January 1999 Federal Election Commission Volume 25, Number 1

Table of Contents

1 A Message from the Chairman

Commissioners

2 New Chairman and Vice

Chairman Elected

Court Cases

2 RNC v. FEC (98-5263)

3 Judd v. FEC

3 Cincinnati v. Kruse; Burris v.

Russell

Reports

4 Reports Due in 1999

6 Electronic Filing Help for

Committees Using Commercial

Software

Regulations

7 Commission Seeks Comments

About Changes to Public Funding

Regulations

10 Commission Publishes Rulemaking

Notice on “Member” Regulations

11 Commission Seeks Comments on

Regulations for LLCs, Subchapter

S Corporations

12 Commission Hears Soft Money

Testimony

12 Federal Register

Compliance

13 MUR 4750

13 MUR 4796

Information

14 FEC Launches Monthly

Roundtable Sessions

16 Advisory Opinions

800 Line

17 Use of Campaign Funds for

Swearing-in Reception

17 Preparing for the Next Election

Cycle

19 Index

A Message from the Chairman

As we approach the new millennium, the FEC must not only address

familiar tasks, but face new and fresh challenges.

Unprecedented spending by PACs and other political committees during

the 1996 and 1998 election cycles has left a great deal of work in its wake.

Audit and enforcement matters arising from those elections still confront us

and must be concluded.

At the same time, the Commission must prepare for the future. The Y2K

problem, preparation for the 2000 presidential election, uncertainties in the

public funding program, and a host of other matters will command the

Commission’s attention in 1999.

The Commission and its highly qualified staff also will strive to maintain a

high level of responsiveness to your questions and informational needs. We

hope you will continue to use our web site (http://www.fec.gov), toll free

number (800/424-9530) and FEC Faxline, the automated fax-on-demand

system through which many FEC publications and other materials are

available (202/501-3413).

The growing workload and increased responsibilities facing the Commission in 1999 are truly significant. We look forward to exploring new ways to

meet these challenges. We welcome your comments and suggestions. ✦
Federal Election Commission RECORD January 1999

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)

Scott E. Thomas, Chairman

Darryl R. Wold, Vice Chairman

Lee Ann Elliott, Commissioner

David M. Mason, Commissioner

Danny L. McDonald,

 Commissioner

Karl J. Sandstrom, Commissioner

James A. Pehrkon, Acting Staff

 Director

Lawrence M. Noble, General

 Counsel

Published by the Information

 Division

Louise D. Wides, Director

Angela Rucker, Editor

http://www.fec.gov

Commissioners

New Chairman and Vice

Chairman Elected

On December 10, 1998, the

Commission elected Scott E.

Thomas as its Chairman and Darryl

R. Wold as its Vice Chairman. Mr.

Thomas had been serving as Acting

Chairman since the September

departure of former Commissioner

Joan D. Aikens.

Mr. Thomas, a Democrat, began

his career with the FEC as a legal

intern in 1975. He also served as an

Assistant General Counsel for

Enforcement and as Executive

Assistant to the late Thomas E.

Harris, a former Commissioner. In

1986, Mr. Thomas was first nominated to become an FEC commissioner by President Ronald Reagan.

He has been twice reappointed for

the post—first by President George

Bush in 1991 and again by President

Bill Clinton in 1997.

A Wyoming native, Mr. Thomas

graduated from Stanford University

and holds a law degree from

Georgetown University Law Center.

Mr. Wold, a Republican, is one of

the newest members of the Commission having been nominated by Mr.

Clinton in 1997. Before joining the

Commission, Mr. Wold was an

attorney in private practice in

Orange County, CA. He also served

as counsel for election law litigation

and enforcement defense matters for

a California law firm that practices

election and political law.

A native Californian, Mr. Wold

graduated from Claremont

McKenna College and received a

law degree from Stanford University. ✦

Court Cases

RNC v. FEC (98-5263)

On November 6, 1998, the U.S.

Court of Appeals for the District of

Columbia Circuit affirmed a lower

court ruling that denied the Republican National Committee’s (RNC’s)

and the Ohio Democratic Party’s

(ODP’s) motion for a preliminary

injunction in this case.

In April 1998, the RNC and ODP

had asked the district court to

prevent the FEC from enforcing its

allocation regulation 11 CFR 106.5.

The regulation requires that the

RNC, ODP and other party committees pay for a portion of certain

federal election-related advertisement costs with federally permissible funds, or hard money. The

other portion of the advertisements

can be funded with nonfederal funds

(soft money), which is easier to

raise in large sums.

The suit charged that the FEC’s

allocation regulation violated the

U.S. Constitution and that the FEC

lacked the authority to promulgate

the regulation. The plaintiffs also

contended that the FEC exceeded its

authority in crafting the regulation

because the rule pertains to issue

advocacy communications. See the

June 1998 Record, pp. 1 and 2.

In June 1998, the U.S. District

Court for the District of Columbia

had denied motions by the RNC and

ODP requesting a preliminary

injunction to prevent the FEC from

taking any action to enforce the

regulation. See the August 1998

Record, p. 5. In September 1998, the

appellate court denied the parties’

emergency motion for an injunction

pending appeal of the district court

decision. See the November 1998

Record, p. 1.

In taking up the matter on a

nonemergency basis, the appellate

court stated that the RNC and ODP

had failed to show that they were

likely to be successful on the merits

of the case or that they would suffer

irreparable harm if an injunction

were not granted.

The court found “scant” evidence

the RNC and ODP would suffer

irreparable harm, citing the two

parties’ own affidavits filed in this

case. The RNC had stated that, if

forced to follow the FEC’s regulation, it would have “to divert hard

money from federal, candidate

support.” Likewise, the ODP

strategized that it would be able to

spend more on issue advocacy

advertisements and free up federal

funds to support the election of

federal candidates if it did not have

to follow the allocation rule.

In light of such “weak evidence,”

the court stated that the RNC and

ODP had to show an exceptional

likelihood that they would succeed

in this case on its merits. This they

did not do. Thus, the court denied

the injunction.

U.S. Court of Appeals for the

District of Columbia Circuit, 98-

5263. ✦
January 1999 Federal Election Commission RECORD

3

(continued on page 4)

Judd v. FEC

On November 4, 1998, the U.S.

Court of Appeals for the District of

Columbia Circuit denied Keith

Judd’s request for a rehearing and a

rehearing en banc of the court’s

decision to dismiss this case.

In April 1998, the court dismissed for lack of prosecution Mr.

Judd’s petition requesting that it

find the Presidential Primary

Matching Payment Account Act

unconstitutional and that it award

him public funding equal to that

received by President Bill Clinton

during his 1996 reelection effort.

The court later denied Mr. Judd’s

motion that it reexamine that

decision. See articles in the June

1998 and October 1998 Record.

U.S. Court of Appeals for the

District of Columbia Circuit, 98-

1078. ✦

Cincinnati v. Kruse

Burris v. Russell

On November 16, 1998, the U.S.

Supreme Court refused to review

two court cases that posed First

Amendment challenges to limits on

campaign contributions and expenditures in state and local elections.

Both cases had been cast as potential challenges to Buckley v. Valeo,

the landmark court case on the

Federal Election Campaign Act (the

Act). The FEC was not a party to

either suit.

Background of Buckley

The appellate courts’ reasoning in

the two cases is based in great part

on Buckley, where the high court

equated campaign spending with the

First Amendment’s guarantee of

free speech. While the Court found

that a compelling government

interest in preventing real or perceived corruption justified imposing

restrictions on contributions, it

concluded that this governmental

interest was inadequate to sustain

limitations on campaign expenditures.

Decision in Cincinnati

In the first case, Cincinnati v.

Kruse, John Kruse, a candidate for a

Cincinnati City Council seat,

challenged a council ordinance that

limited campaign expenditures for

council elections to about $140,000.

The city council argued that the

rising cost of city council races had

resulted in a rise in the influence of

wealthy donors and the decline in

the influence of small donors. The

U.S. District Court for the Southern

District of Ohio at Cincinnati ruled

in favor of Mr. Kruse, finding that

the ordinance was unconstitutional

on its face.

The U.S. Court of Appeals for the

Sixth Circuit affirmed that ruling on

April 27, 1998. It reiterated the

Supreme Court’s view that restrictions that have the potential of

limiting the First Amendment

guarantee of political expression

must be subjected to “exacting

scrutiny” by the courts and that “the

prevention of corruption or the

appearance of corruption” is the

only governmental interest that

survives strict scrutiny and, as a

result, justifies restrictions on

campaign finance.

• Cincinnati failed to show that an

expenditure limit would reduce

corruption in the political process.

