August 1995

Table of Contents

Regulations

1 New Rules Address MCFL

3 New Public Funding Rules

9 FEC Repeals Three Obsolete

Regulations

Court Cases

FEC v. Colorado Republican

Federal Campaign Committee

4 FEC v. NRSC (93-1612)

5 Froelich v, FEC

5 FEC v, Free the EaglelFEC v.

RUFFPAC

Motor Voter

5 FEC Reports on NVRA

Implementation

Public Funding

6 Clinton/Gore Final Repayment

9 Advisory Opinions

12 Federal Register Notices

Compliance

14 MURs Released to the Public

Information

16 Flashfax Menu

18 Index

Federal Election Commission

Regulations

New RulesAddress MCFL

Supreme CourtDecision

On June 28, 1995, the Commission approved new rules precipitated

by the Supreme Court's decision in

FEC v. Massachusetts Citizens for

Life, Inc. 1 In that decision, the

Supreme Court ruled that communiI cations must contain express

advocacy in order to be subject to

the prohibition on independent

expenditures? at 2 U.S.c. §441 b.

The Court also ruled that this

provision of the Federal Election

Campaign Act (the Act) impinged

(continued on page 2)

J These new rules are a part ofa

broader rulemaking . See page 1 of the

August 1992 Record for a summary of

the complete proposed rules. Additional

changes to rules for corporations and

labor organizations are forthcoming .

Z Independent expenditures are expenditures made without coordination with a

candidate's campaign for a communication which expressly advocates the

election or defeat ofa clearly identified

candidate for federal office. This is the

only type of expenditure a qualified

nonprofit corporation can make in

connection with a federal election. In

all other respects. such as the making

of contributions. the corporate ban still

applies. Business corporations. labor

organizations and political parties can

not make independent expenditures.

Volume 21, Number 8

Court Cases

FEC v, Colorado Republican

Federal Campaign Committee

On June 23, 1995, the U.S. Court

of Appeals for the Tenth Circuit

reversed the district court's ruling

that express advocacy is a defining

feature of coordinated party expenditures, an expenditure type limited

by the Federal Election Campaign

Act (the Act). 2 U.S.c. §441a(d).

Further, it concluded that the Act's

limitation of these expenditures does

not violate the defendant committee's First Amendment rights . The

court remanded the case to the

district court with instructions to

enter judgment in favor of the FEC

and to impose on the defendant a

proper civil penalty under 2 U.S.c.

§437g(a)(6).

This case involved the making of

a $15,000 expenditure by the

Colorado Republican Federal

Campaign Committee (the committee) for a radio advertisement that

criticized the voting record of

Senator Tim Wirth, who at the time

was seeking the Democratic nomination in the 1986 U.S . Senate race

in Colorado. In its campaign finance

reports, the committee characterized

the ad as a generic voter education

expense that was not subject to the

§441a(d) limits. The FEC, however,

viewed it as a coordinated party

(continued on page 3)
Federal Election Commission RECORD

Regulations

(continued from page 1)

upon the First Amendment rights of

certain nonprofit corporations by

precluding them from making

independent expenditures. See page

4 of the February 1987 Record for a

summary of that decision.

Subsequently, the Commission

undertook a rulemaking to implement this decision. The new rules

clarify what constitutes "express

advocacy" and also exempt certain

"qualified nonprofit corporations"

from the ban on independent

expenditures by corporations and

labor organizations.

These rules, accompanied by an

Explanation and Justification, were

published in the Federal Register on

July 6, 1995 (60 FR 35292). They

were submitted to Congress on June

30. The Commission will publish an

Announcement of Effective Date in

the Federal Register following a

Congressional review period of 30

legislative days.

Federal Election Commission

999 E Street, NW

Washington, DC 20463

800/424-9530

202/219-3420

202/501-3413 (Flashfax Service)

202/219-3336 (TDD)

Danny L. McDonald, Chairman

Lee Ann Elliott, Vice Chairman

Joan D. Aikens, Commissioner

John Warren McGarry,

Commissioner

Trevor Potter, Commissioner

Scott E. Thomas, Commissioner

John C. Surina, Staff Director

Lawrence M. Noble, General

Counsel

Publishedby the Information

Division

Louise D. Wides, Director

Dario Bard, Editor

2

Express Advocacy

A communication that is not

coordinated with a federal campaign

is considered an independent

expenditure if its message expressly

advocates the election or defeat of a

clearly identified federal candidate.

Independent expenditures may only

be made by individuals, groups of

individuals, nonparty political

committees and, now, "qualified

nonprofit corporations." If express

advocacy exists, certain FEC

regulations governing reporting and

disclaimer notices apply.

The new rules seek to clarify

what is meant by express advocacy.'

Under the new rules, express

advocacy in a communication is

properly determined by viewing all

elements of the communication

collectively and, to a limited degree,

in the context of external events.

Express advocacy exists when a

communication is found to contain a

message that unmistakably urges the

election or defeat of one or more

clearly identified federal candidates.

A communication will be found to

clearly identify a candidate if it

contains the candidate's name,

nickname, photograph or otherwise

makes an unambiguous reference to

a candidate. The focus, it should be

noted, is on the audience's reasonable interpretation of the message

and not on the sender's intent.

The rules include an extensive

list of phrases which constitute

express advocacy per se. For

example: "re-elect your Congressman," "support your Democratic

nominee," "Bill McKay in '94,"

"reject the incumbent," and, when

accompanied by names or photo3 The new rules move the definition of

express advocacy from 11 CFR 109.1 to

11 CFR 100.22. The definition of

express advocacy is thus in the section

containing other general definitions.

This was done because the definition of

express advocacy is relevant to a

number ofareas, including independent

expenditures, disclaimers and corporate and labor expenditures.

August 1995

graphs of candidates identified as

either supporting or opposing some

issue, phrases such as "Vote ProChoice." Also included in the

definition of express advocacy are

messages on posters, bumper

stickers, advertisements, etc. that

clearly show support of or opposition to a candidate, such as "Nixon's

the One," "Carter '76," and "Reagan/Bush."

In the absence of the above

specified language, a communication that, for instance, comments on

a candidate's character, qualifications or accomplishments may be

considered express advocacy if, in

context, it has no other reasonable

meaning than to encourage actions

to elect or defeat a federal candidate. The Commission will consider

the relevance of the timing of these

communications on a case-by-case

basis.

Messages such as "Vote Democrat" and "Vote Republican" will also

be considered on a case-by-case basis.

It should be noted that communications that only advocate issues

and not the election or defeat of

federal candidates are not subject to

FEC regulations; the Act applies

only to federal candidate elections.

Therefore, a communication that

prompts individuals to call the

White House and urge the President

to veto a particular piece of legislation is not subject to FEC rules.

However, add to this communication a call to vote against the

President should the President not

veto the bill, and the communication

becomes subject to FEC rules. This

is because an electoral component

has been introduced into the message. In cases such as this, the

electoral portion of the communication must be unmistakable, unambiguous and suggestive of only one

meaning in order for it to be subject

to FEC regulations.
August 1995

Qualified Nonprofit Corporations

Under the new rules, a "qualified

nonprofit corporation" is allowed to

make independent expenditures. The

rules establish a list of criteria for

determining what is a qualified

nonprofit corporation. These

criteria, which are based on the

Supreme Court's MCFL decision,

are listed below.

• The corporation's only express

purpose is the promotion of

political ideas (i.e., issue advocacy,

election influencing activity,

political research, political training

and education);

• It may not engage in business

activities;

• It does not have shareholders or

persons, other than employees and

creditors, who (I) are either

affiliated in a way that would

allow them to make a claim on the

organization's assets or earnings, or

(2) receive a benefit that is a

disincentive for them to disassociate themselves from the organization (for example, credit cards,

insurance policies, savings plans,

education or business information);

• It was not established by a business corporation or labor organization, does not accept any donations

from such types of organizations,

and, if unable to demonstrate that

it has not accepted such donations,

has a written policy against

accepting donations from corporations and labor organizations; and

• It is a social welfare organization

under 26 U.S.c. §501(c)(4) (the

Internal Revenue Code).

A nonprofit corporation may reconstitute itself in order to meet these

criteria. It must purge its accounts of

all corporate business and labor

union monies before it can become a

qualified nonprofit corporation.

For reporting purposes, qualified

nonprofit corporations are treated as

individuals; they must abide by the

reporting requirements pertaining to

independent expenditures in excess

of $250 4 and by the disclaimer

regulations pertaining to the making

of all independent expenditures. 11

CFR 109.2 and 110.11.

