

party committees are not contributions 

if they do not exceed $1000 per 

candidate per election or $2000 per year 

for the political committees of a political 

party. Personal funds used by volunteers 

for usual and normal subsistence 

expenses incidental to volunteer activity 

are also not considered contributions 

under 11 CFR 100.7(b)(8). However, 

payments by individuals for travel 

expenses that do not fall within these 

two exemptions are contributions under 

FECA.

The Commission has now decided to 

add new § 116.5 to clarify that payments 

by individuals using personal funds or 

personal credit cards to obtain goods or 

services for or on behalf of a political 

committee are contributions to that 

committee unless they fall within one of 

the exemptions set forth in § 100.7(b), as 

outlined above. In addition, this new 

provision sets out a limited exception 

for an individual’s personal 

tranportation expenses, and for usual 

and normal subsistence expenses of an 

individual who is not a volunteer, where 

such expenses are incurred while the 

individual is traveling on behalf of a 

candidate or party committee. These 

exemptions only apply, however, if the 

individual’s transportation and 

subsistence expenses are reimbursed 

within sixty days for credit card 

transactions or thirty days in other 

cases. On the other hand, an in-kind 

contribution will result if an individual 

pays the transportation or subsistence 

expenses of others or pays other types 

of campaign expenses, such as the costs 

of meeting rooms or telephone services, 

regardless o f how long reimbursement, if 

any, takes.

The purpose of this provision is to 

provide flexibility in situations where 

individuals may find it necessary to pay 

personal travel and subsistence 

expenses. The Commission recognizes 

that campaign committees may not want 

to provide credit cards to their field 

workers. This regulation is also 

consistent with the treatment of credit 

card transactions in the public financing 

regulations. S ee11 CFR 9035.2(a)(2).

One commenter testified that 

campaign staff should be able to make
Federal Register / Vol. 55, No. 124 / W ednesday, June 27 / Rules and Regulations 263 8 3

advances of up to $500 for legitimate 

campaign expenses beyond the personal 

travel and subsistence expenses, 

provided the campaign reimburses the 

staff member within thirty or sixty days 

after receipt of a reguest for 

reimbursement. If such a request is not 

forthcoming, the campaign should seek 

it. The commenter argued that the 

expenses in question are usually for 

caterers, hotel rooms, and rental cars, 

not the staffs personal transportation or 

subsistence and, therefore, the 

commenter believed the proposed 

approach was simply too restrictive.

The Commission has decided not to 

adopt the commenter’s suggested 

approach because it is inconsistent with 

the limited nature of the exemption from 

the definition of contribution in section 

431(8)(B)(iv) of the FECA. Thus, under 

the fined rules, advances made by 

individual staff members for expenses 

other than personal transportation or 

subsistence expenses are treated as inkind contributions subject to the 

applicable contribution limits. 

Consequently, reimbursements for these 

nonexempt expenses are treated as 

refunds of the staff members’ 

contributions.

Another commenter urged the 

Commission is extend this provision to 

committees other than campaign 

committees and party committees. The 

Commission believes that limiting this 

provision to candidates' committees and 

party committees parallels the 

transportation and subsistence 

exemption in section 431(8)(B)(iv) of the 

FECA. The Commission notes, however, 

that individuals may advance funds to 

separate segregated funds, and other 

unauthorized committees to the extent 

permitted by the contribution limits of 

the Act. See AO 1984-37 n. 2.

Paragraphs (b) and (d) of the new rule 

indicate that an unreimbursed payment 

must be treated as a debt and reported 

as such until the debt has been paid or 

settled or forgiven and the Commission’s 

review of the debt settlement or 

forgiveness has been completed. The 

Commission wishes to emphasize that 

this rule does not require individual 

creditors to settle or forgive debts if they 

do not wish to do so.

A new “scope” paragraph has also 

been added to the final version of this 

regulation to clarify that individuals 

who are acting as commercial vendors 

are covered by the commercial vendor 

provisions of §§ 116.3 and 118.4. Thus, 

they are not covered by § 116.5, which is 

intended to apply to individuals 

extending credit or using credit cards in 

their personal capacities. The 

subsequent paragraphs of § 116.5 have 

been renumbered accordingly.

Finally, the Commission notes that 

individuals may also lend funds directly 

to political committees. Under both the 

old and new regulations, such loans are 

contributions until repaid, and if not 

repaid, such loans are contributions to 

the extent forgiven by the lender. 11 

CFR 100.7(a)(1) (i)(B), Under new part 

116 of the regulations, such personal 

loans must also be treated as 

outstanding debts, and if settled, the 

settlements are subject to Commission 

review under 11 CFR 116.7. Please note 

that the Commission’s treatment of bank 

loans is discussed below in the 

Explanation and Justification for § 116.7.

Section 116.6 Salary Payments Owed

to Employees

New § 116.6 addresses several 

situations which have arisen concerning 

unpaid salaries owed to committee staff. 

For example, a political committee and 

its campaign workers may agree that 

salary will be paid only as funds are 

available. In other cases, the committee 

may wish to treat the individuals as 

volunteers retroactively. Under section 

431(8) of the Act and 11 CFR 100.7(b)(3), 

the value of services provided by a 

volunteer is not a contribution.

The language of new § 116.6 permits 

committees to treat the unpaid amount 

either as a debt owed to the employee or 

as volunteer services under 11 CFR 

100.7(b)(3), provided the employee 

agrees in writing to be considered a 

volunteer. 11118 decision may be made at 

any time, thereby allowing committees 

and their staffs to set up arrangements 

in which the staff members are paid up 

until the point at which the compaign is 

low on funding. If, on the other hand, the 

committee and the employee agree that 

thë unpaid salary is to be treated as a 

debt, the amount owed is reportable as 

a debt under 11 CFR 104.3 and 104.11 

and must be addressed in a debt 

settlement plan filed under 11 CFR 118.7. 

The new rules do not treat unpaid salary 

obligations as contributions, although 

the NPRM sought comments on 

situations in which it might be advisable 

to do so.

The Commission received one 

comment on § 116.6. The commenter 

stated that the Commission should 

avoid becoming involved in contractual 

disputes between committees and their 

employees, and supported the language 

in paragraph (a) which states that 

unpaid salaries shall not be treated as 

contributions. The commenter also 

questioned whether paragraph (b) would 

permit the settlement of such debts 

owed to employees, but would prohibit 

the complete forgiveness of these 

obligations. The new rules do permit 

such employees to forgive in full these

unpaid amounts. Commission review of 

such forgiveness is not needed because 

the amounts would not be potential 

contributions, and a complete 

forgiveness would not adversely affect 

the committee’s funds available to pay 

other creditors. The Commission notes 

that although an employee of a 

committee may become a volunteer, an 

individual who is an independent 

contractor, such as a consultant, may 

not convert to volunteer status. Such 

person is selling his or her services as a 

commercial vendor, and is therefore 

subject to the requirements of § § 116.3 

and 116.4. Consequently, an individual 

who is an independent contractor may 

agree to the settlement of a debt arising 

from the committee’s failure to pay his 

or her fee, provided that such settlement 

is commercially reasonable and the 

settlement otherwise satisfies the 

Commission’s debt settlement 

standards.