The city had no direct evidence

that imposing contribution limits

alone could prevent quid pro quo

corruption. The council did not

adopt contribution limits until after

it had passed the expenditure

limits. Further, it based its views of

corruption on perceived abuse of

the Act on the federal level. The

court found that such evidence was

not enough. The three-judge panel

stated that problems on the federal

level are explained primarily by

the exception allowing soft money

contributions to party committees

“and do not undermine the Supreme Court’s conclusion that

spending restrictions are not

narrowly tailored to addressing the

problem of the corrupting nature of

money in politics.”

 The court also said the perception that the public is discouraged

and cynical about the democratic

process as a result of perceived

corruption in campaign finance is

not sufficient evidence for limiting

campaign spending.

• Cincinnati failed to show that an

expenditure limit would curb the

rising cost of campaigns. The city,

through an amicus brief filed by

the Brennan Center, had argued

that the Buckley Court had not

considered what is now perceived

to be “uncontrollable campaign

spending” and the effects of such

spending, such as the large

amounts of time candidates must

spend raising campaign funds. The

court rejected this view, stating

that the Supreme Court, in

Buckley, concluded that “reducing

the allegedly skyrocketing costs of

political campaigns is not compelling or sufficient to justify restrictions on campaign spending.”

• Cincinnati failed to prove that

leveling the playing field among

candidates is sufficient justification for an expenditure limit. The

city had argued that the government had an interest in eliminating

the advantage wealth plays in

elections and the perceived disadvantage of poor and minority

voters and candidates. The court

found that restricting the free

speech guarantees of some in order

to enhance the voices of others

would violate the First Amendment. It also said that the Buckley

Court had rejected this argument.

The Buckley Court explained that

spending limits, rather than

promoting financial equality

among candidates, could instead

protect incumbents and handicap

well-known candidates.

Decision in Russell

In Burris v. Russell, Ron Russell

challenged the Arkansas Ethics
Federal Election Commission RECORD January 1999

4

Court Cases

(continued from page 3)

Commission after the state’s voters

approved a referendum that set

contribution limits per election for

district races at $100 per contributor

and for statewide races (such as

governor and state treasurer) at $300

per contributor. (The lowest contribution limit per contributor allowed

under Buckley is $1,000.) The

referendum also introduced an entity

called the small-donor PAC. Individuals could contribute up to $25 to

the PAC, and the PAC, in turn,

could contribute up to $2,500 per

candidate, per election. The initiative also created independent

expenditure committees that could

accept no more than $500 from any

person annually. Finally, the initiative authorized local governments to

set reasonable limits on the amount

of campaign funds candidates for

local offices could raise. Before this

initiative, Arkansas voters had

approved a measure that limited

PAC contributions to $200 per year,

down from $1,000.

This case was merged with

Citizens for Clean Government v.

Russell. The U.S. District Court for

the Eastern District of Arkansas

rendered a split decision, upholding

some of the contribution limits and

ruling others unconstitutional. On

June 4, 1998, the U.S. Court of

Appeals for the Eighth District

struck down the individual and PAC

contribution limits.

• Supporters of the initiative failed

to prove a link between large

contributions and undue influence

or corruption of Arkansas officials.

Proponents argued, for example,

that financial contributions and

support by the Tobacco Institute

and other pro-tobacco sources

caused a state legislator to champion a measure that would have

prohibited local governments from

regulating tobacco products. The

court, however, showed that the

pro-tobacco legislator in question

had already stated his support for

tobacco interests, had not changed

his position on the issue as a result

of the contributions and had not

tried to conceal the tobacco

industry contributions. The court

also found that the $2,700 in

tobacco money the legislator

received was not enough to

influence his vote on the measure.

“We believe,” the court stated,

“that $1,000 is simply not a large

enough sum of money to yield, of

its own accord and without further

evidence, a reasonable perception

of undue influence or corruption.”

 This same pattern emerged with

contributions to legislators from

several lobbyists who represented

various groups, including real

estate interests. Again, none of the

contributions individually exceeded $1,000.

 The court found that the $100

and $300 contribution limits

approved in the voter initiative

were too low to allow meaningful

participation in the political

process. The court also held that

the $200-per-year PAC contribution limit enacted before the voter

initiative was “simply too low to

allow for appropriately robust

participation in protected political

speech and association.”

 The court concluded that, “the

limitations in question here are ...

dramatically lower than, and

different in kind from, the limits

approved in Buckley, and thus are

unconstitutionally low.”

• Proponents of small-donor PACs

with higher contribution limits

failed to show that differential

treatment was warranted. The

supporters argued that raising

funds in $25 amounts would

alleviate the potential for corruption. The court found, in fact, that

the potential for corruption would

move from the individual contributor to the small-donor PAC itself.

 “If any contribution is likely to

give rise to a reasonable perception

of undue influence or corruption, it

would be one from an entity

permitted to contribute two-and-ahalf times the amount that most

others are allowed to contribute,”

the court stated. “The small-donor

PAC provision is not, then,

narrowly tailored to serve the

compelling government interest of

combating the reality or perception

of undue influence or corruption.”

Severability. The court found that

the contribution limits were severable from the remainder of the voter

initiative. It let stand the provisions

for independent expenditure committees and rendered no decision on

the instructions to local governments to establish reasonable

limitations on campaign contributions and expenditures.

Kruse v. City of Cincinnati, 142

F.3d 907 (6th Cir. 1998), cert.

denied 1998 WL 651027 (U.S.);

Russell v. Burris, 146 F.3d 563 (8th

Cir. 1998), cert. denied 1998 WL

596728 (U.S.). ✦

Reports

Reports Due in 1999

This article on filing requirements for 1999 is supplemented by

the reporting tables on this and the

following page.

It is the responsibility of the

committee treasurer to file required

reports on time. To assist treasurers,

the Commission sends committees

FEC reporting forms and notices of

upcoming reporting deadlines.

For more information on reporting or to order extra forms, call the

FEC at 800/424-9530 (press 1) or

202/694-1100. Most forms are

available at the FEC’s web site

(http://www.fec.gov) and from FEC

Faxline, the agency’s automated fax

system (202/501-3413).
January 1999 Federal Election Commission RECORD

5

1

This category includes committees of candidates retiring debts from a previous

election or running for a future election.

2

Presidential committees may file on either a quarterly or a monthly basis. Those

wishing to change their filing frequency should notify the Commission in writing.

3

PACs and party committees may file on either a semiannual or a monthly basis.

Committees wishing to change their filing frequency must notify the Commission in

writing when filing a report under the committee’s current schedule. A committee

may change its filing frequency once per calendar year. 11 CFR 104.5(c).

Type of Filer Reports

’ 98 YearEndSemiannual Quarterly Monthly

House and Senate

Candidate Committees1 ✓ ✓

Presidential Candidate

Committees2 ✓ ✓ ✓

PACs and Party

Committees3 ✓ ✓ ✓

Year-End Reports Covering 1998

Activity

All committees must file a 1998

year-end report due January 31,

1999. The coverage and reporting

dates are found in the table on

page 6.

Reports Covering 1999 Activity

To find out what reports your

committee must file in 1999, check

the Guide to 1999 Reporting on this

page. Then check the table on page

6 for reporting dates. Please note

that committees active in special

elections in 1999 may have to file

additional special election reports,

as explained below.

Where to File

Committee treasurers must file

FEC reports with the appropriate

federal and state filing offices.

Please note that:

• The addresses for the federal

offices (FEC and Secretary of the

Senate) appear in the instructions

on the back of the Summary Page

of FEC Forms 3 and 3X.

• A list of state filing offices is

available from the Commission.

House Candidate Committees.

Principal campaign committees of

House candidates file with the FEC.

11 CFR 105.1. The principal

campaign committee must simultaneously file a copy of each report

and statement with the Secretary of

State (or equivalent officer) of the

state in which the candidate seeks

(or sought) election. 2 U.S.C.

§439(a)(2)(B).

Senate Candidate Committees.

Principal campaign committees of

Senate candidates file with the

Secretary of the Senate, as appropriate. 11 CFR 105.2. The principal

campaign committee must simultaneously file a copy of each report

and statement with the Secretary of

State (or equivalent officer) of the

state in which the candidate seeks

(or sought) election. 2 U.S.C.

§439(a)(2)(B).

Presidential Committees. Principal campaign committees of Presidential candidates file with the FEC.

11 CFR 105.3. The principal

campaign committee must simultaneously file a copy of each report

and statement with the Secretary of

State (or equivalent officer) of each

state in which the committee makes

expenditures. 11 CFR 108.2.

Candidate Committees with More

Than One Authorized Committee. If

a campaign includes more than one

authorized committee, the principal

campaign committee files, with its

own report, the reports prepared by

the other authorized committees as

well as a consolidated report (FEC

Form 3Z or page 5 of FEC Form 3P,

as appropriate). 11 CFR 104.3(f).

PACs and Party Committees.

