May 2000 Federal Election Commission Volume 26, Number 5

Table of Contents

Regulations

1 Administrative Fines Rulemaking

1 Proposed Rules on Mandatory

Electronic Filing

3 Presidential Public Funding

Budget

4 FY 2001 Budget Testimony

Electronic Filing

4 FECFile Manual Available On

Line

Reports

5 States Certified for Filing Waiver

5 Virginia Convention Reports

Public Funding

5 Adjusted Convention Payments

11 Hagelin Certified/Additional

Matching Fund Payments

6 Advisory Opinions

Court Cases

9 Reform Party v. Gargan

Publications

10 Federal/State Disclosure Directory

Outreach

10 FEC Resumes Roundtables

10 Public Appearances

Compliance

Proposed Rules on

Mandatory Electronic Filing

On April 5, the Commission

approved a Notice of Proposed

Rulemaking (NPRM) seeking

comments on new regulations that

would require many filers to submit

their campaign finance reports

electronically.

The proposed rules, which

implement legislation passed in

1999, would mandate electronic

submissions for filers who raise or

spend—or expect to raise or

spend—$50,000 or more in a

calendar year.1

 To determine

whether a filer has reason to expect

to exceed the threshold, the proposed rules would require that filers

review their financial activity from

the comparable year of the previous

election cycle or the previous

calendar year. Though not included

in the proposed rules, the NPRM

also offers for comment a variety of

other methods, such as projecting

annual financial activity based on

the committee’s activity within each

calendar quarter. For example,

should a committee that raises or

spends $30,000 in the first quarter

be required to file electronically

Regulations

Administrative Fines

Rulemaking

On March 23, the Commission

approved a Notice of Proposed

Rulemaking (NPRM) that would

implement a new program for

assessing civil money penalties for

violations involving:

• Failure to file reports on time;

• Failure to file them at all; and

• Failure to file 48-hour notices.

What Is the Administrative Fines

Program?

Last fall, Congress1

 amended the

Federal Election Campaign Act (the

Act) to permit the FEC to impose

civil money penalties, based on a

fine schedule, for violations of

reporting requirements that occur

between January 1, 2000, and

December 31, 2001. This pilot

program is intended to streamline

the process for enforcing and

resolving reporting violations so

that, among other things, FEC

enforcement resources may be

redirected toward resolving more

complex violations.

(continued on page 2) (continued on page 4)

1

 Treasury and General Government

Appropriations Act, 2000, Pub. L. No.

106-58, 106th Cong., d640, 113 Stat.

420, 476-77 (1999).

1

 Voluntary electronic filing would

continue to be an option for any

committee whose financial activity does

not exceed the threshold.
Federal Election Commission RECORD May 2000

2

Federal Election Commission

999 E Street, NW

Washington, DC 20463

800/424-9530

202/694-1100

202/501-3413 (FEC Faxline)

202/219-3336 (TDD for the

 hearing impaired)

800/877-8339 (FIRS)

Darryl R. Wold, Chairman

Danny L. McDonald,

 Vice Chairman

Lee Ann Elliott, Commissioner

David M. Mason, Commissioner

Karl J. Sandstrom, Commissioner

Scott E. Thomas, Commissioner

James A. Pehrkon, Staff Director

Lawrence M. Noble, General

 Counsel

Published by the Information

 Division

Louise D. Wides, Director

Greg J. Scott, Editor

http://www.fec.gov

How Would the FEC Implement

the Administrative Fines

Program?

Under the proposed rules, if the

Commission found “reason to

believe” that a committee had

violated the law, the Commission

would provide written notification

to the committee containing the

factual and legal basis of its finding

and the amount of the civil money

penalty. Upon receipt of the

Commission’s written notice, the

committee would have 40 days from

the date of the reason-to-believe

finding to either pay the civil money

penalty or submit to the Commission a written response outlining the

reasons why it thought the

Commission’s finding and/or

penalty was in error. (Note that,

under these circumstances, the

committee would be required to

submit, within 20 days after the

Commission’s reason-to-believe

finding, a notice of intent to chalRegulations

(continued from page 1)

lenge the finding and/or penalty.)

The committee’s written response

would then be forwarded to an

impartial reviewing officer, who

was not involved in the original

reason-to-believe finding.

After reviewing the

Commission’s reason-to-believe

finding and the committee’s written

response, the reviewing officer

would forward a recommendation to

the Commission, along with the

original reason-to-believe finding,

the committee’s written response

and any supporting documentation.

The Commission would then make a

final determination as to whether the

committee had violated 2 USC d

434a and, if so, assess a civil

penalty based on the schedule of

penalties.

Will Committees Be Able to

Challenge the Penalties?

Yes. The amendment to the Act

requires that committees have “an

opportunity to be heard” before the

Commission makes its final determination by majority vote. The

proposed rules meet this requirement by allowing committees to

challenge the reason-to-believe

finding of the Commission and to

seek review by submitting documentation to an impartial reviewing

officer, who will make a recommendation to the Commission as to the

final determination.

Should a committee fail to pay

the civil money penalties or submit

a challenge within the original 40

days, the Commission would issue a

final determination with an appropriate civil money penalty. The

committee would then have 30 days

to pay the civil penalty or seek

judicial review through a U.S.

district court in the area where the

committee resided or conducted

business.2

What Reports Will Be Covered?