Section 116.7 Debt Settlement Plans

Filed by Terminating Committees;

Commission Review

New § 116.7 contains guidelines 

concerning the submission of debt 

settlement plans by terminating 

committees and explains the 

Commission’s review procedures. For 

the reasons stated above, these rules 

differ from previous § 114.10 in that 

ongoing committees may no longer settle 

debts or file debt settlement requests. 

Another change is that the new 

regulations no longer provide for the 

filing of debt settlements by creditors. 

However, creditors wishing to write off 

bad debts should refer to new § 116.8, 

below.

New § 116.7 continues to permit 

terminating committees to file debt 

settlements once they have reached 

agreements with some of their creditors, 

lliu s, the Commission has decided not 

to adopt the proposal published in the 

NPRM that would have required 

committees to postpone the filing of a 

debt settlement plan until they have 

reached agreements with every creditor. 

That approach would have enabled a 

single creditor to refuse to settle, 

thereby adversely affecting the ability of 

other creditors to be paid. However, the 

new rules encourage terminating 

committees to include as many proposed 

settlement agreements as possible in a 

debt settlement plan. In an appropriate 

case, the Commission may require the 

submission of additional debt settlement 

agreements before reviewing a 

terminating committee’s debt settlement 

plan. This may be necessary to permit 

the Commission to conduct a realistic 

evaluation of the debt settlement plan.
2 6 3 8 4 Federal Register / Vol. 55, No. 124 / W ednesday, June 27 / Rules and Regulations

The new rules do not establish a 

deadline for submitting a debt 

settlement for review once an agreement 

with a creditor has been reached. 

However, under new § 116.7(a), the 

terminating committee must postpone 

payment of the amount agreed to in the 

settlement with the creditor until the 

settlement has been submitted as part of 

a debt settlement plan and the 

Commission has completed its review of 

that plan. Please note that terminating 

committees are not required to settle all 

their debts or terminate within any 

prescribed amount of time. One 

commenter found the lack of a timetable 

to be troubling. Unfortunately, the 

establishment of an overall time limit is 

not feasible because different 

committees and different creditors may 

need different amounts of time to reach 

settlements.

The language of $ 116.7(a) Has been 

reworded from the proposals published 

in the NPRM to clarify that all debts and 

obligations must be paid, settled, 

forgiven, extinguished, or otherwise 

discharged, or become unpayable, prior 

to the political committee’s termination.

Paragraphs (b) and (c) of $ 116.7 

indicate which types of debts may be 

settled subject to Commission review, 

which types may be settled but are not 

subject to review, and which debts may 

not be settled. New paragraph (b) has 

been added to explain that debts owed 

to commercial vendors, committee staff, 

employees, and debts arising from loans 

made by political committees and 

individuals, including candidates, may 

be settled and that the Commission will 

review such settlements. Under 

paragraph (c), publicly-funded 

Presidential candidates may not settle 

repayment obligations arising under 26 

U.S.C. chapters 95 and 96. In addition, 

disputed debts are specifically excluded 

from the Commission's debt settlement 

process. This is based on current 

Commission policy and FEC Directive 

Number 3. Other debts or obligations 

owed to the United States government 

are not specifically mentioned in 

paragraph (b) or (c) because they may 

be governed by other applicable laws. 

Obligations to pay civil penalties are 

also omitted from these two paragraphs.

At the time the Commission issued the 

NPRM, it indicated that the revised debt 

settlement rules would not apply to 

bank loans, since the Commission does 

not generally consider bank loans in the 

debt settlement process, and does not 

intend to change its approach. Further 

guidance on this may be provided in a 

separate rulemaking regarding the bank 

loan rules at 11 CFR 10Q.7(b)(ll) and

100.8(b)(12). See NPRM, 54 FR 31286 

(July 27,1989).

Tlie reporting provisions of this 

section have been removed from draft 

paragraph (a) and placed in a separate 

paragraph (d) for the convenience of the 

reader.

Paragraph (e) sets forth a list of the 

information to be provided when the 

terminating committee submits a debt 

settlement plan for Commission review. 

From now on, the indebted committee 

will be required to include a signed 

statement from each creditor included in 

the plan evidencing agreement to the 

terms of the settlement of the debt owed 

to that creditor.

The wording of paragraph (e)(4) has 

been amended from the language 

presented in die NPRM to indicate that 

if the debt settlement plan does not 

provide for the settlement of all debts, 

the terminating committee must state 

how it intends to resolve all remaining 

debts and obligations, regardless of 

whether such debts may be settled. The 

purposes of this provision are to aid the 

Commission’s evaluation of the debt 

settlements presented thus far in light of 

the terminating committee’s overall 

financial picture, and to indicate how 

the terminating committee intends to 

complete its financial activities.

New paragraph (f) of § 116.7 sets out 

the factors the Commisson may consider 

in reviewing debt settlement plans. Most 

of these factors have been drawn from 

FEC Directive Number 3. They are now 

listed in the new rule to enable political 

committees and their creditors to better 

understand how the Commission 

evaluates debt settlement requests.

The Commission received one 

comment expressing concern that the 

Commission’s review would be based 

on intuitive judgments rather than fixed 

standards. The Commission believes 

that it is impractical to establish fixed 

standards, given the potential for 

varying circumstances in debt 

settlement requests. However, the 

inclusion of these factors will offer 

sufficient guidance regarding the 

Commission’s process. The commenter 

also stated that settlement agreements 

should become effective when made, 

and should not be delayed until 

completion of the Commission’s review 

process. This concern may be alleviated, 

to some extent by the Commission’s 

decision to return to the current 

procedure of reviewing debt settlements 

as they are presented to the 

Commission, rather than waiting until 

all settlements have been readied,

New paragraph (g) has been added to 

this section to clarify the Commission’s 

treatment of debts and obligations that

are released through Bankruptcy Court 

decrees pursuant to 11 U.S.C. chapter 7. 