Generally, PACs and party committees file with the FEC. 11 CFR

105.4. However, committees

supporting only Senate candidates,

and the national Democratic and

Republican senatorial committees,

file with the Secretary of the Senate.

11 CFR 105.2.

PACs and party committees must

simultaneously file copies of reports

and statements with the Secretary of

State (or equivalent officer), as

follows:

• Committees making contributions

or expenditures in connection with

House and Senate campaigns also

file in the state in which the

candidate seeks election. The

committee is required to file only

that portion of the report applicable to the candidate in that state

(e.g., the Summary Page and the

schedule showing the contribution

or expenditure). 2 U.S.C.

§439(a)(2)(B).

• Committees making contributions

or expenditures in connection with

Presidential candidates also file in

the states in which the Presidential

committee and the donor committee have their headquarters. 11

CFR 108.4.

(continued on page 6)

Guide to 1999 Reporting

or

or
Federal Election Commission RECORD January 1999

6

Late Filing

The Federal Election Campaign

Act does not permit the Commission

to grant extensions of filing deadlines under any circumstances.

Filing late reports could result in

enforcement action by the Commission.

Committees Active in Special

Elections

Committees authorized by

candidates running in any 1999

special election must file pre- and

post-election reports in addition to

regularly scheduled reports. 11 CFR

104.5(h). They are also required to

comply with the 48-hour notice

requirement for contributions of

$1,000 or more (including loans)

received shortly before an election.

See 11 CFR 104.5(f).

PACs and party committees

supporting candidates running in

special elections may also have to

file pre- and post-election reports

unless they file on a monthly, rather

than semiannually, basis. 11 CFR

104.5(c)(3) and 104.5(h). However,

all PACs are subject to 24-hour

reporting of independent expenditures made shortly before an election. See 11 CFR 104.4(b) and (c)

and 104.5(g).

When timing permits, the Record

will alert committees to special

election reporting dates. ✦

Reports

(continued from page 5)

1

Reports sent by registered or certified mail must be postmarked by the filing date;

reports sent by other means (including Federal Express) must be received by the

federal and state filing offices on that date.

Electronic Filing Update:

Electronic Filing Help for

Committees Using

Commercial Software

The Commission has announced

that two brands of reporting software have been tested and are

compatible with the requirements of

the FEC’s electronic filing program.

Filers using Campaign Manager

made by Aristotle Publishing, Inc.,

or Keep in Touch made by Gnossos

(continued)

1998 Year-End Report

(Required of all committees.)

Report Period Covered Filing Date1

Year-End Closing date of last

report through

December 31, 1998

January 31, 1999

1999 Semiannual Reports

Report Period Covered Filing Date1

Mid-Year

Year-End

Jan. 1–June 30

July 1–Dec. 31

July 31, 1999

January 31, 2000

1999 Monthly Reports

Report Period Covered Filing Date1

February

March

April

May

June

July

August

September

October

November

December

Year-End

January 1–31

February 1–28

March 1–31

April 1–30

May 1–31

June 1–30

July 1–31

August 1–31

September 1–30

October 1–31

November 1–30

December 1–31

February 20

March 20

April 20

May 20

June 20

July 20

August 20

September 20

October 20

November 20

December 20

January 31, 2000

1999 Quarterly Reports

(Option available to Presidential committees only.)

Report Period Covered Filing Date1

1st Quarter

2nd Quarter

3rd Quarter

Year-End

Jan. 1–March 31

April 1–June 30

July 1–Sept. 30

Oct. 1–Dec. 31

April 15

July 15

October 15

January 31, 2000
January 1999 Federal Election Commission RECORD

7

Software should be able to electronically file reports covering 1999

activity.

Commission surveys indicate that

some committees have purchased

software to manage their activities

and prepare their FEC reports. The

Commission wants to help these

committees report electronically

without having to make major

changes in the way they do their

work. The best way to accomplish

this is for the committees to work

with the software companies,

encouraging the companies to

integrate electronic filing into their

products and provide help to the

committees who use them.

Filers with the latest version of

Campaign Manager or Keep in

Touch can now send reports to the

FEC by modem or diskette. Before,

committees with commercial

software usually prepared reports on

computers, printed out the result and

mailed the pages to the FEC.

Last year, the FEC requested

proposals from software companies

wherein the Commission would

make small payments to a company

in exchange for its allowing the FEC

to test its program for compliance

with electronic filing. Aristotle and

Gnossos responded to this initial

request.

The arrangement also stipulates

that the companies maintain software compatibility with the FEC

through the 2000 election cycle and

that they offer technical support to

their political committee customers.

These vendors also will participate

with the FEC in electronic filing

training seminars for the regulated

community.

Political committees that use

FEC-compatible commercial

software should find electronic

filing a quick, flexible and efficient

way to file their reports. The FEC

anticipates working with other

commercial vendors in the future to

ensure compatibility of their software with the electronic filing

program. ✦

Regulations

Commission Seeks

Comments About Changes to

Public Funding Regulations

On Dec. 10, 1998, the Commission approved a Notice of Proposed

Rulemaking (NPRM) regarding

proposed changes to the rules

governing publicly funded Presidential primary and general election

candidates. The deadline for comments is February 1.

The rulemaking addresses a

number of topics and would affect

11 CFR Parts 9001 through 9039.

Coordination Between Publicly

Funded Presidential Candidates

and Their Political Parties

The proposal seeks comments

concerning the situation where a

national party committee works

closely with its presumptive Presidential nominee to raise and spend

funds on behalf of that presumptive

nominee during the primary season

once the identity of that person is

clear. In this situation, the Commission assumes that the presumptive

nominee has nearly exhausted his or

her spending limit for the primary

election. Any expenditures would

count against the national

committee’s general election

coordinated spending limit on behalf

of the party’s nominee for President

(2 U.S.C. §441a(d)).

The proposal also addresses

advertising, sponsored by national

party committees, that clearly

identifies a presidential candidate.

The proposal would state that such

expenditures are made on behalf of

the candidate unless:

• The advertisement is focused on

legislative or public policy issues;

• The advertisement is addressed to

an audience that would be affected

by the legislation being discussed;

and

• The advertisement mentions the

candidate only incidentally or only

as it relates to his or her role as

sponsor, proponent or opponent for

the subject being presented.

Under the proposed approach,

costs for general public political

advertisements that clearly identify

a Presidential candidate of another

party would be considered expenditures on behalf of the sponsoring

party committee’s nominee or

eventual nominee—even if that

person does not accept public funds

for either the primary or the general

election.

Comments are also requested on

whether the Commission should

apply a standard other than “clearly

identified candidate”—other options

include express advocacy or electioneering message—to determine

when advertising by a political party

committee should be treated as an

expenditure on behalf of a publicly

funded Presidential candidate.

The Commission’s proposal also

addresses polling, media production

and consulting services. Spending

for such services by a party committee would be considered coordinated

expenditures on behalf of publicly

funded Presidential candidates if

either:

• The activities are sponsored jointly

and/or the costs are shared between

the party committee and the

candidate under a single contract

or arrangement; or

• The polling, scripts or other

contract products relate to a clearly

identified candidate and either (1)

the polling results are provided to

the Presidential campaign or (2)

the Presidential campaign is

consulted in advance.

The Commission seeks comments

on whether it should promulgate

new rules to address the transfer or

sharing of employees between

Presidential campaigns and political

party committees. The rules would

provide that spending by party

committees for salary, travel and

other employee expenses for those

(continued on page 8)
Federal Election Commission RECORD January 1999

8

Regulations

(continued from page 7)

employees who had also worked for

a publicly funded Presidential

campaign during the same election

cycle would be considered expenditures on behalf of the Presidential

candidate. There would be two

exceptions to cover situations where

either the Presidential candidate is

no longer considered active under

11 CFR 9033.5 or the employee’s

duties are substantially different

from those performed for the

candidate.

Qualified Campaign Expenses

The Commission proposes

clarifying the regulations that

provide “bright line” distinctions

between primary and general

election expenses. Expenditures for

goods or services that may benefit

both primary and general elections

would generally be attributed on the

basis of whether they were used

before or after a candidate received

the nomination. With regard to the

use of campaign offices before the

party nomination, the current rules

require that expenses be attributed

to the primary unless staff are

working “exclusively” on general

election preparations. Under the

proposal, the exception would apply

to people working “full time” on the

general election. An alternative

would be to drop the “exclusive

use” exception with regard to

overhead and salary expenses for

workers.

The proposal also would clarify

that candidates who win their

parties’ nominations would not treat

salary or overhead expenses as

winding down costs until after the

end of the expenditure report period,

which is 30 days after the general

election.

