August 2000 Federal Election Commission Volume 26, Number 8

Table of Contents

Regulations

1 Electronic Filing

4 Election Cycle Reporting for

Candidate Committees

Commissioners

1 Smith Joins Commission

5 Federal Register

800 Line

5 Use of Internet

8 Advisory Opinions

Compliance

10 Pilot Alternative Dispute

Resolution Program

Court Cases

12 Akins v. FEC

13 Becker v. FEC

14 FEC v. Arlen Specter ’96

14 FEC v. Friends for Fasi

15 Hooker v. All Contributors, et al.

Legislation

16 Disclosure by 527 Political

Organizations

Outreach

4 Electronic Filing Training

17 Roundtables

Public Funding

18 Nader Eligible for Matching

Funds

18 June Matching Fund Payments

Reports

19 Nonfilers

Compliance Regulations

Electronic Filing

On June 15, the Commission

approved the final rules on mandatory electronic filing. Beginning

with the reporting periods that start

on or after January 1, 2001, all

persons required to file their reports

with the FEC who receive contributions or make expenditures in excess

of $50,000 in a calendar year, or

who expect to do so, must submit

their campaign finance reports

electronically. Any filers who are

required to file electronically, but

who file on paper, will be considered nonfilers and may be subject to

enforcement action.

The new rules, required by Public

Law 106-58, provide faster disclosure of filed reports and streamline

operations for both filers and the

Commission. The Commission

estimates, based on data from the

1996 and 1998 election cycles, that,

with the $50,000 threshold, 96 to 98

percent of all financial activity

reported to the FEC will be available almost immediately on the

FEC’s Web site.

Mandatory v. Voluntary Filing

The mandatory electronic filing

regulations (11 CFR 104.18) apply

to any political committee or other

(continued on page 2)

Commissioners

Smith Joins Commission

Bradley A. Smith was nominated

to the Federal Election Commission

by President Clinton on February 9,

2000, and confirmed by the U.S.

Senate on May 24, 2000.

Prior to his appointment, Mr.

Smith was Professor of Law at

Capital University Law School in

Columbus, Ohio, where he taught

Election Law, Comparative Election

Law, Jurisprudence, Law & Economics, and Civil Procedure.

Commissioner Smith’s writings on

campaign finance and other election

issues have appeared in the Yale

Law Journal, the University of

Pennsylvania Law Review, the

Georgetown Law Journal, the

Harvard Journal of Legislation, the

Cornell Journal of Law & Public

Policy and other academic journals.

As a law professor, Mr. Smith was a

frequent witness before Congress on

matters of campaign finance reform,

and also a frequent guest on radio

and television and a contributor to

popular publications such as the

Wall Street Journal and USA Today.

Before joining the faculty at

Capital in 1993, he practiced with

the Columbus law firm of Vorys,

Sater, Seymour & Pease, served as

(continued on page 15)
Federal Election Commission RECORD August 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

David M. Mason, Commissioner

Karl J. Sandstrom, Commissioner

Bradley A. Smith, Commissioner

Scott E. Thomas, Commissioner

James A. Pehrkon, Staff Director

Lawrence M. Noble, General

 Counsel

Published by the Information

 Division

Louise D. Wides, Director

Amy L. Kort, Editor

http://www.fec.gov

1

 Senate candidates, however, are

encouraged to voluntarily file electronically an unofficial copy of their reports

with the FEC to ensure faster disclosure.

person required to file reports,

statements or designations with the

FEC. This includes all filers except

Senate candidate committees (and

other persons who support only

Senate candidates), who are required to file with the Secretary of

the Senate.1

Since 1996, the Commission has

encouraged voluntary electronic

filing. For those individuals and

political committees that do not

exceed (or do not expect to exceed)

the $50,000 threshold, voluntary

electronic filing will still be encouraged.

Voluntary electronic filers must

continue to file electronically for the

remainder of the calendar year

unless the Commission determines

Regulations

(continued from page 1)

that unusual circumstances make

continued electronic filing impractical. 11 CFR 104.18(b). No such

waiver by the Commission, however, has been established for

mandatory electronic filers.

Who Must File Electronically

Candidate Committees. All

committees authorized by one

candidate must file electronically if

their combined total contributions or

combined total expenditures exceed,

or are expected to exceed, the

$50,000 threshold.

PACs and Party Committees. By

contrast, each unauthorized committee (PAC or party committee),

whether or not it is affiliated, must

file electronically if its total contributions or total expenditures exceed,

or are expected to exceed, the

threshold.

Joint Fundraising Representatives. A joint fundraising representative must file electronically if its

total contributions or total expenditures exceed, or are expected to

exceed, the $50,000 threshold.2

Independent Expenditures.

Individuals and qualified nonprofit

corporations whose independent

expenditures exceed, or are expected to exceed, the $50,000

threshold must file electronically on

FEC Form 5. Because Form 5 must

be notarized, filers are required to

submit a paper copy of Form 5

bearing the notarized seal and

signature, or, if filing on diskette,

attach a digital version of the seal

and signature as a separate file when

filing Form 5 electronically. 11 CFR

104.18(h) and 109.2(a).

2

 For more information on joint

fundraising, see 11 CFR 102.17 and the

Campaign Guides for Congressional

candidates and committees and for

party committees.

Calculating the Threshold

A committee (other than a Senate

committee) must file electronically if:

• It has received contributions of

more than $50,000 or made

expenditures of more than $50,000

during any calendar year; or

• It has “reason to expect to exceed”

the above threshold in any calendar year. 11 CFR 104.18(a)(1) and

104.18(a)(3)(i).

“Have Reason to Expect to

Exceed.” Once filers actually

exceed the threshold, they have

“reason to expect to exceed” the

threshold in the following two

calendar years. 11 CFR 104.18

(a)(3)(i). This means they must

continue to file electronically for the

next two years (January through

December).

Exception for Candidate Committees. In some cases, a candidate

committee that has exceeeded the

threshold and filed electronically

may not have to continue filing

electronically. This exception

applies to a candidate committee

that:

• Has $50,000 or less in net debts

outstanding on January 1 of the

year following the election;

• Anticipates terminating prior to the

next election year; and

• Supports a candidate who has not

qualified for the next election and

does not intend to become a

candidate in the next election. 11

CFR 104.18 (a)(3)(i).

Persons With No History. New

political committees or other

persons with no history of campaign

finance activity may rely on one of

the following formulas to determine

whether they will exceed, or should

expect to exceed, the threshold:

• The filer receives contributions or

makes expenditures that exceed

one-quarter of the threshold
August 2000 Federal Election Commission RECORD

3

Calculating the Electronic Filing Threshold

Political committees should use the following formulas to determine if their

total expenditures or total contributions are over $50,000 per calendar year:

CANDIDATE COMMITTEES

Total Contributions Received1

– Refunds of Contributions

Total Contributions (if over $50,000, must file electronically)

Total Operating Expenditures

+ Contributions Made

Total Expenditures (if over $50,000, must file electronically)

PACS

Total Contributions Received

– Refunds of Contributions

+ Transfers from affiliated federal committees

Total Contributions (if over $50,000, must file electronically)

Total Federal Operating Expenditures

+ Transfers to affiliated federal committees

+ Contributions Made

+ Independent Expenditures

Total Expenditures (if over $50,000, must file electronically)

POLITICAL PARTY COMMITTEES

Total Contributions Received

– Refunds of Contributions

+ Transfers from affiliated federal political party committees

Total Contributions (if over $50,000, must file electronically)

Total Federal Operating Expenditures

+ Transfers to affiliated federal political party committees

+ Contributions Made

+ Independent Expenditures

+ Coordinated Expenditures

Total Expenditures (if over $50,000, must file electronically)

1

 Including the outstanding balance of any loans made, guaranteed or

endorsed by the candidate or other person.

amount in the first calendar quarter

of the calendar year; or

• The filer receives contributions or

makes expenditures that exceed

one-half of the threshold amount in

the first half of the calendar year.

11 CFR 104.18 (a)(3)(ii).

Other Considerations. When a

committee calculates whether it has

exceeded, or expects to exceed, the

$50,000 threshold, it should keep in

mind the following:

•The calculation is based on either

making $50,000 in expenditures or

receiving $50,000 in contributions

during the calendar year; it is not

based on a combination of expenditures and contributions.

• Nonfederal funds are excluded

from the calculation.

• Cash on hand and outstanding debt

at the beginning of the calendar

year are excluded from the calculation.

(Also, see chart at right: Calculating the Electronic Filing Threshold.)

Filing Reports and Statements

Validation of Report. Electronic

filers (whether mandatory or

voluntary) must file all their reports

electronically. The reports must

follow the FEC’s Electronic Filing

Specifications Requirements,

available online or on paper from

the FEC. 11 CFR 104.18(d). An

electronic report is considered

“filed” when it is received and

validated by the Commission’s

computer system on or before 11:59

p.m. on the prescribed filing date.

