FEDERAL ELECTION COMMISSION

Volume 14, Number 10

5 ADVISORY OPINIONS

TABLE OF CONTENTS

REGULATIONS

I Allocation Rules

4 Revisions of Rules for Three Activities

STATISTICS

11 1987-88 Congressional Activity

COURT CASES

6 Common Cause v. FEC (Suit Six)

7 Common Cause v, FEC (Suit Three)

9 NRA v. FEG

10 INDEX

COMPLIANCE

11 MUR Summary

General Rules for Allocating Disbursements

Under Alternatives A, Band C, proposed

section 106.5(a)(l) would set forth general rule

governing the allocation methods to be used by

party committees, nonconnected committees and

separate segregated funds when they make dis

burse merits for activities (described above) tha

continued on p, 

Washington DC 20463

Format of Proposed Rules

The notice of proposed rulemaking solicit

comments on four alternative approaches to allo

cating expenses between a political committee'

federal and nonfederal accounts. Alternatives A

and D are set forth in regulatory language in the

notice. The other two alternatives (B and C) are

described in narrative form. In both sets o

proposed rules, section 106.l(e), which currently

contains the provisions for allocating federal and

nonfederal expenses, would be revised to cross

reference a new section 106.5. This new section

of the rules would set forth the various allocatio

methods for the three categories of activitie

covered by the allocation rules.

October 1988 999 EStreet NW

ALLOCATION OF SPENDING BETWEEN

FEDERAL AND NONFEDERAL ACCOUNTS:

NOTICE OF PROPOSED RULEMAKING

On September 22, 1988, the Commission approved the publication of a notice of proposed

rulemaking in the Federal Register that seeks

comments on possible revisions to Part 106 of its

regulations. In the notice, the agency also announced that it planned to hold a public hearing

on December 14, 1988.* The proposed revisions would provide guidelines for the allocation of disbursements made by

political committees to influence both federal

and nonfederal elections. In particular, the agency seeks comments on the allocation of disbursements between federal and nonfederal accounts

by party committees, nonconnected committees

and separate segregated funds for:

o Administrative expenses (see 11 CFR 106.1(e»);

o Exempt party activities (11 CF R 100.7(b)(9),

(b)(l5), (b)(l7) and 100.8(b)(lO), (b)(l6) and

(b)( 18»; and

o Other activities, such as general voter

identification, voter registration and get-outthe-vote activities, conducted by party

committees in federal election years.

The Commission also seeks comments on:

o Methods of payment of allocated expenses; and

o Reporting procedures.

Written comments on the FEC's notice of

proposed rulemaking should be submitted to M.s.

Susan E. Propper, Assistant General Counsel, by

November 30, 1988. Those interested in testifying at the public hearing should so indicate on

their written comments. Ms. Propper may be

contacted at: FECt 999 E Street, N.W.t Washington, D.C. 20463 or by calling 202/376-5690 or,

toll free, 800/424-9530.

*In a recent decision in Common Cause v. FEe

(Suit Six), the U.S. District Court for the District

of Columbia held that the FEe must report on its

.A progress in promulgating these rules every 90

• days. The FEC's first report is due November 25,

1988. See p. 6 of this issue of the Record for a

summary of the suit.
October 1988 FEDERAL ELECTION COMMISSION Volume 14, Number 1

continued from p. 1

influence both federal and nonfederal elections.

For example, proposed subsection 106.5(a)( 1)(0

would require committees to choose one allocation method per year for all disbursements made

for a partleular type of activity (e.g., administrative expenses or exempt party activities). Moreover, once a committee chose a method for

allocating these expenses, it would continue to

use that method for the remainder of the year.

Another proposed subsection to the general

rules (l06.5(a)(l){ii)) would require committees to

allocate administrative expenses every year. This

proposal is based on the assumption that committees conduct numerous activities in a

nonfederal election year that benefit their federal

election activities, such as fundraising and voter

registration activities. Moreover, many special

elections for federal office occur durlne

nonfederal election years. D

Under the proposed rules, disbursements for

general voter activities, such as voter identification, voter registration and get-out-the-vote

drives, would only be allocated durinz federal

election years. 0

Percentage Allocations

Note that the allocation methods under

Alternatives A, Band C envision using

percentage formulas to allocate disbursements

between a committee's federal and nonfederal

accounts, but they provide no specific percentage

formula. (Alternative D does not use percentages

at all.)

In the rulemaking notice, the agency suggested several possible ways to set fixed percentages. The agency could: (1) require a 50-50 split

of expenses between a committee's federal and

nonfederal accounts, (2) base a fixed or minimum

percentage allocation on committee type (e.g., a

local party committee could have a different

percentage than a nonconnected committee) or (3)

base a fixed or minimum percentage allocation on

whether the activities were conducted during a

federal election year, a nonelection year or a

Presidential election year.

Alternative A

Special Provisions for Party Committees.

Under this alternative, proposed subsection

106.5(a)(2) would permit a local party committee

that has a low level of federal activity to allocate all administrative expenses and expenses for

general voter registration and get-out-the-vote

activities on a fixed percentage basis between its

federal and nonfederal accounts.

2

Proposed subsection 106.5(a)(3) explains tha

committees would allocate voter drive activitie

which mention specific candidates by using th

method set forth at section 106.1(a) of the cu

rent rules. If the Commisssion ultimately ap

proves this version of the proposed rules, sectio

106.1(a) may be revised in a way similar t

proposed section 106.5(c).*

Allocation of Administrative Expenses. Pro

posed subsection 106.5(b) describes several pe

missible methods that party committees, noneon

nee ted committees and separate segregated fund

could use to allocate their administrative ex

penses between their federal and nonfederal ac

counts.