All reports that committees are

required to file will be covered

under the Administrative Fines

program. This includes semi-annual,

quarterly, monthly, pre-election, 30-

day post-general, special election

reports, as well as 48-hour notices

that candidate committees are

required to file for elections in

which the candidate participates.

What Are the Basic Factors Used

to Determine the Amount of a

Penalty?

The interaction of several factors

will determine the size of the

penalty:

1. Election sensitivity of the report;

2. Committee as late filer;

3. Committee as nonfiler;

4. The amount of financial activity

in the report; and

5. Prior civil penalties for reporting

violations.

One factor used to determine the

amount of the civil money penalty is

the election sensitivity of the report.

Under the proposed rules, the preprimary, pre-general, October

quarterly and October monthly

reports are considered to be election

sensitive. All other reports are

considered nonsensitive.

The Commission will also

consider whether the committee is a

late filer or a nonfiler. In the case of

nonsensitive reports, a committee

would be considered a late filer if it

filed its report within 30 days after

the due date, and a nonfiler if it filed

its report later than that.

In the case of election-sensitive

reports, a committee would be

considered a late filer if it filed a

report after its due date, but more

than four days before the applicable

election; a committee that filed later

than that would be considered a

nonfiler.

2

 The committee may also seek judicial

review if he/she disagrees with a

determination made by the Commission

after the committee submits a challenge.
May 2000 Federal Election Commission RECORD

3

The fourth factor is the amount of

financial activity—that is, the total

amount of receipts and disbursements in the report.

The final factor is the existence

of prior civil penalties for reporting

violations under the administrative

fines program.

What Is the Schedule of

Penalties?

The NPRM proposes a schedule

of penalties, which takes into

account the factors described above.

For Reports Other Than 48-Hour

Notices

The calculation of the civil

money penalties for late filers and

nonfilers of reports, other than 48-

hour notices, would have four

components, as described below.

1. Base Amount for Late Filers.

The base amount of the civil

money penalty would depend on the

total amount of financial activity in

the report and the election sensitivity of the report. Penalties would

range from $100 to $5,000 for

nonsensitive reports and from $150

to $7,500 for election-sensitive

reports.

2. Amount Based on Level of

Financial Activity for Late Filers.

The second component would be

calculated by multiplying a set

amount based on the financial

activity in the report by the number

of days the report is filed late (up to

30 days). Penalties would range

from $25 to $200 per day.

3. Set Amount for Nonfilers.

The third component would be a

set amount for nonfilers. It would

depend on both the election sensitivity of the nonfiled report and the

estimated level of activity based on

average activity in the current or

prior two-year election cycle.

Penalties would range from $1,600

to $17,000 for nonsensitive reports

and from $1,650 to $19,500 for

election-sensitive reports.

4. Additional Premium for Prior

Civil Money Penalties.

The fourth component would be

an additional premium for prior civil

money penalties assessed against a

committee for failure to file timely

reports. The premium would be

equal to 25 percent of the civil

penalty times the number of civil

money penalties assessed during the

previous and current two-year

election cycles under the administrative fines program.

For 48-Hour Notices

The calculation of the civil

money penalties for committees

which fail to file timely 48-hour

notices would be $100 for each

nonfiled notice plus 15 percent of

the dollar amount of the contributions not timely reported. The civil

money penalty would increase by 25

percent for each time a prior civil

money penalty was assessed during

the previous and current two-year

election cycles under the administrative fines program.

What Happens if the Committee

Does Not Pay the Penalty?

The FEC would transfer unpaid

civil money penalties to the U.S.

Department of the Treasury for

collection.3

 However, the Commission might decide in certain cases

that, instead of transferring the

unpaid amount of the civil money

penalty to the U.S. Treasury, it

would file suit in the appropriate

U.S. district court to collect owed

civil money penalties, under 2

U.S.C. §437g(a)(6).

When Does the Commission Plan

to Begin This Program?

The Commission hopes to submit

final rules to Congress this month in

anticipation of a July 2000 effective

date. If this occurs, the new fine

program would begin with the July

Quarterly Reports.

Comments

The NPRM, published in the

Federal Register on March 29,

2000, provides greater detail about

the new proposal. A copy of that

document is available:

• From the Public Records Office at

800/424-9530 (press 3),

• Through the FEC’c Faxline at 202/

501-3413 (request document 247)

and

• At the FEC’s web site - http://

www.fec.gov.

All comments were to be addressed to Rosemary C. Smith,

Assistant General Counsel, in either

written or electronic form, by April

28, 2000.✦

3

 In compliance with the Debt Collection Improvement Act of 1996 (31

U.S.C.d 3711 (g)).

Audit Procedures, Primary/

General “Bright Line” and

Vice Presidential Committee

Rules Take Effect

Revised regulations governing

certain aspects of the public funding

of Presidential primary and general

election campaigns took effect April

19, 2000. See Federal Register

Announcement of Effective Date

(65 FR 20893, April 19, 2000).

The rules modify the Presidential

audit procedures to include Commission approval of the Preliminary

Audit Report. They also address the

“bright line” between primary and

general election expenses, and the

formation of Vice Presidential

committees prior to the nomination

of the Presidential and Vice Presidential candidates.

See page 7 of the December 1999

Record for a more detailed description of the revised regulations. Free

copies of the final rules as they

appeared in the Federal Register (64

FR 61777, November 15, 1999) are

available through the FEC Faxline.