The terminating committee should 

attach a copy of the court order to its 

debt settlement plan, along with a list 

specifying which debts are covered by 

the order. For each debt covered, the 

terminating committee need not provide 

the signed affidavit from the creditor or 

the information regarding the initial 

extension of credit, subsequent efforts to 

collect settlement terms, or the 

committee’s ability to pay. However, the 

terminating committee is required to 

demonstrate that it qualifies as a 

terminating committee, and it must list 

in the debt settlement plan all debts not 

released, as well as the disposition of 

any residual funds or assets. Although a 

political committee may not be eligible 

for a chapter 7 discharge, the 

Commission will treat the debts as 

settled for FECA purposes if the 

candidate received a discharge under 

chapter 7 that applies to those debts.

116.8 Creditor Forgiveness o f Debts

Owed by Ongoing Committees;

Commission Review

Section 116.8 establishes conditions 

under which creditors may forgive the 

outstanding balances of debts owed by 

committees not intending to terminate. 

For the reasons stated above, part 116 

does not permit ongoing committees to 

settle debts with creditors if those 

committees have the ability and the 

intention to continue fundraising for 

election-related purposes. Consequently, 

new $ 116.8 only allows creditors to 

forgive ongoing committees’ debts if the 

creditors cannot locate the ongoing 

committees or if the ongoing committees 

meet certain conditions demonstrating 

that they are essentially defunct and 

clearly unable to pay their bills. An 

additional requirement has been added 

to those set out in the proposed rule: 

that the ongoing committee’s 

disbursements not exceed $1000 during 

.the previous twenty-four month period. 

Without this restriction, ongoing 

committees would be able to pay part of 

their debts and settle the rest simply by 

having the creditor declare that it has 

“forgiven” the outstanding balance. This 

section also establishes review 

procedures so that the Commission may 

ascertain whether the creditor’s actions 

are commercially reasonable or whether 

the foregiveness would result in an 

apparent violation of the Act or the 

regulations.

Section 116.9 Creditors That Cannot be

Found or That A re Out o f Business

During the course of this rulemaking, 

the Commission determined that it is
Federal Register / Vol. 55, No. 124 / Wednesday, June 27 / Rules and Regulations 2 6 3 8 5

advisable to address the situation where 

either an ongoing or a terminating 

committee cannot locate a creditor or 

the creditor has gone out of business. 

Consequently, new § 116.9 has now 

been added to permit committees in 

such circumstances to request that the 

debt be determined to be "unpayable” 

for purposes of the Act. Such a 

determination does not mean that the 

debt has been extinguished or is no 

longer owed. The political committee 

must demonstrate that it made the 

necessary efforts to reach the creditor. 

Once the Commission determines that a 

debt is “unpayable,” the political 

committee may so indicate on its next 

due report, and then omit the debt from 

subsequent reports until there is a 

change in the status of the debt. Political 

committees with “unpayable” debts may 

terminate under 11 CFR 102.3.

Section 116.10 Disputed Debts

New § 116.10 has been added to the 

regulations to clarify the reporting of 

disputed debts, and to indicate what 

information concerning disputed debts 

should be included in a terminating 

committee’s debt settlement plan.

The Commission has now revised the 

proposals presented in the NPRM in two 

respects. First, the final rule does not 

require the committee to report the fair 

market value of what was provided, 

since that may be in dispute. Secondly, 

paragraph (b) has been rewritten to 

more clearly state what information 

must be disclosed in the debt settlement 

plan regarding the disputed debt. The 

Commission received one comment on 

this new provision, which supported the 

draft rule.

Conforming Amendments

The Commission has determined that 

conforming amendments to §§ 100.7, 

104.3, and 104.11 of the regulations are 

needed to clarify those provisions, and 

to make them consistent with the 

language of new part 116. One public 

comment was received, which supported 

the proposed changes to § 104.11.

The Notice of Proposed Rulemaking 

also suggested revising the definition of 

excess campaign funds in § 113.1(e) to 

prevent campaign committees from 

declaring excess campaign funds until 

after the campaign has ended and the 

committee has determined that it is not 

in a net debt situation. This proposal 

was intended to ensure that campaign 

funds would be used to pay for goods 

and services provided to the campaign 

rather than for a variety of political or 

nonpolitical purposes unrelated to the 

campaign. One comment opposed this 

revision in the absence of evidence that 

it is a common problem. The

Commission has now concluded that the 

proposed language is not needed 

because the new requirements set out in 

5 116.2(c) adequately address these 

concerns.

Section 100.7 Contribution (2 U.S.C.

431(8))

The language of 11 CFR 100.7(a)(4) has 

been revised to clarify when the 

extension of credit, or the failure to 

attempt to collect the amount owed, or 

the settlement of a debt will result in a 

contribution by the creditor. The revised 

language more closely parallels the 

requirements set out in new 11 CFR part 

116. In addition, new cross-references to 

11 CFR 116.3 and 116.4 have been 

included to replace the current crossreferences to 11 CFR 114.10.

Section 104.3 Contents o f Reports (2

U.S.C. 434(b))

There are no substantive changes in 

this section. However, in paragraph (d), 

the cross-reference to previous § 114.10 

has been revised to refer to new § 116.7.

Section 104.11 Continuous Reporting of

Debts and Obligations

The Notice of Proposed Rulemaking 

sought comments on possible 

conforming amendments to 11 CFR 

104.11(b), which concerns continuous 

reporting of debts and obligations. The 

Commission has now decided to make 

several changes to this regulation. First, 

the new language clarifies that debts 

exceeding $500 should be reported as of 

the date the debts are incurred. The 

current language says “as of the time of 

the transaction.” Second, as the NPRM 

indicated, for amounts exceeding $500, 

disclosure is currently required for "any 

loan, debt or obligation,” whereas for 

smaller amounts committees must 

disclose any “debt, obligation or other 

promise to make an expenditure.” The 

revised language makes these two 

provisions consistent, since in practice 

the Commission has not drawn 

distinctions between these two 

categories. The revisions also clarify 

that periodic administrative costs 

incurred for rent and 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 o u ts ta n d in g

must be reported as a debt Finally, new 

language is also included which follows 

the current policy that if the exact 

amount of a debt is not known, the 

committee should report an estimated 

amount on schedule D, and then either 

amend the report or include the correct 

figure in a subsequent report when the 

exact amount has been determined. See

AO 1980-38.

List of Subjects 

11 CFR Part 100

Elections, Political committees and 

parties.

11 CFR Part 104

Political candidates, Political 

committees and parties, Reporting 

requirements.

11 CFR Part 114

Business and industry, Elections, 

Labor.

11 CFR Part 116

Administrative practice and 

procedure, Business and industry,

Credit, Elections, Political candidates, 

Political committees and parties.

Certification of No Effect Pursuant to 5 

U.S.C. 605(b) (Regulatory Flexibility Act)

The attached final rules will not, if 

promulgated, have a significant 

economic impact on a substantial 

number of small entities. The basis for 

this certification is that any small 

entities affected are already required to 

comply with the requirements of the A ct 

in these areas.