For example, a committee would have th

option of paying all its administrative expense

from its federal account. Alternatively, a com

mittee could use the method described in curren

section 106.I(e); that is, the committee coul

allocate its administrative expenses between it

federal and nonfederal accounts based on th

ratio of funds it spent for federal elections t

funds spent for nonfederal elections. The new

provision would, however, make clear which ex

penses the committee had to include when deter

mining that portion allocated to federal elections

The regulation would also establish a four-yea

base period during which a fixed percentage of a

administrative expenses would be paid from th

federal account, to correct for any under-alloca

tion made to the federal account during a Pres

dential election year. (The four-year perio

would also establish an information base for new

committees.) After this four-year period, th

committee could use an allocation formula base

on actual disbursements for federal election ac

tivities four years earlier (e.g., its expenses for 

current Presidential election year would be base

on the ratio of federal to nonfederal disburse

ments for the last Presidential year).

Proposed subsection 106.5(b)(3) provides 

third alternative-the "candidates method't-e-fo

allocating administrative expenses. Administra

tive expenses would be allocated based on th

proportion of federal candidates to all other type

of candidates on the ballot in a particular stat

during the election year. This method, limited t

party committees, would require a minimum pe

centage of administrative expenses to be allo

cated to the federal account. It would als

specify the kinds of elective offices that shoul

be included when calculating the amount of ex

penses to be allocated between the party com

mittee's federal and nonfederal accounts. (Se

AO 1978-28.)

*Section L06.l(a) would also contain ne

language to cover allocation of expenditures mad

for broadcast ads.
October 1988 FEDERALELECTION COMMISSION Volume 14, Number10

•

•

The Commission welcomes suggestions for

applying the "candidates method" to other kinds

of committees as well. Finally, a committee could request Commission approval of any other allocation method

through the advisory opinion process.

Allocation of Expenses for Exempt Party

Activities. Under proposed subsection 106.5(c)(2),

disbursements for exempt party activities (e.g.,

sample ballots or slate cards) would be allocated

based on the proportion of the communication

devoted to federal candidates or elections. This

method would require a minimum percentage of

the costs to be allocated to federal candidates.

Proposed SUbsection 106.5(c)(2)(i) would specify

how this allocation method could be used for

specific kinds of communications. (Since exempt

activities do not include communications made

through public political advertising, this subsection includes no method for allocating those

costs.)

Allocation of Expenses for General Voter

Activities. Proposed subsection 106.5(d) would

govern the allocation of disbursements for general

voter drives and other activities that urge support

of a party or the party's candidates but that do

not mention specific candidates. The allocation

methods proposed for these activities parallel

those set forth in section 106.5(b) (see above) for

allocating administrative expenses. A fixed minimum percentage of all expenses for these activities would be allocated in alternate (t.e., federal

election) years during a four-year period. As in

the case of administrative expenses, expenses for

these activities could be subsequently allocated

on the basis of the actual amount of disbursements made during the election year four years

earlier.

Alternative B

Under Alternative B, committees with nonfederal and federal accounts (other than separate

segregated funds) would have to allocate their

administrative expenses and expenses for general

voter drive activities on a fixed percentage basis

between the two accounts. During a Presidential

election year, a higher percentage of general

voter drive expenses would De allocated to federal

elections. If the Commission adopts this approach, it may decide to distinguish between

types of committees in determining the actua

allocation formula that a committee would be

required to use.

Alternative C

Alternative C would establish different me

thods for allocating expenses in federal and non

federal election years. During a nonfederal elec

tion year, committees would allocate administra

tive expenses and general voter drive expense

based on the ratio of funds the com mittee re

ceived for the federal account to the total a

mount of funds received. In a federal election

year, the allocation of these expenses would be

based on the ratio of federal to nonfederal candi

dates on the ballot. However, in a Presidentia

election year, committees would be required to

allocate a fixed minimum percentage of the cost

of general voter drive activities to their federa

accounts.

Alternative D

Alternative D would only apply to party com

mittees. It would establish two allocation me

thods, each depending on the type of expense

With regard to its administrative expenses and ex

penses for nonexempt activities, a party commit

tee could allocate expenses according to: (I) 

"ballot-office" ratio, (2) a "prior comparable year

method or (3) any other reasonable basis approved

by the Commission through its advisory opinion

process.

Using the "ballot-office" ratio method, a par

ty com mittee would allocate expenses based o

the ratio 'of federal offices to state offices listed

on the state's ballot in the election year. Th

offices included in the calculation would be th

same as under Alternative A. However, thi

method would not fix a minimum percentage o

expenses to be allocated to the federal account.

Using the "prior comparable year" method, 

party committee could allocate its expenses based

on the ratio of its federal to nonfederal expense

in a prior comparanle year. For example, al

locable disbursements made for a prior Presiden

tial election year could be used to gauge the

federal expenses for the current Presidentia

election year. At the end of each year, the

committee would reconcile its estimated allo

cable disbursements with its actual disburse

ments.

continue

•

The Record is published by the Federal Election Commission, 999 E Street, N.W., WaShington,

D.C. 20463. Commissioners are: Thomas J. Josefiak, Chairman; Danny L. McDonald, Vice

Chairman; Joan Aikens; Lee Ann Elliott; John Warren McGarry; Scott E. Thomas; Walter .J.

Stewart, Secretary of the Senate, Ex Officio; Donnald K. Anderson, Clerk of the House of

Representatives, Ex Officio. For more information, call 202/376-3120 or toll-free 800/424-9530• (TDD For Hearing Impaired 202/376-3136)

3
October 1988 FEDERALELECTION COMMISSION Volume 14, Number 1

Concerning the allocation of expenses for

exempt party activities (e.g., slate cards and

sample ballots), party committees could allocate

expenses based on the proportion of the total

communication activity that is devoted to federal

candidates or elections. The allocation would be

made on a project-by-project basis.