Incomplete or inaccurate reports that

do not pass the FEC’s validation

program will not be considered

filed. The Commission will notify

the filer that the report has not been

accepted. 11 CFR 104.18(e)(2).

(continued on page 4)
Federal Election Commission RECORD August 2000

4

Filing an Amendment. To amend

an electronically filed report, the

filer must electronically resubmit

the entire report, not just the

amended portions. Additionally, the

amendments must comply with the

formatting rules contained in the

FEC’s Electronic Filing Specifications Requirements. 11 CFR

104.18(f).

Registration Documents (FEC

Forms 1 and 2)

If a committee has exceeded or

expects to exceed the $50,000

threshold, its Statement of Organization (FEC Form 1) and Statement

of Candidacy (FEC Form 2), and

any amendments to either form,

must be filed electronically. 11 CFR

102.2(a)(2) and 104.18(c). Note that

all filers (whether electronic or

paper) must include on their Statement of Organization the URL for

their Web site, if they maintain one,

and their e-mail address, if they

have one. 11 CFR 102.2(a)(1)(vii).

Refiling Paper Reports

Filers will not be expected to

refile any reports or statements that

were correctly filed on paper earlier

in the calandar year or election

cycle. 11 CFR 104.18(a)(2).

Signature Requirements

A committee’s treasurer (or other

person responsible for filing designations with the FEC) must verify

that all electronically filed documents have been examined by the

treasurer and (to the best of that

person’s knowledge) are accurate

and complete. Verification may be:

• Direct transmission of the filing,

using the treasurer’s personal

password received from the FEC.

(In order to receive a password,

treasurers should call the electronic

filing office at (202)208-5263); or

• If filing on diskette, a digitized

copy of a signed certification sent,

as a separate file on the diskette,

with the electronically filed

documents. 11 CFR 104.18(g).

Availability of Forms

FECFile software, available free

from the FEC, currently generates

FEC forms 3 and 3X for disclosure

of financial information. The

Commission anticipates that the

software will generate Form 3P,

Form 4 and Form 5 in the near

future, and Form 1 and Form 2 by

January 1, 2001, when the program

takes effect.

Many commercially available

software products also include

electronic filing capabilities.

Nonfilers

Those filers who are required to

file electronically and who file on

paper instead, or who fail to file,

will be considered nonfilers and

may be subject to enforcement

action by the Commission, including publication of their names or the

imposition of civil money penalties

under the new Administrative Fines

Program.3

 11 CFR 104.18(a)(2) and

Part 111, Subpart B and 2 U.S.C

§437g(a)(4) and (6)(A).

More Information

Free copies of the final rules, and

their Explanation and Justification,

as they appeared in the Federal

Register (65 FR 38415, June 21,

2000) are available through the FEC

Faxline (202/501-3413, document

227). For further information, see

the FEC’s Web site at http://

www.fec.gov/electron.html. The

FEC will be sending copies of the

final rules to registered

committees.✦

Regulations

(continued from page 3)

3

 See the July 2000 Record.

Electronic Filing

Training

To help committees understand

and comply with the new rules

mandating electronic filing, the

FEC will offer weekly Electronic

Filing Training Sessions

beginning in September. Training

sessions will focus on using the

Commission’s free FECFile 3

electronic filing software and will

be held on Mondays—September

11, September 18 and September

25.

Topics for September include:

• FEC Form 3;

• FEC Form 3X, without Hschedules; and

• FEC Form 3X, with Hschedules.

All sessions will run from 9:00 to

12:00 and will be held in room

411 of the Federal Election

Commission, located at 999 E

Street, NW, Washington, D.C.

20436. These training sessions

are provided free of charge. To

register, contact Jeff Chumley at

202-694-1321.

Election Cycle Reporting for

Candidate Committees

On July 5, 2000, the Commission

approved new regulations requiring

authorized committees of federal

candidates to aggregate and report

receipts and disbursements on an

election-cycle basis rather than on a

calendar-year basis, which is the

current system. These revised

regulations will affect reports

covering periods that begin on or

after January 1, 2001. The new rules

do not affect unauthorized committees, such as PACs and party

committees.

The change to election cycle

reporting, required by Public Law

106-58, is intended to simplify

recordkeeping and reporting. Under

current regulations, candidate
August 2000 Federal Election Commission RECORD

5

800 Line

Use of Internet

This article summarizes Commission advisory opinions (AOs) and

one Matter Under Review (MUR)

issued to date on the use of the

Internet in connection with federal

elections. Copies of the referenced

advisory opinions are available via

the FEC’s Web site at http://

herndon3.sdrdc.com/ao/ao.html.

The Internet as Public Political

Advertising

In several advisory opinions the

Commission said that the use of the

Internet for express advocacy1

communications or political

fundraising constituted “general

public political advertising.” As a

result, a Web site that contained

express advocacy and/or solicited

contributions in connection with a

federal election had to contain the

appropriate disclaimer stating who

paid for the site and whether or not

the communication was authorized

by a candidate or candidate’s

committee. See 11 CFR 110.11 and

AOs 1998-22 and 1995-9. Moreover, any e-mail containing express

advocacy or a solicitation had to

contain the appropriate disclaimer if

it was sent to more than 100 separate e-mail addresses in a calendar

year. AO 1999-37.

Support of Candidates Through

Internet

Creation of Web Site. Fees

associated with the creation and

administration of a Web site may be

subject to the federal election law.

Specifically, the Commission said

that the fee to secure registration of

a domain name, funds invested in

next general election for that seat or

office. 11 CFR 100.3(b). The

length of the election cycle, thus,

depends on the office sought. For

example, the election cycle is two

years for House candidates, six

years for Senate candidates and four

years for Presidential candidates.

Transition to Election-Cycle

Reporting

Since the new regulations will

take effect after the close of postgeneral and year-end reporting

periods for 2000, many candidates

will have already reported receipts

and disbursements related to the

2002, 2004 or 2006 election cycles

under the current reporting system.

Committees will need to include the

total of this previously-disclosed

activity in their election-cycle-todate figures, beginning with their

first report under the new system.1

In some cases, the activity may span

several years. For example, a Senate

candidate for a 2002 election who

has been receiving contributions and

making disbursements since the

1996 election for that seat will need

to include the aggregate of that

activity in his or her election-cycleto-date totals. The Commission is

creating a one-time worksheet to

help campaigns aggregate their

election-cycle-to-date figures during

this transition period.

More Information

Free copies of the final rules as

they appeared in the Federal Register (65 FR 42619, July 11, 2000) are

available through the FEC Faxline

(202/501-3413, document 248) and

on the FEC’s Web site at http://

www.fec.gov/pdf/cyclefinal.pdf.

The FEC will be sending copies of

the final rules to registered candidate committees.✦

1

 For most campaigns, the first report

under the new system will be the midyear report, due July 31, 2001.

Federal Register

Federal Register notices are

available from the FEC’s Public

Records Office.

Notice 2000-13

Mandatory Electronic Filing;

Final Rules and Explanation and

Justification—Transmittal to

Congress; (65 FR 38415, June 21,

2000)

Notice 2000-14

Guidance to Candidates and

Political Party Committees on

Status of FEC Civil Enforcement

Actions Pending Supreme Court

Consideration of FEC v.

Colorado Republican Federal

Campaign Committee (65 FR

42365, July 10, 2000)

Notice 2000-15

Election Cycle Reporting by

Authorized Committees

(Candidate Committees); Final

Rules and Explanation and

Justification—Transmittal to

Congress (65 FR 42619, July 11,

2000)

1

 “Express advocacy” refers to a

communication that unambiguously

advocates the election or defeat of a

clearly identified candidate. See 11

CFR 100.22.

(continued on page 6)

committees monitor contribution

limits on a per-election basis, but

disclose their financial activity on a

calendar-year-to-date basis. Under

the new system, committees will

report all of their receipts and

disbursements on an election-cycle

basis. 11 CFR 104.3. For example,

campaigns must itemize a donor’s

contributions once they exceed $200

for the election cycle, rather than for

the calendar year. Likewise,

candidate committees must itemize

disbursements to a person once they

aggregate in excess of $200 within

the election cycle.

Election Cycle

Under FEC regulations, an

election cycle begins the day after

the general election for a seat or

office and ends on the day of the
Federal Election Commission RECORD August 2000

6

hardware and utility costs associated

with the creation of a Web site that

supported or opposed a candidate

were generally expenditures under

the Federal Election Campaign Act

(the Act) unless they fell within an

exception to the Act’s definitions of

contribution or expenditure. AO

1998-22.

Exception for Web Sites Established by Campaign Volunteers. In

another AO, the Commission said

that costs incurred by a campaign

volunteer who used his or her

personal home computer to set up a

Web site supporting a candidate fell

within the Act’s exception for the

use of personal property by an

individual volunteer. See 2 U.S.C.