Compliance and Fundraising

Costs

The Commission is considering

amending these rules to simplify the

calculation of legal and accounting

costs for the primary election. Under

the proposal, the regulations would

be amended to state that a “standard

deduction” equal to 10 percent of all

operating expenditures for each

reporting period could be treated as

compliance expenses exempt from

the primary expenditure limit. The

proposal would not permit committees to demonstrate that their

compliance expenses were greater

than 10 percent of operating expenditures.

The Commission is proposing

several alternatives for Presidential

campaigns that wish to form prenomination General Election Legal

and Accounting Compliance Funds

(GELACs).

• Alternative One. The proposal

would bar solicitations for contributions for a GELAC prior to a

candidate’s nomination. A committee could establish a GELAC

before the nomination, but only for

receiving correctly redesignated

contributions that would otherwise

have to be refunded as excessive

primary election contributions.

• Alternative Two. The proposal

would bar GELAC fundraising

before a specific date, for example,

April 15 of the Presidential

election year. If a candidate failed

to win his or her party’s nomination for President, the GELAC

contributions would have to be

refunded.

• Alternative Three. The proposal

would allow GELAC fundraising

to begin 90 days before each

candidate’s date of nomination.

• Alternative Four. This proposal

would bar establishment of a

GELAC until the date of the last

Presidential primary before the

national nominating convention.

One variation on this proposal

would allow the presumptive

nominee to establish the GELAC

earlier than the last Presidential

primary, but prohibit fundraising

until after that date.

• Alternative Five. This proposal

would allow Presidential primary

candidates to establish and run a

GELAC at any time. Candidates

who did not win their party’s

nomination could use the contributions in the GELAC to offset their

GELAC fundraising and administrative expenses, and would only

need to refund the amount remaining in their accounts as of the date

their party selected its nominee.

The Commission is also proposing alternatives for joint primary/

GELAC solicitations.

• Alternative One. This proposal

would require committees to

allocate solicitation expenses and

the distribution of net proceeds

from the fundraiser following the

percentage of contributions each

committee received from the event.

• Alternative Two. The proposal

would prohibit joint fundraising

between primary committees and

GELACs.

• Alternative Three. This proposal

would treat all expenses incurred

by the GELAC prior to the

candidate’s date of ineligibility or

date of nomination as qualified

campaign expenses for the primary

election.

• Alternative Four. This proposal

would detail the types of

fundraising costs that a GELAC

could cover. For example, under

this proposal, GELAC solicitation

expenses could include costs for

printing invitations and solicitations, mailing postage and

telemarketing, but not expenses for

catering, facilities rental,

fundraising consultants, employee

salaries or travel to the event site.

The Commission also is seeking

comments on whether the provisions

that cover transfers of funds from

primary committees to GELACs

should be strengthened.

Modification of the Audit and

Repayment Process

There are three alternatives under

this proposal.
January 1999 Federal Election Commission RECORD

9

• Alternative One. The Commission

proposes returning to the procedures it used for 1992 Presidential

candidates who received public

funding. This procedure included

an FEC Audit Division exit

conference to discuss preliminary

findings with Presidential campaign committees; an interim audit

report containing a preliminary

calculation of the repayment

obligations of a federally financed

campaign committee; and a final

audit report, which was considered

by the Commission in open

session. Before the Commission

considered the interim and final

audit reports, the audited committee had a chance to review them

and submit materials disputing or

commenting on them.

• Alternative Two. This proposal

would make no change to the

current audit process.

• Alternative Three. This proposal

would retain many of the current

audit procedures. However, one

change would include legal

analysis in the exit conference

memorandum and have the memorandum approved by at least four

Commissioners in executive

session before its release to the

committee during the exit conference.

The Commission is also proposing to more clearly indicate that a

post-administrative review of a

repayment determination (the

candidate submits materials supporting a smaller repayment and can

request an oral hearing in an effort

to convince the Commission to

change the repayment determination) must be approved by at least

four Commissioners, and that this

vote is not to revise a repayment

determination, but simply to issue a

repayment determination.

Bases For Repayment

Determinations

The Commission is considering

whether to delete the regulation (11

CFR 9038.2(b)(2)(ii)(A)) that

permits it to order repayment of

primary matching funds if a publicly

funded Presidential campaign

committee has made expenditures in

excess of the primary spending

limit. Differences between the

general and primary election statutes

have led the Commission to question whether the FEC has the

statutory authority to obtain repayments when a primary campaign

exceeds either the overall spending

limit for the Presidential primaries

or the limits applicable to each state.

The Commission is also examining

whether it should seek repayments

when a campaign exceeds its

spending limit by receiving in-kind

contributions from a party committee making expenditures on its

Presidential candidate’s behalf. The

NPRM explains at length the

statutory basis for the current

regulation and the arguments for its

elimination.

Net Outstanding Campaign

Obligations/Capital Assets

The proposed regulations would

revise the formulas for assessing the

value of capital assets owned by

either the Presidential primary or the

general election campaign for

purposes of determining net outstanding campaign obligations.

The Commission is also proposing to clarify application of the term

“capital assets” to components of a

computer system or a telecommunications system that are used as a

whole.

Transportation and Services

Provided to the Media

The Commission seeks comments

on whether it should revise the

primary and general election rules to

include lists of allowable and

prohibited expenses for ground costs

that publicly funded campaigns may

bill to the media. Among items

disputed in the past were security

services for the press, sound and

lighting equipment and press risers

and camera platforms.

The Commission also is seeking

comments on whether to further

clarify regulations specifying that

Presidential campaigns can only

charge each member of the press for

his her own pro rata share of the

costs of meals, phones and transportation.

Documentation of Disbursements

The Commission is proposing to

modify its regulations to clarify that

documentation for disbursements

greater than $200 must always

include a canceled check that has

been negotiated by the payee.

Matching Fund Documentation

Another proposal would permit

Presidential primary committees to

use digital imaging technology to

submit their matching fund threshold submissions to the Commission,

as well as contributor

redesignations, reattributions and

supporting materials to establish the

matchability of contributions.

Prenomination Vice Presidential

Committees

The Commission proposes new

regulations specifying that payment

of expenses incurred in connection

with seeking the Vice Presidential

nomination would be expenditures

by the candidate who obtains that

political party’s nomination for

President. This rule would apply

only to a Vice Presidential candidate

who became the nominee of his or

her party. Comments are also

invited as to whether this proposed

rule should be further restricted to

apply only to situations where the

Vice Presidential nominee’s committee has acted in concert with the

Presidential nominee’s committee.

Under the proposal, funds raised

and spent by the Vice Presidential

committee for travel of its candidate

and his or her family to the convention would not count against the

Presidential candidate’s expenditure

limit.

(continued on page 10)
Federal Election Commission RECORD January 1999

10

Regulations

(continued from page 9)

Nominating Conventions and Host

Committees

Another proposal defines the

conditions under which public funds

received by a convention committee

could be used to make up for the

cost of lost items.

The Commission is also proposing to allow local banks to donate

funds and make in-kind donations to

host committees, government

agencies and municipal corporations

in connection with nominating

conventions.

The Commission is also seeking

comments on whether it should

augment its regulations to provide

greater detail about the expenses a

host committee can fund with

donated funds, and the expenses

convention committees can cover

with public funds.

Because the major political

parties are already in the midst of

selecting convention locations, the

Commission is requesting comments

as to whether it would be better to

defer consideration of this topic

until after the 2000 Presidential

elections.

Comments

The NPRM, published in the

December 16, 1998, Federal

Register (63 FR 69524), provides

greater detail about the various

proposed changes. A copy of that

document is available:

• From the Public Records Office at

800/424-9530 (press 3),

• Through the FEC’s Faxline at 202/

501-3413 (request document 235),

and

• At the FEC’s web site—

http://www.fec.gov.

Public comments must be submitted in either written or electronic

form to Susan E. Propper, Assistant

General Counsel. Written comments

should be mailed to the Federal

Election Commission, 999 E St.,

NW, Washington, DC 20463. Faxed

comments should be transmitted to

202/219-3923, with a copy mailed

to the preceding address to ensure

legibility.

Comments also may be sent by email to publicfund@fec.gov.

Electronic submissions must include

the commenter’s full name, e-mail

address and postal mail address. ✦

Commission Publishes

Rulemaking Notice on

“Member” Regulations

On December 10, 1998, the

Commission approved a Notice of

Proposed Rulemaking (NPRM)

offering further proposals for

revisions to the rules governing who

qualifies as a “member” of a membership organization. The deadline

for comments is February 1.

This is the second NPRM on this

subject. The first, published in

December 1997, offered three

alternatives and was initiated in

response to a petition for

rulemaking filed with the Commission in response to Chamber of

Commerce of the United States v.

FEC. See the January 1998 Record,

p. 4. The Commission held a public

hearing on the subject in April, but

commenters offered no consensus

on which alternative would best suit

membership organizations. See the

June 1998 Record, p. 9. This notice

replaces the earlier NPRM.