For the reasons set out in the 

preamble, subchapter A, chapter L title 

11 of the Code of Federal Regulations is 

amended as follows:

PART 100— SCOPE AND DEFINITIONS 

(2 U.S.C. 431)

1. The authority citation for part 100 

continues to read as follows:

A uthority: 2 U .S.C . 431, 438(a)(8).

2.11 CFR part 100 is amended by 

revising § 100.7(a)(4) to read as follows:

§ 100.7 Contribution (2 U.S.C. 431(8)).

(a) * * *

(4) The extension of credit by any 

person is a contribution unless the credit 

is extended in the ordinary course of the 

person’s business and the terms are 

substantially similar to extensions of 

credit to nonpolitical debtors that are of 

similar risk and size of obligation. If a 

creditor fails to make a commercially 

reasonable attempt to collect the debt, a 

contribution will result. (See 11 CFR 

116.3 and 116.4.) If a debt owed by a 

political committee is forgiven or settled 

for less than the amount owed, a 

contribution results unless such debt is 

settled in accordance with the standards 

set forth at 11 CFR 116.3 and 116.4.

* ' * - # * <*
2 6 3 8 6 Federal Register / Voi. 55, No. 124 / W ednesday, June 27 / Rules and Regulations

PART 104— REPORTS BY POLITICAL 

COMMITTEES (2 U.S.C. 434)

3. The authority citation for part 104 

continues to read as follows:

Authority: 2 U.S.C. 431(1), 431(8), 431(9), 

432(i), 434,438(a)(8), and 438(b).

4.11 CFR part 104 is amended by 

revising § 104.3(d) to read as follows:

§ 104.3 Contents of reports (2 U.S.C. 

434(b)).

* .# * . * *

(d) Reporting debts and obligations.

Each report filed under 11 CFR 104.1 

shall, on schedule C or D, as 

appropriate, disclose the amount and 

nature of outstanding debts and 

obligations owed by or to the reporting 

committee. Loans obtained by an 

individual prior to becoming a candidate 

for use in connection with that 

individual’s campaign shall be reported 

as an outstanding loan owed to the 

lender by the candidate’s principal 

campaign committee, if such loans are 

outstanding at the time the individual 

becomes a candidate. Where such debts 

and obligations are settled for less than 

their reported amount or value, each 

report filed under 11 CFR 104.1 shall 

contain a statement as to the 

circumstances and conditions under 

which such debts or obligations were 

extinguished and the amount paid. See

11 CFR 116.7.

* * , * * *

5.11 CFR part 104 is amended by 

revising § 104.11(b) to read as follows:

§ 104.11 Continuous reporting of debts 

and obligations.

* ; ' * • *' * :

(b) A debt or obligation, including a 

loan, written contract written promise 

or written agreement to make an 

expenditure, the amount of which is 

$500 or less, shall be reported as of the 

time payment is made or not later than 

60 days after such obligation is incurred, 

whichever comes first. A debt or 

obligation, including a loan, written 

contract written promise or written 

agreement to make an expenditure, the 

amount of which is over $500 shall be 

reported as of the date on which the 

debt or obligation is incurred, except 

that any obligation incurred for rent 

salary or other regularly reoccurring 

administrative expense shall not be 

reported as a debt before the payment 

due date. See 11 CFR 118.6. If the exact 

amount of a debt or obligation is not 

known, the report shall state that the 

amount reported is an estimate. Once 

the exact amount is determined, the 

political committee shall either amend 

the report(s) containing the estimate or 

indicate the correct amount on the

report for the reporting period in which 

such amount is determined.

PART 114— CORPORATE AND LABOR

ORGANIZATION ACTIVITY

6. Thè authority citation for part 114 

continues to read as follows:

A uthority: 2 U .S.C . 431(8)(B ), 431(9)(B ), 432,

437d (a)(8), 438(a)(8), and 441b.

§ 114.10 [Removed and reserved]

7.11 CFR part 114 is amended by 

removing and reserving § 114.10.

8.11 CFR part 116 is added to read as 

follows:

PART 116— DEBTS OWED BY

CANDIDATES AND POLITICAL

COMMITTEES

Sec.

116.1 Definitions.

116.2 D ebts ow ed by term inating

com m ittees, ongoing com m ittees, and

authorized com m ittees.

116.3 E xten sion s o f credit by com m ercial

vendors.

116.4 Forgiveness or settlem en t o f debts

ow ed to com m ercial vendors.

116.5 A d v an ces by com m ittee staff and

oth er individuals.

116.6 S alary p aym ents ow ed to em ployees.

118.7 D ebt settlem en t plan s filed by

term inating com m ittees; Com m ission

review .

116.8 C reditor forgiveness o f debts ow ed b y

ongoing com m ittees; Com m ission review .

116.9 C reditors th at can n o t b e found o r that

a re out o f business.

116.10 D isputed debts.

A uthority: 2 U .S.C . 433(d), 434(b)(8),

438(a)(8), 441a, 441b, an d 451.

§116.1 Definitions.

(a) Terminating committee. For 

purposes of this part, "terminating 

committee” means any political 

committee that is winding down its 

political activities in preparation for 

filing a termination report, and that 

would be able to terminate under 11 

CFR 102.3 except that it has outstanding 

debts or obligations. A political 

committee will be considered to be 

winding down its political activities if it 

has ceased to make or accept 

contributions and expenditures, other 

than contributions accepted for debt 

retirement purposes and expenditures 

representing payments of debts or 

obligations previously incurred or 

payments for the costs associated with 

the termination of political activity, such 

as the costs of complying with the post 

election requirements of the Act, if 

applicable, and other necessary 

administrative costs associated with 

winding down a campaign er winding 

down committee activities, including 

office space rental, staff salaries and 

office supplies.

(b) Ongoing committee. For purposes 

of this part, "ongoing committee” means 

any political committee that has not 

terminated and does not qualify as a 

terminating committee.

(c) Commercial vendor. For purposes 

of this part, "commercial vendor” means 

any persons providing goods or services 

to a candidate or political committee 

whose usual and normal business 

involves the sale, rental, lease or 

provision of these goods or services.

(d) Disputed debt For purposes of this 

part, "disputed debt” means an actual or 

potential debt or obligation owed by a 

political committee, including an 

obligation arising from a written 

contract, promise or agreement to make 

an expenditure, where there is a bona 

fide disagreement between the creditor 

and the political committee as to the 

existence or amount of the obligation 

owed by the political committee.