Payment Methods

This proposed subsection describes how each

account could pay its share of allocable expenses.

Under Alternatives A, Band C, proposed section

106.5(e) would permit a nonfederal account to pay

for the committee's administrative expenses, provided the federal account reimbursed the nonfederal account for its share of the expenses

within 10 days. However, for activities that

impact directly on federal elections, as, for

example, exempt party activities and general

voter drives, each account would have to pay the

vendor directly for its share of costs incurred.

The committee could use one of the allocation

methods proposed for each of these types of

activities (see above).

This proposed subsection would also explain

how groups that are not political committees

should pay for such expenses.

Under the payment method proposed in Alternative D, a committee's federal account and

its nonfederal account could each pay its share of

allocated expenses directly to the vendor or

payee. Alternatively, the nonfederal account

could pay the entire expense, with the federal

account reimbursing the nonfederal account within 10 days after the bill was paid.

Finally, the Commission also welcomes comments on an alternative payment method that

would involve the establishment of an escrow

account" for a committee's combined federal and

nonfederal activities.

Reporting Methods

Under the proposed reporting prOVISIOn in

Alternatives A, Band C (11 CFR 106.5(f)), when

the committee first reported one of the three

categories of allocable expenses, it would have to

submit a letter with that report providing detailed

information on the allocation method it used for

that category of expenses (e.g., administrative

expenses). Reports of allocated disbursements

would have to include the full amount of the

allocated disbursement, the date the nonfederal

portion was paid and a cross-reference to the

itemized federal payment.

The Commission also seeks comments on

whether it should develop a new form for

reporting allocation methods or merely require

*This payment method is described in the

FEC's notice of inquiry, published in the February

23, 1988 issue of the Federal Register. 52 Fed.

Reg. 5277.

4

the disclosure of this information as a mem

entry on Schedule B of Form 3X.

Finally, the Commission seeks comments o

another reporting method proposed in Alternativ

D. This method would require com mittees t

disclose, as a memo entry, the allocation metho

and the percentage applied for each allocab

disbursement.

FEC PROPOSES REVISIONS OF

THREE REGULATED ACTIVITIES

On September 8, 1988, the Commission d

cided to publish a notice in the Federal Regist

which seeks comments on three proposed revision

to its regulations at 11 CFR 100.7(b)(8

100.8(b)(9), 110.11(a)(I)(iv)(A) and 114.8(f). See 5

Fed. Reg. 35827.

The Com mission has published propose

changes to three unrelated areas of its regulation

in a single notice of proposed rulemaking becau

these discrete issues do not require a larger-sca

rulemaking procedure.

Written comments on the proposed rules mu

be filed by October 17, 1988. They should b

addressed to Ms. Susan E. Propper, Assista

General Counsel, FEC, 999 E Street, N. W., Was

ington, D.C. 20463. Ms. Propper may be contac

ed at 202/376-5690 or, toll free, 800/424-9530.

Travel Exemption 

II CFR lOO.7(b)(8) and lOO.8(b)(9)

These rules allow all individuals, includin

paid campaign staff and volunteers, to incur 

limited amount of unreimbursed expenses fo

travel on behalf of a candidate or party." The

limited expenses are not considered contribution

or expenditures on behalf of the candidate 

party.

The rules also permit volunteers to mak

unlimited expenditures from their personal fund

to cover their subsistence expenses. The propose

revisions to these rules would permit paid staff 

incur unreimbursed subsistence expenses whi

they are paying for their travel under the limite

exemption permitted for transportation costs.

A new definition would restrict SUbsistenc

expenses to an individual's personal livin

expenses, such as food and lodging.

Disclaimer Notice Requirements

II CFR llO.ll(a)(l)(iv)(A)

Under the current provision, if a person sol

cits the general pubtie for contributions to 

*Individuals may spend up to $1,000 p

election on travel expenses related to 

candidate's campaign and up to $2,000 p

calendar year for travel on behalf of all th

political committees of each political party.
October 1988 FEDERAL ELECTION COMMISSION Volume 14, Number 

political committee that is not authorized by a

candidate, that person's full name must be clearly

stated on the solicitation. Under a proposed

addition to this rule, the solicitation must also

state whether or not it was authorized by a

candidate or any of his or her authorized

committees or agents-even if the solicitation

does not expressly advocate the candidate's

election or defeat. This new authorization

requirement for solicitations would conform with

the authorization notice requirements of 2 U.S.C.

§441d(a).

Trade Association Solicitations

II CPR 114.8(f)

Under this provision, a trade association may

solicit the restricted class* of its member corporations, provided certain conditions are met. A

proposed amendment would make clear that, if a

subsidiary corporation is a member of the trade

association but its parent corporation is not, the

trade association may not solicit the parent

corporation's restricted class. Current rules

already make clear that, if the parent is a

member but the SUbsidiary is not, the trade

association may not solicit the restricted class of

the SUbsidiary corporation.

ADVISORY OPINION REQUESTS

The following chart lists recent requests for

advisory opinions (AORs). The full text of each

AOR is available to the public in the

Commission's Office of Public Records.

AOR Subject

1988-37 Affiliated status of two corporate

PACs. (Date made public: August 23,

1988; Length: 4 pages, plus 15-page

supplement)

1988-38 Commodity exchange's solicitations

and partisan communications to its

membership categories. (Date made

public: August 24, 1988; Length: 22

pages)

------------

*A corporation's restricted class includes its

executive and administrative personnel, its

stockholders and the respective families of both

groups.