Terminology

The Commission has proposed

replacing the term “membership

association” with “membership

organization” at 11 CFR

100.8(b)(4)(iv)(A) and 114.1(e)(1).

The replacement is the term used in

the Federal Election Campaign Act

(the Act).

Membership Organizations

The new proposal focuses

primarily on the attributes of

membership organizations. It

suggests revisions to the preliminary

requirements an organization must

meet to qualify as a membership

organization—changes that were not

proposed in the original NPRM. The

proposed changes would amend 11

CFR 100.8(b)(4)(iv)(A) and

114.1(e)(1) in the following ways.

• The proposal would replace

language in the regulations that

calls for a membership organization to expressly provide for

members in its articles and bylaws

with a more general statement that

such organizations should be

composed of members.

• The proposal would require that a

membership organization be self

governing. The organization would

have to provide in its articles,

bylaws or other formal organizational documents that the power

and authority to direct and control

the organization be vested in some

or all members, although the

organization could delegate these

responsibilities to committees or

groups within the organization.

• The proposal would require

membership organizations to

inform their members of their

rights, qualifications and obligations under the organization’s

articles, bylaws and other formal

organization documents, and to

make these documents available to

their members.

• The proposal would clarify that the

current membership communications exception at 11 CFR

100.8(b)(4) applies only to communications made at the direction

or control of a membership

organization, and not of any

outside party.

Definition of Member

The new proposal also addresses

the definition of member, as explained below. The proposal would

require members to renew membership in writing on an annual basis,

as well as meet one of the following

requirements:

• Pay annual dues set by the membership organization. The regula-
January 1999 Federal Election Commission RECORD

11

tions do not specify a minimum

amount of dues.

• In those situations where members

are not required to pay a specific

amount of annual dues, membership organizations would have to

provide “direct and enforceable

participatory and governing rights”

to members. The new rules would

provide some examples of the

types of activities that would

signify a sufficient organizational

attachment, but they would not set

out an exhaustive list.

• Retired union members who have

paid dues and been active members

of the organization for at least 10

years would be granted member

status. Their past membership, the

Commission suggests, would

satisfy the requirement of a

significant financial attachment to

the membership organization and

their union insurance policies and

retirement benefits would provide

significant organizational attachment.

• In the previous NPRM, the Commission suggested that students

and lifetime members would be

able to qualify as members even if

they paid smaller dues than active

members. This proposal remains a

part of the current NPRM. The

preceding requirements would

satisfy the requirement from FEC

v. National Right to Work Committee1 that members have a “relatively enduring and independently

significant financial or organizational attachment” to the organization.

Other Proposed Revisions

• The proposal would recognize as

membership organizations certain

organizations that, under state law,

are not allowed to have “members”

for policy reasons unrelated to the

Act, if they otherwise meet the

requirement of these rules.

• The proposal would include

unincorporated associations under

the regulation’s definition of

membership organization, for

purposes of the internal communications exemption in 11 CFR

100.8 only. Unincorporated

associations would include entities

that are not trade associations,

cooperatives, corporations without

capital stock or labor organizations, but that nonetheless meet the

requirements for membership

organizations. This proposal, if

adopted, would not however allow

unincorporated associations to

establish and support separate

segregated funds.

Comments

The NPRM, published in the

December 16, 1998, Federal

Register (63 FR 69224), 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’s Faxline at 202/

501-3413 (request document 229),

and

• At the FEC’s web site—

http://www.fec.gov.

Public comments must be submitted in either written or electronic

form to Susan E. Propper, Assistant

General Counsel. Written comments

should be mailed to the Federal

Election Commission, 999 E St.,

NW, Washington, DC 20463. Faxed

comments should be transmitted to

202/219-3923, with a copy mailed

to the preceding address to ensure

legibility.

Comments also may be sent by email to members@fec.gov. In order

to be considered, electronic submissions must include the commenter’s

full name, e-mail address and postal

mail address. ✦

1

 FEC v. National Right to Work

Committee, 459 U.S. 196, 204 (1982).

Commission Seeks

Comments on Regulations

for LLCs, Subchapter S

Corporations

On December 10, 1998, the

Commission approved a Notice of

Proposed Rulemaking (NPRM) to

seek comments on new rules

governing contributions from

limited liability companies (LLCs)

and possible new rules on subchapter S corporations. The last day to

submit comments on these subjects

is February 1.

LLCs

Currently, the Commission has

responded to LLCs on a case-bycase basis through its advisory

opinion process. LLCs in California,

the District of Columbia, Illinois,

Missouri, Pennsylvania and Virginia

have been deemed “persons” for

purposes of the Federal Election

Campaign Act (the Act) and have

been allowed to make contributions

in federal elections to the same

extent that other persons can.

Through this rulemaking, the

Commission intends to promulgate a

nationwide approach to regulating

contributions from LLCs. The

NPRM contains draft language on

two possible approaches.

Alternative A. This proposal

would treat all LLCs as partnerships

are treated under the Act. Contributions from an LLC would be attributed to the LLC and to each member

of the LLC in direct proportion to

his or her share of the business’s

profits, or as directed by the LLC.

Profits from any LLC members that

are prohibited from making contributions under the Act would not be

included in contributions to federal

candidates. LLCs could, however,

make contributions to federal

candidates if some, but not all, of

their members were prohibited from

giving. This is a change from the

treatment of LLCs as persons under

past advisory opinions.

(continued on page 12)
Federal Election Commission RECORD January 1999

12

Regulations

(continued from page 11)

Alternative B. This proposal

would require that LLCs be treated

as either partnerships or corporations, depending on which option

they had elected under Internal

Revenue Service taxation rules. If

an LLC opted to be treated as a

partnership for purposes of the IRS,

then it would follow FEC regulations governing partnerships when

making federal contributions. If, on

the other hand, an LLC opted to be

treated as a corporation for IRS , it

would follow the Act and regulations governing corporations and

would be unable to make direct

contributions in federal elections,

although it could establish a separate segregated fund and engage in

other authorized activities. If an

LLC did not select tax treatment as

either a partnership or a corporation,

the Commission would treat it as a

partnership, as this is the default

position for IRS in cases where

LLCs fail to select either alternative.

Subchapter “S” Corporations

The Commission also invites

comments about treatment of

subchapter S corporations for

purposes of the Act. Specifically,

the Commission is seeking comments both on the merits of allowing

subchapter S corporations to make

contributions in federal elections,

and on whether the Commission has

authority to act in this manner. The

contributions would be attributed

only to the individual stockholders

of the corporation as personal

contributions subject to the Act’s

limits for individuals.

Comments

The NPRM, published in the

December 18, 1998, Federal

Register (63 FR 70065), provides

greater detail about the proposals. A

copy of that document is available:

• From the Public Records Office at

800/424-9530 (press 3),

• Through the FEC’s Faxline at 202/

501-3413 (request document 236),

and

• At the FEC’s web site—

http://www.fec.gov.

Public comments must be submitted in either written or electronic

form to N. Bradley Litchfield,

Associate General Counsel. Written

comments should be mailed to the

Federal Election Commission, 999

E St., NW, Washington, DC 20463.

Faxed comments should be transmitted to 202/219-3923, with a copy

mailed to the preceding address to

ensure legibility.

Comments also may be sent by email to LLCnprm@fec.gov. Electronic submissions must include the

commenter’s full name, e-mail

address and postal mail address. ✦

Commission Hears Soft

Money Testimony

FEC proposals to change the way

party committees use soft money

drew sharply divergent opinions

from witnesses at a November 18,

1998, public hearing. While one

side suggested that soft money is a

viable way for party committees to

support their nonfederal candidates,

the other side argued that the large,

unregulated contributions have

made meaningless the contribution

limits of the federal election statutes.

Soft money generally refers to

funds that are raised outside the

contribution limits and prohibitions

of the Federal Election Campaign

Act (the Act). Soft money ostensibly

is used for party building activities,

not for direct support of federal

candidates. The Act prohibits the

use of soft money to influence

federal elections.

Craig M. Engle, general counsel

for the National Republican Senatorial Committee (NRSC), told

Commissioners that the hearing

was, in fact, based on an inaccurate

premise—that there exists a soft

money crisis. “There is not a soft

money crisis. There is a hard money

crisis,” he said.

Mr. Engle suggested that the

Commission urge Congress to index

hard money contribution limits for

inflation. He also described the

escalating costs of financing campaigns and the need for large sums

of money to operate them.

The NRSC also maintained its

long-standing position that the FEC

is outside its jurisdiction in attempting to regulate soft money. Bobby

Burchfield, an attorney for the

NRSC, said the FEC’s attempts to

regulate soft money are tantamount

to regulating political speech, which

is protected by the First Amendment. He also asserted that large,

soft money contributions do not buy

wealthy contributors any greater

access to government power brokers

Federal Register

 Federal Register notices are available from the FEC’s Public Records Office.