§431(8)(B)(ii). Therefore, costs

incurred by a volunteer using a

home computer were not contributions or expenditures under the Act.

Such costs did not need to be

reported by the campaign. This

exception extended to the redistribution or other use of downloaded

material from the campaign’s Web

site. AO 1999-17.

Web Sites Established by NonVolunteer. In the case of an individual who was not a campaign

volunteer and who set up and ran a

Web site supporting or opposing a

federal candidate, the campaign had

no reporting obligation. AO 1999-

17. In this AO, the Commission

assumed that the campaign had not

coordinated a particular Web site’s

activity with the non-volunteer and

that the non-volunteer provided

nothing of value to the campaign.

Provision of Web Space/Online

Accounts to Federal Candidates. In

another AO, the Commission

concluded that a corporation could

not provide online accounts (for

which it normally charged a fee) to

candidates free of charge. AO

1996-2. Such activity did not fall

800 Line

(continued from page 5)

within the type of exemption

afforded to news organizations

covering election-related news

stories (at 2 U.S.C. §431(9)(B)(i)) or

to organizations engaging in nonpartisan efforts to encourage individuals to vote (at 2 U.S.C.

§431(9)(B)(ii)).

Nonpartisan Web Sites. In AO

1999-25, the Commission said that

two incorporated nonprofit organizations could jointly sponsor a Web

site that provided information on

federal candidates because the

information fell within the exception

for nonpartisan activity designed to

encourage individuals to vote or to

register to vote. (See 2 U.S.C.

§431(9)(B)(ii) and 11 CFR

100.8(b)(3).) Similarly, in AO

1999-24, a for-profit limited liability

company was permitted to sponsor a

Web site promoting communication

between voters and all candidates on

a nonpartisan basis because the

activities on the Web site also fell

within the exemption for nonpartisan voter registration and voter

drive activity. See 2 U.S.C.

§431(9)(B)(ii) and 11 CFR

100.8(b)(3).

Hyperlinks. In Matter Under

Review 4340, the Commission

found that a link from a candidate’s

corporate Web site to his campaign

Web site represented something of

value and, consequently, was a

prohibited corporate contribution.

By contrast, nonpartisan Web

sites, such as those described above,

have been permitted to establish

hyperlinks to all candidate sites as

part of exempt nonpartisan voter

registration and voter drive activity.

AOs 1999-25, 1999-24 and 1999-7.

On the other hand, in AO 1999-

17, the Commission said that the

provision of a hyperlink was a

contribution in those cases where a

Web site owner normally would

have charged for a link to another

site, but chose either not to charge

the campaign for a link to the

campaign’s site or to charge less

than it normally charged to a

similarly situated nonpolitical

organization or entity.

Corporate/Labor/Trade Association Communications. A corporation, labor organization or trade

association could endorse, or solicit

contributions for a candidate via its

Web site only if it used a method

(such as passwords) to limit access

to these messages to the

organization’s restricted class.2

 AO

1997-16. See also 2 U.S.C.

§441b(b)(2)(A) and 11 CFR 114.3.

Independent Expenditures. The

Commission said, in another AO,

that a Web site containing express

advocacy would be considered an

independent expenditure if the

activity was completely independent

of the campaign. On the other hand,

if the activity was done in cooperation, consent or concert with a

campaign, it would be an in-kind

contribution and, thus, reportable by

the campaign. AO 1998-22. See

also 2 U.S.C. §431(17) and 11 CFR

Part 109.

In AO 1999-37, a PAC that

created independent expenditures

for electronic distribution through

downloads and e-mail did not need

to include the costs of Web site

hosting, domain name registration

or computer hardware and software

in the valuation of its independent

expenditures. Only the expenses of

initially distributing the advertisements through e-mail represented

the cost of the independent expenditure. Moreover, the PAC was not

required to collect information on

those individuals who downloaded

the PAC’s advertisements and used

them for their own political activity.

2

 See the Campaign Guide for Corporations and Labor Organizations for a

chart detailing the restricted classes of

various organizations for communications purposes.
August 2000 Federal Election Commission RECORD

7

E-Mail. In AO 1999-17, the

Commission said that campaign

volunteers could use their home

computers to send e-mail supporting

the campaign without making a

contribution. This activity came

under the law’s exception at 2

U.S.C. §431(8)(B)(ii) for the use of

personal property. The volunteers

could also make isolated, incidental

use of their corporate employers’

computers, in connection with

campaign activity, under 11 CFR

114.9(a).3

The Commission also noted, in

AO 1999-37, that a PAC could email communications that contained

express advocacy to foreign nationals because the Act does not prohibit

the distribution of such messages to

foreign nationals.

Use of Internet for Fundraising

Recordkeeping. In AO 1995-9,

the Commission said that a political

committee using the Internet for

fundraising had to comply with all

of the Act’s recordkeeping provisions.4

 The committee had to ensure

that its electronic records were

retrievable and that contributor data

was maintained for three years after

the date on which it reported the

contributions.

In two AOs, the Commission said

that committees using the Internet

for fundraising had to use “best

efforts” to obtain and report the

identification of contributors who

made more than $200 in contributions during a calendar year, including making follow-up requests to

those contributors who failed to

provide the requested information.

11 CFR 104.7. The follow-up

request could take the form of an email to the contributor. AOs 1999-

17 and 1995-9.

Avoiding Prohibited Contributions. In several AOs, the Commission said that Web sites soliciting

contributions in connection with a

federal election were required to

inform potential contributors of all

of the Act’s prohibitions, including

the prohibitions on contributions

from corporations, labor organizations, federal government contractors and foreign nationals,5

 and the

restrictions at 11 CFR 110.1(i)(2) on

contributions from minors. AOs

1999-22, 1999-9 and 1995-9 contain

detailed examples of sample language and mechanisms for vetting

contributors.

Acceptance of Funds Via Credit

Cards and Electronic Checks. In

several AOs, the Commission said

that online contributions could be

made via credit card. Such contributions were acceptable for publicly

funded Presidential campaigns and

were matchable provided that the

correct documentation was provided

to the Commission. See 11 CFR

9034.2(c)(8) and AOs 1999-22,

1999-9 and 1995-9.

In the same AOs, companies

were permitted to administer online

fundraising for political committees.

The date the contributors sent the

electronic confirmation of their

contributions to the online company

was the date “made,” for contribution limitation purposes. See 11

CFR 110.1(b)(6) and AO 1995-9.

The date of receipt, used for reporting purposes, was the date the

committee received notice of the

electronic confirmation from the

contributor. Political committees

were required to compensate the

companies providing this service at

the usual and normal rates. Funds

paid to the companies were reportable as operating expenditures. AOs

1999-22, 1999-9 and 1995-9.

In AOs 1999-36 and 1999-22, the

Commission provided detailed

guidance to companies providing

online fundraising services to

federal candidates and political

committees.

Fundraising for Corporate/

Labor/Trade PACs. Under federal

election law, any solicitation

message for a corporate/labor/trade

association PAC may only be

directed to the organization’s

restricted class.6

 Accordingly, a

corporate PAC could send a newsletter containing a PAC solicitation

via e-mail to the secretaries of

corporate executives, provided that

the material was accompanied by a

note informing the secretary that the

3

 Such use is defined as isolated and

incidental if it does not exceed one hour

per week or four hours per month or if

it does not prevent the employee from

carrying out the workload that the

employee normally carries out during

that period. 11 CFR 114.9(a) and (b).

6

 See 11 CFR 114.5(g), 114.7(a) and

114.8(c). Also, see the Campaign

Guide for Corporations and Labor

Organizations for a chart detailing the

restricted classes of various organizations for solicitation purposes.

(continued on page 8)

Back Issues of the

Record Available on

the Internet

This issue of the Record and all

other issues of the Record starting

with January 1996 are available

through the Internet as PDF files.

Visit the FEC’s World Wide Web

site at http://www.fec.gov and

click on “What’s New” for this

issue. Click “Campaign Finance

Law Resources” to see back issues. Future Record issues will be

posted on the web as well. You

will need Adobe® Acrobat®

Reader software to view the publication. The FEC’s web site has

a link that will take you to Adobe’s

web site, where you can download

the latest version of the software

for free.

4

 See 2 U.S.C. §432 and 11 CFR 102.5,

102.8 and 102.9.

5

 See 2 U.S.C. §§441b, 441c and 441e.
Federal Election Commission RECORD August 2000

8

material was intended solely for the

executive. AO 1995-33. Similarly,

a corporation could maintain an

electronic mail list serve (i.e.,

mailing list) to send PAC solicitations to members of the

corporation’s restricted class who

had indicated an interest in the

corporation’s PAC. AO 2000-07.