Dial 202/501-3413 and request

document 245.✦
Federal Election Commission RECORD May 2000

4

since it could reasonably expect to

exceed the $50,000 threshold for the

year?

Once a filer exceeds, or expects

to exceed, the threshold they would

begin filing electronically with their

next scheduled report and would be

required to continue filing electronically all reports covering financial

activity occurring during the remainder of the calendar year. The

proposed rules would not require

filers to electronically resubmit

documents that were properly filed

on paper earlier in the calendar year

or election cycle. For example, if an

authorized committee filed its April

quarterly report on paper, then

exceeded the $50,000 threshold in

June, the committee would have to

file its July quarterly report electronically, but would not need to

resubmit its April quarterly in

electronic form. Note, however, that

if a committee submitted a report on

paper that should have been filed

electronically, the Commission

would treat it as a nonfiler, possibly

subject to enforcement action.

Whatever final rules the Commission adopts will take effect for

reporting periods beginning on or

after January 1, 2001, and will apply

to all committees and other persons

who file with the FEC. This excludes Senate candidates because

they file their reports with the

Secretary of the Senate.2

 The

Regulations

(continued from page 1)

mandatory electronic filing requirements will apply not only to reports

of receipts and disbursements, but

also to Statements of Candidacy,

Statements of Organization and any

other filing required by the Federal

Election Campaign Act.3

Based on analysis of filings from

previous election cycles, the Commission believes that the proposed

$50,000 threshold would capture the

bulk of campaign finance activity

without unduly burdening smaller

committees.4

 However, the Commission welcomes suggestions for

alternative threshold amounts and

applications.

The NPRM is available from the

Public Records Office at 800/424-

9530 (press 3) or 202/694-1120;

through the FEC’s Faxline at 202/

501-3413 (document 227); and on

the FEC’s Web site—http://

www.fec.gov. The notice was

published in the Federal Register on

April 11. (65 FR 19339, April 11,

2000).

All comments should be addressed to Rosemary C. Smith,

Assistant General Counsel, and

must be submitted in either written

or electronic form. Written comments should be sent to the Federal

Election Commission, 999 E Street,

N.W., Washington, D.C. 20463.

Faxed comments should be sent to

202/219-3923, with a printed copy

follow-up to insure legibility.

3

 Please note that the FEC’s computer

system can currently accept all required forms if they are properly

formatted. The Commission’s FECFile

software, available from the FEC at no

cost, currently generates Forms 3 and

3X, and soon will generate Forms 1, 2,

3P, 4, 5 and 7.

4

 Based on data from the 1996 and

1998 election cycles, the $50,000

threshold would capture between 85

and 99 percent of all financial activity,

yet affect only between 15 and 44

percent of committees. These percentages vary depending, in part, on the

type of committee.

Electronic mail comments should be

sent to electronfile@fec.gov. Those

sending comments by electronic

mail should include their full name,

electronic mail address and postal

service address within the text of

their comments. Comments that do

not contain the full name, electronic

mail address and postal service

address of the commenter will not

be considered. No oral comments

can be accepted. The deadline for

comments is May 11, 2000.✦

FECFile Help on Web

 The manual for the Commission’s FECFile 3 electronic filing

software is now available on the

FEC’s web site. You can download a PDF version of the manual

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

fecfile3.pdf.

2

 Senate candidates may file an

unofficial copy of their reports with the

FEC to expedite disclosure.

FEC Testifies Before House

Appropriations Committee

FEC Vice Chairman Danny

McDonald presented the FEC’s

request to members of a House

appropriations subcommittee for a

$40.96 million budget for fiscal year

2001, a modest 7 percent increase

over the FEC’s current budget. The

increase is needed largely to cover

inflation in operating costs, but

would also provide additional

resources in core program areas.

Mr. McDonald, who appeared

March 22 before the House Appropriations Subcommittee on Treasury, Postal Service and General

Government, noted that the

Commission’s request matches the

Office of Management and Budget’s

proposed funding level of $40.5

million and 352 personnel (full-time

equivalent or FTE), plus a request

for an additional $460,000 to

support four additional FTE for the

Commissioners’ offices.

The increased funding would,

among other things, permit the

agency to complete its Voting

System Standards (VSS) update, to

hold a national conference on the

revised VSS and to continue to

image and index its legal documents.

A news release about the FEC’s

budget request is available at http://

www.fec.gov.✦

Budget
May 2000 Federal Election Commission RECORD

5

Virginia Convention Reports*

Democratic Party

Election Day Close of Books Mailing Date Filing Date 48-Hour Notice

Period

House Districts May 20 April 30 May 5 May 8 May 1 - 17

1, 5, 8, 9, 10, 11

House District 2 May 13 April 23 April 28 May 1 April 24 - May 10

House Districts 6, 7 Convention Dates Pending

Republican Party

Election Day Close of Books Mailing Date Filing Date 48-Hour Notice

Period

House Districts May 20 April 30 May 5 May 8 May 1 - 17

3, 4, 8

House Districts 5, 6 May 13 April 23 April 28 May 1 April 24 - May 10

House District 9 May 27 May 7 May 12 May 15 May 8 - 24

* Virginia will hold a primary election on June 13 for U.S. Senate candidates and House candidates in districts other than those

listed in this chart. See the January Record for reporting dates.

Reports

Three More States Certified

for Filing Waiver

On April 10, 2000, the Commission certified that Minnesota, North

Carolina and South Carolina qualify

for state filing waivers. This brings the

total number of states certified to 43.1

In the certified states, the public

will now be able to review and copy

campaign finance reports of most

federal candidates by accessing the

FEC’s Web site on computers

located in the state’s campaign

finance records office.