Notice 1998-17

Definition of “Member” of a Membership Association; Notice of Proposed

Rulemaking (63 FR 69224, December 16, 1998)

Notice 1998-18

Public Financing of Presidential Primary and General Election Candidates;

Notice of Proposed Rulemaking (63 FR 69524, December 16, 1998)

Notice 1998-19

Treatment of Limited Liability Companies Under the Federal Election

Campaign Act; Notice of Proposed Rulemaking (63 FR 70065, December 18,

1998)
January 1999 Federal Election Commission RECORD

13

than do smaller contributions from

contributors of more modest means.

On the other side of the issue,

Don Simon, general counsel of

Common Cause, said soft money

contributions had “distorted almost

beyond recognition” the federal

statute, and that the current use of

soft money is “a national scandal of

historic proportions.”

Calling the increased misuse of

soft money during the 1996 elections more blatant than ever, Mr.

Simon urged the Commission to

enact measures to rein in what he

perceived as widespread abuse of

nonfederal funds.

Rep. Martin Meehan, who during

the last Congressional session

proposed legislation that would have

curtailed the use of soft money in

federal elections, added that soft

money is a growing problem in

federal elections among both

Democrats and Republicans.

Other witnesses advocating a ban

on soft money were Roger Witten,

counsel for Common Cause, Glenn

Moramarco, with the Brennan

Center for Justice, and Robert

Weinberg, with the American Bar

Association’s House of Delegates.

Other pro-soft money witnesses

were Michael A. Dawson, representing the NRSC, Paul Sullivan and

Cleta Mitchell, of Americans Back

in Charge Foundation, Inc., and

James Bopp, Jr., with the James

Madison Center for Free Speech.

For more information about the

Notice of Proposed Rulemaking

(NPRM) and public hearing on soft

money:

• Review testimony from speakers

attending the public hearing. For

copies of witness testimony, call

the Public Records Office at 800/

424-9530 (press 3). Eighty-two

written comments received in

response to the NPRM are also

available from the Public Records

Office.

• Read the FEC’s NPRM in the July

13, 1998, Federal Register (63 FR

37721). The document is available

from Faxline, the FEC’s automated

fax service (dial 202/501-3413 and

request document 230). The

Federal Register notice is also

available at the FEC’s web site—

http://www.fec.gov.

• See the August, October and

November 1998 issues of the Record

for summaries of the NPRM and

public hearing notices. ✦

Compliance

MUR 4750

Contributions to Extinguish

Debt Result in Excess

Contributions

The Harvey Gantt for Senate

Campaign Committee has paid a

$19,000 civil penalty to the FEC

because it accepted post-primary

election contributions designated for

1996 primary election debts after

the debts had been extinguished,

resulting in a number of excessive

contributions.

After the 1996 primary election,

the committee assertedly had

$214,964 in primary debt. On July

1, 1996, a few months after the

primary, the committee used funds it

had raised for the upcoming general

election to pay off its outstanding

primary debts. Nonetheless, it still

accepted post-primary election

contributions.

The Federal Election Campaign

Act specifically provides that

contribution limits apply separately

to each election. 2 U.S.C.

§441a(a)(6). Political committees

are prohibited from knowingly

accepting contributions that exceed

contribution limits. 2 U.S.C.

§441a(f). Undesignated contributions count toward the next election

after the date of receipt, and designated post-election contributions

can only be accepted if they do not

exceed a committee’s “net debt

outstanding” for that election. 11

CFR 110.1(b)(3)(i) and

110.2(b)(3)(i). If net debts outstanding do exist, a committee should

adjust this figure as it receives

additional contributions and makes

expenditures. 11 CFR

110.1(b)(3)(iii). If net debts do not

exist, a committee may not accept

post-election contributions.

Any contributions received by the

committee after the primary debt

was paid counted against the

contributor’s general election (the

next election) limit—even if the

contributions were designated for

the primary election. Thus, any

contributions designated for the

primary, but received after the

primary election debt was paid, had

to be aggregated with contributions

made by the same contributors for

the general election. All told, the

committee accepted $95,135 in

excessive contributions.

This matter was initiated by the

FEC. Prior to finding probable cause

that a violation had occurred, the

agency entered into a conciliation

agreement with the committee. ✦

MUR 4796

Contributions in the Names

of Others

DeLuca Liquor and Wine, Ltd.,

and one its vice president have paid

a combined $60,000 civil penalty

for using corporate funds to make

contributions to the Dole for President Committee in the names of 10

individuals.

Ray E. Norvell, the company vice

president, made a $1,000 contribution to the Dole committee and

caused his wife, four managers and

their spouses to do the same, with

the understanding that DeLuca

would reimburse them for the

contributions. The Dole committee

refunded the $10,000 to DeLuca in

May 1997.

It is unlawful for a corporation to

make contributions or expenditures

(continued on page 14)
Federal Election Commission RECORD January 1999

14

Compliance

(continued from page 13)

in connection with any federal

election. 2 U.S.C. §441b(a). It is

also unlawful for any person to

make a contribution in the name of

another or to knowingly permit his

or her name to be used to effect such

a contribution. 2 U.S.C. §441f.

This matter was referred to the

FEC by the Department of Justice.

Prior to finding probable cause that

violations had occurred, the FEC

entered into a conciliation agreement with both parties. DeLuca paid

a $50,000 civil penalty. Mr. Norvell

was cited for knowingly and willfully violating Commission statutes.

He paid a $10,000 civil penalty. ✦

Date Subject Intended Audience

February 3

9:30-11 a.m.

Trade Association

PACs: Fundraising

Basics for Newcomers

(Code #299)

•

•

New Trade

Association PACs

New PAC Staff of

Trade Associations

March 3

9:30-11 a.m.

Candidate

Preparations for the

Next Election Cycle

(Code #399)

•

•

Candidates &

Congressional Staff

Political Party Staff

April 7

9:30-11 a.m.

Use of the Internet to

Raise Funds

(Code #499)

•

•

•

Candidates

Political Party Staff

Nonconnected PACs

FEC Monthly Roundtables

Information

FEC Launches Monthly

Roundtable Sessions on

Election Financing Topics

The FEC will begin conducting

monthly roundtable sessions for the

regulated community in February.

The roundtables, limited to 10

participants per session, will focus

on a range of topics from PAC

fundraising fundamentals to advancing money to a campaign through

personal funds. See the chart below.

Candidates, congressional

staffers, lawyers, accountants,

consultants and political committee

staff are invited to register for the

discussions, which will be held from

9:30 to 11 a.m. at the FEC, 999 E

Street, NW, Washington, DC. FEC

staff will facilitate the sessions.

Registration is $25 and payments

will be accepted on a first-come,

first-served basis, beginning January

4, up to the day before a roundtable

takes place. Pre-payment is required. Organizations that have

accounts set up with the FEC’s

Public Records Office may charge

the fee to their accounts.

Mail or fax the registration form

on the next page to sign up for a

session. (The form is also available

from Faxline, the FEC’s automated

fax system. Call 202/501-3413 and

request document 590.) The FEC

will maintain a waiting list in the

event there are cancellations.

Any cancellation must be received in writing or by fax at least

two days before the discussion. The

FEC will not refund registration fees

to individuals who cancel after that

period or who fail to show up for a

roundtable session.

For more information about the

roundtable sessions, call the FEC’s

Information Division at 800/424-

9530 (press 1) or 202/694-1100. In

addition, log on to the FEC’s web

site—http://www.fec.gov—to stay

abreast of future roundtable topics.

Updates will also appear in the

Record. ✦

The FEC Takes Visa

and Mastercard

 FEC customers can pay for FEC

materials with Visa or

Mastercard. Most FEC materials

are available free of charge, but

some are sold, including financial

statistical reports ($10 each),

candidate indexes ($10) and PAC

directories ($13.25). The FEC

also has a 5¢ per page copying

charge for paper documents and a

15¢ per page copying charge for

microfilmed documents.

 Paying by credit card has its

advantages. For instance, since

the FEC will not fill an order

until payment is received, using a

credit card speeds delivery by

four to five days.

 Visitors to the FEC’s Public

Records Office may make

payments by credit card. Regular

visitors, such as researchers and

reporters, who in the past have

paid for FEC materials out of their

own pockets, may make payments

with a company credit card.