Qualified nonprofit corporations

have two additional responsibilities

under the new rules. Upon making

its first independent expenditure, the

corporation must certify that it

meets the above criteria for qualified nonprofit corporations by

submitting either a letter or a Form

5, the form individuals use to report

independent expenditures.' And, the

corporation must include language

in its solicitations informing donors

that their contributions may be used

for political purposes, such as

supporting or opposing federal

candidates.•

Revised Public Funding

Regulations Before Congress

On June 12, 1995, the Commission submitted to Congress new

rules governing publicly funded

Presidential campaigns. These rules

were published in the Federal

Register along with an Explanation

and Justification on June 16, 1995

(60 FR 31854). An Announcement

of Effective Date will be published

in the Federal Register after Congress has had 30 legislative days to

review the rules.

(continued on page 7)

4 In MCFL, the Supreme Court ruled

that a qualified nonprofit corporation

that makes extensive independent

expenditures may have adopted

campaign activity as its major purpose,

causing the corporation to become a

political committee subject to further

reporting requirements. In this regard,

the Commission is developing a "major

purpose" test in another rulemaking.

Until those rules are promulgated, the

Commission will exercise itsjudgment

in determining when a qualified

nonprofit corporation has become a

political committee.

5 The Commission will modify FEC

Form 5 for this purpose.

Court Cases

(continued from page 1)

expenditure and filed suit against

the committee for violating the

Act's expenditure limits and reporting requirements for this type of

expenditure. The committee counterclaimed with a First Amendment

challenge to the constitutionality of

the §441a(d) limits.

The District Court Decision

The district court ruled that the ad

was not subject to the limits at

2 U.S.c. §441a(d) because, in the

court's view, only communications

that expressly advocate the election

or defeat of a candidate qualify as

coordinated party expenditures. The

court decided that the radio ad did

not contain express advocacy, and

therefore was not a coordinated

party expenditure.

The district court reasoned that in

FEC v. Massachusetts Citizens for

Life, the Supreme Court established

that the presence of express advocacy determined whether or not an

independent expenditure was made

"in connection with" a federal

election. Although the MCFL

decision dealt with independent

expenditures rather than coordinated

party expenditures, the district court

noted that §441a(d) also includes

the phrase "expenditure in connection with" a federal election. The

court therefore followed a common

law rule: a phrase recurring in a

I statute is to be interpreted consistently.

The district court then referred to

the list of words and phrases,

contained in the Supreme Court's

Buckley v. Valeo decision as examples of express advocacy.

Finding that the committee's ad did

not contain any of these words or

phrases, the district court ruled that

the expenditure for the ad did not

constitute a coordinated party

expenditure and therefore did not

count toward the committee's

§441a(d) limit. See page I of the

(continued on page 4)

3
Federal Election Commission RECORD

Court Cases

(continu ed fr om page 3)

November 1993 Record for a

summary of the district court's

decision.

Coordinated Party Expenditures

and Independent Expenditures

The court of appeals noted that

both Buckley and MCFL distinguish

between these two types of expenditures:

"The Supreme Court cases have

distinguished between the potential

for corruption that attaches to

contributions and coordinated

party expenditures, and those that

might develop from independent

expenditures, finding less inherent

risk in the latter."

The court of appeals noted that in

Buckley the Act's limits on independent expenditures were struck

down because they were an unwarranted infringement on the First

Amendment rights of individuals

whereas the Act's limits on party'

expenditures were upheld because

they s.erved the substantial government interest of preserving the

integrity of the electoral process.

The validity of this interest has been

reinforced in subsequent court case

decisions.

In the appeals court's view, the

distinctions made in these precedents indicate that the phrase

"expenditures in connection with"

should not be construed the same

way with respect to independent

expend!tures and coordinated party

expenditures.

Rather, the court held that

judicial deference was due to the

Commission's interpretation of its

statute. Advisory Opinions 1984-15

and 1985-14 establish the Commission's criteria for determining

whether or not a party expenditure

counts against the §441a(d) limit: an

expenditure counts against the limit

if it is made for a communication

that (1) clearly identifies a candidate

and (2) contains an electioneering

message. The presence of express

4

advocacy is not a factor in this

determination.

The court then found that the ad

identified a candidate (Senator

~irth) and "unquestionably cont~med. an electioneering message,"

since It sought to diminish public

support for Senator Wirth and

garner support for the then-yet-tobe-named Republican nominee.

Consequently, the court reasoned

that the radio ad resulted in an

"expenditure made in connection

with" an election and thus counted

against the party committee's

I §44la(d) limit.

The First Amendment and the

Government's Interest

Citing the reasoning of the

Supreme Court in Buckley and

subsequent cases, the court of

appeals ruled that, as with contribution limits, the coordinated party

~xp~nditure limits are a justifiable

infringement on the First Amendment rights of party committees.

"The opportunity for abuse is

gre~ter when the contributions (or in

the mst~nt case, coordinated party

expenditures) derive from sources

inherently aligned with the candidate, rather than with independent

expenditures."

The coordinated party expenditure limits were adopted because of

I Congressional concern that unc?~cked party spending would give

~Iuzens who make large contribunons to party committees undue

influence on elected officials. The

court concluded that the §441a(d)

limits diminish this potential with a

minimal impact on the important

role of political parties. This follows

the precedent set in Buckley that

found that these and other contribution and expenditure limits served

the overriding government interest

of preserving the integrity of the

electoral process.

U.S. Court of Appeals for the

Tenth Circuit (93-1433 and 93-

1434), D.Ct. No. 89-N-1159, June

23,1995...

August 1995

FEC v, NRSC (93-1612)

On June 12, 1995, the U.S.

District Court for the District of

I Columbia found that, as stipulated

by both parties in a Stipulation to

Final Judgment, the National

Republican Senatorial Committee

(NRSC) violated 2 U.S.c. §§441a(h)

an~ 434(b) by directing the redesignation of contributions it received

an~ by failing to properly report this

acuvity.

Additionally, the court, in

c?ncurrence with the other provisions of the Stipulation to Final

Judgment, precluded the NRSC

from arguing the legality of its

scheme (the workings of which are

discussed below) in future cases

~nd required the NRSC to report'

Itself as a contributor through the

end of 1998 whenever it asks

contributors to redesignate their

contributions to specific candidates.

The FEC was precluded from

collecting civil penalties in this case

because in a February 24, 1995

decision, the court ruled that the 5-

year statute of limitations had

expired. See page 4 of the April

1995 Record for a summary of this

decision.

Background

In its original suit (see page 8 of

the June 1993 Record for a summary), the FEC alleged that during

the 1986 election cycle the NRSC

having exhausted its contribution'

~d coordinated party expenditure

limits, contacted its contributors and

asked.them to redesignate a portion

of their NRSC contributions to the

principal campaign committee of

Republican Senate candidate Jim

Santini. The NRSC then forwarded

these newly earmarked contributions to the Santini committee.

Under 11 CFR 11O.6(d)(2), the

full amount of a contribution

earmarked by a contributor at the

dir~tion of an intermediary counts

against both that contributor's and

that intermediary's contribution

limit for the recipient. In the matter
August /995

at hand, this rule caused the NRSC

to exceed its contribution limit for

Mr. Santini by $ 183,500-$ 104,200

of which was the total value of the

earmarked contributions and

$79,300 of which was the cost of

securing the redesignations (an inkind contribution).

Stipulation to Final Judgment

In this stipulation, the NRSC

admitted to engaging in the alleged

conduct, but stated that it offered

this admission only to bring this

case to a close. In addition, the

NRSC agreed to accept, in all future

matters, the FEC's position that this

conduct constitutes violations of

2 U.S.c. §§44la(h) and 434 (b), and

II CFR 110.6(d)(2). Furthermore,

the NRSC agreed that throu gh

December 31, 1998, it would report

all contributions that it asks contributors to redesignate to candidates

as contributions from both itself and

the contributor. •

Froelich v, FEC

On June 14, 1995, the U.S. Court

of Appe als for the Fourth Circuit

affirmed the district court's decision

in this case and found the plaintiff's

appeal to be without merit.

The district court had dismissed

Francis E. Froelich's suit becau se of

lack of standing. Plaintiff's original

suit challenged the constitutionality

of the use of out-of-state contributions by U.S. Senate campaigns. See

page 9 of the August 1994 Record

for a summary of the district court's

decision .

U.S. Court of Appe als for the

Fourth Circuit (94-1777), D.O. No.