Moreover, that corporation also

could include a message on a

company intranet site (available

only to corporate employees) about

the company’s PAC if that message

did not constitute a solicitation. For

example, the corporation could post

a statement that merely explained

the legal requirements that applied

to the PAC but did not encourage

support for the PAC. The same

message could include a link to a

separate, password-protected site

accessible only by members of the

corporation’s restricted class.

Because access was limited to the

restricted class, the passwordprotected Web site could contain a

solicitation. It was also important

that the page introducing the PAC

Web site stated that federal law

prohibits the PAC from soliciting

donations from persons outside the

restricted class and that any contribution received from a person

outside the restricted class would be

returned to the donor. AO 2000-07.

Finally, in AO 2000-10, the

Commission said that a trade

association could use its Web site to

seek prior approval from its corporate members under 11 CFR 114.8

so that the restricted class of those

corporations could be subsequently

solicited for contributions to the

trade association’s PAC.✦

Advisory

Opinions

AO 2000-10

“Permission to Solicit Form”

Placed on Trade Association

Web Page

America’s Community Bankers

Community Campaign Committee

(COMPAC), the separate segregated

fund of America’s Community

Bankers (ACB), may use ACB’s

informational, “members only” Web

page to obtain permission from

corporate members to solicit contributions from their restricted classes.

COMPAC may also place a notice

on a publicly-accessible ACB Web

page inviting inquiries about

COMPAC and providing contact

information.

ACB is an incorporated, national

trade association. Under the Federal

Election Campaign Act (the Act),

the separate segregated fund (SSF)

of a trade association may solicit the

“restricted class” of its member

corporations, but only after a

representative of each corporation

has provided written permission for

the solicitations.1

 11 C.F.R.

114.8(c). COMPAC plans to

include a “permission to solicit

form” on ACB’s Web page. The

corporate executive could print the

form, sign it and return it to

COMPAC by fax or mail.

COMPAC proposes to institute a

series of safeguards to ensure that

no prohibited contributions are

received. First, the form would be

available only on the “members

only” Web page, which is inaccessible without a password. Second,

the form would be accompanied by

statements explaining:

• COMPAC’s purpose;

• That participation is voluntary and

contributions are not tax

deductable;

• That COMPAC “can only solicit

voluntary contributions from

executive, administrative personnel and directors of member

institutions”; and

• That member corporations can

give such permission to only one

trade association per calendar

year.2

Finally, COMPAC plans to

return immediately any contributions from individuals whose

corporation has not given consent

for the trade association solicitation

or who are otherwise prohibited

from contributing to COMPAC.

In addition to the “permission to

solicit form” available on the

“members only” Web page,

COMPAC plans to place an informational notice on a portion of

ACB’s Web site that is accessible to

the general public. This notice may

result in inquiries about COMPAC.

Under the Act, a distinction can

be drawn between a solicitation for

contributions to a PAC and a

request for corporate approval of a

solicitation. AO 1980-65 and AO

1981-41. In this case, both

COMPAC’s notice and its consent

form are permissible because

neither communication solicits or

encourages contributions. In

addition, the Commission notes

1

 The “restricted class” includes

stockholders and executive and

administrative personnel as well as the

families of these individuals.

2

 Under the law, a corporation may not

approve solicitations by more than one

trade association in a single calendar

year, but it may grant permission in

advance for a trade association to

solicit its members for several years.

In order to do so, the corporation must

submit a signed statement for each

year approved. These signatures and

statements may all appear on a single

form. 11 CFR 114.8 (d)(1) and (4); and

Advisory Opinion 1984-61.

800 Line

(continued from page 7)
August 2000 Federal Election Commission RECORD

9

COMPAC’s assertion that it will

return checks from “improper”

sources. (The Commission understands that “improper sources”

includes individuals who may not be

solicited for COMPAC contributions

until the related corporation member

of ABC has given the requisite

approval described above.) Further,

because these statements are not

solicitations, they do not need

disclaimers. The statements also do

not qualify as in-kind contributions

to COMPAC or to any candidate. 2

U.S.C. §441d.

COMPAC must, however, change

the language of its consent form,

which asks the corporate representative to provide the names of “executive, administrative personnel and

directors employed by my institution.” The Commission noted that

directors are not considered members of a corporation’s restricted

class unless they are paid by salary

or stipend or they qualify as stockholders or executive employees. 11

C.F.R. 114.5(g)(1) and AOs 1992-9

and 1985-35.

Issued: June 23, 2000;

Length: 8 pages.✦

AO 2000-11

Misplaced Payroll-Deducted

Contributions

The Georgia-Pacific

Corporation’s (Georgia-Pacific)

separate segregated fund, G-P

Employees Fund of Georgia-Pacific

(the Fund), may accept new payroll

deduction checks to replace those

misplaced by its treasurer and report

the contributions as having been

made on the dates of the original

payroll deductions. The Fund must

amend each of its affected reports to

reflect the dates the contributions

were initially received.

Georgia-Pacific operates a payroll

deduction plan through which

eligible employees contribute to the

Fund. Early in 2000, when a new

treasurer assumed his position and

(continued on page 10)

reviewed the Fund’s accounts, the

Fund discovered that 14 checks

issued to the Fund by the payroll

department between 1997 and 1999,

representing $125,809 in contributions made through payroll deduction, had not been deposited in the

Fund’s account or anywhere else.

The former treasurer was able to

find most of the undeposited checks

in her office, but they were staledated and non-negotiable.

As the connected organization of

the Fund, Georgia-Pacific may act

as the Fund’s collecting agent. A

collecting agent receiving contributions through a payroll deduction

system may deposit the funds in its

treasury before forwarding them to

the separate segregated fund (SSF)

provided the collecting agent and

the SSF follow FEC rules, such as

forwarding funds in a timely

manner and recordkeeping. 11 CFR

102.6(c)(4)(ii)(B). The date of the

committee’s receipt of a contribution is the date that the collecting

agent obtains possession of the

funds. In this case, the date of

receipt is the date on which the

funds were withheld from the

employee’s salary payment. 11

CFR 102.8(b)(2); AO 1999-33.

Committee receipts must be deposited in the committee’s depository

within ten days of the committee

treasurer’s receipt. 11 CFR

103.3(a). Thus, a check that contained payroll-deducted contributions and was transmitted by a

collecting agent to a committee

must be deposited within ten days

of the receipt of that check.

In this case, the Fund may accept

replacement payroll checks despite

its failure to deposit the original

checks within the required time

frame. The Commission based its

decision on two factors. First, the

failure to comply did not appear to

have been intentional. Second,

denying the SSF these funds would

contradict the intentions of the

contributors who had not only

released control of the funds but

also no longer had possession of the

funds because they were in the

collecting agent’s account.

The Fund must, however, fully

report the contributions as having

been received on the dates of the

deductions. As a monthly filer, the

Fund must amend each of the

previous monthly and other required

reports covering the periods of these

payroll deductions in order to

disclose the contributions’ dates of

receipt. Each amended report

should include revised totals on the

summary page and detailed summary page, and the Schedule A of

each report naming a contributor

should also be amended. In addition,

the Fund must provide a short

statement with each report explaining the reasons for the amendments

and making reference to this advisory opinion. These amended

reports must be filed with the

Commission within 30 days after

the Fund receives the first replacement check from Georgia-Pacific.

Issued: June 23, 2000;

Length: 6 pages.✦

AO 2000-13

Internet Video Coverage of

Republican and Democratic

National Conventions

iNEXTV Corporation (iNEXTV),

through its affiliate, EXBTV, may

provide gavel-to-gavel Internet

video coverage of the Republican

and Democratic national conventions without making a prohibited

corporate contribution or expenditure. The proposed activities fall

within the Federal Election Campaign Act’s (the Act) exemption for

news stories and commentary.

iNEXTV, a wholly-owned

subsidiary of Ampex Corporation,

controls a network of affiliates that

webcast Internet video programming. For example, its Executive
Federal Election Commission RECORD August 2000

10

1

 See also AO 1988-17, 1996-48, 1996-

41, and 1996-16.

Advisory Opinion Requests

AOR 2000-12

Effective date to revise state

party ballot composition ratio for

allocation of administrative and

generic voter outreach expenses

when there are unexpected vacancies in state offices.

 (Republican Party of Florida,

June 26, 2000)✦

Advisory Opinions

(continued from page 9)

Branch Television Web site

(EXBTV) features news and

information about the federal

government, including commentary

and interviews. iNEXTV’s Web

sites are supported by the sale of

public advertising.

This summer, iNEXTV plans to

expand EXBTV’s coverage of

government affairs to include

complete coverage of the Republican and Democratic national

conventions, including interviews

with political experts and candidates and commentary by EXBTV

journalists.

The Federal Election Campaign

Act (the Act) prohibits “any corporation whatever” from making a

contribution or expenditure in

connection with a federal election.