5

AOR Subject

1988-39 Commodity exchange's solicitation 

members who have leased their sea

(Date made public: August 25, 198

Length: 10 pages, plus 62-page supp

ment)

1988-40 House campaign's use of "coattail e

ception'' for mailing done by volu

teers. (Date made publics August 3

1988; Length: 3 pages, plus 2-pa

supplement)

1988-41 Retiring Congressman's reporting/d

posal of excess funds of 1988 comm

tee. (Date made public: September 

1988; Length: I page, plus 20-pa

supplement)

1988-42 Title for PAC established by two c

porations. (Date made public: Se

tember 6, 1988; Length: 1 page, p

2-page supplement)

ADVISOR Y OPINIONS; SUMMARIES

AO 1988-28: Corporation's ngoonLine Telephon

Service for Political Clients

Tele/900, Inc. (Teleline), a California corporatio

may not enter into two proposed contract

arrangements with various federal candidates a

committees to provide a "900" line telepho

service for their political messages. Both of 

contractual arrangements proposed by Telel

for providing the "900" line service would result 

prohibited corporate contributions from Te1el

to the candidates and committees. See 2 U.S

§441b. Since the proposed arrangements 

impermissible, the Commission did not addr

the issue of whether an individual paying for 

11900" line service would be making a contribut

to the candidate or committee sponsor-ing 

message.

Teleline has leased a number of informat

channels from AT&T. Teleline, in turn, packa

and sells "900" line telephone services to clie

who wish to sponsor a "900" line message. Te

line, in association with a client, advertises a

markets the client's "900" line service. Telel

pays AT&T tariff rates for establishing a "9

line service and monthly bills for calls made 

the 11900" line. AT&T permits Teleline, in turn, 

bill callers who use one of the "900" line servic

In some cases, Teleline pays a royalty to a cli

based on the volume of callers who use the "9

line service.

Under the two plans proposed by Teleli

political clients would have produced their o

continu
October 1988 FEDERALELECTION COMMISSION Volume 14, Number 10

political messages and included a tagline on their

political advertisements promoting the u90Qtt line

service to potential callers. While Teleline would

have charged individual callers for accessing the

service, it would have been solely liable for

AT&T's tariffs and billings for calls.

The two proposed plans differed with regard

to the payment of a royalty. Under one plan,

Teleline would not have paid any royalty to a

political client from the revenues Teleline earned

.on the 1t900" line service. Under a second proposed contractual arrangement, Teleline would

have Ipaid the political client a royalty representing a percentage of the revenue generated

above the amount needed to pay AT&T's tariffs

and charges. Commissioner Lee Ann Elliott filed

a dissenting opinion and Commissioner Joan D.

Aikens filed a concurring opinion. (Date issued:

August 3, 1988; Length: 11 pages, including

concurring and dissenting opinions)

COMMON CA USE v. PEC (Suit Six)

On August 25, 1988, the U.S. District Court

for the District of Columbia decided to hold in

abeyance Common Cause's motion to enforce the

district court's previous order that the FEC promulgate rules on "soft money."* Instead, the

COUl't retained jurisdiction in the case and ordered

the FEC to submit, at 90-day intervals, concise

reports on the agency's progress toward promulgating the rules.** (The FEC must submit its

first report by November 25, 1988.)

Background

Common Cause filed its petition for rulemaking on soft money in November 1984. On April 29,

1986, after taking a number of steps in response

to the petition,*** the FEe denied Common

Cause's petition for rulemaking (see 51 Fed. Reg.

*In its original complaint, Common Cause

defined the term "soft money" as "funds from

sources prohibited under the FECA that are given

to political committees and party organizations

ostensibly for use at the state and local level, but

which are actually used in connection with and to

influence federal elections in violation of the

FECA."

* "See p. 1 for an article on the new Notice of

Proposed Rulemakinq published by the FEC.

***For a summary of the steps taken by the FEC

in response to the petition, see the January 1986

Record, p, 6, and the June 1986 Record, p. 6.

6

15915). On June 30, 1986, Common Cause filed

an action with the district court pursuant to the

Administrative Procedure Act, 5 U.S.C. S706.

(This provision provides that an agency action

that is "not in accordance with the law" must be

set aside by the reviewing court.)

In the suit it filed with the district court,

Common Cause argued that the FEC:

o Improperly construed the Federal Election

Campaign Act (the Act) by: (a) improperly considering "intent" as a requisite factor when it

concluded that non federal funds had not been

transferred to the state and locallevel with the

intent to influence federal elections and (b)

allowing the allocation of expenditures made in

connection with federal and non federal elections;

o Inadequately regulated the allocation of federal

and non federal funds, thereby creating a loophole through which "soft money" could be used

in connection with federal elections; and

o Acted arbitrarily and capriciously in denying

the petition for rulernaklng, given ample evidence to justify a rulemaking.

District Court Ruling: August 1987

On August 3, 1987, the district court issued

an order which granted the FEC's motion for summary judgment on all issues in this case except

one: the allocation, between the federal and nonfederal accounts of state party committees, of

expenses of certain specified activities (e.g.,

voter registration, "get out the vote" efforts and

campaign materials used in connection with volunteer activities). (Common Cause v. FEC; Civil

Action No. 86-1838).

Specifically, the court maintained that the

Commission's regulations provide "no guidance

whatsoever on what allocation methods a state or

local party committee may use." Concluding tha

a revision of the Commission's regulations was

warranted with respect to this one issue, the

court remanded the matter to the Commission.