 The credit card payment system

also reduces costs and paperwork

associated with check processing,

enabling FEC staff to better serve

the walk-in visitor.
January 1999 Federal Election Commission RECORD

15

Session Information

Subject of Monthly Roundtable You Wish to Attend: Code Number:

Date of Roundtable:

Registration Information

Name of Attendee:

Organization:

Mailing Address:

E-Mail:

Phone Number: Fax:

Payment (Check one box)

❐ Check (payable to the Federal Election Commission)

❐ Credit Card:  ̈ Mastercard  ̈ Visa

Account #__ __ __ __ - __ __ __ __ - __ __ __ __ - __ __ __ __ Expiration Date:__ __ / __ __

Name/Billing Address (if different from above):____________________________________________________

Signature:___________________________________________________________________________________

Note: Payment is required prior to the meeting. Refunds will be made only when a cancellation is

received in writing or by fax at least two business days prior to the event. Those who fail to cancel by this

deadline will NOT receive a refund.

FEC Monthly Roundtable Registration Form

Mail Form/Check To: Monthly Roundtables

Federal Election Commission

999 E Street, N.W., Rm. 232

Washington, DC 20463

Credit card orders may be submitted by fax (202/219-8504) or by telephone (202/694-1100).

#
Federal Election Commission RECORD January 1999

16

Advisory

Opinions

AO 1998-22

Including Disclaimer on Web

Site

Leo Smith, a Connecticut resident, must include a disclaimer on a

web site he constructed to advocate

the election of former U.S. House

candidate Charlotte Koskoff.

Moreover, depending on how much

Mr. Smith spends and whether his

activity is independent, he may have

to file reports.

Mr. Smith created the web site in

September 1998 to protest House

Republican efforts against President

Clinton. On the site, he advocated

Ms. Koskoff’s election and the

defeat of her opponent, GOP

Representative Nancy Johnson. The

site offered visitors a choice of

contributing money or volunteering

time to the Koskoff campaign and

included a link to the official

Koskoff e-mail address.

Mr. Smith asserts that he spends

no money in maintaining the web

site, and that it cost him nothing to

create it. He says the web site is run

independently of Ms. Koskoff’s

campaign. The site includes a

statement declaring that it is not

affiliated with the Koskoff campaign. Nonetheless, staffers with the

Koskoff campaign asked Mr. Smith

to correct the spelling of the

candidate’s name on the web site

and to remove references to the use

of credit cards for making contributions to the Koskoff campaign. He

complied with both requests.

Expenditures

The definition of expenditure

includes anything of value made to

influence a federal election. 2

U.S.C. §431(9). Mr. Smith’s web

site is considered something of

value because it advocates the

election of one federal candidate

and the defeat of another. Thus, any

AO 1998-23

Status of State Party as State

Committee of Political Party

The Maine Green Party Council

meets both of the Commission’s

requirements for state committee

status.

The Federal Election Campaign

Act (the Act) defines a state committee as “the organization which, by

virtue of the bylaws of a political

party, is responsible for the day-today operation of such political party

at the State level, as determined by

the Commission.” 2 U.S.C. §431(15).

The definition of a state committee requires the existence of a

political party. A political party is

“an association, committee, or

organization which nominates a

candidate for election to any Federal

office whose name appears on the

election ballot as the candidate of

such association, committee, or

organization.” 2 U.S.C. §431(16).

In a number of Advisory Opinions, the Commission has identified

two requirements necessary for state

political committee status. First, the

organization must have a state

affiliate agreement that “delineates

activities commensurate with the

day-to-day operation” of a party at a

state level. Second, the state affiliate

must gain ballot access for its

Presidential and other federal

costs associated with construction

and maintenance of the web site are

expenditures. (Note that, although

the web site includes express

advocacy, under 2 U.S.C. §431(9), a

communication does not necessarily

have to contain express advocacy in

order to qualify as an expenditure.)

Whenever a person makes an

expenditure to finance a communication that expressly advocates the

election or defeat of a clearly

identified candidate through general

public political advertising, the

communication must include a

disclaimer. 2 U.S.C. §441d. The

disclaimer must state who paid for

the communication and, in the case

of an advertisement that was not

paid for by the candidate’s committee, who authorized it. In five

advisory opinions, the Commission

has concluded that communication

via a web site is a form of communication to the general public. AOs

1997-16, 1996-16, 1995-35, 1995-

33 and 1995-9.

Thus, Mr. Smith’s web site must

include a disclaimer stating who

paid for the communication and

whether or not it was authorized by

any candidate. Mr. Smith’s current

attempt at a disclaimer is insufficient. He only identifies himself as

an “Independent voter in the Sixth

District.” He must use his full name

in the disclaimer.

Reporting Obligation

The Commission also concludes

that—contrary to Mr. Smith’s

assertion—there are costs associated

with this web site. A portion of the

overhead costs could be apportioned

to each web site created by Mr.

Smith. Those costs include the

domain name registration fee, the

amount invested in the hardware

(computer and peripherals) that

created the web site and the utility

costs associated with creating and

maintaining the site.

If Mr. Smith’s web site activity

on behalf of the Koskoff campaign

was completely independent of the

campaign, then he would be required to file independent expenditure reports with the Commission if

the total value of the expenditures

exceeded $250 in 1998. 2 U.S.C.

§§431(17) and 434(c),

441a(a)(7)(B). If, however, Mr.

Smith’s web site activity was done

in cooperation, consultation or

concert with that campaign, then the

campaign would be required to

report the expenditure as an in-kind

contribution from Mr. Smith. 2

U.S.C. §§431(8)(A)(i), 434(b)(2)(A)

and 434(b)(3)(A).

Date Issued: November 20, 1998;

Length: 5 pages. ✦
January 1999 Federal Election Commission RECORD

17

800 Line

Use of Campaign Funds for

Swearing-in Reception

Can campaign funds be used to

pay for a reception to celebrate the

swearing-in ceremony of a newly

elected U.S. Representative or

Senator? The Commission has said

yes because the reception costs are

not considered to be a “personal

use” of campaign funds.

The Federal Election Campaign

Act prohibits the use of excess

campaign funds to pay for personal

expenses. Under Commission

regulations at 11 CFR 113.1(g),

“personal use” is any use of funds in

a campaign account to fulfill a

commitment, obligation or expense

of any person that would exist

irrespective of the candidate’s

campaign or responsibilities as a

federal officeholder. If an expense

results from campaign or officeholder activity, then it falls outside

the personal use ban, and can be

paid for with campaign funds. On

the other hand, if the expense would

exist even in the absence of the

candidacy, or even if the officeholder were not in office, then the

personal use ban applies, and

campaign funds cannot be used.

In Advisory Opinion 1981-2, the

Commission permitted a member of

Congress to use campaign funds to

pay the costs of a reception for

constituents on the day of his

swearing-in ceremony. The Commission viewed them as “ordinary

and necessary expenses associated

with the duties of a federal officeholder.” The Commission also said

that, if the reception were held to

thank campaign workers or encourage their assistance in a reelection

campaign, the expenses could be

regarded as campaign-related

expenditures, and could be covered

with campaign funds. ✦

Preparing for the Next

Election Cycle

This article examines issues that

candidates and their ongoing1

committees need to pay special

attention to now, as they begin to

plan for the next election cycle:

• Fundraising

• Registration

• Reporting

Fundraising and Contribution

Limits

Undesignated Contributions.

Candidates and their committees

need to be aware that contributions

made at this time, unless otherwise

designated in writing by the contributor, automatically count against

the donor’s limit for the candidate’s

next election. The date a contribution is made is important because it

determines which election limit it

counts against. FEC regulations

specify that a hand-delivered

contribution is considered made on

the date it is delivered to the campaign, while a mailed contribution is

made on the date of the postmark.

11 CFR 110.1(b)(6). For example,

an undesignated contribution to a

House candidate postmarked after

the 1998 general election of November 3 counts against the 2000

primary election limit.

Debt Retirement for a Previous

Election. A campaign may accept

contributions after an election to

retire election debts provided that it

satisfies the following requirements:

• The contribution is designated in

writing, by the contributor, for a

specific election (since an

undesignated contribution made

1

 An ongoing committee is any committee that plans to continue to raise funds

and make expenditures (other than for

the purposes of paying winding down

costs and retiring past election debts in

preparation for termination as a

campaign committee). See 11 CFR

116.1(a) and (b).

Advisory Opinion Request

Advisory opinion requests are

available for review and comment in

the Public Records Office.

AOR 1998-26

Candidate committee’s acceptance

of loan repayment from contested

election trust fund that contains

funds loaned to it by candidate (The

Friends of Mary Landrieu, Inc.,

December 9, 1998; 7 pages) ✦

candidates. See AOs 1998-24, 1998-

2, 1997-29, 1997-7, 1997-3 and

1996-51.

The Commission has made clear

that a state political party can

qualify as a state party committee

without an affiliation with any

national political party. The state

party’s candidate must qualify as a

candidate under FEC regulations in

order for the party to satisfy the

second requirement.