2 U.S.C. §441b(a). The Act,

however, makes an exception for

news media, exempting from the

definition of “expenditure” any

“news story, commentary, or

editorial distributed through the

facilities of any broadcasting

station, newspaper, magazine, or

other periodical publication, unless

such facilities are owned or controlled by any political party,

political committee, or candidate.”

2 U.S.C. §431(9)(B)(i).

In this case, the Commission

concluded that iNEXTV and

EXBTV meet the three criteria for

the exemption for news media.

First, they qualify as press entities

both in their purpose and in their

function:

• iNEXTV operates news and

information sites, which can be

characterized as “webcast video

periodicals”;

• EXBTV provides a news function

for its viewers, similar to that

offered by other televised news

programming by offering direct

access to government and business

news events (similar to C-SPAN)

and reports and commentary of its

prominent journalists; and

• The Web sites are viewable by the

general public and akin to a

periodical or news program

distributed to the general public

(AO 1982-58).

Second, iNEXTV and EXBTV

are not owned by any political party,

political committee or candidate

and, third, they would be acting in

their capacity as press entities in

undertaking this media coverage.1

Issued: June 23, 2000;

Length: 4 pages.✦

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.

Compliance

1

 The Commission meets in closed

sessions weekly to discuss matters that,

by law, must remain confidential.

2

 Title 2 audit referrals are those

matters that are referred, by the Audit

Division, from an audit for cause

conducted pursuant to 2 U.S.C. §438

(b).

3

 A respondent is the person (an

individual, a committee or other group)

against whom a complaint has been

filed or who is the subject of a Title 2

audit referral from the Audit Division

to the Office of General Counsel.

Pilot Alternative Dispute

Resolution Program

Goals of the Program

In a closed session1

 held on July

25, the Commission approved an

Alternative Dispute Resolution

(ADR) program, set to begin this

Fall. The pilot program is designed

to promote compliance with the

Federal Election Campaign Act and

FEC regulations by encouraging

settlements outside the enforcement

context. By expanding the tools for

resolving complaints and Title 2

audit referrals,2

 the program aims to:

• Resolve complaints and audit

referrals faster;

• Increase the number of complaints

and referrals processed;

• Reduce costs for respondents;3

• Ensure greater satisfaction for the

respondents involved; and

• Enhance FEC enforcement efforts

by freeing up resources from less

compelling complaints and Title 2

audit referrals.

Overview of the ADR Process

The ADR program aspires to

bring complaints and Title 2 audit

referrals to resolution expeditiously

through both direct and, when

necessary, mediated negotiations
August 2000 Federal Election Commission RECORD

11

between the parties. The speed with

which each case will be settled will

be contingent upon:

• The availability of resources;

• The willingness of respondents to

engage and cooperate in the

process; and

• The complexity of the case in

question.

Taking account of these contingencies, it is expected that complaints and Title 2 audit referrals

will be processed, on average,

within five months following the

receipt of the complaint or the

referral.

When a complaint or Title 2 audit

referral is filed with the Commission, the Office of the General

Counsel (OGC) will provide the

respondent with information about

the ADR option. Additionally,

OGC will make an initial determination as to whether the case is

suitable for the ADR program.

OGC — or the Commission —

will refer cases to the ADR office.

The ADR office will then review

and evaluate them to determine

whether they meet the requirements

for the ADR program. In order to

have a case considered for treatment

within the ADR program, the

respondent must:

• Express a willingness to engage in

the ADR process;

• Agree to set aside the statute of

limitations while the complaint is

pending in the ADR Office; and

• Agree to participate in bilateral

negotiations and, if necessary,

mediation.

After the Commission concurs

that the case can be dealt with

through ADR procedures, the ADR

office will notify the respondent and

forward an agreement to engage in

bilateral negotiation and/or mediation. Upon receipt of the agreement

from the respondent, negotiations

will begin. 4

 The mediators will be chosen from a

list of senior, experienced mediators

from the private sector.

The ADR Process

Bilateral Negotiations. The

bilateral negotiation phase involves

direct negotiations between the

respondent and a representative

from the ADR office of the FEC.

Bilateral negotiation offers:

• The possibility for a speedy

resolution of the complaint;

• The chance to fashion a settlement

that is focused on correcting

behavior and the activities that

gave rise to the complaint; and

• The opportunity for both parties to

clarify the disputed issues, should

the case be brought to mediation at

a later time.

The negotiations are oriented

toward reaching an expedient

resolution of the complaint or Title

2 audit referral in a way that is both

satisfying to the respondent and in

compliance with the Federal Election Campaign Act (the Act). While

compliance with the Act will be

stressed in the negotiations, the

negotiated resolution may not

always entail an admission of guilt

on the part of the respondent. Any

resolution reached in negotiations

will be submitted to the Commission for final approval. If a resolution is not reached in bilateral

negotiations, the case will proceed

to mediation.

Mediation. The mediation phase

begins with the selection of a

mediator4

 agreed upon by the

respondent and the representative

from the ADR office. The Commission will pay for all mediation costs,

unless the respondent desires to split

the mediation costs with the ADR

Office. Before the mediation

sessions begin, both the respondent

and ADR office representative must

submit a written synopsis of the case

to the mediator. For the sake of cost

efficiency, the ADR office will not

require or recommend the filing of

formal briefs for mediation.

The mediator will meet with the

parties both jointly and separately as

needed. In accord with Section 574

of the ADR Act and 2 U.S.C. §437g

(a) (4) (B) and (a) (12) (A), information disclosed in mediation will

remain strictly confidential. Information discussed in closed “caucus”

meetings between the mediator and

a single party cannot be shared with

the other party unless that party has

given the mediator express permission to do so. Nor can such information be used in a later

enforcement proceeding. In those

instances when no agreement is

reached, the case will be returned to

OGC for processing.

If an agreement is reached in

mediation related to the case, the

ADR office will send the agreement

to the Commission for approval.

All approved agreements will be a

matter of public record, which will

state that the agreement was negotiated and that it cannot serve as a

precedent for the settlement of

future cases. ✦

Need FEC Material

in a Hurry?

 Use FEC Faxline to obtain FEC

material fast. It operates 24 hours

a day, 7 days a week. More than

300 FEC documents—reporting

forms, brochures, FEC

regulations—can be faxed almost

immediately.

 Use a touch tone phone to dial

202/501-3413 and follow the

instructions. To order a complete

menu of Faxline documents, enter

document number 411 at the

prompt.
Federal Election Commission RECORD August 2000

12

4

 While this case was pending, the

Commission promulgated new regulations defining “member.” However,

the D.C. Court of Appeals in Chamber

of Commerce v. FEC, found that these

regulations were unduly restrictive as

applied to the U.S. Chamber of Commerce and the American Medical

Association. Chamber of Commerce v.

FEC, 1994 WL 615786 (Oct. 28, 1994);

No. 94-5339 (D.C. Cir. Nov. 14, 1995).

On November 2, 1999, new FEC

regulations defining membership went

into effect.

Akins v. FEC

On May 31, 2000, James Akins,

et al. (Akins) asked the District

Court of the District of Columbia to

require the Federal Election Commission (the Commission) to

reconsider its March 2000 dismissal

of Akins’s administrative complaint

against the American Israel Public

Affairs Committee (AIPAC).1

Akins alleges that AIPAC failed to

register and report as a political

committee with the Commission.

Akins’s administrative complaint,

filed in 1989, had alleged that

AIPAC, an incorporated, tax-exempt

lobbying group, had violated the

campaign finance law in two

respects. First, AIPAC had made

prohibited corporate expenditures in

the form of campaign-related

communications and activities

directed at an audience beyond its

membership.2

 Second, AIPAC had

failed to register and report as a

political committee once these

expenditures exceeded $1,000 in a

calendar year. 2 U.S.C. §431(4)(A).

In its March 2000 dismissal of

the administrative complaint, the

Commission found that AIPAC did

not qualify as a political committee.

Instead, the Commission determined

that AIPAC was a membership

organization and that, based on

recently revised regulations defining

“member,” supporters receiving

AIPAC’s communications were

members of the organization.

Communications from a memberCourt Cases

1

 Plaintiffs include James E. Akins,

Richard Curtiss, Paul Findley, Robert

J. Hanks, Andrew Killgore and Orin

Parker.

2

 The Federal Election Campaign Act

(the Act) prohibits corporations from

using their general treasury funds to

make contributions or expenditures in

connection with federal elections. 2

U.S.C. §441b(a).

3

 At the time of the Commission’s

decision, “member” was defined as a

person who both paid dues and had

voting rights within the organization or

who had a significant financial attachment to the organization (other than

dues). 100.8(b)(4)(iv)(B) and 114.1(e).

This definition was superseded by new

regulations in November 1999.

ship organization to its members are

not considered to be “contributions”

under the Federal Election Campaign Act (the Act). 2 U.S.C.