District Court RUling: August 1988

In petitioning the district court to enforce its

order of August 1987, Common Cause asked the

court to impose a timetable on the FEC which

would require the agency to:

o Propose allocation rules within 30 days of the

court's order; and

o Make the proposed rules final as soon as possi

ble.

The FEC argued that it had begun to respond

to the court's 1987 order by publishing a Notice o

Inquiry in the Federal Register that sough

comments on its proposed rulemaking. The FEC

pointed out that the election law had established

no timetable for rulemakings. Furthermore

under the law, Common Cause could file a docu

mented administrative complaint to remedy any

alleged abuses of the allocation rules. Addi
October1988 FEDERAL ELECTION COMMISSION Volume 14, Number 

tionally, the FEC argued that its delay (of seven

months) did not approach the three- and five-year

agency delays that courts have found to be reasonable. Finally, the agency cited demands on the

FEC's resources during a Presidential election

year.

The court concluded that "Common Cause ha[d!

not shown that the Commission's delay thus far

warrant[ed] the intrusive relief sought by the

plainti ffs," Nevertheless, the court ruled that the

FEC should submit a report to the court every 90

days on its progress toward promulgating the

rules.

COMMON CAUSE v, FEC (Suit Three)

On July 15, 1988, in response to an order by

the U.S. District Court for the District of Columbia, three FEC Commissioners submitted a second

set of statements of reason to the court and to

Common Cause. The statements set forth the

Commissioners' reasons and justification for

dismissing an ad ministrative complaint filed by

Common Cause against President Reagan's 1984

reelection campaign. (The Com missioners' first

statements of reason were submitted to Common

Cause on October 27, 1986, in response to the

court's remand order in Common Cause v. FEC

[Civil Action No. 86-3465], a suit brought by

Common Cause to challenge the agency's dismissal of the administrative eornplaint.)

In ordering the Commissioners who voted to

dismiss the complaint to resubmit their statements of reason within 30 days of the court's July

1988 order, the court held that the Commissioners

must explain in greater detail:

a Why they chose to apply the test they had used

to determine whether an officeholder/candidate's appearance was campaign related, rather

than related to his or her official duties as a

federal officeholder; and

a Why that test was consistent or inconsistent

with prior FEC advisory opinions.

In response to the court's second remand

order, Commissioners Joan D. Aikens and John W.

McGarry submitted a joint statement of reasons,

while Commissioner Lee Ann Elliott submitted a

separate statement. The fourth dissenting Commissioner in the case, Frank P. Reiche, did not

submit a statement of reasons because he left the

Commission in April 1985.

In issuing its second remand order, the court

retained jurisdiction over the suit, while dismissing motions for summary judgment filed by both

Common Cause and the FEC.

Background

On September 20, 1984, Common Cause filed

an administrative complaint with the FEC against

the Reagan-Bush '84 General Election Committee

(the Reagan campaign), President Reagan's prinei7

pal campaign committee for his 1984 gene

election campaign. In the complaint, Comm

Cause alleged that the travel costs related to 

speech President Reagan gave before the Ve

rans of Foreign Wars (V.F. W.) in Chicago cons

tuted "qualifed campaign expenses'i" incurred f

Mr. Reagan's publicly funded general electi

campaign. Consequently, Common Cause claim

that the Reagan campaign had to: (1) p

for and report the costs of the Chicago trip 

"qualified campaign expenses" and (2) reimbu

the government for President Reagan's use o

government airplane to make the trip.

On December 24, 1984, the FEC's Gene

Counsel recommended that the Commission f

"reason to believe" that the Reagan campaign a

its treasurer had violated provisions of the el

tion law and public funding statutes by failing 

report these expenses. On January IS, 1985, ho

ever, the Commission decided, by a vote of fo

to two, to find "no reason to believe" the Reag

campaign and its treasurer had violated fede

election laws. Consistent with past practice, 

Commission did not issue a formal statement 

reasons for its decision to dismiss Comm

Cause's administrative complaint.

On March 22, 1985, Common Cause challe

ed the FEC's dismissal decision by filing s

against the Commission with the district court

its suit, Common Cause asked the court to: 

declare that the FEC's dismissal of its administ

tive complaint was contrary to law and (2) or

the agency to act on the allegations in its co

plaint.

In arguing that the FECls dismissal was c

trary to law, Common Cause said that, in det

mining whether President Reagan's Chicago t

was campaign related, the Commission sho

have considered the "totality of circumstanc

surrounding his Chicago speech rather than us

a standard, which focused on: (1) whether Pre

dent Reagan's speech expressly advocated his 

election and (2) whether he solicited contributio

in conjunction with his speech.

The District Court's Eirst Ruling

Although accepting the legal standard wh

the parties agreed had been applied by the FEC 

its dismissal of Common Cause's complaint (i

the "two-prong" standard), the court observ

that it still had to "determine whether the agen

has presented a rational basis for its decision." 

this regard, the court noted that "the rec

before us prevents that threshold determinatio

In its June 1986 ruling, the court therefore 

manded the case to the FEC "both for an expla

ll:FEe regulations define "qualified campa

expenses" as those expenditures made to furth

the general election campaign of a publi

funded Presidential candidate. See 11 C

9002.11.
FEDERAL ELECTIOI\J COMMISSION Volume 14, Number 1

Statement of Reasons: Commissioner Ellio

In explaining her view that the Commission shou

apply only the "two-prong" test to determi

whether President Reagan's speech was campaig

related, Commissioner Elliott stated that "an o

ficeholder's speech will be considered campaig

related if it expressly advocates the election 

defeat of a clearly identified candidate or solic

contributions on behalf of a federal candida

This 'two-prong' test is sensible and workab

concluded that they had applied a "totality-

eireumstances" standard. On the other han

Commissioner Elliott concluded that, in the ca

of an officeholder, the "two-prong" test was a

propriate.