(e) Extension of credit. For purposes 

of this part, "extension of credit” 

includes but is notiimited to:

(1) Any agreement between the 

creditor and political committee that full 

payment is not due until after the 

creditor provides goods or services to 

the political committee;

(2) Any agreement between the 

creditor and the political committee that 

the political committee will have 

additional time to pay the creditor 

beyond the previously agreed to due 

date; and

(3) The failure of the political 

committee to make full payment to the 

creditor by a previously agreed to due 

date.

(f) Creditor. For purposes of this part, 

"creditor” means any person or entity to 

whom a debt is owed.

§ 116.2 Debts owed by terminating 

committees, ongoing committees, and 

authorized committees.

(a) Terminating committees. A 

terminating committee may settle 

outstanding debts provided that the 

terminating committee files a debt 

settlement plan and the requirements of 

11 CFR 116.7 are satisfied. The 

Commission will review each debt 

settlement plan filed to determine 

whether or not the terminating 

committee appears to have complied 

with the requirements set forth in this 

part, and whether or not the proposed 

debt settlement plan would result in an 

apparent violation of the Act or the 

Commission’s regulations.

(b) Ongoing committees. Ongoing 

committees shall not settle any 

outstanding debts for less than the 

entire amount owed, but may request a 

Commission determination that such
Federal Register / Vol. 55, No. 124 / W ednesday, June 27 / Rules and Regulations 2 6 3 8 7

debts are not payable under 1 1 CFR

116.9, and may resolve disputed debts 

under 11 CFR 116.10. Creditors may 

forgive debts owed by ongoing 

committees under the limited 

circumstances provided in 11 CFR 116.8.

(c) Authorized committees.

(1) An authorized committee shall not 

settle any outstanding debts for less 

than the entire amount owed if any 

other authorized committee of the same 

candidate has permissible funds 

available to pay part or all of the 

amount outstanding. Except as provided 

in paragraph (c)(3), of this section, an 

authorized committee shall not 

terminate under 11 CFR 102.3 if—

(1) It has any outstanding debts or 

obligations; or

(ii) It has any funds or assets 

available to pay part or all of the 

outstanding debts or obligations owed 

by another authorized committee of the 

same candidate and that other 

authorized committee is unable to pay 

such debts or obligations.

(2) No transfers of funds may be made 

from a candidate’s authorized 

committee to another authorized 

committee of the same candidate if the 

transferor committee has net debts 

outstanding at the time of the transfer 

under the formula described in 11 CFR 

110.1(b)(3)(ii).

(3) An authorized committee that 

qualifies as a terminating committee 

may assign debts to another authorized 

committee of the same candidate to the 

extent permitted under applicable state 

law provided that the authorized 

committee assigning the debts has no 

cash on hand or assets available to pay 

any part of the outstanding debts, and 

provided that the authorized committee 

assigning the debts was not organized to 

further the candidate’s campaign in an 

election not yet held. If a Presidential 

candidate elects to receive federal funds 

pursuant to 11 CFR part 9001 et seq. or 

11 CFR part 9031 et seq., the authorized 

committee(s) of the Presidential 

candidate shall not assign debts or 

receive assigned debts until after the 

authorized committee(s) or the 

Presidential candidate has made all 

required repayments pursuant to 11 CFR 

parts 9007 and 9038 and has paid all 

civil penalties pursuant to 2 U.S.C. 437g. 

An authorized committee that has 

assigned all its outstanding debts may 

terminate if—

(i) The authorized committee that has 

assigned the debts otherwise qualifies 

for termination under 11 CFR 102.3; and

(ii) The authorized committee that 

received the assigned debts notifies the 

Commission in writing that it has 

assumed the obligation to pay the entire 

amount owed and that it has assumed

the obligation to report the debts, and 

any contributions received for 

retirement of the assigned debts, in 

accordance with 11 CFR part 104. The 

assigned debts shall be disclosed on a 

separate schedule of debts and 

obligations attached to the authorized 

committee’s reports. Contributions 

received for retirement of the assigned 

debts shall be disclosed on a separate 

schedule of receipts attached to the 

authorized committee’s reports. See 11 

CFR 110.1 (b)(3) and (b)(4) and 110.2

(b)(3) and (b)(4). The authorized 

committee that has assigned the debts 

shall notify each creditor in writing of 

the assignment no later than thirty days 

before the assignment takes effect and 

shall include the name and address of 

the authorized committee that will 

receive the assigned debts.

§ 116.3 Extensions off credit by 

commercial vendors.

(a) Unincorporated vendor. A 

commercial vendor that is not a 

corporation may extend credit to a 

candidate, a political committee or 

another person on behalf of a candidate 

or political committee. An extension of 

credit will not be considered a 

contribution to the candidate or political 

committee provided that the credit is 

extended in the ordinary course of the 

commercial vendor’s business and the 

terms are substantially similar to 

extensions of credit to nonpolitical 

debtors that are of similar risk and size 

of obligation.

(b) Incorporated vendor. A 

corporation in its capacity as a 

commercial vendor may extend credit to 

a candidate, a political committee or 

another person on behalf of a candidate 

or political committee provided that the 

credit is extended in the ordinary course 

of the corporation's business and the 

terms are substantially similar to 

extensions of credit to nonpolitical 

debtors that are of similar risk and size 

of obligation.

(c) Ordinary course o f business. In 

determining whether credit was 

extended in the ordinary course of 

business, the Commission will 

consider—

(1) Whether the commercial vendor 

followed its established procedures and 

its past practice in approving the 

extension of credit;

(2) Whether the commercial vendor 

received prompt payment in full if it 

previously extended credit to the same 

candidate or political committee; and

{3) Whether the extension of credit 

conformed to the usual and normal 

practice in the commercial vendor’s 

trade or industry.

(d) Extension o f credit by regulated

industries. The Commission may rely on 

the regulations prescribed by the 

Federal Communications Commission, 

the Interstate Commerce Commission, 

and the Department of Transportation 

on behalf of the Civil Aeronautics 

Board, issued pursuant to 2 U.S.C. 451 

and any other regulations prescribed by 

other Federal agencies to determine 

whether extensions of credit by the 

entities regulated by those Federal 

agencies were made in the ordinary 

course of business.

§ 116.4 Forgiveness or settlement of 

debts owed to commercial vendors.

(a) Unincorporated vendor. A 

commercial vendor that is not a 

corporation may forgive or settle a debt 

incurred by a candidate, a political 

committee or another person on behalf 

of a candidate or political committee for 

less than the entire amount owed on the 

debt The amount forgiven will not be 

considered a contribution by the 

commercial vendor to the candidate or 

political committee if—

(1) The amount forgiven is exempted 

from the definition of contribution in 11 

CFR 100.7(b); or

(2) The commercial vendor has treated 

the debt in a commercially reasonable 

manner and the requirements of 11 CFR

116.7 or 116.8, as appropriate, are 

satisfied.