Under the State Filing Waiver

Program, states that meet certain

criteria set out by the Commission

no longer have to receive and

maintain paper copies of most FEC

1

 The Commission previously certified

Alabama, American Samoa, Arkansas,

California, Colorado, Connecticut,

Delaware, Florida, Hawaii, Idaho,

Illinois, Indiana, Kansas, Kentucky,

Maine, Maryland, Michigan, Missouri,

Nebraska, New Hampshire, New

Jersey, New Mexico, New York, North

Dakota, Ohio, Oklahoma, Oregon ,

Pennsylvania, Rhode Island, South

Dakota, Tennessee, Texas, Utah,

Vermont, Virginia, Virgin Islands,

Washington, West Virginia, Wisconsin

and Wyoming.

reports. Additionally, most committees no longer have to file copies of

their reports in the certified states.

Note that the waiver does not apply

to reports filed by Senate campaigns

because those reports are not

currently available on the FEC’s

Web site. ✦

Public Funding

Adjusted Public Funding

Payment for Conventions

On March 28, the Commission

approved an additional public

funding payment of $288,000 for

each of the major parties’ 2000

presidential nominating conventions. This additional payment

reflects an adjustment in the consumer price index. With this payment, the Democratic and

Republican convention committees

have each received their full public

funding entitlement of

$13,512,000.✦

(continued on page 11)
Federal Election Commission RECORD May 2000

6

AO 1999-40

Solicitation of Members of

Rural Electric Cooperatives

The Action Committee for Rural

Electrification (ACRE), a separate

segregated fund (SSF) sponsored by

the National Rural Electric Cooperative Association (NRECA), may

solicit the members of NRECA’s

distribution cooperatives and may

use the cooperatives’ billing systems

to collect voluntary contributions.

Background and Proposal

NRECA is a nonprofit cooperative whose members comprise rural

electric systems in 46 states. Among

NRECA’s members are local

distribution cooperatives,1

 who

provide retail electricity to consumers. The consumers, most of whom

are individuals, pay a membership

fee to belong to the local distribution cooperative, and are billed

monthly for the electrical services it

provides.

NRECA proposes soliciting the

local distribution cooperatives’

individual members for contributions to ACRE, and to ask the local

cooperatives to collect the contributions. The solicitations would take

one of two forms. One would

request members to pre-authorize

the local cooperative to include, on

the monthly bill to the member, a

line item for the amount of a preauthorized ACRE contribution. The

other would ask members to authorize the cooperative to deduct an

ACRE contribution from the

Advisory

Opinions

member’s “capital credits.” Capital

credits are reimbursements the local

cooperative pays its customers when

the cooperative’s income exceeds its

operating costs. They are usually

paid on an annual basis.

Affiliation and Membership

Under 11 CFR 114.7(k)(1),2

NRECA and its local cooperatives

are affiliated membership organizations. Based on an analysis of the

regulatory definition of “member,”3

the local distribution cooperatives

qualify as NRECA members by

affirmatively deciding to become

members and by paying annual predetermined dues. In turn, the

consumers who purchase electricity

from the local distribution cooperatives qualify as members by affirmatively deciding to become

members, affirming the membership

frequently through the payment of

monthly electric bills and by having

the ability to vote directly for the

cooperative’s board of directors.

Since the distribution cooperatives are local affiliates of NRECA,

their members may be solicited for

contributions to ACRE, and they

may act as collecting agents for

these contributions. As collecting

agents, the cooperatives may pay all

the costs of soliciting and transmitting the contributions to ACRE. 11

CFR 102.6(c)(2)(i).

Solicitation Programs

Under the Commission’s collecting agent regulations, a contributor

may combine a payment of dues or

other fees with a contribution to the

SSF, so long as the contribution

represents the personal funds of the

contributor. 11 CFR 102.6(c)(3).

Given that fact, NRECA may

implement the first proposal, a

program for a combined payment of

monthly electrical charges and a

contribution to ACRE.

In implementing the program, the

local cooperatives, acting as collecting agents, must transmit the

contributions and contributor

information to ACRE within

specific time frames. They must

forward contributions of $50 or less

within 30 days of receipt, and

contributions of more than $50,

within 10 days. 11 CFR 102.6(c)(4).

They must also provide the name

and address of contributors who

give more than $50, and must

additionally provide the occupation

and employer for contributors who

give more than $200. 11 CFR

102.8(b)(1) and (2). Before forwarding the contributions to ACRE, the

cooperatives, functioning as collecting agents, may temporarily deposit

the funds in either a separate

transmittal account or in their own

treasury so long as they keep

separate records of all receipts and

deposits that represent contributions

to ACRE.

With regard to the second

proposal, NRECA may seek preauthorization to deduct ACRE

contributions from individual

members’ capital credits. The

Commission conditioned its approval on several factors:

• The cooperative should explicitly

solicit for this type of deduction;

1

 Local distributors, the focus of this

opinion, are one of three types of

NRECA members, each of which pays

annual dues and has voting rights. The

other two categories are referred to as

generation and transmission members

and service members.

2

 11 CFR 114.7(k)(1) provides that the

local, regional and state affiliates of a

federated or rural cooperative are

affiliated.