Statement of Reasons: Commissioners Aike

and McGarry. The Commissioners stated the

views that, in determining whether an offic

holder's speech was campaign related, the Co

mission "has consistently applied a legal standa

that has been described as a 'totality of circu

stances' test, involving examination of extern

factors." While they agreed that an examinati

of the elements of the "two-prong" test was 

necessary first step, they maintained that th

had to "look further to the timing, the setting a

the purpose of the event as integral componen

of the 'totality of circumstances' test and 

necessary to the ultimate determination th

certain activity is or is not campaign-related

Citing agency precedents,* the Commission

stated that their use of the "totality-or-circu

stances" standard was "totally consistent with t

approach recommended by the General Coun

in his Report...and adopted by the Commission 

many advisory opinions."

Based on these standards, the Commissione

concluded that President Reagan's speech w

made in performance of his official duties, rath

than to further his reelection. The speech d

not expressly advocate President Reagan's ele

tion or solicit contributions to his campaign. N

did the timing, setting or purpose of the Pre

dent's speech support the complainant's alleg

tions that the speech was campaign related.

With regard to the ti ming of the speech, t

Commissioners noted that the V.F. W. conventi

was an annual event and that the invitation 

attend it had been extended to President Reag

six months before the Republican National Co

vention. They concluded, "To argue that t

timing of this appearance makes it a campai

event would mean that no incumbent Preside

could make an official appearance to perfo

officeholder duties after the renomination."

cited 

1977-5

1981-3

"'For example, the Commissioners

precedent Advisory Opinions 1977-42,

1978-4, 1978-15, 1980-16, 1980-22,

1982-15,1982-56 and 1984-13.

8

October 1988

Commissioners' Second Statements of Reason

Responding to the court's second remand order, on July 15, 1988, the three Commissioners

submitted a second set of statements of peason to

the court and to Common Cause. While the three

Commissioners all agreed that President Reagan's

speech before the V.F. W.'s annual convention was

not campaign related, they were not in unanimous

accord concerning the standard that should have

been applied to reach this determination. Commissioners Joan D. Aikens and John W. McGarry

tion of the legal standard actually applied and.••a

statement of reasons demonstrating hOw the

Commission applied such legal standards to the

facts before it."

"'The court cited, for example, AOs 1984-13

and 1978-15.

'"*The court noted that, although the appeals

court had ruled in Orloski v. FEC (795 F.2d at

167) that the FEC had used the "two-prong" test

consistently since 1977, that court did not have

the Commissioners' statement of reasons citing

the agency's use of a broader standard.

The District Court's Second Ruling

In response to the court's first remand order,

three of the Commissioners who originally voted

to dismiss Common Cause's administrative complaint submitted statements of reason to the

court.

After reviewing these statements, the court

found that they did not adequately explain why:

(1) two of the Commissioners had used the "totality-of-clreurnstances" test, which had previously

been applied in a series of FEC advisory opinions*

and (2) one of the Commissioners had used a "twoprong" standard. The cour-t said that the

Commissioners' use of two different standards

"somewhat compounded" the court's task of discerning lithe Commission's exact policy or practice" for determining when an officeholder's appearance is campaign related.

The court noted that, although "an agency is

free to depart from established practice or policy,

it must provide a statement of reasons indicating

that such change is in fact occurring, and for

articulated reasons," Otherwise, the agency's

decisions appear to be "shaped arbitrarily" and

deprive the court of a foundation for judicial

review when complainants challenge the agency's

decisions in court.** Mindful of the FEC's "role as formulator of

general policy under federal election laws," the

court decided to order the agency to provide a

fuller explanation of its reasons for dismissing

Common Cause's administrative complaint. In

doing so, the court rejected Common Cause's

motion to have the FEC reconsider its action in

the administrative complaint, based on the "totality-of-eircurnstanees' test.
October 1988 FEDERAL ELECTION COMMISSION Volume 14, Number10

•

Commission precedent and has repeatedly been

held a permissible construction of the Act. Further, the 'two-prong' test avoids subjective or

imponderable considerations when evaluating an

officeholder's speech."

Commissioner Elliott cited as precedent for

the test the Supreme Court's decision in Buckley

v. Valeo, as well as a series of other federal

court cases and FEC actions, including Commission advisory opinions.* The Commissioner noted

that "the reasonableness of this policy is enhanced

when viewed against 11 years of even-handed

app lieation."

Commissioner Elliott concluded that the totality of circumstances approach "is really not

applicable for officeholders. Its objective elements are already part of the 'two-prong' testis

legal inquiry into 'express advocacy' and its subjective elements are too vaporous upon which to

rest a legal conclusion."

Finally, the Commissioner stated that the

"totality-of-circumstances" test could not be appropriately applied to the Reagan speech. In the

past, the Commissioner explained that this test

had been applied only to: (1) nonincumbent candidates, (2) officeholders who were engaging in

activities that were not normally part of their

duties and (3) officeholders who were invited to

make appearances as candidates, rather than in

their official capacities. Commissioner Elliott

therefore concluded that "following Counsel's recommendation in this case would not have been

following Commission precedent."

Commissioner Elliott found that, based on

the two-prong test, President Reagan had not

made a campaign-related speech at the convention. "I concluded that the speech [did] not

advocate the re-election of the President or the

defeat of his opponent...His appearance was that

of a head-of-state and his remarks were on issues

of importance to America's veterans."

