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[Federal Register Volume 62, Number 147 (Thursday, July 31, 1997)]
[Proposed Rules]
[Pages 40982-40985]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-20094]

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FEDERAL ELECTION COMMISSION

11 CFR Parts 100 and 114

[Notice 1997--12]

Definition of ``Member'' of a Membership Association

AGENCY: Federal Election Commission.

ACTION: Advance notice of proposed rulemaking.

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SUMMARY: The Commission is seeking comments on how to revise its rules 
governing who is a ``member'' of a

[[Page 40983]]

membership association following the decision of the United States 
Court of Appeals for the District of Columbia Circuit in Chamber of 
Commerce of the United States v. Federal Election Commission. The 
Commission is not proposing specific amendments to the rules at this 
time but is rather attempting to obtain general guidance on the factors 
to be considered in determining this relationship.

DATES: Comments are due on September 2, 1997.

ADDRESSES: All comments should be addressed to Susan E. Propper, 
Assistant General Counsel, and must be submitted in either written or 
electronic form. Written comments should be sent to the Federal 
Election Commission, 999 E Street, NW., Washington, DC 20463. Faxed 
comments should be sent to (202) 219-3923, with printed copy follow-up. 
Electronic mail comments should be sent to [email protected] and should 
include the full name, electronic mail address and postal service 
address of the commenter. Additional information on electronic 
submission is provided below.

FOR FURTHER INFORMATION CONTACT: Ms. Susan E. Propper, Assistant 
General Counsel, or Ms. Rita A. Reimer, Attorney, 999 E Street NW., 
Washington, DC 20463, (202) 219-3690 or (800) 424-9530.

SUPPLEMENTARY INFORMATION: The Federal Election Campaign Act of 1971 as 
amended (``FECA'' or ``Act'') permits membership associations to 
solicit contributions from their members for a separate segregated fund 
(``SSF''), which contributions can be used for federal political 
purposes. The Act also allows membership associations to communicate 
with their members on any subject, including communications that 
include express electoral advocacy. 2 U.S.C. 441b(b)(2)(A), 
441b(b)(4)(C). The implementing regulations defining who is a 
``member'' of a membership association are found at 11 CFR 
100.8(b)(4)(iv) and 11 CFR 114.1(e).
    On August 30, 1993, the Commission published the text of revisions 
to these regulations. 58 FR 45770. The revised rules became effective 
on November 10, 1993. 58 FR 59640. The rules provide that either a 
significant financial attachment to the membership association (not 
merely the payment of dues) or the right to vote directly for all 
members of the association's highest governing body is sufficient in 
and of itself to confer membership rights. However, in most instances a 
combination of regularly-assessed dues and the right to vote directly 
or indirectly for at least one member of the association's highest 
governing body is required. The term ``membership association'' 
includes membership organizations, trade associations, cooperatives, 
corporations without capital stock, and local, national and 
international labor organizations that meet the requirements set forth 
in these rules.
    These rules were adopted in response to the Supreme Court's ruling 
in Federal Election Commission v. National Right to Work Committee 
(``NRWC''), 459 U.S. 196 (1982), and a series of Advisory Opinions 
(``AO'') adopted by the Commission following that decision. NRWC 
rejected an argument by a nonprofit, noncapital stock corporation, 
whose articles of incorporation stated that it had no members, that it 
should be able to treat as members, and thus solicit funds to its SSF 
from, individuals who had at one time responded, not necessarily 
financially, to an NRWC advertisement, mailing, or personal contact. 
The Supreme Court rejected this definition of ``member,'' saying that 
to accept it ``would virtually excise from the statute the restriction 
of solicitation to `members.''' Id. at 203. The Court determined that 
``members'' of nonstock corporations should be defined, at least in 
part, by analogy to stockholders of business corporations and members 
of labor unions. Viewing the question from this perspective meant that 
``some relatively enduring and independently significant financial or 
organizational attachment is required to be a `member''' for these 
purposes. Id. at 204. The recent revisions to the Commission's rules 
were intended to incorporate this standard.
    The United States District Court for the District of Columbia held 
that the revised ``member'' rules were not arbitrary, capricious or 
manifestly contrary to the statutory language, and therefore deferred 
to what the court found to be a valid exercise of the Commission's 
regulatory authority. Chamber of Commerce of the United States 
(``Chamber'') v. Federal Election Commission, Civil Action No. 94-2184 
(D.D.C. Oct. 28, 1994)(1994 WL 615786). However, the United States 
Court of Appeals for the District of Columbia Circuit reversed. 69 F.3d 
600 (D.C.Cir. 1995), amended on denial of rehearing, 76 F.3d 1234 
(D.C.Cir. 1996).
    The case was jointly brought by the Chamber of Commerce and the 
American Medical Association (``AMA''), two associations that do not 
provide their asserted ``members'' with the voting rights necessary to 
confer this status under the current rules. The court held that the 
ties between these members and the Chamber and the AMA are sufficient 
to comply with the Supreme Court's NWRC criteria, and therefore 
concluded that the Commission's rules are invalid because they define 
the term ``member'' in an unduly restrictive fashion. 69 F.2d at 604.
    The Chamber is a nonprofit corporation whose members include 3,000 
state and local chambers of commerce, 1,250 trade and professional 
groups, and 215,000 ``direct business members.'' The members pay annual 
dues ranging from $65 to $100,000 and may participate any of 59 policy 
committees that determine the Chamber's position on various issues. 
However, the Chamber's Board of Directors is self-perpetuating (that 
is, Board members elect their successors); so no member entities have 
either direct or indirect voting rights for members of the Board.
    The AMA challenged the exclusion from the definition of member 
44,500 ``direct'' members, those who do not belong to a state medical 
association. Direct members pay annual dues ranging from $20 to $420; 
receive various AMA publications; and participate in professional 
programs put on by the AMA. They are also bound by and subject to 
discipline under the AMA's Principles of Medical Ethics. However, since 
state medical associations elect members of the AMA's House of 
Delegates, that organization's highest governing body, direct members 
do not satisfy the voting criteria set forth in the current rules.
    The Chamber of Commerce court, in an Addendum to the original 
decision, noted that the Commission ``still has a good deal of latitude 
in interpreting'' the term ``member.'' 76 F.3d at 1235. However, in its 
original decision, the court held the rules to be arbitrary and 
capricious (as applied to the Chamber), since under the current rules 
even those paying $100,000 in annual dues cannot qualify as members. As 
for the AMA, the rule excludes members who pay up to $420 in annual 
dues and, among other organizational attachments, are subject to 
sanctions under the Principles of Medical Ethics. The court explained 
that this latter attachment ``might be thought, [] for a professional, 
[to be] the most significant organizational attachment.'' 69 F.3d at 
605 (emphasis in original).
    On February 24, 1997, the Commission received a Petition for 
Rulemaking from James Bopp, Jr., on behalf of the National Right to 
Life Committee, Inc. The Petition urged the Commission to revise its 
rules defining who is a member of a membership