3

 Under FEC regulations, the term

“members” includes all persons who

satisfy the requirements for membership in a membership organization,

affirmatively accept the organization’s

invitation to become a member, and

either:

•Have a significant financial attachment to the organization; or

• Pay dues at least annually, of a

specific predetermined amount; or

• Have significant organizational

attachment to the organization,

including: annual affirmation of

membership and voting rights.

11 CFR 114.1(e)(2)(i)-(iii).
May 2000 Federal Election Commission RECORD

7

• If NRECA pairs a solicitation for

capital credits with a solicitation

for the combined dues/payment

program, it should request a

separate authorization for each

program; and

• The bill or other document that

informs members of their capital

credits must explicitly denote the

deduction of their pre-authorized

ACRE contribution.

The Commission further conditioned its approval of both solicitation programs on NRECA’s pledge

to employ safeguards to prevent

ACRE from accepting corporate

contributions. Among them, the

local cooperatives will require

donors to affirm that a check

comprising both a bill payment and

an ACRE contribution is made with

personal funds. In addition, ACRE

solicitations will inform members of

the corporate prohibition and other

prohibitions of federal election law.

The Commission also emphasized

that all solicitations must comply

with the voluntariness requirements

set out at 11 CFR 114.5(a)(1)-(5).4

Date Issued: March 20, 2000;

Length: 11 pages.✦

4

 Contributions are considered voluntary if, among other things, the contributors have not been threatened in

any way, have been informed of their

right to refuse to contribute without

reprisal, have been told about the

political purpose of the SSF and that

any contribution guideline is merely a

suggestion.

AO 2000-2

Campaign Rental of

Candidate-Owned Office

The Rick Hubbard for U.S.

Senate committee may rent candidate-owned office space and equipment without violating the ban on

the conversion of campaign funds to

personal use, even though the office

is located in the same building as

the candidate’s residence.

For several years, Rick Hubbard

has worked as an attorney in Stowe,

Vermont. He rents the top 1 1/2

floors of a three-story commercial

building; that space houses both his

law offices and his residence.

Mr. Hubbard has consistently

divided tax, utility and rental

payments 50/50 between his law

practice and his personal residence.

The law practice owns all of the

office equipment.

Mr. Hubbard is now using his

office space and equipment for his

U.S. Senate campaign. Aside from

performing occasional legal work

for existing clients, Mr. Hubbard

has been—and plans to continue—

working full time on his campaign.

Based on the campaign’s use of

his office space, Mr. Hubbard

proposes that his campaign committee reimburse him for 75 percent of

the rent for office space and 75

percent of the typical rental value of

furnishings and equipment of

comparable age and serviceability as

his own. Mr. Hubbard himself will

continue to pay all rent and utility

costs associated with the residential

portion of the property.

Although the Commission has

long held that candidates have wide

discretion over how they choose to

spend their campaign funds, the Act

and FEC regulations prohibit the

conversion of those funds to the

personal use of a candidate or any

other person. 2 U.S.C. §439a; 11

CFR 113.2(d).

Commission regulations define

“personal use” to include the use of

campaign funds for any expense that

would “exist irrespective of the

candidate’s campaign or duties as a

Federal officeholder.” 11 CFR

113.1(g). The regulations go on to

specifically state that mortgage, rent

or utility payments by the campaign

for any part of a candidate’s residence is a personal use. Campaign

payments for use of “real or personal property that is owned by the

candidate or a member of the

candidate’s family” is also a personal use to the extent that it

exceeds “the fair market value of the

property usage.” 11 CFR

113.1(g)(1)(i)(E)(1) and (2).

The Commission’s Explanation

and Justification of these regulations

explains that, while the personal use

rules prevent a campaign from

renting space in a candidate’s

residence, the campaign may rent

space in other buildings owned by

the candidate so long as the campaign pays no more than the fair

market value.

Despite the fact that Mr.

Hubbard’s office space is in the

same building as his residence, his

campaign may nonetheless rent the

space and pay utility costs as

described in the proposal. The

Commission based this conclusion

on several factors:

• The dual use of the property, as

both office space and a residence,

predates Mr. Hubbard’s candidacy

by several years, and the premises

are located in a commercial

building.

• The premises serve as Mr.

Hubbard’s sole office space, and

the tax treatment of the rent has

reflected the office residence

division.

• Campaign funds will apply only to

the portion of rent that Mr.

Hubbard previously ascribed to his

law office use.

For these reasons, the Rick

Hubbard for U.S. Senate campaign

may pay rent, utility and equipment

costs for Mr. Hubbard’s office

space, as long as the payments do

not exceed the usual and normal

charge, based on the percentages

Mr. Hubbard suggests.

Date: March 17, 2000; Length: 4

pages.✦
Federal Election Commission RECORD May 2000

8

Advisory Opinions

(continued from page 7)

AO 2000-03

PAC’s Payment for

Corporate Communication

The American Society of Anesthesiologists Political Action

Committee (ASAPAC), the separate

segregated fund (SSF) of ASA, may

pay for receptions involving partisan

appearances by federal candidates

before the association’s members

without treating the payments as

contributions or expenditures.

Background

 ASAPAC plans to host candidate

receptions at meetings and conventions of ASA members. At these

receptions, ASAPAC will expressly

advocate the election of the invited

House and Senate candidates, and

will encourage ASA members to

contribute to the candidates’ campaigns. In addition, the candidates

and their campaign staff will be

permitted to solicit and collect

contributions. ASAPAC plans to

pay for the receptions.