The Maine Green Party Council

meets both requirements. In addressing the first requirement, the

party’s bylaws set out a comprehensive organizational structure for the

party from the statewide level down

through local levels. These bylaws

do indeed delineate activity commensurate with the day-to-day

functions and operations of a

political party on the state level.

The second requirement of ballot

access for a federal candidate also

has been satisfied. The party’s 1992

federal candidate, Jonathan Carter,

attained ballot access and satisfied

FEC requirements for establishing

himself as a federal candidate under

2 U.S.C. §431(2). It makes no

difference that Mr. Carter was a

bona fide candidate more than six

years ago because the party continued to pursue its political objectives

through the most recent election

cycle (1997-1998) by placing

candidates on the Maine ballot for

state races.

Date Issued: November 16, 1998;

Length: 4 pages. ✦

(continued on page 18)
Federal Election Commission RECORD January 1999

18

after an election counts toward the

limit for the candidate’s upcoming

election). For example, a donor

should label a contribution to retire

the 1998 general election debt as

“1998 general debt.”2

• The contribution does not exceed

the contributor’s limit for the

designated election; and

• The campaign has net debts

outstanding for the designated

election on the day it receives the

contribution. (A campaign’s net

debts outstanding consist of unpaid

debts incurred with respect to the

election minus cash on hand.)

11 CFR 110.1(b)(3).

Registration by Candidates and

Their Committees

Individuals running for federal

office must designate a principal

campaign committee within 15 days

of becoming a “candidate.” 11 CFR

101.1(a) and 102.12(a). This

requirement applies to all candidates, including incumbents who

qualify as candidates for a future

election (see paragraph below).

Definition of Candidate. An

individual becomes a “candidate”

when the individual or persons

authorized to conduct campaign

activity on his or her behalf receive

over $5,000 in contributions or

make over $5,000 in expenditures.

11 CFR 100.3(a)(1) and (2). Unauthorized campaign activity on behalf

of a candidate may also trigger

candidate status unless the individual disavows the activity by

writing a letter to the FEC within 30

days after being notified by the

agency that unauthorized activity

reported to the FEC has exceeded

$5,000. 11 CFR 100.3(a)(3) and

102.13(a)(2).

Designation of Committee.

Candidates must designate a principal campaign committee by filing a

Statement of Candidacy on FEC

Form 2 (or a letter containing the

same information) within 15 days

after becoming a “candidate.” 11

CFR 101.1(a).

Registration by Principal Campaign Committee. Within 10 days

after it has been designated by the

candidate, the principal campaign

committee or other authorized

committee must register by filing a

Statement of Organization on FEC

Form 1. 11 CFR 102.1(a). Please

note that the name of the committee

must include the candidate’s name.

11 CFR 102.14(a).

Ballot Access. Registration with

the FEC does not mean that the

individual has qualified for the

ballot. State law governs ballot

access requirements for federal

offices; for information, consult the

appropriate state authority (generally, the secretary of state’s office).

Candidates Who Ran in Previous

Elections

A candidate who ran in 1998 or

another previous election must file a

new FEC Form 2 (Statement of

Candidacy) within 15 days after

qualifying as a “candidate” (as

defined above) for the 2000 election

cycle or another future election. The

candidate may either designate a

new principal campaign committee

or redesignate his or her previous

principal campaign committee (if it

has not terminated). A newly

designated committee will receive a

new FEC identification number,

while a redesignated committee

retains its original number.

If the candidate redesignates an

existing committee, the committee

need only amend its Statement of

Organization if there has been any

change in the information on it (e.g.,

a change in the committee’s name,

address or treasurer). The committee

must file the amendment within 10

days of the change in information,

either by using FEC Form 1 or by

writing a letter noting the changes.

11 CFR 102.2(a)(2).

Where to File Forms 1 and 2

U.S. House candidates and their

principal campaign committees file

their statements and amendments

directly with the FEC; U.S. Senate

candidates and their principal

campaign committees file with the

Secretary of the Senate. 11 CFR

Part 105.

Campaigns must also file copies

of statements and amendments with

state officers. House and Senate

campaigns file in the state in which

the candidate seeks election. 2

U.S.C. §439(a)(2)(B).

Other Authorized Committees

In addition to designating a

principal campaign committee, a

candidate may designate other

authorized committees to receive

contributions and make expenditures on his or her behalf, using the

following steps:

• The candidate designates the

authorized committee by filing an

FEC Form 2 (or letter) with the

principal campaign committee. 11

CFR 101.1(b) and 102.13(a)(1).

• Within 10 days of being designated by the candidate, the authorized committee must register by

filing an FEC Form 1 with the

candidate’s principal campaign

committee. 11 CFR 102.1(b). (The

name of the committee must

include the candidate’s name. 11

CFR 102.14(a).)

• The principal campaign committee, in turn, files both forms with

the appropriate federal and state

offices, as explained above.

Reporting Issues

Upcoming FEC Reports. All

campaign committees must file their

next regular FEC report on January

31, 1999, disclosing activity through

December 31, 1998. In 1999,

campaign committees file on a

semi-annual basis, with reports due

2

 The donor may make the written

designation using the memo line of his

or her check; alternatively, the donor

may sign a note accompanying the

check.

800 Line

(continued from page 17)
January 1999 Federal Election Commission RECORD

19

July 31, 1999, and January 31, 2000,

covering the preceding six months.

Disclosing Contributions for Two

Election Cycles in One Report. A

candidate who has received both

1998 general election debt retirement contributions and 2000

primary election contributions must

disclose information on both cycles

in the same FEC report. On the

Summary Page of Form 3 (Reports

of Receipts and Disbursements), the

campaign may indicate that the

report contains activity for both the

primary and general elections by

checking the applicable boxes.

When itemizing contributions on

Schedule A, campaigns should

check the primary or general

election box when itemizing contributions for the current (2000)

election cycle. By contrast, campaigns should check the “other” box

when itemizing contributions for the

1998 or other previous election

cycle, and note the specific election

to which the contribution applies.

Disclosing Debts from a Previous

Election Cycle. Redesignated

campaign committees must continue

to report outstanding loans and

debts remaining from the 1998 or

other previous elections on Schedules C and D. 11 CFR 104.11. For

information on debt settlement and

related issues, consult the Campaign

Guide for Congressional Candidates

and Committees, Chapter 13. 11

CFR 116.2(b).

Where to Obtain Forms and More

Information

Call the FEC’s Information

Division (800/424-9530, press 1, or

202/694-1100). Staff are also

available to answer questions.

Alternatively, dial the automated

FEC Faxline at 202/501-3413 and

request documents 801 (Form 1) and

802 (Form 2). ✦

Index

The first number in each citation

refers to the “number” (month) of

the 1999 Record issue in which the

article 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

1998-22: Application of expenditure

definition and disclaimer requirements to web site containing

express advocacy, 1:16

1998-23: Status as state committee

of political party, 1:16

Compliance

MUR 4750, Excessive contributions, 1:13

MUR 4796, Corporate contributions

and contributions in the names of

others, 1:13

Court Cases

_____ v. FEC

– Judd, 1:3

– RNC (98-5263), 1:2

Other

Burris v. Russell, 1:3

Cincinnati v. Kruse, 1:3

Regulations

Definition of “Member” of a

Membership Association, 1:10

Limited Liability Companies, 1:11

Public Financing of Presidential

Primary and General Election

Candidates, 1:7

Soft money, 1:12

Reports

Electronic filing, 1:6

Reports due in 1999, 1:4

PACronyms, Other

PAC Publications

Available

 The Commission annually

publishes PACronyms, an

alphabetical listing of acronyms,

abbreviations and common names

of political action committees

(PACs).

 For each PAC listed, the index

provides the full name of the

PAC, its city, state, FEC

identification number and, if not

identifiable from the full name,

its connected, sponsoring or

affiliated organization.

 The index is helpful in identifying PACs that are not readily

identified in their reports and

statements on file with the FEC.

 To order a free copy of

PACronyms, call the FEC’s

Disclosure Division at 800/424-

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

PACronyms also is available on

diskette for $1 and can be

accessed free under the “Using

FEC Services” icon at the FEC’s

web site—http://www.fec.gov.

Other PAC indexes, described

below, may be ordered from the

Disclosure Division. Prepayment

is required.

• An alphabetical list of all

 registered PACs showing each

 PAC’s identification number,

 address, treasurer and

 connected organization ($13.25).

• A list of registered PACs

 arranged by state providing the

 same information as above

 ($13.25).

• An alphabetical list of

 organizations sponsoring PACs

 showing the PAC’s name and

 identification number ($7.50).

 The Disclosure Division can

also conduct database research to

locate federal political committees

when only part of the committee

name is known. Call the telephone

numbers above for assistance or

visit the Public Records Office in

Washington at 999 E St., N.W.
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 January 1999