[[Page 40984]]

association to reflect the Chamber of Commerce decision.
    The Commission published a Notice of Availability (``NOA'') in the 
Federal Register on March 29, 1997. 62 FR 13355. The Commission 
received two comments in response to the NOA.
    Other than its comments on the Chamber's and the AMA's member 
attachments that it found sufficient to comply with the Supreme Court's 
NRWC criteria, the Chamber of Commerce court provided little guidance 
on how the current rules should be revised to comply with this ruling. 
Both of these associations present specific and somewhat unique 
circumstances that do not necessarily lend themselves to 
generalizations applicable to the broader membership association 
community. Nor did the Petition for Rulemaking suggest alternative 
language for this purpose.
    The Commission has therefore decided to issue an Advance Notice of 
Proposed Rulemaking (``ANPRM''), seeking general comments on how best 
to effectuate this decision. After analyzing the comments received in 
response to the ANPRM, the Commission may issue a Notice of Proposed 
Rulemaking (``NPRM'') seeking comments on specific regulatory language.
    The current rules provide a ``safe harbor'' for membership 
associations, since those who meet the requirements set forth in these 
rules clearly enjoy ``member'' status. Associations can also seek 
advisory opinions pursuant to 2 U.S.C. 437f and 11 CFR part 112 to 
determine how the rules, as interpreted in the Chamber of Commerce 
decision, apply to their particular situations. This has already been 
done by certain entities, including the Chicago Mercantile Exchange 
(``CME'' or the ``Exchange''). See discussion of AO 1997-5, infra.
    The Commission notes that there are three preliminary requirements 
an entity must meet before it qualifies as a ``membership association'' 
for purposes of these rules: It must expressly provide for ``members'' 
in its articles and by-laws; expressly solicit members; and expressly 
acknowledge the acceptance of membership, such as by sending a 
membership card or including the member on a membership newsletter 
list. 11 CFR 100.8(b)(4)(iv)(A), 114.1(e)(1). These requirements were 
not challenged in the litigation and the Commission does not anticipate 
that it will propose any changes to this language.
    The Chamber of Commerce, in commenting on the NOA, argued that 
these three requirements should in and of themselves be sufficient to 
confer membership status. However, it may be that these attachments, 
standing alone, are insufficient to meet the ``relatively enduring and 
independently significant financial or organizational attachment'' 
standard articulated by the NRWC Court. (The other comment, from the 
Internal Revenue Service (``IRS''), stated that a potential rulemaking 
on this topic would not conflict with the Internal Revenue Code or any 
IRS regulation.)
    In addition to retaining these three preliminary requirements, the 
Commission believes that the current rules recognizing as members those 
who have a stronger financial interest in an association than paying 
dues (for example, the ownership of a stock exchange seat) and those 
who have the right to vote directly for all members of the 
association's highest governing body, should likewise be retained for 
those associations that meet either of these requirements. 11 CFR 
100.8(b)(4)(iv)(B) (1), (3); 114.1(e)(2) (i), (iii). Thus, the 
Commission is seeking comments on what other attachments, or 
combination of attachments, should also be sufficient to confer 
membership status in lieu of current 100.8(b)(4)(iv)(B)(2) and 
114.1(e)(2)(ii).
    One approach would be to establish a certain level of annual dues 
as in and of itself sufficient for this purpose. Those who paid this 
amount would be considered members regardless of whether they had 
organizational attachments to the association. One possibility is that 
any amount of annual dues set by an association would be a sufficient 
financial attachment, regardless of amount. Another possibility is a 
$200 per year cut-off point, since $200 is the amount that Congress has 
decided is such a significant attachment to a political committee that 
itemized disclosure is required for what could be considered 
``membership'' in a political committee. The Commission welcomes 
comments on this approach as well as suggestions for what level of 
annual dues would be appropriate to confer membership status, if this 
were to be included in the rules.
    For a lesser dues obligation, the rules might list other factors 
the Commission would consider per se sufficient to provide the required 