Analysis

Although FEC regulations

prohibit corporations from making

contributions or expenditures in

connection with federal elections,

the regulations contain an exemption to the definition of contribution

or expenditure that would permit

ASA to host the proposed receptions. Specifically, 11 CFR 114.3(a)

permits a corporation (including an

incorporated trade association) to

bear the costs of communicating

with its restricted class on any

subject, including candidate advocacy. In the case of a membership

organization such as ASA, that

restricted class includes the

organization’s executive and

administrative personnel and

members. Thus, under this exemption, ASA itself could defray the

costs of the proposed candidate

receptions, reporting its payments

on FEC Form 7 once the payments

exceeded $2,000 with respect to any

election. 11 CFR 104.6(a).

Because a corporation may

exercise control over its SSF,1

 any

payments made by the SSF that

could be made by the parent corporation are considered to be payments

on behalf of, or as part of, the

corporation and hence, tantamount

to payments by the corporation.

Consequently, ASAPAC may

engage in the same exempt communications activities permitted to

ASA under FEC regulations and

may pay for the costs of the receptions. Despite the fact that

ASAPAC, rather than ASA, will

finance the receptions, the payments

will fall within the communicationcosts exemption and, therefore, will

not be considered contributions or

expenditures in support of the

participating candidates.

Reporting

ASAPAC will report the payments as “other disbursements” on

its FEC reports. Since the PAC

rather than the association is reporting the payments, the $2,000

reporting threshold (noted above)

will not apply. If the payments to a

person, such as a vendor, exceed

$200, and thus require itemization

on a Schedule B, ASAPAC should

describe the type of expense, name

the candidate making the appearance and indicate that the purpose of

the payment is an internal communication to ASA’s members.

ASAPAC should also make reference to this advisory opinion in any

report that includes such disbursements.

Date Issued: March 17, 2000;

Length: 5 pages.✦

AO 2000-4

Automatic Deductions for

Credit Union PAC

The National Association of

Federal Credit Unions (NAFCU)

may solicit contributions for

NAFCU/PAC from share account

holders in member credit unions.

The credit unions may deduct the

resulting pre-authorized contributions from the donors’ accounts,

screen them for permissibility and

transmit them to NAFCU/PAC. The

costs of screening and transmitting

the contributions may be treated as

legal and accounting services

provided by the employees of the

credit union or as exempt administrative costs paid by NAFCU.

NAFCU is a trade association

whose members are incorporated

credit unions. While the Federal

Election Campaign Act and FEC

regulations permit trade associations

to solicit stockholders of the corporate members for contributions to

the trade association PAC (provided

the members give prior approval),

the law is silent on whether corporate members can solicit their own

members for these contributions. In

this case, however, individual

account holders at these credit

unions have rights of governance

and equity ownership in the credit

unions that qualify them not merely

as members or depositors, but also

as stockholders, for purposes of

FEC regulations. Consequently,

NAFCU may—with prior approval

from the member credit unions—

solicit their share account holders.

NAFCU’s member credit unions

do not appear to qualify as local

units or affiliates of the association,

under 11 CFR 100.5(g). As a result,

they cannot serve as “collecting

agents” for NAFCU/PAC. However,

as depository institutions, the credit

unions may—like any other bank—

process pre-authorized deductions

from their depositors’ accounts,

including those representing contributions to NAFCU/PAC. 1

 11 CFR 114.5(d)
May 2000 Federal Election Commission RECORD

9

The credit unions may also screen

NAFCU/PAC contributions to

ensure that they are not deducted

from accounts that would fall below

required minimum balances and that

the contributions come from accounts that are owned by persons

who may lawfully contribute. These

activities may be treated either as

exempt legal and accounting

services provided by credit union

employees or as exempt administrative expenses paid by NAFCU.

Under FEC regulations, legal and

accounting services provided to a

political committee are not considered contributions if the person

paying for the services is the regular

employer of the individual providing them and the services are

provided solely to ensure compliance with the federal election laws.

11 CFR 100.7(b)(14). Nevertheless,

the political committee must report,

as a memo entry on Schedule A, the

amounts the employer paid for the

services, the dates the services were

provided and the names of the

persons providing them. 11 CFR

104.3(h). Given the number of

credit unions that might provide

such services for NAFCU/PAC (up

to 1,100), the PAC need only report

the information on its year-end

report. It should include the total

yearly amount spent by the credit

unions and the names of the participating credit unions and, for each

credit union, the employees providing the services, along with the time

period in which the services were

provided.

As an alternative, NAFCU may

treat these expenses as exempt

administrative costs under 2 U.S.C.

§441b(b)(2)(C) if it pays the credit

unions for them. NAFCU may

periodically pay the credit unions

for the actual costs they incur, or it

may enter into a contract with them

based on estimated costs anticipated

for a specific time period.

The Commission conditioned its

approval of the program on compliance with the voluntariness requirements set out at 11 CFR

114.5(a)(1)-(5). These requirements

include informing the solicitee of

the political purpose of the PAC,

that the solicitee is free to contribute

more or less than any suggested

guideline, that the solicitee will not

be favored or disadvantaged by

reason of the amount of the contribution or decision not to contribute,

and that the solicitee is free to

contribute or refuse to contribute

without reprisal.