93-1640-A, June 14, 1995 . •

FEC v, Free the Eagle

FEC v, RUFFPAC

On June 5, 1995, the U.S. District

Court for the District of Columbia

issued consent judgments in these

two cases. In both cases the FEC

sought enforcement of conciliation

agreements (Matter Under Review

2191 ) entered into by Free the Eagle

and by RUFFPAC and Tammy J.

Lyles. Ms. Lyles was the managing

director of Free the Eagle and the

treasurer of RUFFPAC.

In the stipulations for consent

j udgments, both defendants and Ms.

Lyles admitted to being in breach of

the conciliation agreement. Free the

Eagle owed the Commission $5,000,

and RUFFPAC and Ms. Lyles owed

the Conunission $8,000, both with

interest accrued since November 15,

1994. Defendants and Ms. Lyles

agree to the following:

• Free the Eagle and RUFFPAC,

both in conjunction with Ms.

Lyles, would make monthly

payments of $250 and $350,

respectively, until their debts, with

compounded intere st, were paid in

full.

• Should either Free the Eagle or

RUFFPAC file for bankruptcy,

Ms. Lyles would be personall y

obligated to make all of the

defendant organization 's remaining payments. Ms. Lyles would

remain liable for these amounts

even if her relationship with Free

the Eagle and RUFFPAC were

terminated, unless she secured a

written assumption of liability

from her successor at each organization. This assumption would

have to be approved by the Commission prior to the effective date

of Ms. Lyles' resign ation.

Additionally , a $5,000 civil

pena lty was assessed aga inst each

defendant under 2 U.S.c. §437g

(a)(6)(A) for breach of the conciliation agreement. The FEC agreed to

waive both civil pen alties provided

that all parties complied with the

court's consent judgment order and

that all payments were timely.

U.S. District Court for the

District of Columbia, No.

95CV00297, June 5, 1995.•

Federal Election Commission RECORD

Motor Voter

FEC Submits Report on

NVRA Implementation to

Congress

On June 30, the Conunission

presented Congress with a statu s

report on the implementation of the

National Voter Registration Act

(NVRA). This is the first progress

report on the implementation of the

NVRA. The FEC will submit future

progress reports in June of every

odd-numbered year.

The '95 report is based on the

survey responses of 37 states' and

the District of Columbia, and

contains a discussion of some of the

implementation problems they

experi enced. Quantifiable data is

limited to voting registration and

voting age population figures. This

is because the NVRA has been in

effect only since January of this

year. This short time period also

made it prema ture to assess the

NVRA's impact on the admin istration of elections or to recommend

legislative changes; therefore, these

issues are absent from the '95

report.

The contents of the report are

summarized below.

(continued on page 6)

I Ofthe 13 states not covered by this

report, AR, /D, MN, ND, NH, VT, WI

and WY consider themselves exempt

from the NVRA f or varying reasons.

The remainin g states-i-Ce, IL. PA, SC

and VA- have challenged the constitutionality ofthe NVRA and refused to

comply with its pro visions. District

courts have upheld the constitutionality

ofthe NVRA in the CA, IL and PA

cases. See page I of the May Record fo r

a summary ofthe decision in the CA

case. JL lost on appeal to the U.S.

Court of Appeals f or the Seventh

Circuit. Additionally, one surv ey

respondent, MI, also challenged the

NVRA 's constitutionality.

5
Federal Election Commission RECORD

Motor Voter

(continued from page 5)

Motor Voter Registration

The NVRA requires states to

provide voter registration servi~es at

their Department of Motor Vehicle

(DMV) offices, where more than 90

percent of adults go to obtain either

driver's licenses or state ID cards.

Survey respondents reported that

this was relatively easily accomplished. More than half of them had

such a system in place before the

NVRA took effect, and those

implementing it for the fi~st tim~

experienced only minor difficulties.

Agency Voter Registration

The NVRA also requires states to

provide voter registration services at

the offices of public assistance

agencies, the offices o~ stat~ ag~~­

cies serving persons with disabilities, and armed forces recruitment

offices. Additionally, the states are

required to select other appropriate

agencies to provide this service.

Some survey respondents reported challenges in c?ordi~ating

their efforts with public assistance

agencies, which often operate as

separate individual bureaus. Others

reported difficulties in identifying

appropriate registration sites other

than those mandated.

Almost one third of respondents

reported difficulties with a required

declination form, which is used to

record applicants' decisions not to

register to vote.

Seven respondents advocated

limiting the mandatory offering of

voter registration to only initial

applicants and those changing their

address.

Mail Registration

The NVRA requires states to

allow voter registration by mail. As

of this writing, all 38 respondents

allow their residents to register to

vote by mail. In addition to their

own forms, respondents also accept

6

the FEC-designed national voter

registration form as a valid registration document.

Maintenance of Voter Lists

The NVRA prohibits states from

removing names from their voter

rolls merely because an individual

failed to vote. States may use other

systematic methods to purge their

lists.

Respondents reported using the

following criteria to remove names

from their lists: death, criminal

conviction, mental incompetence,

change of address and duplicate

registrations. Respondents reported

various problems with the NVRA's

list-maintenance provisions, most of

which related to confirming changes

of address via the U.S. Postal

Service.

Fail-Safe Voting Provisions

The NVRA seeks to reduce the

number of incidents in which

citizens are denied the right to vote

due to some oversight on their part

or to some clerical error on the part

of the state election office.

For instance, citizens in some

states are required to reregister

when they change address, even if

the move is entirely within one

registrar's jurisdiction; citizens

sometimes only discover this when

they attempt to cast a vote. Other

times a clerical mistake, such as an

erroneous change of address, results

in a citizen's missing a voting

opportunity. The NVRA requires

states to maintain a registered

voter's eligibility to vote so long as

that individual remains an eligible

voter in that jurisdiction.

Survey respondents have taken

various approaches to comply with

this mandate. These are technical

matters, however, and they have yet

'I· to face the test of experience.

Therefore, they drew no substantive

comment from the respondents...

I,

I

August 1995

Public Funding

1992 Clinton/Gore Final

Repayment Set At $109,061

On June 1, 1995, the Commission

issued a final repayment determination for the Clinton/Gore '92 Committee, the principal general election

committee of President Bill Clinton

and Vice President AI Gore. The final

determination required the committee to make a repayment of $84,421

and a payment of $24,640, for a total

of $109,061 due to the U.S. Treasury.

The payment amount consisted of

I $24,640 in stale-dated checks.

The repayment amount is comprised of $76,775 for nonqualified

I campaign expenditures, $6,646 for.

earnings on the investment of public

funds and $1,000 for the unlawful

I acceptance of a contribution.

Additionally, in the course of

I campaigning, the general electi?n

committee exceeded its expenditure

limit. To reduce general election

spending to a permissible level,

monies were transferred from the

General Election Legal and Accounting (GELAC) fundi to the committee

to reimburse the committee for compliance costs it had originally paid..

The Commission's final determination reflects changes from the

initial determination contained in the

final audit report. See page 5 of the

February 1995 Record for a summary of the final audit report's

findings. The payment amount w~s

reduced because some of the previously outstanding stale-dated checks

J Publicly funded general election

campaigns may establish GELAC

funds, which are special accounts used

to pay for legal and accounting expenses

incurred solely to comply with the

campaign finance law, and other

specified expenses. GELACfunds are

the only permissible depositories for

private contributions received by

publicly funded general election campaigns. GELAC spending does not ~o~nt

against a campaign's expenditure limits.
August 1995

were subsequently resolved. The

repayment items the Commission

reconsidered are summarized below.

Revised Final Audit Repayments

//legal receipt ofin-kind contribution. The final audit report

contained a determination that the

conunittee had received a $111, I00

in-kind contribution from the

Democratic National Committee

(DNC) to defray qualified campaign

expenses. The Conunission initially

regarded this as the receipt of an

unlawful contribution; publi cly

funded campaigns may not receive

con tributions. II CFR 9003.2(a)(2).

The committee argued that the

supposed contri bution resulted from

the DNC's assumption of a portion

of a media contract. Upon assumption of the contract, the committee

maintained that the DNC directed the

vendor to produce generic advertisements urging support for Democratic

candidates in general without mentioning a specific candidate. The committee presented the Commission with

an affidavit from the vendor, video- , . tapes of four of the advertisements

and invoices of the production costs.

In light of this documentation, the

Commission concluded that the DNC

had not made an in-kind contribu tion

because its advertisements did not

specifica lly support the committee's

Presidential ticket? Subsequently,

this $ 111,100 repayment was

dropped from the Commission's final

repayment determination.

Duplicate payments to vendors.