§441b(2). Such communications are

permissible under the Act, and any

costs involved do not count toward

the $1,000 registration requirement

threshold for political committees.

Akins I

In 1992, the Commission originally dismissed Akins’s 1989

complaint, having found that

AIPAC was not a political committee because its “major purpose” was

not to influence federal elections.

Thus, the Commission concluded,

AIPAC did not need to register and

report as a political committee even

though it had made contributions

totaling more that $1,000 a year.

The “major purpose test” derives

from the Supreme Court’s Buckley

v. Valeo decision, in which the

Court ruled that the definition of

political committee “need only

encompass organizations that are

under the control of the candidate or

the major purpose of which is the

nomination or election of a candidate.”

Although the Commission found

that AIPAC had most likely made

communications to individuals who

did not qualify as “members,” it

voted to take no further action

against AIPAC. The Commission

cited the ambiguity of its regulatory

definition of “member”3

 and the fact

that AIPAC had “come close to

meeting the ‘spirit’ of the

Commission’s membership criteria.”

July 27, 1992, Statement of Reasons, pages 1-2. Thereafter, the

Commission initiated a rulemaking

to reconsider the regulatory definition of “member.”

On August 12, 1992, Akins filed

a lawsuit against the Commission,

focusing on the Commission’s

finding that AIPAC was not a

political committee. Akins took

issue with the Commission’s

application of the “major purpose

test” to the AIPAC case.

The U.S. District Court for the

District of Columbia and the Court

of Appeals (three-judge panel)

upheld the Commission’s application of the major purpose test. But,

in December 1996, the appeals

court, sitting en banc, found that the

Commission should have considered

only the Act’s definition of a

political committee and not the

major purpose test in a case like

AIPAC’s where an organization

makes contributions to federal

candidates rather than independent

expenditures. The Act defines a

political committee as any committee, association or other group that

receives contributions or makes

expenditures in excess of $1,000

during a calendar year to influence

federal elections. 2 U.S.C. §431(4)(A).

On June 1, 1998, the U.S. Supreme Court vacated the ruling of

the court of appeals and referred the

matter back to the Commission to

determine whether AIPAC’s

expenditures were for “membership

communications,” which are not

considered contributions under the

Act.4
August 2000 Federal Election Commission RECORD

13

Becker v. FEC

Independent voter Heidi Becker,

candidate Ralph Nader, the Green

Party and others (collectively,

“Becker”) have filed a lawsuit

asking the court to find that the

Federal Election Commission’s

regulations concerning debates, at

11 CFR 110.13 and 114.4(f), are

unlawful.

The Commission’s regulations

allow a nonprofit corporation to

stage a debate among federal

candidates and to “use its own

funds” and “accept funds donated

by corporations or labor organizations” as long as certain guidelines

are followed. 11 CFR 110.13 and

114.4(f).

Under the earlier regulations, the

Commission had found that supporters receiving AIPAC’s communications had too few rights to

participate in the governance of the

organization and did not, therefore,

qualify as members. Under the

revised regulations, however, these

supporters did qualify as members.

11 CFR 114.1(e)(2)(i)-(iii). Consequently, they could receive from

AIPAC the communications meant

to influence federal elections

without such expenses being

considered contributions. Having

reached this determination, the

Commission found no reason to

revisit the “major purpose” issue in

this case and dismissed Akins’s

administrative complaint.

Akins II

In its most recent court complaint, Akins challenges the

Commission’s finding that AIPAC

is a membership organization and

argues that the Commission did not

thoroughly investigate whether or

not AIPAC was a political committee under the Act. Akins contends

the Commission failed to consider

the “type and intent of AIPAC’s

activities, viewed as a whole.”

According to Akins, were the

Commission to conclude that

AIPAC was organized primarily for

the purpose of influencing a federal

election, AIPAC would not be

considered a membership organization and those who received its

communications would not qualify

as members. In that case, Akins

alleges, AIPAC’s communications

would count toward the $1,000

political committee registration

threshold.

Akins further argues that, even if

AIPAC is a membership organization, it is still in violation of the

federal election law. Akins contends that AIPAC spent in excess of

$2,000 in one year on membership

communications that expressly

advocated the election of federal

candidates, but it did not report

these disbursements to the Commission. The Act requires that corporations (including incorporated

membership organizations) disclose

the costs of distributing express

advocacy communications to their

restricted class once those costs

exceed $2,000 per election. 2

U.S.C. §431(9)(B)(iii).

Plaintiffs ask the court to:

• Declare that the FEC’s decisions in

Akins’s administrative complaint

were contrary to law and arbitrary

and capricious (2 U.S.C.

§437g(a)(8)); and

• Remand the matter to the FEC and

order the Commission to remedy

either the deficiencies in its

investigation of AIPAC’s status as

a political committee or the

deficiencies in its investigation of

whether AIPAC, functioning as a

membership organization, failed to

disclose its disbursements for

membership communications that

contained express advocacy.

U.S. District Court for the

District of Columbia, 92-1864 JLG,

May 31, 2000.✦

Becker argues that these regulations exceed the Commission’s

statutory authority because the

Federal Election Campaign Act (the

Act) prohibits corporations from

making contributions or expenditures “in connection with” a federal

election, and the statute does not

make an exception for corporate

activity that helps stage federal

candidate debates. 2 U.S.C.

§441b(a). Becker further argues

that Commission regulations allow

corporations to fund debates between the major party candidates

that exclude independent and ballotqualified third party candidates.

Becker alleges that the

Commission’s regulations deprive

the plaintiffs of their right to

participate in presidential elections

that are free of the corrupting

influence of illegal corporate

contributions.

Becker asks the court to:

• Enter a declaratory judgment that

11 CFR 110.13 and 114.4(f)

exceed the Commission’s statutory

authority;

• Enter a declaratory judgment that

the Act does not permit a debate

staging organization to use its own

corporate funds or accept funds

donated by corporations or labor

organizations; and

• Preliminarily and permanently

enjoin the Commission from

relying on 11 CFR 110.13 and

114.4(f) and require it to enforce

the Act’s prohibition against the

use of corporate funds in the

staging of federal candidate

debates.

U.S. District Court for the

District of Massachusetts, 00-CV11192 MLW, June 19, 2000. ✦

(continued on page 14)
Federal Election Commission RECORD August 2000

14

FEC v. Friends for Fasi

On June 6, 2000, the U.S. District

Court for the District of Hawaii

granted in part and denied in part

Frank F. Fasi’s and Friends for

Fasi’s (Fasi) motion to dismiss the

Federal Election Commission’s (the

Commission) civil complaint. The

Commission’s complaint had

alleged that Fasi accepted prohibited

contributions from foreign nationals.

The court found that the Commission could pursue its civil enforcement suit against Fasi, but the

complaint could only address

alleged violations occurring after

January 12, 1995.

On January 12, 2000, the Commission filed a complaint alleging

that Mr. Fasi, a former Mayor of

Honolulu and gubernatorial candidate in Hawaii, and his campaign

committee, Friends for Fasi, had

accepted prohibited contributions in

the form of reduced rent for space

that was owned, managed and/or

controlled by foreign nationals. The

Federal Election Campaign Act (the

Act) prohibits foreign nationals

from making “any contribution of

Court Cases

(continued from page 13)

FEC v. Arlen Specter ’96

On June 22, 2000, the Federal

Election Commission filed suit

asking the U.S. District Court for

the Eastern District of Pennsylvania

to find that the following defendants

violated the Federal Election

Campaign Act (the Act): Arlen

Specter ’96, the principal campaign

committee of Senator Specter’s

campaign for the Republican

presidential nomination; Paul S.

Diamond, the treasurer of the

committee; and Koro Aviation, Inc.

(Koro). The Commission argues that

Specter ’96 (the Committee) accepted prohibited corporate contributions from Koro in the form of

reduced charges for air transportation in violation of 2 U.S.C. §441b.

The Commission also charges that

the Committee accepted contributions from individuals that exceeded

the contribution limits. 2 U.S.C.

§441a(a)(1)(A).

Between November 1994 and

November 1995, the Committee

used Koro for campaign-related

flights. Under Commission regulations, a committee must pay the

normal charter fare a commercial

charter carrier charges its customers.

By contrast, in the case of air travel

contracted from a carrier not

licensed to provide commercial

charter air service (e.g., a private

corporate jet) a committee may pay

the normal first class air fare, if the

travel is between cities linked by

regular commercial service. 11 CFR

114.9(e).

In this suit, the Commission

alleges that, although Koro was in

the business of providing commercial charter air service, the Committee paid the first class air fare, rather

than the “usual and normal” rate

charged by a commercial charter

service. As a result, the Commission

states, the Committee paid $233,768

less for air transportation than it

would have paid had it paid Koro’s

normal charter rate. Under FEC

regulations, the difference between

the usual cost of a service and the

amount paid by a candidate or

committee represents an in-kind

contribution. 11 CFR

100.7(a)(1)(iii)(A). Thus, the

Commission argues that the

Committee’s payment at the first

class commercial rate resulted in a

$233,768 prohibited corporate

contribution from Koro.