Date issued: March 17, 2000;

Length: 9 pages.✦

Advisory Opinion Requests

AOR 2000-5

Application of $25,000 annual

contribution limit to Indian tribe

(Oneida Nation of New York,

March 30, 2000)

AOR 2000-6

Use of public funds to develop

voter base and conduct balloting

prior to minor party Presidential

nominating convention (Reform

Party of the USA, April 18, 2000)

AOR 2000-7

Corporate PAC’s use of intranet

and e-mail to disseminate information and solicit contributions

(Alcatel USA, Inc., April 19, 2000)

AOR 2000-8

Donations by individual to

candidates solely to defray their

living expenses during campaign

(Philip D. Harvey, April 26, 2000)✦

Reform Party of the USA v.

John J. Gargan

On March 27, 2000, the U.S.

District Court for the Western

District of Virginia, Lynchburg

Division, resolved a Reform Party

leadership dispute.

Court Cases

The court previously had ordered

the Reform Party to transfer to the

registry of the court approximately

$2.5 million in public funds—funds

that the Party had received to

finance its 2000 Presidential nominating convention. Once the court

determined the rightful leadership of

the Party, the funds were to be

returned to the Reform Party.

In its decision, the court concluded that members of the National

Committee of the Reform Party had

duly removed John J. Gargan and

Ronn Young as Party Chairman and

Treasurer, respectively, at a Nashville, Tennessee, meeting on February 12, 2000. The members voted to

replace them with Pat Choate and

Tom McLaughlin as Interim Party

Chairman and Treasurer, respectively. As a result, the court enjoined Mr. Gargan and Mr. Young

from acting as officers or authorized

representatives of the Reform Party,

including its Convention Committee.

Having resolved the leadership

dispute, the court ordered that the

public funds for the Party’s Presidential nominating convention

should be released to Gerald Moan,

the duly appointed Chairman of the

Party’s convention committee.

Based on an amicus brief filed by

the Federal Election Commission

(FEC), which took no position on

the leadership dispute, the court

conditioned the release of the funds

on the Party’s written acknowledgment of its obligations to comply

with the agreements it had filed with

the FEC pursuant to 11 CFR

9008.3(a)(1). The court required the

Party to deposit and maintain the

public funds in an account registered with the FEC, and to notify the

Commission of any changes to the

information the Party provided in its

original application for public funds.

The court also ordered Mr.

Gargan and Mr. Young to turn over

all documentation regarding convention funding and disbursements

made by the Convention Committee
Federal Election Commission RECORD May 2000

10

Disclosure Directory of

Federal and State Election

Offices Available

The Combined Federal/State

Disclosure and Election Directory

2000, which lists national and state

agencies responsible for public

disclosure of financial- and electionrelated filings for candidates and

officeholders, is now available.

The publication contains information concerning state responsibilities

in the areas of campaign finances,

candidates on the ballot, election

results, lobbying, personal finances,

public financing, spending on state

initiatives and other financial

filings. It also includes e-mail and

home page addresses for agencies

that have a presence on the Internet.

The directory is available at the

FEC’s web site—http://

www.fec.gov—and includes links to

many of the other agencies listed in

the publication. The web edition of

the directory will be updated

periodically throughout the year.

The directory is also available on

3.5-inch diskettes. Paper copies of

the 2000 edition, which are free, can

be ordered from the Public Records

office by calling 800/424-9530

(press 3) or 202/694-1120.✦

Publications

(or on its behalf) to the Reform

Party in anticipation of the required

post-convention audit by the FEC.

On March 29, 2000, the court

received the Party’s written acknowledgment of its obligations,

and the court subsequently released

the public funds.

U.S. District Court for the

Western District of Virginia,

Lynchburg Division,

No.6:00CV00014 ✦

FEC Resumes Roundtables

The FEC has announced its

schedule of roundtable sessions for

the summer.

FEC roundtables, limited to 12

participants per session, focus on a

range of subjects. See the table

below for dates and topics. All

roundtables are conducted at the

FEC’s headquarters in Washington,

D.C.

Outreach

Date Subject Intended Audience

Roundtable Schedule

August 2 Update on New and Proposed • PACs

9:30 - 11 a.m. FEC Filing Regulations • House and Senate

• State Filing Waiver Campaigns

• Mandatory Electronic Filing • Political Party

• Administrative Fines Committees

for Reporting Violations • Lawyers, Accountants

• Election Cycle Reporting and Consultants to

Above

June 7 Partner/Partnership • Partnerships

9:30 - 11 a.m. Federal Election Activity • Lawyers, Accountants

and Consultants to

Above

Registration is $25 and will be

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

before registering or sending money

to be sure that openings remain in

the session of your choice. Prepayment is required. The registration

form is available at the FEC’s Web

site—http://www.fec.gov—and

from Faxline, the FEC’s automated

fax system (202/501-3413, request

document 590). For more information, call 800/424-9530 (Ext. 1100)

or 202/694-1100.✦

Public Appearances

May 3, 2000

National Democratic Institute for

International Affairs

Washington, D.C.

Commissioner Scott Thomas

May 3, 2000

American Society of Association

Executives

Washington, D.C.

Chairman Darryl Wold

May 4, 2000

Elections Canada

Washington, D.C.

Lawrence Noble

Bob Biersack

May 7, 2000

Robert Wood Johnson Executive

Nurse Fellows Program

Washington, D.C.