The final audit report contained a

determination that the committee had

made duplicate payments of $8,329

to vendors. The committee subsequently documented that it had received a $1,850 refund of a duplicate

payment. The Commission adjusted

the repayment amount accordingly. +

2TheCommission notedthathadtheDNC

wished to createadvertisementsthat

specifically supported President Clinton 's

candidacy, it couldhavelegally doneso by

applying the expense toward itscoordinated

partyexpenditurelimitfor Clinton/Gore '92. I

Regulations

(continued from page 3)

Some of the issues addressed in

the new rules are discussed below .

Streamlined Audit Process

The FEC adopted new regula -

tions governing the audit process in

order to save time and money for all

involved. The new rules eliminate

the interim audit report, reducing the

process to the follow ing stages:

• An expanded exit conference,

resulting in a written exit conference memo, to which the committee may make a written response;

• An audit report that includes the

Commission's repayment determination;

• The opportunity for an FEC

administrative review of the audit

repo rt, including, upon the committee's request, an oral presentation with respect to specified

repayment issues; and

• A post-review repayment determination acco mpanied by a Statement of Reasons.

Additionally, the committee's

receipt of the audit report now

constitutes notification for purposes

of the 3-year statute of limitations.

General Election Legal and

Compliance Fund

Under the new regulations,1

solicitations for this fund (the

GELAC fund)? must inform contribut ors that publicly funded

I Morefar reaching changes contained in

a Petitionfor Rulemaking submitted by

the Centerfor Responsive Politics were

not adopted. See 60 FR 31855-31856.

2Publicly funded general election campaigns may establish GELAC fundsspecial accounts used to pay legal and

accounting expenses incurred solely to

comply with the campaign finan ce law,

and other specified purposes. GELAC

funds are the only permissible depositories fo r private contributions received

by these campaigns. GELAC spending

does not count against the expenditure

limits.

Federal Election Commission RECORD

general election campaigns may not

pay campaign expenses with private

funds. The solicitation must also

include instructions on how to

properly designate a contribution to

the GELAC fund .

The new rules also state that only

those contributions clea rly designated in writi ng for the GELAC

fund may be deposited in the

GELAC acco unt. The new rules

define what constitutes a proper

written designation. Contributions

with a questionable designation

must be deposited initially in a

primary election account and

reported as primary election contributions.

The new rules state under what

circumstances a committee may

transfer primary election contributions to the GELAC fund and when

redesignations from contributors

must be secured. In all cases, the

primary electio n conunittee must

have all its debts settled before its

monies may be transferred to the

GELAC fund . GELAC monies can

be used to retire primary election

debts (or for any other lawful

purpose) only after all GELAC

expenses are paid.

Contributions designated or

redesignated for the GELAC fund

are not matc hable.

The new rules reduce the percentage of computer-related costs that

may be paid for with GELAC

monies from 70 percent to 50

percent; a higher percentage figu re

may be ado pted if a committee is

able to demonstrate that it is warranted. Computer expenses incurred

after the end of the expenditure

report period, however, may be paid

for entirely with GELAC funds. The

same is true for salary and overhead

payments.

Funding General Election

Expenses with Primary Funds

The Commission has added

certain bright-line rules that set

criteria for determining whether

(continued on page 8)

7
Federal Election Commission RECORD

Regulations

(continued from page 7)

certain expenses are to be attributed

to the primary election or general

election expenditure limits. These

rules are relevant only to nominees.

Expenditures for goods and

services used exclusively for either

the primary or the general el~ct~on

effort are attributable to the limits

applicable to that election. Note

that, for primary elections, th~ s~ate

limits, as well as the overall limit,

apply. .

Polling expenses are attnbuted

according to the date the poll's

results are received relative to the

date of the nomination.

Attribution of overhead expenditures and salary costs for running

campaign offices is based on the

date of the nomination. Those

expenses incurred prior to this da~e

are attributable to the corresponding

primary election limits and those

incurred after are attributable to the

general election limit. Howev.er,

when an office is used exclusively

by persons working on general

election preparations, these expenses are attributable to the gen~ral

election limit, even if incurred pnor

to the date of the nomination.

The cost of campaign materials

such as bumper stickers, brochures

and buttons that were purchased by

the primary election committee and

later transferred to the general

election committee are attributable

to the general election limit only if

they are used in connection with that

election.

Production costs for media

communications broadcast or

published both before and aft~r the

date of the nomination are split

equally between the prim~ry.and.

general election limits. Distribution

costs, however, are attributed based

on the date the communication is

distributed.

The costs of a solicitation are

attributable based on the purpose of

the solicitation-either to raise

monies for the primary election

8

committee or the GELAC fund,

since publicly funded candidates

may not accept private funds for

their general election efforts. If a

solicitation requests monies for both

purposes, then its cost is split

equally between them.

Campaign-related travel expenses

are attributed based on the date the

travel occurs. If it occurs before the

date of the nomination, it is a

primary election expense, unless the

person traveling is workin? exclusively on the general election effort;

in that case, the travel cost is a

general election expense. Travel ~o

and from the nominating convention

is considered a primary election

expense.

Travel on Government

Conveyance

When using government aircraft,

whether federal, state or local, the

committee must reimburse the

government no less than the lowest,

unrestricted, non-discounted, first

class commercial air fare for that

trip at that time for each campaignrelated passenger. The following

persons are considered campaignrelated passengers: the candidate,

his or her campaign staff, media

personnel and Secret Service ag~nts.

When travel is to cities not serviced

by first class flights, then the

reimbursement will be no less than

the coach fare for the trip. When

travel is to cities not serviced by

commercial flights, then the charter

rate applies. In such instances, the

charter rate must reflect the expense

of chartering an aircraft large

enough to accommodate all campaign-related travelers. When the

airplane must be flown to a takeoff

point to pick up passengers, the

committee must reimburse the

greater of either the government's

bill or the single passenger fare for

the positioning flight.

For travel using other government vehicles (e.g. helicopters, cars,

other ground conveyance), the

committee must reimburse the

August 1995

government the commercial rental

fee for a similar vehicle.

A trip will be considered campaign related if it entails: ~olic.iting,

making or accepting contributions;

expressly advocating the nomin~­

tion, election or defeat of a candidate; or other factors listed in the

new rules.

Other Issues Addressed by the

New Regulations

Other issues affected by the new

regulations include:

• Candidate agreements (new

requirement to include closed

captioning' on television commercials);

• Documentation of disbursements

(canceled checks required for

disbursements in excess of $200);

• Lost or damaged equipment (may

be considered a nonqualified

campaign expense);

• Investment of public funds (repayment obligation arises if profit is

garnered);

• Statement of Net Outstanding

Qualified Campaign Expenses

(submission schedule revised,

breakdown of estimated winding

down costs required);

• Reporting (schedules of receipts,

disbursements and debts must be

alphabetized);

• Sampling (use of statistical sampling to audit primary contributions and to quantify dollar value

of related audit findings);

• Disgorgement (repayment .o~

certain excessive and prohibited

contributions to the U.S. Treasury);

• Interest charged on late repayments (assessed after certain

repayment periods have ended!;

• Matching fund eligibility requirements (past history' no longer

considered in declaring a candidate

3 Congress added this new requirement

to 26 U.S.c. §9003(e).

4 This reflects the U.S. Court ofAppeals

decision in LaRouche v. FEe. See page

3 ofthe September 1993 Record.
August 1995

eligible);

• Gifts and bonuses paid with public

funds ($150 gift cap per campaign

worker, but not more than $20,000

for all gifts to campaign workers;

bonuses must be provided for in

written contracts and paid by

specified date);

• Option to use digital imaging for

matching fund submissions (must

supply Commission with equipment to read the data); and

• Repayment ratio (calculated 90

days after date of ineligibility).

• Administrative record for judicial

review of repayment determinations (committees may add materials to the record provided they

submit them to the Commission

within specified time limits).

The Commission is also continuing to consider the Petition for

Rulemaking submitted by Mr.

Anthony F. Essaye and Mr. William

Josephson (59 FR 63274, December

8, 1994). This petition poses questions in connection with campaign

activity that is focused on either the

electoral college or the U.S. House

of Representatives in event of, or in

anticipation of, an indecisive

general election result. ..

Commission Repeals Three

Obsolete Regulations

The Commission published a

final rule in the Federal Register on

June 15, 1995 (60 FR 31381)

repealing three obsolete rules. These

rules regulated activity that has now

been concluded and that can not

recur. They involved:

• Contributions to retire pre-1975

debts;

• Certain 1976 payroll deductions

for separate segregated funds; and

• An alternative reporting option for

candidates in Presidential elections

held prior to January I, 1981.