Additionally, during its postelection audit of the Committee’s

records, the Commission found that

Mr. Diamond and the Committee

had accepted $83,749 in contributions from persons who had exceeded their contribution limits. 2

U.S.C. §441a(a)(1)(A).

U.S. District Court for the

Eastern District of Pennsylvania,

CVOO3167, June 22, 2000.✦

money or other things of value . . .

in connection with an election to

any political office.” 2 U.S.C.

§441e(a). The Commission asked

the court to declare that Fasi had

violated the Act, enjoin them from

accepting further contributions

prohibited by 2 U.S.C. §441e and

assess appropriate civil penalties.

Subsequently, Fasi filed a motion

to dismiss the Commission’s

complaint, arguing three major

points:

• First, 2 U.S.C. §441e does not

apply to contributions for nonfederal elections because the

statute defines “contribution” as

anything of value given “for the

purpose of influencing any election

for Federal office” (2. U.S.C.

§431(8)(A)(i));

• Second, because the reductions in

rent began prior to 1995, the

Commission’s January 12, 2000,

complaint was filed after the 5-

year statute of limitations had

expired and, thus, was time-barred

(28 U.S.C. §2462); and

• Third, the Commission’s request

for injunctive relief was “improper

and unauthorized by law” because

there was no basis to allege that

the defendants were “about to

commit” a violation of the Act.

The court rejected Fasi’s argument—that §441e only applies to

federal elections. Although the court

found the language of the statute to

be ambiguous in this regard, it

concluded that the Commission’s

interpretation of §441e—as expressed in its own regulations and

advisory opinions—was consistent

and reasonable. The court said that

the Commission has express authorization to “elucidate statutory

policy in administering FECA”

unless the court finds the

Commission’s interpretations

“demonstrably irrational or clearly

contrary to the plain meaning” of the

Act. United States v. Kanchanalak,

192 F.3d at 1049; Nevitt v. United

States, 828 F.2d at 1406-07.
August 2000 Federal Election Commission RECORD

15

The court granted in part and

denied in part Fasi’s motion to

dismiss based on Fasi’s second

argument that the Commission had

filed its suit after the statute of

limitations had expired. The court

agreed that any claims based on

alleged violations that occurred

before January 12, 1995, were

barred by the statute. The court also

found, however, that the reduced

rent constituted a “continuing

violation” and that each month that

Fasi was allowed to rent space at a

reduced rate marked a new and

separate contribution. The court

reached this decision both because

the Act makes each contribution a

separate violation of 441(e) and

because, in the absence of a longterm rental agreement or a fixed

rental rate, the court concluded that

Fasi had rented on a month-tomonth basis. Thus, the court ruled

that the Commission could only file

claims based on alleged violations

occurring between January 13,

1995, and November 1996, after

which Fasi allegedly stopped

receiving prohibited contributions.

Finally, the court refused, at this

time, to dismiss the FEC’s motion to

enjoin Fasi from future violations of

the law.

U.S. District Court for the District

of Hawaii, 00-00024 DAE.✦

Hooker v. All Contributors,

et al.

On June 7, 2000, John Jay

Hooker filed a lawsuit broadly

challenging the constitutionality of

all campaign contributions. Mr.

Hooker alleges that campaign

contributions are both a “backdoor

property qualification” for voting

rights and bribes of public officials

and are, thus, illegal.

Mr. Hooker requests that the

court:

• Grant a preliminary injunction

against all who contribute, receive

contributions or otherwise participate in the solicitation and expenditure of campaign funds;

• Declare that the solicitation and

acceptance of campaign contributions, the Federal Election Campaign Act, and public “matching

funding” for presidential elections

(26 U.S.C. §§9001 and 9031)are

unconstitutional;

• Order that neither Congress nor the

States have the power to authorize

campaign contributions; and

• Order that all contributions in the

1998 and 2000 elections be

returned to contributors.

U.S. District Court for the Middle

District of Tennessee, Nashville

Division, 3-00-0496, June 7, 2000.✦

United States Vice Consul in

Guayaquil, Ecuador, worked as a

consultant in the health care field,

and served as General Manager of

the Small Business Association of

Michigan, where he managed the

organization’s political action

committee.

Commissioner Smith received his

B.A. cum laude from Kalamazoo

College in Kalamazoo, Michigan,

and his J.D., cum laude, from

Harvard Law School. ✦

Commissioners

(continued from page 1)

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 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 RECORD August 2000

16

Legislation

Disclosure by 527 Political

Organizations

On July 1, 2000, the President

signed into law an amendment to the

Internal Revenue Code, requiring

certain “527 political organizations” to disclose descriptive

information and information on their

political activities to the Internal

Revenue Service (the IRS).1

 Pub. L.

106-230. Depending on the nature

or activities of the particular organization, a 527 organization may have

to file three reports with the IRS:

1. Notice of Section 527 Status;

2. Periodic Reports of Contributions

and Expenditures; and

3. Annual Returns.

Note that 527 organizations that

qualify as political committees

under the Federal Election Campaign Act (FECA) and are required

to file reports with the Federal

Election Commission (or the

Senate)2

 do not have to file either

the Notice or the Report with the

IRS. They must, however, continue

to file their FEC reports.

Description of 527 Organizations

Named after their tax-exempt

designation under section 527 of the

Internal Revenue Code, 527 organizations include parties, committees,

associations, funds or other organizations that are organized and

operated “primarily for the purpose

of directly or indirectly accepting

contributions or making expenditures” for the purpose of influencing

“the selection, nomination, election,

or appointment of any individual to

Federal, State, or local public office

or office in a political organization,

or the election of Presidential...

electors....” 26 U.S.C. §527(e)(1)-(2).

While not all 527 organizations

qualify as political committees

under FECA, political committees

under FECA qualify as 527 organizations. Such organizations have

several tax advantages. For example:

• 527 organizations are not required

to pay taxes on contributions or

dues; and

• Contributions to 527 organizations

are exempt from the gift tax.

Notice of Section 527 Status

Pub. L. 106-230 generally

requires a 527 organization to notify

the IRS that it is a 527 organization,

within 24 hours of its establishment.3

 The Notice requirement,

however, does not apply to:

• A political committee required to

report under the Federal Election

Campaign Act of 1971 (2 U.S.C.

§431 et seq.);

• “An organization that reasonably

expects its annual gross receipts to

always be less than $25,000”;4

 or

• A tax-exempt organization described in section 501(c) (of the

U.S. Internal Revenue Code) that

is treated as having political

organization taxable income under

section 527(f)(1).

Covered organizations must

disclose their status by filing (with

the IRS) IRS Form 8871, “Political

Organization Notice of Section 527

Status,” both electronically and in

writing.

A political organization that does

not file a timely Notice will not be

treated as a 527 organization by the

IRS. This means that its taxable

income will include “exempt

function” income (e.g., contributions and dues), otherwise excluded

by section 527 of the Internal

Revenue Code, until such time as it

files the Notice.

The IRS must make the Notices

(IRS Form 8871) filed by 527

organizations available to the

public. A list of organizations filing

IRS Form 8871 will be available on

the IRS Web site by August 15,

2000. Once the list is posted, the

IRS must include an organization on

the list within five business days

after the IRS has received a notice

from that organization.

Report of Contributions and

Expenditures

Beginning July 1, 2000, 527

organizations that accept contributions or make expenditures to

influence the election or appointment of any individual to any public

office or an office in any political

organization, or any Presidential

elector, must disclose to the IRS:

• Expenditures that exceed $500 in

the aggregate to one person, per

calendar year; and

• Contributions that amount to $200

in the aggregate from one person,

per calendar year.

These disclosure rules do not apply:

• To political committees required to

report under the Federal Election

Campaign Act of 1971 (2 U.S.C.

§431 et seq.);

• To state and local committees of

political parties;

• To campaign committees of state

and local candidates;

• With respect to independent

expenditures made in support of,

or in opposition to, federal candidates;

• To organizations that reasonably

expect their annual gross receipts

to always be less than $25,000; or

1

 The IRS has sole authority to administer this law. The Federal Election

Commission is providing this information merely as a service to its readers.

2

 Senate committees file their reports

with the Secretary of the Senate. 2

U.S.C. §432(g)(1).

3

 Organizations formed prior to July 31,

2000, were required to file by July 31.

4

 IRS Form 8871, General Instructions,

p. 3. See also 26 U.S.C. §527, new

subsection (i)(a)(5)(B), which states

that these requirements do not apply to

any organization “which reasonably

anticipates that it will not have gross

receipts of $25,000 or more for any

taxable year.”
August 2000 Federal Election Commission RECORD

17

FEC Roundtables

The Commission will host

roundtable sessions in August and

September.