Vice Chairman McDonald

May 10-11, 2000

Minnesota Institute of Legal

Education

Bloomington, Minnesota

N. Bradley Litchfield
May 2000 Federal Election Commission RECORD

11

FEC Certifies Hagelin and

Approves Additional

Matching Funds

On March 31, the FEC certified

John Hagelin, a candidate of the

Natural Law Party, as eligible for

federal matching funds, and authorized an initial payment of $100,000

to his campaign.

The Commission approved an

additional $5,787,098.82 in matching fund payments to six other

Presidential candidates. With these

latest certifications, the FEC has

now declared nine candidates

eligible to receive a total of

$49,099,463.81 in federal matching

funds for the 2000 election.

Due to a shortfall in the Presidential Election Campaign Fund, the

U.S. Treasury Department has been

making partial payments to the

qualified candidates, based on the

Commission’s certifications. The

chart below lists the most recent

certifications and cumulative

payments for each candidate.✦

Matching Funds for 2000 Presidential Candidates:

March Certification

Candidate Certification Cumulative

 March 2000 Certifications

Gary L. Bauer (R) 1 $130,795.85 $4,550,189.03

Bill Bradley (D) 2 $849,553.36 $12,112,743.27

Patrick J. Buchanan (Reform) $174,185.04 $3,330,127.03

Al Gore (D) $718,484.81 $13,126,047.00

John Hagelin (Natural Law) $100,000.00 $100,000.00

Alan L. Keyes (R)3 $254,281.07 $2,232,486.17

Lyndon H. LaRouche, Jr. (D) 4 $0.00 $901,338.93

John S. McCain (R) 5 $3,659,798.69 $10,644,007.38

Dan Quayle(R) 6 $0.00 $2,102,525.00

1 Gary L Bauer publicly withdrew from the race on February 4, 2000.

2 Bill Bradley publicly withdrew from the race on March 9, 2000.

3 Alan L. Keyes became ineligible for matching funds on April 20, 2000.

4

 Lyndon H. LaRouche, Jr. became ineligible for matching funds on March 6, 2000.

5 John S. McCain publicly withdrew on March 9, 2000.

6 Dan Quayle publicly withdrew from the race on September 27, 1999.

Public Funding

(continued from page 5)

The first number in each citation

refers to the “number” (month) of

the 2000 Record issue in which the

article appeared. The second

number, following the colon,

indicates the page number in that

issue. For example, “3:4” means

that the article is in the March issue

on page 4.

Advisory Opinions

1999-24: Web site sponsored by

LLC featuring information on

candidates, 1:17

1999-29: Fundraising exemption

from state limits for direct mailing

by Presidential committee, 1:19

Index 1999-30: Application of allocation

ratio in state with single house

legislature, 1:20

1999-31: Application of one-third

rule to prizes and premiums used

in connection with payroll

deduction, 1:21

1999-32: Indian tribe’s utility

authority treated as separate from

the tribe, 3:4

1999-33: Delayed transmittal of

payroll deductions, 3:5

1999-34: Use of campaign funds to

finance charity event, 2:2

1999-35: Soliciting for SSF through

electronic deduction system, 2:4

1999-36: Fundraising via electronic

checks and Internet fund transfers,

3:5

1999-37: PAC distribution of

express advocacy communications through Web site and email, 4:1

1999-39: Disaffiliation of SSFs after

corporate restructuring, 4:5

1999-40: Solicitation of Members of

Rural Electric Cooperatives, 5:6

2000-1: Paid leave of absence for

attorney seeking federal office,

4:5

2000-2: Campaign rental of candidate-owned office, 5:7

2000-3: PAC’s payment for corporate communication, 5:8

2000-4: Automatic Deductions for

Credit Union PAC, 5:8
FEDERAL ELECTION COMMISSION

999 E Street, NW

Washington, DC 20463

Official Business

Penalty for Private Use, $300

Bulk Rate Mail

Postage and Fees Paid

Federal Election Commission

Permit Number G-31

Printed on recycled paper

Federal Election Commission RECORD May 2000

Compliance

MUR 3774: Failure to allocate

expenses between federal and

nonfederal accounts for get-outthe-vote drive conducted by third

party, 3:3

MURs 4322 and 4650: Violations

by candidate, campaign committees, treasurer and relative, 2:1

MUR 4648: Failure to disclose

purpose of expenditures and other

violations, 3:4

Court Cases

_____ v. FEC

– Christine Beaumont, et al., 3:9

– DNC, 4:6

– DSCC, 1:2

– Virginia Society for Human Life,

Inc., 3:8

FEC v. _____

– Christian Coalition, 4:7

– Friend for Fasi, 3:9

Other

– Fireman v. USA, 1:13

– Mariani v. USA, 1:3

– Reform Party v. Gargan, 5:9

– Shrink PAC v. Nixon, 3:7

Regulations

Administrative Fines, 5:1

Coordination, 1:14; 4:3

Electronic Filing, 5:1

Electronic Freedom of Information

Act, 4:1

Express Advocacy, 4:2

Presidential Public Funding, 5:3

Repayments by Federally Financed

Presidential Primary Campaign

Committees, 4:2

State Waivers, 4:3

Reports

Reports due in 2000, 1:5

State Filing Waiver, 1:2; 2:5, 4:3, 5:5

Virginia Convention Reports, 5:5

Administrative Fines

The Federal Election Commission

plans to implement a new

Administrative Fines Program.

Failure to file reports on time

could result in fines ranging from

$125 to $19,500.

Details on this new program are

available on page 1.