This marks the first time the

Commission used the direct final

rules procedure, which is endorsed

by the National Performance

Review and the American Bar

Association. This time-saving

procedure allows the Commission to

publish a proposed rule in the

Federal Register as a "final rule with

request for comments," under the

assumption that the rule will not

receive adverse public comments.

Should adverse comments be

received, however, the rule would

have to be published a second time

as a Notice of Proposed Rulemaking,

per the normal procedures.

The public comment period on

the final rule repealing these provisions closed on July 17. No adverse

comments were received, and the

Commission subsequently forwarded the rule to Congress, which

has 30 legislative days to review it.

An announcement of effective date

will be published in the Federal

Register. ..

Advisory

Opinions

AO 1995-12

Affiliation and Cross

Solicitation Between Trade

Association Federation and

State Associations

The Independent Bankers Association of America (IBAA) is

considered a trade association

federation composed of state

independent banking associations

(SLBAs). Furthermore, the relationship between IBAA and the SIBAs

indicate that they are affiliated,

allowing them to solicit each others'

members-including stockholders

and eligible personnel of incorporated members (with the required

prior approval). Because the national and state associations are

affiliated, their separate segregated

funds (SSFs or PACs) are treated as

Federal Election Commission RECORD

one committee for purposes of the

contribution limits and they may

make unlimited transfers to one

another.

Definition of Trade Association

IBAA and the typical SIBA are

nonprofit corporations organized to

promote the interests of community

banking. They both have membership structures with two principal

membership classes, including

active members, who pay dues and

have sufficient voting rights to meet

the definition of "member" contained in II CFR 114.I(e)(2)(ii).

IBAA and the SIBAs meet the

definition of trade association: a

nonprofit membership organization

composed of persons in a related

line of commerce and organized to

promote and improve business

conditions in that line of commerce.

11 CFR 114.8(a).

For example, IBAA's active

members are community financial

institutions supporting IBAA's

goals, and a typical SIBA has active

members consisting of national

banks, state banks and trust companies which agree with its principles

and are approved by the Board.

Federation of Trade Associations

A federation of trade associations

is "an organization representing

trade associations involved in the

same or allied line of commerce."

II CFR I 14.8(g)(l). Although

IBAA's constitution and bylaws do

not recognize the SIBAs as official

state components, the national

association qualifies as a trade

association federation because of

the organizational relationship

between IBAA and the SLBAs and

because IBAA performs a major

coordinating and representative

function. According to the formal

rules and practices of IBAA and a

typical SIBA :

• IBAA Board members elected by

community banks in a given state

(continued on page 10)

9
Federal Election Commission RECORD

Advisory Opinions

(continued from page 9)

serve on the Board of that state's

SIBA.

• Two SIBA executives-the

President and President-Elect of

the SIBA Council-sit on the

IBAA Board. (The Council is a

group composed of the chief

executive staff persons of the

SIBAs.)

• Members of the SIBA Council

serve as nonvoting members on

all but three of IBAA's standing

committees.

• IBAA consults with the SIBAs on

the division of states into districts, which elect a member to

the IBAA Board.

• Each IBAA Board member

representing a specific state or

district serves as a liaison between the IBAA and the SIBA in

that state .

• SIBA executives meet at least

once a year with the IBAA

executive committee.

IBAA also coordinates and

involves the SIBAs in its national

lobbying efforts, is provided with a

free booth at SIBA conventions,

provides the main speaker at those

conventions and seeks advice from

the SIBAs concerning the activities

of its SSF (IBAAPAC). All the

above factors-as well as the

similarities in the purposes and

membership structures of the

national and state associationsindicate that !BAA acts as a federation of SIBAs.

Affiliation

When a federation and its state

associations are affiliated, their

respective SSFs are also affiliated

and treated as one political committee for purposes of the contribution

limits. Affiliation is based on the

relationship between the organizations, analyzed in terms of the

affiliation factors set out at 11 CFR

100.5(g)(4). II CFR 114.8(g)(I).

See AO 1994-19.

fO

Because of the composition of the

Boards of IBAA and a typical SIBA,

as well as other facts, a number of

those factors apply to the relationship between IBAA and the SIBAs:

the national and state assoc iations

have the ability to participate in

each other's governance; they have

overlapping directors; IBAA and a

typical SIBA each have some ability

to chose decision makers in the

other association; and a significant

percentage of their memberships

overlap. II CFR 100.5(g)(4)(ii)(B)-

(E).

Based on this analysis, IBAA and

the SIBAs are affiliated with each

other.

Solicitations

A trade association may, with the

prior approval of an incorporated

member, solicit contributions to its

SSF from the corporate member's

restricted class, i.e., its individual

stockholders, its executive and

administrative personnel and the

families thereof. 11 CFR 114.8(c)

and (d).

Because IBAA and its federated

SIBAs are all affiliated with one

another, a SIBA need not have an

SSF of its own in order to solicit,

collect and transmit contributions to

IBAAPAC or any SIBA SSF. In

acting as a fundraising arm, a

SIBA-or IBAA-must comply

with the collecting agent regulations

(II CFR 102.6(b) and (c)).

Furthermore, their affiliated

status would allow IBAA or a SIBA

to solicit a member of an incorporated bank's restricted class provided that person is also a member

of (as defined in the Act) either

IBAA or a SIBA, and provided that

the bank first gives its solicitation

approval to one of the associations.

Affiliation between the SSFs of

the federation would also allow

IBAAPAC to accept a transfer from

a SIBA SSF even if the funds

contained contributions from

personnel of non-IBAA members.

Affiliated committees are permitted

Augustf995

to accept transfers of any amount,

assuming the transferred funds come

from permissible sources. II CFR

102.6(a)(I)(i) and (iv). If the

underlying contributions were from

the SIBA's solicitable sources, the

transferred funds could be accepted.

While affiliation permits the

associations to cross-solicit members and transfer unlimited funds

between their SSFs, it restricts the

contribution activity of their SSFs.

As affiliated committees, IBAAPAC

and SIBA SSFs share the same

limits on contributions received and

made. The SSFs should establish

procedures to keep one another

informed about their incoming and

outgoing contributions to avoid

exceeding the limits.

Date Issued: June 30,1995 ;

Length: 14 pages...

AO 1995-13

Definition of Member

Applied to Membership

Association

The American Society of Association Executives (ASAE) is an

incorporated membership association with 22,250 members including

association executives and staff and

representatives of suppliers for the

association corrununity. ASAE's

"regular members," numbering

6,411, meet the membership requirements set out in FEC regulations and may be solicited for

contributions to ASAE's PAC (APAC). ASAE's life members, who

total 3 percent of overall membership, do not meet the membership

requirements and may not be

solicited for contributions to APAC. The Commission was unable

to reach a conclusion on the membership status of the two other

ASAE membership types-section

and associate-that include 15,195

individuals representing 68 percent

of ASAE's total membership.
. August 1995

Under 11 CFR 114.1(e), to

qualify as a solicitable "member" of

a membership association, a person

must:

• Pay regular dues and be entitled to

vote for at least one member of the

association's "highest governing

body" or for those who choose at

least one member of that body;

• Have a significant financial

attachment to the association in

addition to the payment of dues;

• Have the right to vote directly for

all those on the association's

highest governing board; or

• Have an organizational and

financial attachment to the association that is significant enough to

qualify as a "member," as determined by the Commission on a

case-by-case basis.

ASAE's "regular members" have

both the right to vote for the elected

officers of ASAE and the ASAE

Board of Directors and the obligation to pay regular membership

dues. They therefore satisfy the

membership requirements set out at

11 CFR 114.1(e)(2)(ii).

ASAE' s life members do not vote

for any ASAE officer, director or

any person who can vote for an

ASAE officer or director. In addition , the Commission had no

evidence that life members pay

dues. Based on these facts, the

Commission concluded that life

members do not meet the membership requirements and may not be

solicited for contributions to APAC.

The Commission could not reach

agreement on the status of associate

and section members. Although they I

pay dues and have certain participatory rights, they are not entitled to

vote for ASAE's elected officers or

the ASAE Board of Directors.