(b) Incorporated vendor. A 

corporation may not forgive or settle a 

debt incurred by a candidate, a political 

committee or another person on behalf 

of a candidate or political committee for 

less than the entire amount owed on the 

debt unless—

(1) The amount forgiven is exempted 

from the definition of contribution in 11 

CFR 100.7(b); or

(2) The corporation has treated the 

debt in a commercially reasonable 

manner and the requirements of 11 CFR

116.7 or 116.8, as appropriate, are 

satisfied.

(e) Reasonable efforts by a political

committee. A debt or obligation owed 

by a candidate or a political committee 

may be totally forgiven [see 11 CFR 

116.8), or settled (see 11 CFR 116.7), 

provided that—

(1) The amount forgiven is exempted 

from the definition of contribution in 11 

CFR 100.7(b); or

(2) The candidate and the political 

committee have undertaken all 

reasonable efforts to satisfy the 

outstanding debt and the requirements 

of 11 CFR 116.7 or 116.8, as appropriate, 

including the submission of the 

information specified in those sections 

and Commission review, are satisfied.
2 6 3 8 8 Federal Register / Val. 55, No. 124 / W ednesday, June 27 / Rules and Regulations

(d) Commercially reasonable. The 

Commission will determine that a debt 

settlement between a political 

committee and a commercial vendor is 

commercially reasonable if—

(1) The initial extension of credit was 

made in accordance with 11 CFR 116.3;

(2) The candidate or political 

committee has undertaken all 

reasonable efforts to satisfy the 

outstanding debt Such efforts may 

include, but are not limited 6% the 

following—

(i) Engaging in fundraising efforts;

(ii) Reducing overhead and 

administrative costs; and

(iii) Liquidating assets; and

(3) The commercial vendor has 

pursued its remedies as vigorously as it 

would pursue its remedies against a

nonpolitical debtor in similar 

circumstances. Such remedies may 

include, but are not limited to, the 

following—

(i) Oral and written requests for 

payment;

(ii) Withholding delivery of additional 

goods or services until overdue debts 

are satisfied;

(Mi) Imposition of additional charges 

or penalties for late payment;

(iv) Referral of overdue debts to a 

commercial debt collection service; and

(v) Litigation.

(e) Settlement or forgiveness not

required. The provisions of this part 

shall not be construed to require a 

commercial vendor to forgive or settle 

the debt for less than the entire amount 

owed.

(f) Reporting. The political committee 

shall continue to report the debt in 

accordance with 11 CFR 104.3(d) and

104.11 until the Commission has 

completed a review of the debt 

settlement plan pursuant to 11 CFR 

116.7(f) or until the Commission has 

completed a review of the request to 

forgive tiie debt pursuant to 11 CFR

116.8, or until the political committee 

pays the debt, whichever occcors first.

§ 116.5 Advances by commutes staff and

other individuate.

(a) Scope. This section applies to 

individuals who are not acting as 

commercial vendors. Individuals who 

are acting as commercial vendors shall 

follow the requirements of 11 CFR 116.3 

and 116.4.

(b) Treatment as contributions. The 

payment by an individual from his or 

her personal hinds, including a personal 

credit card, for the costa incurred in 

providing goods or services to, or 

obtaining goods or services that are 

used by or on behalf of, a candidate or a

political committee is a contribution 

unless the payment is exempted from

the definition of contribution under 11 

CFR 100.7(b)(8). If the payment is not 

exempted under 11 CFR 100.7(b)(8), it 

shall be considered a contribution by 

the individual unless—

(1) The payment is for the individual's 

transportation expenses incurred while 

traveling on behalf of a candidate or 

political committee of a political party 

or for usual and normal subsistence 

expenses incurred by an individual, 

other than a volunteer, while traveling 

on behalf of a candidate or political 

committee of a political party; and

(2) The individual is reimbursed 

within sixty days after the closing date 

of the billing statement on which the 

charges first appear if the payment was 

made using a personal credit card, or 

within thirty days after the date on 

which the expenses were incurred if a 

personal credit card was not used. For 

purposes of this section, the “dosing 

date" shall be the date indicated on the 

billing statement which serves as the 

cutoff date for determining which 

charges are included mi that billing 

statement.

(c) Treatment as debts. A political 

committee shall treat the obligation 

arising from a payment described in 

paragraph (b) of this section as an 

outstanding debt until reimbursed.

(d) Settlement or forgiveness o f the

debt The individual and the political 

committee may agree to the total 

forgiveness of the debt [See 11 CFR 

11841) or a settlement of the debt for less 

than the entire amount owed [See 11 

CFR 116.7), provided that the 

requirements of 11 CFR 1 1 6 J or 116A as 

appropriate, including the submission of 

the information specified in these 

sections and Commission review, are 

satisfied. The provisions of this part 

shall not be construed to require the 

individual to forgive or settle the debt 

for less than the entire amoimt owed.

(e) Reporting, The political committee 

shall continue to report the obligation 

arising from the payment as a debt in 

accordance with 11 CFR 104.3(d) and

104.11 until the Commission has 

completed a review of the debt 

settlement plan pursuant to 11 CFR 

116.7(f) or until the Commission has 

completed a review of the request to 

forgive the debt pursuant to 11 CFR

116.8, or until the political committee 

pays the debt, whichever occurs first

$ 116.6 Salary payments owed to 

employees.

(a) Treatment as debts or volunteer

services. If a political committee does 

not pay an employee for services 

rendered to the political committee in 

accordance with an employment 

contract or a formal or informal

agreement to do so, the unpaid amount 

either may be treated as a debt owed by 

the political committee to the employee 

or, provided that the employee signs a 

written statement agreeing to be 

considered a volunteer, converted to a 

volunteer services arrangement under 11 

CFR 100.7(b)(3). The unpaid amount 

shall not be treated as a contribution 

under 11 CFR 100.7.

(b) Settlement or forgiveness o f the

debt. If the unpaid amount is treated as 

a debt, the employee and the political 

committee may agree to a settlement of 

the debt for less than the entire amount 

owed pursuant to 11 CFR 118.7. The 

provisions of this part shall not be 

construed to require tiie employee to 

settle the debt for less than the entire 

amount owed.

(c) Reporting If the unpaid amount is 

treated as a debt, the political 

committee shall continue to report the 

debt in accordance with 11 CFR 104.3(d) 

and 104.11 until the Commission has 

completed a review of tiie debt 

settlement plan pursuant to 11 CFR

118.7(f) or until the employee agrees to 

be considered a volunteer, or until tiie 

political committee pays the debt, 

whichever occurs first.

§ 116.7 Debt settlement plans filed by 

terminating committees; Commission 

review.