FEC roundtables, limited to 12

participants per session, focus on a

range of subjects. See the table for

dates and topics. All roundtables are

conducted at the FEC’s headquarters

in Washington, DC.

Outreach

Date Subject Intended Audience

Roundtable Schedule

August 2 Update on New and Proposed • PACs

9:30 - 11 a.m. FEC Reporting 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

September 13 Pre-Election Reporting • PACs

9:30 - 11 a.m. Tune-Up • House and Senate

• October Deadlines Campaigns

• Last-Minute Notices • Political Party

• Problems to Avoid Committees

• Your Questions Answered • Lawyers, Accountants

and Consultants to

Above

Filled!

Waiting List

Only

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. Theregistration

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 (press 1,

then 3) or 202/694-1100.✦

• To tax-exempt organizations

described in section 501(c) (of the

Internal Revenue Code) that are

treated as having political organization taxable income under

section 527(f)(1).

The information must be disclosed on IRS Form 8872, “Political

Organization Report of Contributions and Expenditures.” With

regard to reportable transactions,

that form requires organizations to

disclose the names, addresses,

employers and occupations of

contributors and those persons to

whom expenditures are made. The

IRS will make these disclosure

reports available to the public at the

discretion of the Secretary of the

Treasury, and it will penalize those

527 organizations that fail to

disclose this information at an

amount equal to the highest corporate tax rate (35 percent) multiplied

by the amount not disclosed.

Annual Returns

For taxable years beginning after

June 30, 2000, political committees

that file with the FEC (or the Senate)

will have to file an annual Return with

the IRS if they have either taxable

income (of any amount) or gross

receipts exceeding $25,000.5

 This

requirement applies to all 527 organizations. These Returns will also be

made available to the public by the

IRS.

Forms and Information

IRS Forms 8871 and 8872 are

available electronically at the IRS

Web site, www.irs.gov, in the

“Forms and Pubs” section. IRS

Form 8871 can be filed electronically at

www.irs.gov/bus_info/eo/pol-file.html.

Contact the IRS for more information by calling 1-877-829-5500.✦

5

 Note that, for taxable years beginning

before June 30, 2000, former tax requirements still apply. See 26 U.S.C.

§6012(a)(6).

Change of Address

Political Committees

 Treasurers of registered political committees automatically receive the

Record. A change of address by a political committee (or any change to

information disclosed on the Statement of Organization) must, by law, be

made in writing on FEC Form 1 or by letter. The treasurer must sign the

amendment and file it with the Secretary of the Senate or the FEC (as

appropriate) and with the appropriate state office.

Other Subscribers

 Record subscribers who are not registered political committees should

include the following information when requesting a change of address:

• Subscription number (located on the upper left corner of the mailing label);

• Subscriber’s name;

• Old address; and

• New address.

 Subscribers (other than political committees) may correct their addresses by

phone as well as by mail.
Federal Election Commission RECORD August 2000

18

Matching Funds for 2000 Presidential Candidates:

June Certification

Candidate Certification Cumulative

 June 2000 Certifications

Gary L. Bauer (R) 1 $96,782.18 $4,771,139.94

Bill Bradley (D) 2 $0.00 $12,462,047.69

Patrick J. Buchanan (Reform) $110,562.22 $3,852,250.41

Al Gore (D) $672,879.40 $15,317,874.13

John Hagelin (Natural Law) $65,541.00 $314,135.00

Alan L. Keyes (R)3 $422,598.54 $3,325,344.36

Lyndon H. LaRouche, Jr. (D) 4 $283,036.92 $1,184,375.85

John S. McCain (R) 5 $131,997.22 $14,467,791.10

Ralph Nader (G) $100,000.00 $100,000.00

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. reestablished eligibility for matching funds on May 23,

2000, by receiving more than 20 percent of the vote in the Arkansas primary.

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

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

June Matching Fund

Payments

On June 30, 2000, the Commission certified Ralph Nader eligible

for $100,000 in matching funds.

The Commission also approved an

additional $1,783,397.48 in matching fund payments to seven other

Presidential candidates.

With these latest certifications,

the FEC has now declared ten

candidates eligible to receive a total

of $57,897,483.48 in federal

matching funds for the 2000

election.

Previously, due to a shortfall in

the Presidential Election Campaign

Public Funding Fund, the U.S. Treasury Department

made partial payments to the

qualified candidates, based on the

Commission’s certifications.

Now, with the deposit of tax

dollars (for tax year 1999), the

Presidential Fund has sufficient

funds to make full payments to

candidates. By June 15, 2000, the

Treasury Department had paid the

balance of the entitlements and will

continue to match candidates’

monthly certifications in full. The

chart lists the most recent certifications and cumulative payments for

each candidate. ✦

Nader Eligible for Matching

Funds

On June 30, 2000, Green Party

presidential candidate Ralph Nader

became eligible for public matching

funds for his primary election

campaign.

To establish eligibility, a candidate must raise $100,000 by collecting $5,000 in matchable

contributions in at least 20 different

states. Only contributions received

from individuals, and only up to

$250 of a contributor’s total, are

matchable by the federal government.

Eligible candidates must agree to

limit their spending, use funds for

campaign-related expenses only,

keep financial records and submit

their records to an FEC audit.

Once declared eligible, candidates can submit additional contributions for matching funds on the

first business day of every month.

The U.S. Treasury began paying out

the FEC-certified amounts in

January 2000. Currently, the maximum amount a 2000 Presidential

primary candidate can receive in

matching funds is calculated at

$16.75 million.

Matching fund submissions are

available at the FEC’s Web site —

http://www.fec.gov—as

downloadable FTP files. Go to

“Financial Information About

Candidates, Parties and PACs” and

follow the links. Instructions are on

the Web site.

Copies of submissions are also

available from the FEC’s Public

Records Office. Call 800/424-9530

(press 3) or 202/694-1120.✦
August 2000 Federal Election Commission RECORD

19

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

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

Index 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

2000-5: Application of $25,000

limit to contributions by Indian

tribe, 7:8

2000-6: Use of federal convention

funds to develop voter data base

and balloting system, 7:9

2000-7: Use of corporate web sites

to provide PAC information and

solicit contributions, 7:9

2000-10: “Permission to solicit

form” placed on trade association

Web page, 8:8

2000-11: Misplaced payrolldeducted contributions, 8:9

2000-13: Internet video coverage of

Republican and Democratic

national conventions, 8:9

Compliance

Alternative Dispute Resolution

Program, 7:2, 8:10

MUR 3774: Failure to allocate

expenses between federal and

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

party, 3:3

MUR 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

– Akins, 8:12

– Arlen Specter ‘96, 8:14

– Becker, 8:13

– Christine Beaumont, et al., 3:9

– DNC, 4:6

– DSCC, 1:2

– Fulani, Lenora B., 7:7

– Hooker, John Jay, 6:9, 7:8

– Unified Independent Party,

Committee for, 7:8

– Virginia Society for Human Life,

Inc., 3:8

FEC v. _____

– Christian Coalition, 4:7

– Colorado Republican Federal

Campaign Committee, 7:1

Nonfilers

The campaign committees of the

candidates listed at right failed to

file required campaign finance

disclosure reports. The list is based

on recent FEC news releases. The

FEC is required by law to publicize

the names of nonfiling campaign

committees. 2 U.S.C. §438(a)(7).

The agency pursues enforcement

actions against nonfilers on a caseby-case basis.✦

Candidate Office Sought Report Not Filed

Brown, Henry E., Jr. House SC/01 Pre-Primary

Giordano, Philip A. Senate CT Pre-Convention

Kingston, John H. House GA/01 Pre-Primary

Limehouse, H.B., Jr. House SC/01 Pre-Primary

Warren, Charles F. House GA/07 Pre-Primary

Reports
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 August 2000

– Freedom’s Heritage Forum, 6:8

– Friend for Fasi, 3:9, 8:14

– Fund for Conservative Majority

(Heckman), 6:8

– National Rifle Association, 6:9

– Salvi for Senate Committee, 6:9

– Toledano, James, 6:9

Other

– Fireman v. USA, 1:13

– Hooker v. All Contributors, 8:15

– Mariani v. USA, 1:3, 7:7

– Reform Party v. Gargan, 5:9, 7:8

– Shrink PAC v. Nixon, 3:7

Regulations

Administrative Fines, 5:1, 7:1

Coordination, 1:14; 4:3

Election Cycle Reporting, 6:1, 8:4

Electronic Filing, 5:1, 8:1

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, 7:5

Reports

Reports due in 2000, 1:5

Reports due in July, 6:1

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

5:5, 6:3, 7:5

Virginia Convention Reports, 5:5

In this Issue:

• Using the Internet, p. 5

• Alternative Dispute Resolution

Program, p. 10

• Disclosure by 527

Organizations, p. 16