Date Issued: June 9, 1995;

Length: 7 pages.•

AO 1995-14

Operating a Booth at a Joint

Convention

The Oral and Maxillofacial

Surgery PAC (OMSPAC) may

operate a fundraising booth at a

convention jointly sponsored by the

American Association of Oral and

Maxillofacial Surgeons (AAOMS),

which is its connected organization,

and another membership organization provided that OMSPAC

complies with the guidelines

summarized below . At the convention, OMSPAC may solicit and

receive contributions from the

following types of AAOMS members: fellows, life fellows, retired

fellows, members, life members and

retired members. The Commission

could not agree on whether or not

affiliate members could be solicited.

Background

OMSPAC planned to set up a

booth to collect contributions at a

joint convention of AAOMS and the

American Association of Orthodontists (AAO). OMS PAC expects

about 900 AAOMS and AAO

members at the convention, and an

additional 1,325 attendees who are

not members of either organization.

AAOMS and AAO do not have

common members, directors,

trustees, officers or key employees.

OMSPAC has a policy of rejecting contributions from individuals

who are not executive level AAOMS

employees or members of AAOMS.

Status of AAOMS

AAOMS is a membership

organization for purposes of federal

election law because it expressly

provides for membership in its

bylaws, actively recruits new

members and acknowledges an

individual's status as an AAOMS

member by sending him or her

membership publications; in these

ways it fulfills the requirements for

a membership organization under 11

CFR 114.1(e)(1 )(i), (ii) and (iii),

respectively.

Federal Election Commission RECORD

Who May Be Solicited at the

Convention

OMSPAC may solicit AAOMS's

administrative and executive

personnel and their families, and

those AAOMS members who

qualify as "members" under 11 CFR

114.1(e)(2). To be considered a

"member" under this provision, a

person must:

• Pay regular dues and be entitled to

vote for at least one member of the

association's "highest governing

body" or for those who choose at

least one member of that body;

• Have a significant financial

attachment to the association in

addition to the payment of dues ;

• Have the right to vote directly for

all those on the association's

highest governing board; or

• Have an organizational and

financial attachment to the association that is significant enough to

qualify as a "member," as determined by the Commission on a

case-by-case basis.

AAOMS has four classes of

membership: fellow, member,

affiliate and honorary. An individual

belonging to any of these membership classes attains life or retired

status over time.

OMSPAC may solicit fellows

and members because they pay dues

and have voting rights. It may also

solicit life and retired members and

fellows because, even though they

no longer pay dues, they retain their

voting rights. They therefore qualify

under the case-by-case rule at 11

CFR 114.l(e)(3).

OMSPAC may not, however,

solicit honorary members, or

inactive members of other classes,

because these individuals do not pay

dues, do not have voting rights and

do not have a significant financial

attachment to the organization .

AAOMS affiliate membership is

open to individuals in foreign

nations who are recognized professionally in that nation as oral and

(continued on page J2)

II
Federal Election Commission RECORD

Advisory Opinions

(continued from page 11)

maxillofacial surgeons. This class

pays dues but does not have voting

rights. Upon reaching life or retired

status, the dues paying obligation

ceases to exist. The Commission

was unable to decide whether

affiliate members qualified as

"members." Nevertheless, noting

that affiliate and honorary memberships were available to individuals

in foreign nations, the Commission

cautioned OMSPAC about soliciting

affiliates who may be foreign

nationals. Foreign nationals are

prohibited from making contributions in connection with U.S.

elections. 2 U.S.c. §441e.

Operating the Booth

A membership organization's

PAC may direct its solicitation

activities only to the organization's

members and its executive and

administrative personnel and their

families. Booth activities are

considered solicitations if they do

more than simply provide factual

information about the PAC.

OMSPAC's policy of rejecting

contributions from persons who are

not members of AAOMS or part of

AAOMS executive personnel

enables it to follow a precedent

established in Advisory Opinion

1978-17.

In accordance with that opinion,

OMSPAC may operate a booth to

Federal Register

Federal Register notices are

available from the FEC's Public

Records Office.

1995-10

II CFR 100, 106,109and 114:

MCFL Rulemaking; Final Rules

on Express Advocacy,

Independent Expenditures and

Corporate andLabor

Organization Expenditures (60

FR35292, July6, 1995)

12

solicit contributions at the convention provided that:

• Its booth displays signs clearly

stating OMSPAC's policy of

rejecting contributions from

persons who are not members of

AAOMS or part of AAOMS

executive personnel; I

• Those manning the booth enforce

this policy;

• A method of identifying solicitable

attendees is maintained; and

• OMSPAC abides by the record

keeping requirements at 2 U.S.c.

§432(c) with respect to all contributions collected at the booth.

Additionally, the distribution of

any pre-convention mailings and

convention registration packets

containing advertisements for the

OMSPAC booth must be limited to

solicitable members and their

families. Similarly, presentations to

convention attendees should not

include invitations to the booth or

booth promotions if the group

includes individuals who are not

solicitable.

Date Issued: June 19, 1995;

Length: 14 pages...

AO 1995-15

Foreign-Owned Subsidiary:

Earmarked Contributions

and Payroll Deductions

Allison Engine Company (the

company) may continue to operate

its political action committee

(Allison PAC) after the company is

acquired by Rolls-Royce, a corporation registered in the United Kingdom; the PAC's proposed safeguards

ensure its compliance with the

prohibition on foreign national

I participation at 11 CFR 110.4(a)(2).

Furthermore, Allison PAC may

offer its executive and administrative employees a payroll deduction

J OMSPAC may also solicit its own

executive and administrative personnel,

if it wishes.

August 1995

plan that enables them to earmark

their PAC contributions for up to

three federal candidates of the

employee's choice. Allison PAC

may not, however, use a payroll

deduction plan to carry out twiceyearly solicitations of employees

outside the company's restricted

class. 2 U.S.c. §441b(b)(4)(B).

Foreign-Owned Subsidiary

Allison Engine Company is

organized under the laws of Delaware and has its principal place of

business in Indianapolis, Indiana.

Rolls-Royce intends to purchase 100

percent of Allison Engine's stock.

When this occurs, the company will

become a domestic subsidiary of a

foreign corporation.

2 U.S.c. §441e places broad

prohibitions on the involvement of

foreign nationals in U.S. elections.

Foreign nationals are prohibited

from playing any role in a PAC's

decision-making process. 11 CFR

110.4(a)(3).

A PAC of a domestic subsidiary

of a foreign corporation may not

allow foreign national members of

the subsidiary's board to vote on

matters concerning the PAC or to

select individuals who will operate

the PAC and exercise decisionmaking authority with respect to its

contributions and expenditures.

In anticipation of its acquisition

by Rolls-Royce, Allison PAC

adopted bylaws instituting the

following safeguards against foreign

national participation:

• All Allison PAC members must be

U.S. citizens;

• Changes to Allison PAC, including

PAC membership and determinations about disbursements, are to

be made by majority vote of PAC

members;

• All contributors to the PAC must

be U.S. citizens;

• Contributors must certify that they

were not influenced by a foreign

national in their decision to

earmark a contribution; and

• PAC disbursements will not be
· August 1995

made under the influence of

foreign nationals, and members of

the PAC will disclose any such

effort to influence disbursements.

The Commission concluded that

these safeguards were sufficient to

ensure the PAC's compliance with

the foreign national prohibition.

Employee Earmarking Program

Allison PAC also proposed

instituting a monthly payroll deduction plan for the company's restricted class.' Under this plan ,

employees would have the opportu -

nity to designate a percentage of

their yearly deduction total for the

PAC to as many as three federal

candidates of their choosing. Allison

PAC would treat these deductions as

both contributions to the PAC and

contributions earmarked for specific

candidates, and would forward them

to the candidates each October.

The Commission noted that,

because the PAC is treating the

contributions as contributions to and

from the PAC, the company's funds

may be used to pay for the administration of the program and the

solicitation of the contributions.

Under FEC niles at 11 CFR

102.8, contributions that are earmarked must be forwarded by the

conduit, in this case Allison PAC, to

the ultimate recipient within 10 days

of receipt. Because Allison PAC's

transfer plan would not comply with

the 1O-daytime limit, the Commission approved Allison PAC's plan

subject to the following modifications: Allison PAC must inform

restricted class personnel that during

a 10-day window in October they

will have the opportunity to earmark

their PAC contributions for up to

three federal candidates of their

choice.

I A corporation's restricted class

includes its executive and administrative personnel, its stockholders, and the

famili es ofboth groups.

The funds to be earmarked would

be accounted for in "book accounts"

maintained by the PAe.2 This would

constitute a reasonable accounting

method for ensuring that funds to be

earmarked in the future would not

be used until the time vi designation. Contributions in an employee's

book account would be forwarded to

candidates only after the PAC

received a written designation from

the contributor.