(a) Procedures fo r filin g debt

settlement plans. Every terminating 

committee as defined in 11 CFR 1164(a) 

shall file at least one debt settlement 

plan with the Commission prior to filing 

its termination report under 11 CFR 

102-3, The terminating committee shall 

file a debt settlement plan after the 

creditors included in the debt settlement 

plan have agreed to the settlement or 

forgiveness of the particular debt(s) 

owed to each of them. The terminating 

committee shall not make any payments 

to the creditors included in the debt 

settlement plan until completion of 

Commission review. The Commission 

encourages terminating committees to 

include as many debt settlement 

agreements as possible in a debt 

settlement plan. The terminating 

committee shall not file its termination 

report under 11 CFR 102.3 and shall not 

terminate until each debt or obligation 

owed either.

(1) Has been paid in full;

(2) Has been settled and the

requirements of this section, including

Commission review, have been satisfied;

(3) Has been forgiven by the creditor 

and the requirements of 11 CFR 116.8, 

including Commission review, have 

been satisfied;
Federal Register / Vol. 55, No. 124 / W ednesday, June 27

(4) Has been determined not to be 

payable pursuant to 1 1 CFR 116.9; or

(5) Has been otherwise extinguished 

or discharged.

(b) Debts subject to settlem ent Debts 

and obligations subject to the debt 

settlement and Commission review 

requirements and procedures set forth in 

this section include:

(1) Amounts owed to commercial 

vendors [See 11 CFR 116.3 and 116.4);

(2) Debts arising from advances by 

committee staff and other individuals 

[See 11 CFR 116.5);

(3) Salary owed to committee 

employees [See 11 CFR 116.6); and

(4) Debts arising from loans from 

political committees or individuals, 

including candidates, to the extent 

permitted under 11 CFR part 110.

(c) Debts that shall not be settled;

Disputed debts.

(1) Debts and obligations that shall 

not be forgiven or settled for less than 

the entire amount owed include 

repayment obligations pursuant to 11 

CFR 9007.2,9008.10,9008.11,9038.2 or 

9038.3 of funds received from the 

Presidential Election Campaign Fund or 

the Presidential Primary Matching 

Payment Account.

(2) Disputed debts are not subject to 

the debt settlement and Commission 

review requirements and procedures. 

(See CFR 116.10).

(d) Reporting. The terminating 

committee shall continue to report each 

outstanding debt or obligation included 

in a debt settlement plan in accordance 

with 11 CFR 104.3(d) and 104.11 until the 

Commission has completed a review of 

the debt settlement plan pursuant to 

paragraph (f) of this section. The 

terminating committee shall continue to 

report all remaining debts and 

obligations not included in the debt 

settlement plan in accordance with 11 

CFR 104.3 and 104.11.

(e) Contents o f debt settlement plans.

(1) The debt settlement plan shall

provide the following information on 

each debt covered by the plan—

(i) The terms of the initial extension of 

credit and a description of the terms 

under which the creditor has extended 

credit to nonpolitical debtors of similar 

risk and size of obligation;

(ii) A description of the efforts made 

by the candidate or the terminating 

committee to satisfy the debt;

(iii) A description of the remedies 

pursued by the creditor to obtain 

payment of the debt and a comparison 

to the remedies customarily pursued by 

the creditor in similar circumstances 

involving nonpolitical debtors; «nrf

(iv) The terms of the debt settlement 

and a comparison to the terms of the 

creditor’s other debt settlements

involving nonpolitical debtors in similar 

circumstances, if any.

(2) Each debt settlement plan filed 

under this section shall include a signed 

statement from each creditor covered 

indicating agreement to the terms of the 

settlement of the debt owed to that 

creditor.

(3) The debt settlement plan shall 

include a statement as to whether the 

terminating committee has sufficient 

cash on hand to pay the total amount 

indicated in the debt settlement plan, 

and if not, a statement as to what steps 

the terminating committee will take to 

obtain the funds needed to make the 

payments.

(4) If a debt settlement plan does not 

include settlements for all of the 

terminating committee’s outstanding 

debts and obligations, the debt 

settlement plan shall include a separate 

list of all of the terminating committee's 

remaining debts and obligations, 

including debts that are not subject to 

debt settlement as set forth in paragraph

(c) of this section. The debt settlement 

plan shall indicate—

(i) Whether the terminating committee 

intends to pay the entire amount still 

owed on each remaining debt or 

obligation or to settle such debts and 

obligations, and if settlement is 

contemplated, the terms that were or 

will be offered to the creditor(s); and

(ii) Whether the terminating 

committee has sufficient cash on hand 

to pay such remaining debts and 

obligations, or to pay a lesser portion of 

such amounts, and if not, what steps the 

terminating committee will take to 

obtain the funds needed to make such 

payments.

(5) If the terminating committee 

expects to have residual funds or assets 

after disposing of all its outstanding 

debts and obligations, the debt 

settlement plan shall include a 

statement as to the purpose for which 

such residual funds or assets will be 

used. See 11 CFR 110.1(b)(3)(iii) 

regarding contributions received to pay 

net debts outstanding owed by 

authorized committees.

(6) The political committee filing the 

debt settlement plan shall demonstrate 

in the debt settlement plan that such 

political committee qualifies as a 

terminating committee under 11 CFR 

116.1(a) and shall state when the 

political committee expects to file a 

termination report under 11 CFR 102.3.

(7) Upon the Commission's request, 

the candidate, the terminating 

committee or the creditor shall provide 

such additional information as the 

Commission may require to review the 

debt settlement plan. The Commission 

may also require the submission of

/ Rules and Regulations 26389

additional debt settlement agreements 

prior to Commission review of the debt 

settlement plan.

(f) Commission review o f debt

settlement plans. In reviewing the debt 

settlement plan, the Commission Will 

consider—

(1) The information provided by the 

terminating committee and the creditors 

under this section;

(2) The amount of each debt that 

remains unpaid and the length of time 

each debt has been overdue;

(3) The amount and percentage of 

each debt that would be forgiven under 

the plan;

(4) The total amount of debts and 

obligations owed by the terminating 

committee to all creditors, compared to 

the total amount of cash on hand and 

other amounts available to pay those 

debts and obligations;

(5) The year to date expenditures and 

receipts of the terminating committee; 

and

(6) Whether the total percentage that 

was or will be repaid on any loans made 

by the candidate to the terminating 

committee is comparable to the total 

percentage that was or will be paid to 

other creditors.

(g) Debts dischargeable in

bankruptcy. If a terminating committee 

is released from debts or obligations 

pursuant to a discharge under 11 U.S.C. 

chapter 7, the terminating committee's 

debt settlement plan shall include a 

copy of the order issued by the 

Bankruptcy Court of the United States 

so indicating, and a list of all debts and 

obligations from which the terminating 

committee is released, in lieu of the 

information specified in paragraphs

(e)(1), (e)(2), and (e)(3) of this section.