NRA v; FEe

On August 5, 1988, the U.S. Court of Appeals

for the District of Columbia Circuit issued a

decision in National Rifle Association of America

(NRA) v. FEC (Civil Action No. 87-5373), which

affirmed an October 1987 decision by the U.S.

District Court for the District of Columbia. In its

decision, the district court found that a peti tion

for review of the Com mission's dismissal of an

administrative complaint that NRA had filed

against Handgun Control, Inc. (HCn constituted

an untimely appeal of an earlier FEC dismissal of

"For example, the Commissioner cited as

precedent Buckley v. Valeo, 424 U.S. 1, 84 0.112

(1976) and Advisory Opinions 1977-42, 1977-54,

1978-4, 1979-25, 1980-16, 1980-22, 1980-89 and

1981-37.

9

another administrative complaint also filed by

NRA against HCI. See 2 U.S.C. §437g(a)(8)(B).

Background

NRA's suit challenged the FEC's dismissal o

NRA's third administrative complaint agains

HCI. NRA's third administrative complaint had

alleged violations of the election law by Hel, an

incorporated membership organization that sup

ports restrictions on gun ownership. All three o

NRA's administrative complaints challenged HCI

status as a membership organization under th

election law.

The first administrative complaint resulted i

a conciliation agreement between the FEC an

HCI. In dismissing NRA's second administrativ

complaint, the FEC found that HCr had qualifie

as a membership organization by taking the step

specified in the conciliation agreement resultin

from the first complaint, even though it had im

properly applied the membership requirements re

troactively to past contributors. With respect to

NRA's third administrative complaint, the FEC

found that the allegations were virtually identica

to those raised in NRA's second complaint. Con

sequently, the agency dismissed the third com

plaint.

District Court Ruling

In a brief filed with the district court, the

FEC argued that, under section 437g(a)(8)(B) o

the election law, a party challenging the agency'

dismissal of an administrative complaint must fil

suit within 60 days after the date of dismissal

NRA did not petition for review of the FEe'

dismissal of its second administrative complain

within the statutory time period. Instead, NRA

reasserted its previously dismissed claim in 

third administrative complaint Which, the FE

contended, amounted to nothing more than an

attempt to obtain review beyond the GO-day pe

riod.

In dismissing NRA's suit, the court concurred

with the FEC's argument. On October 26, 1987

NRA filed an appeal of the district court'

decision with the U.S. Court of Appeals for th

D.C. Circuit.

Appeals Court Ruling

In affirming the district court's dismissal o

NRA's suit, the appeals court found that "th

second and third NRA complaints [were] substan

tially similar by virtue of the fact that the lega

question posed by both was the same: whether an

organization that does not provide for an annua

meeting at which members may participate in th

conduct of corporate business may qualify as 

membership organization under section 44Ib(b)(4)

(C)....Having raised that issue in the second com

plaint and [having] failed to appeal the Commis

sion's order, the NRA cannot obtain judicial re
October 1988 FEDERAL ELECTION COMMISSION Volume 14, Number 1

view of the issue by the expedient of bringing it

(albeit in a more concrete context) before the

FEC once again,"

The appeals court concurred with NRA's

argument that, because it had again dismissed the

merits of NRA's argument in rejecting its third

administrative complaint, the FEC had

effectively reopened the issue and had rendered a

decision that was, in principle, subject to court

review. Nevertheless, the appeals court noted

that NRA had failed to make this argument with

the district court when the FEC moved to dismiss

NRA's suit on grounds that the court lacked

subject matter jurisdiction over it. The appeals

court concluded that, "having failed to raise the

reopening argument as the basis for jurisdiction in

the District Court, the NRA is not at liberty to

raise it for the first time on appeal."

This cumulative index lists advisory

opinions, court cases and 800 Line articles published in the Record during 1988. The first

number in the citation refers to the "number"

(month) of the Record issue; the second number,

following the colon, indicates the page number in

that issue.

OPINIONS

1987-29: Partisan communications by incorporated membership organization, 4:6

1987-30: Assets of candidate's wife used to pay

off bank loan to candidate, 2:3

1987-31: Eligibility of security exchange's eight

membership classes for PAC solicitations, 3:5

1987-32: Campaign contributions in the form of

silver dollars, 3:7

1987-33: Law firm and partner are not government contractors, 3:7

1987-34: Solicitations by subsidiary of joint

venture partnership, 6:5

1988-1: Activity to influence delegate selection,

5:3

1988-2: FEe reports posted on security exchange's

bulletin boards, 4:7

1988-3: Trade association solicitations, 7:3

1988-4: Affiliation of PACs through corporate

merger, 5:4

1988-5: Presidential matching payments used for

'84 debts, 5:5

1988-6: Allocation of media expenses to fundraising exemption, 4:7

1988-10: Activities for post-primary delegate

selection, 6:5

10

1988-11: Solicitation of teachers by trad

association of schools, 6:7

1988-12: Promotion of credit card program b

party com mittee/bank, 7:3

1988-13: Campaign funds used to pay candidate'