During the 1O-day window in

October, Allison PAC would accept

designation forms on which employees could list any candidates to

whom they wished to contribute

with the amounts each would

receive from that employee's book

account. Employees could also

denote a percentage of funds in their

book accounts to be used at the

PAC's discretion.

Allison PAC should report

receipts from participating employees as contributions to the PAC at

the time the PAC receives the

monthly payroll deduction proceeds.

As a conduit of earmarked contributions, Allison PAC should also

identify the original donor and

disclose the conduit transaction in

its reports to the FEe.

These earmarked contributions

are considered contributions from

the participating employee(s). And,

as Allison PAC stated , these earmarked contributions would be

treated as contributions from the

PAC, as well. The letter accompanying the contributions to the

candidate should make clear to the

I recipient committee that the contribution amount is attributable to both

the contributing individual(s) and

the PAe. The letter should also

provide identifying information

(name, address, occupation and

employer) for each individual and, if

the check includes designations by

more than one employee, the

2Thisfollows the example set in

Advisory Opinion 1991-29.

Federal Election Commission RECORD

amount earmarked by each individual.

Allison PAC should also inform

participating employees that all or

part of their contributions might not

be sent to the specified candidate.

Because candidate contributions are

attributable to Allison PAC as well

as to the participating employee,

Allison PAC might exhaust its

$5,000 per election limit for a

candidate before one or more of the

contributing employees exhausts his

or her individual limit.

After the October contributions

are made, Allison PAC should send

a notice to participating employees

informing them of the amount of

contributions attributed to them with

respect to each recipient candidate.

Payroll Deduction Plan for

Nonrestricted Class Employees

Although Allison PAC may

conduct twice-yearly solicitations of

employees outside the company's

restricted class, according to the

guidelines set out in 11 CFR 114.6,

Commission regulations specifically

forbid the establishment of a payroll

deduction plan to facilitate the

making of contributions in response

to these twice-yearly solicitations.

This prohibition exists along with,

not in place of, the guidelines for a

proper twice-yearly solicitation.

Date Issued: June 30, 1995;

Length: 10 pages. ..

AO 1995-18

Campaign Funds Given for

Portrait of House Committee

Chairman

Congressman James A. Leach,

Chairman of the House Committee

on Banking and Financial Services,

and other Members of Congress

may donate their excess campaign

funds to commission an official

portrait of the former Chairman. The

portrait will be donated to the U.S.

House of Representatives for

(continued on page 14)

13
Federal Election Commission RECORD

Advisory Opinions

(continued from page 13)

display in committee rooms (a

traditional method of honoring

former Chairmen), The proposed

use of excess campaign funds is

permissible under 2 U.S.c. §439a,

which specifically permits making

excess fund donations to organizations described in 26 U.S.c. §170(c).

This includes the United States

Government if the donation is

exclusively for public purposes. The

Commission concluded that is the

case here, assuming that the portrait

will remain the official property of

the U.S. House of Representatives in

perpetuity. See also 11CFR 113.2(b).

The Commission expressed no

opinion on the tax ramification of

the proposed activity, since those

issues are outside its jurisdiction .

Date Issued: June 30, 1995;

Length: 3 pages. •

AO 1995-20

Campaign Funds Used for

Travel Expenses of

Candidate's Family

When traveling with his wifewho is also his campaign advisoron campaign trips from Washington,

D.C., to his home district, Congressman Tim Roemer may use campaign

funds to pay for an airline ticket for

his young son even if his son does

not participate in picnics or other

campaign events. Such payments

would not constitute the personal

use of campaign funds.

While campaigns have wide

discretion in spending their funds,

they are not permitted to convert

them to personal use. 2 U.S.c.

§439a. New FEC regulations I

/ The regulations became effecti ve on

April 5, 1995. They are not included in

the 1995 edition ofFEC regulations. but

the final rules are available as reprints

ofthe Federal Register notice (60 FR

7826. February 9. 1995). Call the FEC

to order a copy, or use Flashfax (202/

501-3413 ) 10 order document #228.

/ 4

define "personal use" as the use of

campaign funds to pay for expenses

"that would exist irrespective of the

candidate's campaign or duties as a

Federal officeholder." 11 CFR

11 3.1(g). The regulations state that

the Commission will determine on a

case-by-case basis whether payment

of travel-related expenses constitutes

personal use. 11 CFR 113.1(g)(l )(ii).

In this case, the travel expenses

of the Congressman 's wife, in her

capacity as senior campaign advisor,

would clearly be campaign related,

and therefore permissible expenses.

The expenses of the Congressman' s children, however, require a

different analysis. Because of their

ages (an infant and a 2-year-old),

they need to accompany their

parents on campaign trips to the

district. The children's expenses are

therefore campaign related because

they are necessitated by the campaign trips of their parents.

Therefore, in these specific

circumstances, the use of campaign

funds to pay the travel-related

expenses of minor children accompanying their parents between

Washington, D.C., and the candidate's

home district do not constitute the

personal use of campaign funds

provided that the parents are traveling for campaign purposes.

The Commission expressed no

opinion on the tax ramifications of

the proposed activity, since those

issues are outside itsjurisdiction.

Date Issued: June 30, 1995; Length:

3 pages. •

Advisory Opinion Requests

Advisory opinion requests (AORs)

are available for review and comment in the Public Records Office.

AOR 1995-23

Use of campaign funds for legal

costs incurred by candidate (Christopher Shays; June 16, 1995; 1 page)

Augusl 1995

AOR 1995-24

Candidate committee's liquidation

of debts through sale of book

published by candidate (Robert

Palmer; June 23, 1995; 4 pages)

AOR 1995-25

Applicability of allocation rules to

party-paid advertisements advocating

the passage of partisan legislation

(Republican National Committee'

June 29, 1995; 3 pages) • '

Compliance

MURs Released to the Public

Listed below are summaries of

FEC enforcement cases (Matters

Under Review or MURs) recently

released for public review. This

listing is based on the FEC press

releases of July 5 and 11. Files on

closed MURs are available for

review in the Public Records Office.

MUR2717

Respondents: (a) Haig for President

(VA); (b) Dominic 1. Saraceno,

treasurer, Haig for President (MA);

(c) various individuals and corporations; (d) Olympic International

Bank & Trust Company (MA) and

Crown Equipment Corporation

(formerly known as Crown Controls

Corporation) (OH)

Complainant: FEC initiated (1988

Presidential audit)

Subject: Contributions in the name

of another; corporate and bank

contributions; excessive contributions

Disposition: (a) Waived further

civil prosecution in exchange for

committee's acceptance of conciliation agreement in MUR 3367; (b)

waived further civil prosecution in

exchange for Mr. Saraceno's guilty

plea in United States v. Domini c J.

Saraceno; (c) two civil penalties of

$750 and $500; various findings of

reason to believe, probable cause to
August 1995

believe and no probable cause to

believe, some knowing and willful;

took no further action in some cases

and closed the others; (d) reason to

believe but took no further action

MUR 2903

Respondents: (a) Haig for President

(VA); (b) Dominic J. Saraceno,

treasurer, Haig for President (MA);

(c) various corporations and individuals

Complainant: FEC initiated (1988

Presidential audit)

Subject: Corporate contributions;

excessive contributions; extension

of credit by bank

Disposition: (a) Waived further

civil prosecution in exchange for

committee's acceptance of conciliation agreement in MUR 3367; (b)

waived further civil prosecution in

exchange for Mr. Saraceno's guilty

plea in United States v. Dominic 1.

Saraceno; (c) two $ 1,000 civil

penalties and findings of reason to

believe but took no further action

MUR 3182/3145

Respondents: (a) Kentucky State

Democratic Central Executive

Committee, Clay Patrick, treasurer

(KY); (b) Harvey 1. Sloane, M.D.

and Sloane for Senate Committee

(1990), Victoria Buster, treasurer

(KY); (c) DNC Services Corporation, Robert T. Matsui, treasurer

(DC); (d) Association of Trial

Lawyers of America PAC, Joan C.

Pollitt, treasurer (DC); (e) Mary C.

Bingham (deceased) (KY); (f)

Association of Trial Lawyers of

America (DC); (g) Greer, Margolis,

Mitchell & Associates (DC)

Complainants: Common Cause

(DC); the Republican Party of

Kentucky, Bob Gable, Chairman

(KY)

Subject: Excessive contributions;

failure to report disbursements; use

of nonfederal funds for contributions; union contributions; failure to

allocate federallnonfederal expenses; excessive coordinated

expenditures; failure to report

coordinated expenditures properly;

exceeding annual $25,000 contribution limit

Disposition: (a-e) Reason to

believe, but took no further action;

(f-g) no reason to believe

MUR 3342/3111IDSR 90-16 J

Respondents: (a) Richard A.