$ 116.8 Creditor forgiveness of debts

owed by ongoing committees; Commission

review.

(a) General requirements. A creditor 

may forgive the outstanding balance of a 

debt owed by an ongoing committee if 

the creditor and the ongoing committee 

have satisfied the requirements of 11 

CFR 116.3 or 116.5, as appropriate, 

regarding extensions of credit by 

commercial vendors and advances by 

committee staff and other individuals, 

and the debt has been outstanding for at 

least twenty-four months, and—

(1) The creditor has exercised 

reasonable diligence in attempting to 

locate the ongoing committee and has 

been unable to do so; or

(2) The ongoing committee—

(i) Does not have sufficient cash on 

hand to pay the creditor;

(ii) Has receipts of less than $1000 

during the previous twenty-four months;
2 6 3 9 0 Federal Register / Vol. 55, No, 124 / W ednesday, June 27 / Rules and Regulations

(hi) Has disbursements of Less than 

$1000 during the previous twenty-four 

months; and

(iv) Owes debts to other creditors of 

such magnitude that the creditor could 

reasonably conclude that the ongoing 

committee will not pay this particular 

debt

(b) Procedures fo r forgiving debts. A 

creditor that intends to forgive a debt 

owed by an ongoing committee shall 

notify the Commission by letter of its 

intent. The letter shall demonstrate that 

the requirements set forth in paragraph 

(a) of this section are satisfied. The 

letter shall provide the following 

information—

(1) The terms of the initial extension 

of credit and a description of the terms 

under which the creditor has extended 

credit to nonpolitical debtors , of similar 

risk and size of obligation;

(2) A description of the efforts made 

by the candidate or the ongoing 

committee to satisfy the debt;

13) A description of the remedies 

pursued by the creditor to obtain 

payment of the debt and a comparison 

to the remedies customarily pursued by 

the creditor in similar circumstances 

involving nonpolitical debtors; and

(4) An indication that the creditor has 

forgiven other debts involving 

nonpolitical debtors in similar 

circumstances, if any.

(c) Commission review. Upon the 

Commission’s request, the ongoing 

committee or the creditor shall provide 

such additional information as the 

Commission may require to review the 

creditor’s request. The Commission will 

review each request to forgive a debt to 

determine whether the candidate, the 

ongoing committee, and the creditor 

have complied with the requirements of 

1 1 CFR part lid , and whether or not the 

forgiveness of the debt would result in 

an apparent violation of the Act or the 

Commission's regulations.

§ 118.9 Creditors that cannot be found or

that are out of business.

(a) General requirements. A political 

committee may request that the 

Commission determine that a debt owed 

to a creditor is not payable for purposes 

of the Act if the debt has been

outstanding for at least twenty-four 

months, and the requirements of 

paragraph (b) or (c) of this section, as 

appropriate, have been satisfied, and—

(1) The creditor has gone out of 

business and no other entity has a right 

to be paid the amount owed; or

(2) The political committee has 

exercised reasonable diligence in 

attempting to locate the creditor and has 

been unable to do so. “Reasonable 

diligence in attempting to locate the 

creditor” means the political committee 

has attempted to ascertain the current 

address and telephone number, and has 

attempted to contact the creditor by 

registered or certified mail, and either in 

person or by telephone.

(b) Terminating committees. If the 

political committee making the request 

is a terminating committee, the 

terminating committee shall include the 

request in a debt settlement plan filed 

with the Commission, and shall 

demonstrate that the requirements of 11 

CFR 116.3,116.5 or 116.6, as appropriate, 

and 116.9(a) are satisfied. The 

terminating committee shall continue to 

disclose the debt on its schedules of 

outstanding debts and obligations until 

the Commission has completed its 

review of the debt settlement plan 

pursuant to 11 CFR 116.7(f) and has 

determined that the debt is not payable 

for purposes of the Act.

(c) Ongoing committees. If the 

political committee making the request 

is an ongoing committee, the ongoing 

committee shall make the request in 

writing and shall demonstrate that the 

requirements of 11 CFR 116.3,116.5 or

116.8, as appropriate, and 118.9(a) are 

satisfied. The Commission will review 

the request to determine whether the 

ongoing committee and the creditor have 

complied with the requirements of 11 

CFR part 116, and to determine whether 

reporting the debt as not payable would 

result in an apparent violation of die Act 

or the Commission’s regulations. The 

ongoing committee shall continue to 

disclose the debt on its schedules of 

outstanding debts and obligations until 

the Commission has completed its 

review of the request and has 

determined that the debt is not payable 

for purposes of the Act.

(d) Reporting. Upon notification that 

the Commission has determined that the 

debt is not payable for purposes of the 

Act, the political committee may list the 

debt as not payable on the next due 

report. Notwithstanding 11 CFR 104.11, 

the debt does not have to be included in 

subsequent reports unless the status of 

the debt changes. The presence of a debt 

that the Commission has determined is 

not payable shall not bar toe political 

committee from terminating its 

registration pursuant to 11 CFR 102.3.

§ 116.10 Disputed debts.

(a) Reporting disputed debts. A 

political committee shall report a 

disputed debt in accordance with 11 

CFR 104.3(d) and 104.11 if the creditor 

has provided something of value to the 

political committee. Until the dispute is 

resolved, toe political committee shall 

disclose on toe appropriate reports any 

amounts paid to the creditor, any 

amount toe political committee admits it 

owes and the amount the creditor claims 

is owed. The political committee may 

also note on toe appropriate reports that 

the disclosure of the disputed debt does 

not constitute an admission of liability 

or a waiver of any claims the political 

committee may have against toe 

creditor. [See also 11 CFR 9035.1(a)(2) 

regarding the effect of disputed debts on 

a candidate’s expenditure limitations 

under 11 CFR part 9035.)

(b) Disputed debts owed by

terminating committees. If a terminating 

committee and a creditor have been 

unable to resolve a disputed debt, and 

the terminating committee files a debt 

settlement plan covering other debts or 

other creditors, the terminating 

committee shall include in the debt 

settlement plan a brief description as to 

the nature of toe dispute and the status 

of the terminating committee’s efforts to 

resolve the dispute. The debt settlement 

plan need not include a signed affidavit 

from the creditor involved in the dispute 

pursuant to 11 CFR 116.7(e)(2),

D ated: June 2 2 ,1 9 9 0 .

L ee Ann Elliott,

Chairm an, F ed eral E lection Com m ission.

[FR D oc. 9 0 -1 4 9 1 * Filed 0 -2 6 -9 0 ; 8:45 am )

BILUNG CODE 6715-01-«