organizational attachment, provided that some level of dues was also 
required. These could include such attachments as the voting rights 
contained in the current rule; the right to serve on policy-making 
boards and/or vote on policy issues; eligibility to be elected to 
governing positions in the organization; and whether the member may be 
subject to disciplinary action by the association. If this approach is 
adopted, the Commission would like to make this list as comprehensive 
as possible, so that the large majority of covered entities will be 
able to quickly determine who qualifies as a member.
    On May 16, 1997, the Commission determined in AO 1997-5 that, based 
on the facts presented, both owners and lessees of seats on the Chicago 
Mercantile Exchange could be considered ``members'' of the CME for 
purposes of these rules. The member-owners, by virtue of their 
ownership stake, qualify as members under 11 CFR 100.8(b)(4)(iv)(B)(1) 
and 114.1(e)(2)(i). In addition, the Commission found, member-lessees 
have sufficient rights and obligations to also qualify as members. 
These attachments include substantial financial obligations to the CME, 
the right to serve on policy-formulating committees, and the 
possibility of sanctions by the CME that would impact on their 
professional status. AO 1997-5 overruled AO 1988-39 and 1987-31 (in 
part), which had concluded that only one membership in the Exchange 
existed with respect to each leased membership. The Commission is 
seeking comments on whether to incorporate this result into the 
regulatory text.
    The Commission's rules at 11 CFR 100.8(b)(4)(iv)(B) and 114.1(e)(2) 
that require both a financial and an organizational attachment for 
members of most membership associations clearly include two-tiered 
associations, such as those in which members vote for delegates to a 
convention, and those delegates elect those who serve on the 
association's highest governing body. At the time of the 1993 
amendment, the Commission explained that multi-tiered associations 
could solicit across all tiers, as long as the various tiers met the 
same criteria that govern solicitations by two-tiered associations. 
Explanation and Justification for Regulations on the Definition of 
``Member'' of a Membership Association, 58 FR 45770 (1993). In 
addition, the Commission authorized farm cooperatives as defined in the 
Agricultural Marketing Act of 1929 (12 U.S.C. 1141j) and those entities 
eligible for assistance under the Rural Electrical Act of 1936 as 
amended (7 U.S.C. 901-950aa-1) to solicit across all tiers even though 
the precise attachments set forth at 11 CFR 100.8(b)(4)(iv)(B) and 
114.1(e)(2) might not always be present. 11 CFR 114.7(k)(1). 
Federations of trade associations had earlier been given this same 
right, 11 CFR 114.8(g), as had labor organizations, 11 CFR 114.1(e)(4). 
The Chamber of Commerce court, in

[[Page 40985]]

discussing the AMA's organizational attachments, cited these exceptions 
as another basis for its ruling that the AMA should be able to cross-
solicit across multiple tiers even where no voting rights were present. 
69 F.3d at 606.
    If the Commission expands the membership definition, many multi-
tiered associations that may not presently qualify for cross-tier 
solicitation would likely be able to do so. The Commission welcomes 
comments on whether this should be stated explicitly in the rules, as 
well as whether the particular circumstances of certain multi-tiered 
associations might justify different standards.
    All comments on this ANPRM should be addressed to Susan E. Propper, 
Assistant General Counsel, and must be submitted in either written or 
electronic form. Written comments should be sent to the Commission's 
postal service address: Federal Election Commission, 999 E Street, NW., 
Washington, DC 20463. Faxed comments should be sent to (202) 219-3923. 
Commenters submitting faxed comments should also submit a printed copy 
to the Commission's postal service address to ensure legibility. 
Comments may also be sent by electronic mail to [email protected]. 
Commenters sending comments by electronic mail should include their 
full name, electronic mail address and postal service address within 
the text of their comments. All comments, regardless of form, must be 
submitted by September 2, 1997.
    The Commission also welcomes comments on any related topic.

    Dated: July 25, 1997.
John Warren McGarry,
Chairman, Federal Election Commission.
[FR Doc. 97-20094 Filed 7-30-97; 8:45 am]
BILLING CODE 6713-01-P
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