rent, 7:4

1988-14: Joint PAC sponsored by affiliate

corporations, 6:7

1988-17: Corporation's sale of medallion

depicting candidates and national nominatin

conventions, 8:3

1988-18: Liability of union for donations from it

funds by non federal entities, 7:9

1988-19: Solicitability of employee shareholders

7:5

1988-21: Act's preemption of California ordinanc

governing contributions, 7:5

1988-23: Air travel coupons sold to campaign, 8:4

1988-25: Cars provided by corporation to nationa

Presidential nominating conventions, 8:4

1988-26: Hourly wage earners not solieitable, 8:5

1988-27: Corporate expenditures for PAC fund

raiser and honorarium, 9:6

1988-28: Corporation's 900 line telephone servic

for political committees, 10:5

1988-32: Reporting last-minute contributions, 9:7

COURT CASES

Ralph J. Galliano v, U.S. Postal Service, 1:7; 3:9

Harry Kroll v, Americans with Hart, Inc., 5:6

Xerox Corp. v, Americans with Hart, Ine., 5:6

FECV•._~~

-Augustine for Congress, 1:8

-Beatty for Congress Committee, 6:9

-Californians for a Strong America, 8:7

-Citizens for the President '84, 3:10

-Citizens to Elect Jerald Wilson for

Congress, 1:9

-Dietl for Congress, 6:9

-Dominelli (second suit), 5:8

-Ted Haley Congressional Committee, 9:7

-Holmes Committee, 7:7

-Lee, 7:7

-New York State Conservative Party State

Committee/1984 Victory Fund, et al., 2:4

-Rodriguez, 8:6

-Thornton Township Regular Democrati

Organization, 9:8

-Working Names, Ine., 7:6

v. FEC

-Antosh, 1:8; second suit, 3:10; 6:8

-Boulter and National Republican Senatoria

Committee, 9:7

-Comrnon Cause (Third Sui t), 5:7, 10:7; Sixt

Suit, 10:6

-NRA, 10:9

-Stark (second suit), 4:8

-USDC, 7:6
October 1988 FEDERAL ELECTION COMMISSION Volume 14, Number 10

MUR 2454: Transfer from State to Federal

Account of Corporate PAC

This MUR, resolved through conciliation, involved

a separate segregated fund's receipt of funds

transferred from its nonfederal account.

Complaint

The MUR was internally generated by the

Commission in the normal course of carrying out

its administrative responsibilities. A review of

the separate segregated fund's report disclosed

receipts from an affiliated committee. An

amended report disclosed that the transfer was

from the fund's nonfederal account.

General Counsel's Report

The FEC conducted an investigation after it

found reason to believe that the federal PAC had

violated 11 CFR 102.5(a)(1)(i), which prohibits a

federal PAC from receiving a transfer from its

affiliated nonfederal account, and 2 U.S.C.

§441b(a), which bans the use of corporate funds in

federal elections.

Pursuant to 11 CFR 102.5(a)(I)(0, an organization that finances political activity in connection with both federal and nonfederal elections

may choose to establish a separate federal

account pursuant to the requirements of 11 CFR

102 and 104. Only funds SUbject to the

prohibitions and limitations of the Act may be

deposited into such a federal account. Further,

no transfers may be made to the federal account

from any nonfederal aecountls) maintained by

such organization. The General Counsel

concluded, in this case, that the PAC had

transferred $10,000 from its nonfederal account

in violation of 11 CFR 102.5(a)(1)(i).

The respondents contended that they were

unaware that the transfer from the state account

was a prohibited transaction, and they attempted

to rectify the error immediately after

Commission notification. In addition, the respondents asserted that only contributions from individuals were deposited into the nonfederal account,

to substantiate that 2 U.S.C. S44lb(a) had not

been violated.

Commission Determination

A conciliation agreement was concluded prior

to the Commission's finding "probable cause to

believe" the Act had been violated. The agreement stated that the separate segregated fund

had violated 11 CFR 102.5(a)(1)(i) by transferring

non federal funds into its federal account. The respondents agreed to pay a $1,000 civil penalty.

11

ACTIVITY OF 1987-88

CONGRESSIONAL CAMPAIGNS

A study released by the FEC on August 1

showed that, during the first 18 months of th

1987-88 election cycle, House candidates increas

ed their total financial activity, as compared wit

House candidates active during the same period i

the 1985-86 cycle. On the other hand, 198

Senate candidates showed an overall decline i

activity, in comparison with candidates campaign

ing in 1986 Senatorial races.* By the end of June 1988, spending by Hous

candidates active in the 1987-88 election cycl

totaled $111 million, an 11 percent increase ove

spending by House candidates active during th

same 18-month period in the 1985-86 cycle. Tot

funds raised by the candidates (i.e., $154 million

increased 12 percent over total funds raised b

House candidates in the last election cycle.

Senate candidates spent $70 million durin

the first 18 months of the current cycle, a 23.

percent decrease from spending by Senate cand

dates during the same period in the last electio

cycle. Total funds raised by 1988 Senate cand

dates (l.e., $116 million) declined 6.5 percen

from total receipts of candidates running in 198

races.

During the current cycle, political actio

com mittees (PACs) increased their contribution

to Democratic House and Senate candidates an

to incumbents. (See the comparative chart on p

12.)

By contrast, PACs gave less to candidates i

open seat races in 1988, as compared with PA

contributions to candidates running in open sea

races during the last election cycle. Fewer ope

seat races in the current cycle account for som

of this decline.

More detailed information on Congression

campaign activity may be obtained from th

FEC's August 11, 1988, press release. For a cop

of the release, call the FEC's Public Record

Office at 202/376-3120 or, toll free, 800/424

9530.

continued

"'This decline in activity may be accounte

for, in part, by fewer open seat Senate races i

1988 and by the different states involved i

Senate races during the current cycle.
October 1988 FEDERAL ELECTION COMMISSION Volume 14, Number 1

PAC CONTRIBUTIONS TO CONGRESSIONAL CANDIDATES

Through June 30 of the Election Year

Democrats

Republicans

Incumbents

Challengers

Open Seats

10 20 30 40

Millions of Dollars

50

1985--86

1987--88

60 7

FEDERAL ELECTION COMMISSION

999 E Street, NW

Washington, DC 20463

Official Business

Bulk Rate Mail

Postage and Fees Paid

Federal Election Commission

Permit Number G-31