Gephardt, Gephardt for President

Committee and Gephardt for

Congress Committee (S. Lee King

and John R. Tumbarello, respective

treasurers) (DC); (b) Beryl Anthony

for Congress Campaign Committee,

Joseph Hickey, treasurer (AR); (c)

Slattery for Congress Committee,

Mike Van Dyke, treasurer (KS); (d)

Iowa Democratic Party (Federal

Division), Mary Maloney, treasurer

(IA); (e) various corporations; (f)

various banks; (g) various individuals

Complainant: FEC initiated (1988

Presidential audit)

Subject: Excessive contributions;

excessive transfers between principal campaign committees of a

candidate; corporate contributions;

spending in excessof Iowa state limit;

spending in excess of candidate's

personal limit; failure to report inkind political party contribution

Disposition: (a) $80,000 civil

penalty and refund of approximately

$70,000 in excessive and prohibited

contributions; file amended reports;

(b) $1,500 civil penalty; (c) $750

civil penalty; (d) reason to believe

but took no further action; (e)

$1,900 civil penalty; findings of no

probable cause to believe and reason

to believe; took no further action;

sent admonishment letter; (f) no

I reason to believe; (g) two civil

penalties of $500 and $400 and

various findings of probable cause

to believe and reason to believe;

took no further action

J Debt Settlement Request (DSR): in this

case, the committee 's Debt Settlement

Plan was combined with these MURs.

Federal Election Commission RECORD

MUR3367

Respondents: (a) Haig for President, Dominic Saraceno, treasurer

(VA); (b) Committee for America,

Sherwood D. Goldberg, treasurer

(DC)

Complainant: FEC initiated (1988

Presidential audit)

Subject: Excessive contributions;

corporate contributions; furnishing

fictitious or fraudulent information

and falsifying information for

primary matching fund certification;

earmarked contributions

Disposition: (a-b) $60,000 civil

penalty

MUR 3476

Respondents: Democratic Federal

Campaign Committee of St. Louis

City, Bruce B. Yamplosky, treasurer

(MO)

Complainant: FEC initiated

Subject: Failure to file disclosure

reports timely; deposit of nonfederal funds in federal account

Disposition: $7,000 civil penalty

MUR3492

Respondents: (a) Jesse Jackson for

President '88 Committee, Howard

Renzi, treasurer (DC) and New

Yorkers for Jesse Jackson '8 8, J.

Wesley Parker, treasurer (NY); (b)

various individuals; (c) Apollo

Theater Patrons (NY) and various

other groups; (d) F & S Development Company (MI) and two of its

partners; (e) Capital National Bank

(M!); (f) Florida Junior College at

Jacksonville Foundation, Inc (FL);

(g) Black Ford-Lincoln-Mercury

Dealers Association, Inc. (MI); (h)

Islamic Society of North America

(IN)

Complainant: FEC initiated (1988

Presidential audit)

Subject: Excessive contributions

from individuals, unregistered

organizations and partnership;

corporate and labor contributions;

acceptance of loan not made in the

ordinary course of business; failure

to report loan and line of credit;

(continued on page 16)

15
Federal Election Commission RECORD

Information

(continued from page 17)

709. AO 1995-9

710. AO 1995-10

711. AO 1995-11

713. AO 1995-13

714. AO 1995-14

801. AO 1994-1

802. AO 1994-2

803. AO 1994-3

804. AO 1994-4

805. AO 1994-5

806. AO 1994-6

807. AO 1994-7

808. AO 1994-8

809. AO 1994-9

810. AO 1994-10

811. AO 1994-11

812. AO 1994-12

813. AO 1994-13

814. AO 1994-14

815. AO 1994-15

816. AO 1994-16

817. AO 1994-17

818. AO 1994-18

819. AO 1994-19

820. AO 1994-20

821. AO 1994-21

822. AO 1994-22

823. AO 1994-23

824. AO 1994-24

825. AO 1994-25

826. AO 1994-26

827. AO 1994-27

828. AO 1994-28

18

829. AO 1994-29

830. AO 1994-30

831. AO 1994-31

832. AO 1994-32

833. AO 1994-33

834. AO 1994-34

837. AO 1994-37

838. AO 1994-38

839. AO 1994-39

840. AO 1994-40

900. Brochure

901. AO 1993-1

902. AO 1993-2

903. AO 1993-3

904. AO 1993-4

905. AO 1993-5

906. AO 1993-6

907. AO 1993-7

908. AO 1993-8

909. AO 1993-9

910. AO 1993-10

911. AO 1993-11

912. AO 1993-12

913. AO 1993-13

914. AO 1993-14

915. AO 1993-15

916. AO 1993-16

917. AO 1993-17

918. AO 1993-18

919. AO 1993-19

920. AO 1993-20

921. AO 1993-21

922. AO 1993-22

923. AO 1993-23

924. AO 1993-24

925. AO 1993-25

August 1995

Index

The first number in each citati on

refers to the "number" (month) of

the 1995 Reco rd issue in which the

artic le appeared. The second number,

following the colon, indicates the

page number in that issue. For example, " 1:4" means that the article

is in the January issue on page 4.

Advisory Opinions

1994-33: Calling card solicitations,

3:5

1994-34: Consolidating membership

association PACs following a

merger, 3:7

1994 -35: Terminating reporting

obligations, 5:5

1994-36: Solicitation of stockholders in an employee -owned

company, 5:5

1994 -37 : Allocating between federal

and nonfederal campaigns, 3:7

1994-39: So lic itat ion of affiliates by

a membership organization, 3:8

1994-40: Storing records on micro- 4

film, 3:9

1995-1: Respondents and the

confidentiality provisions, 4:8
· August 1995

1995-2: Membership organization's

solicitation of representatives of

member firms, 6:3

1995-3: Running simultaneous

Senate and Presidential campaigns, 4:8

1995-5: Use of contributor lists

derived from FEC reports, 4:9

1995-7: Candidate's personal

liability for bank loan, 6:4

1995-8: Committee's rental of

candidate-owned office and

equipment, 6:5

1995-9: Operating a political

committee in cyberspace, 6:6

1995-10: Ownership of committee

records, 6:7

1995-11: Status of limited liability

company, 6:8

1995-12: Affiliation and cross

solicitation between trade association federation and state associa -

tions, 8:9

1995-13: Definition of member

applied to membership association,8:10

1995-14: Operating a PAC booth at

a joint convention, 8:II

1995-15: Foreign-owned subsidiary:

earmarked contributions and

payroll deductions, 8:12

1995-18: Campaign funds given for

portrait of former House Committee Chairman, 8:13

1995-20: Campaign funds used for

travel expenses of candidate's

family, 8:14

Compliance

$25,000 Annual contribution limit,

4:1

MUR 2884: Reporting misstatements and excessive contributions, 7:2

MUR 3452 : Excessive contributions,6:8

MUR 3540: Corporate facilitation, 1:2

MUR 3650 : Loan guarantors, 1:2

MUR 4016/4076: Reporting earmarked contributions, 7:2

Court Cases

FECv.

- Branstool, 6:12

- Citizens for Wofford, 6:13

- Colorado Republican Federal

Campaign Committee, 8: I

- Free the Eagle, 8:5

- Fulani (94-4461), 6:12

- Michigan Republican State

Committee, 5:4

I _ Montoya, 2:7; 5:4

- NRA Political Victory Fund, 2: I

Federal Election Commission RECORD

- National Republican Senatorial

Committee (93-1612), 4:4; 8:4

- Populist Party, 7:9

- RUFFPAC, 8:5

- Williams, 4:5

v. FEC

- Albanese, 7:8

- Condon, 3:5

- Democratic Senatorial Campaign

Committee (93-1321),1:10

- Democratic Senatorial Campaign

Committee (95-0349), 4:8

- Dukakis, 7:9

- Freedom Republicans, 2:6

- Froelich, 8:5

- Fulani (94-1593),4:6

- Lytle, I: 10,2:7

- National Republican Senatorial

Committee (94-5148), 5:4

- Robertson, 4:6

- Simon, 7:9

- Whitmore, 2:7

- Wilson, 2:7; 5: I

Mcintyre v, Ohio, 6:12

Rove v. Thornburgh, 4:7

Reports

Schedule for 1995, 1:4

800 Line Articles

Administrative termination, 2:9

Corporate facilitation, 6:I

19