[Federal Register Volume 62, Number 245 (Monday, December 22, 1997)]
[Proposed Rules]
[Pages 66832-66838]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-33305]


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Proposed Rules
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of 
the proposed issuance of rules and regulations. The purpose of these 
notices is to give interested persons an opportunity to participate in 
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 62, No. 245 / Monday, December 22, 1997 / 
Proposed Rules

[[Page 66832]]


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FEDERAL ELECTION COMMISSION

11 CFR Parts 100 and 114

[Notice 1997-20]


Definition of ``Member'' of a Membership Association

AGENCY: Federal Election Commission.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Commission is proposing revisions to its rules governing 
who qualifies as a ``member'' of a membership association to reflect 
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. A membership association can solicit contributions 
from its members to a separate segregated fund established by the 
association, and can include express electoral advocacy in 
communications to its members. The proposed rules would describe a 
range of financial and organizational attachments that would be 
sufficient to confer this status.

DATES: Comments must be received on or before January 21, 1998. If the 
Commission receives sufficient requests to testify, it will hold a 
hearing in early 1998. The precise date and time of the hearing will be 
announced in the Federal Register. Persons wishing to testify should so 
indicate in their comments.

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, N.W., Washington, DC 20463. Faxed 
comments should be sent to (202) 219-3923, with printed copy follow-up. 
Electronic mail comments should be sent to <a href="/cdn-cgi/l/email-protection#deb3bbb3bcbbacad9eb8bbbdf0b9b1a8"><span class="__cf_email__" data-cfemail="dfb2bab2bdbaadac9fb9babcf1b8b0a9">[email protected]</span></a>. Commenters 
sending comments by electronic mail should include their full name and 
postal service address within the text of their comments. Comments that 
do not contain the full name, electronic mail address and postal 
service address of the commenter will not be considered. The hearing 
will be held in the Commission's ninth floor meeting room, 999 E Street 
N.W., Washington, D.C.

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

SUPPLEMENTARY INFORMATION: Although the Federal Election Campaign Act 
of 1971 as amended (``FECA'' or ``Act''), 2 U.S.C. 431 et seq., 
prohibits direct corporate contributions in connection with federal 
campaigns, 2 U.S.C. 441b(a), it permits corporations, including 
incorporated membership associations, to solicit contributions from 
their restricted class to a separate segregated fund (''SSF''). In the 
case of membership associations, the restricted class consists of the 
members of each association, their executive and administrative 
personnel, and their families. These 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 Commission's 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).
    The Commission's original ``member'' rules, which had been adopted 
in 1977, were the subject of a 1982 United States Supreme Court 
decision, FEC v. National Right to Work Committee (``NRWC''), 459 U.S. 
196 (1982). In 1993, following a series of advisory opinions in this 
area, the Commission revised the text of the rules to reflect that 
decision. 58 FR 45770 (Aug. 30, 1993), effective Nov. 10, 1993. 58 FR 
59640. The revised rules were held to be unduly restrictive by the 
United States Court of Appeals for the District of Columbia Circuit in 
Chamber of Commerce of the United States (``Chamber'') v. FEC, 69 F.3d 
600 (D.C.Cir. 1995), amended on denial of rehearing, 76 F.3d 1234 (D.C. 
Cir. 1996).
    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 
member rules to reflect the Chamber 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.
    On July 31, 1997, the Commission published in the Federal Register 
an Advance Notice of Proposed Rulemaking (``ANPRM'') addressing these 
rules. 62 FR 40982. Because the Chamber decision, the petition for 
rulemaking, and the comments received in response to the NOA provided 
few specific suggestions as to how the rules should be amended to 
comport with the decision, the Commission did not propose specific 
amendments to the rules. Rather, it sought general guidance on the 
factors to be considered in determining the existence of this 
relationship.
    The Commission received 14 comments in response to the ANPRM. 
Commenters included the American Association of Meat Processors 
(``AAMP''); the American Dental Association (``ADA''); the American 
Federation of State, County and Municipal Employees, AFL-CIO 
(``AFSCME''); the American Society of Association Executives 
(``ASAE''); the Chicago Board of Trade; the Chicago Mercantile 
Exchange; the Connecticut Veterinary Medical Association; the 
Metropolitan Kansas City Board of Realtors; the National Association of 
Realtors; the National Citizens Legal Network; the National Right to 
Life Committee, Inc.; Michael A. Schoenfield; the United States Chamber 
of Commerce; and the Wholesaler-Distributor Political Action Committee 
(``WDPAC''). After reviewing these comments, the Commission is now 
seeking further comment on the specific amendments to the member rules 
described below.

Background

    In its NRWC decision, the Supreme Court 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 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

[[Page 66833]]

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 NRWC's 
asserted members did not qualify under this standard because they 
played no part in the operation or administration of the corporation, 
elected no corporate officials, attended no membership meetings, and 
exercised no control over the expenditure of their contributions. Id. 
at 206. The 1993 revisions to the Commission's rules were intended to 
incorporate this standard.
    The current 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.
    The United States District Court for the District of Columbia held 
that the current 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 v. FEC, Civil 
Action No. 94-2184 (D.D.C. Oct. 28, 1994)(1994 WL 615786). However, the 
D.C. Circuit Court of Appeals reversed this ruling.
    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 circuit court held that 
the ties between these members and the Chamber and the AMA are 
nonetheless sufficient to comply with the Supreme Court's NRWC 
criteria, and therefore concluded that the Commission's rules are 
invalid because they define the term ``member'' in an unduly 
restrictive fashion. 69 F.3d 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 on 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 any 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 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).
    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 to determine how the rules, 
as interpreted in the Chamber of Commerce decision, apply to their 
particular situations. In addition, the Commission believes it is 
appropriate to include in the text of the rules more guidance 
consistent with the Chamber decision. The effect of the proposed rules 
should be to expand the class of persons considered as ``members.''

Proposed Revisions

General Considerations

    One commenter argued that, since the NRWC decision involved an 
entity whose by-laws specifically stated that it had no members, the 
Supreme Court's reasoning in that decision applies only to similar 
entities. That commenter urged the Commission to reinstate its original 
definition of ``member,'' which included ``all persons who are 
currently satisfying the requirements for membership in a membership 
organization.''
    However, the Court's discussion makes clear that the NRWC's failure 
to provide for members in its by-laws was not the main focus of its 
reasoning. It was not until after the Court noted that the NRWC's 
asserted ``members'' had no governance rights or significant other 
attachments to the organization, supra, that it reiterated an earlier 
statement that the ``NRWC's own articles of incorporation and other 
publicly filed documents explicitly disclaimed the existence of 
members.'' 459 U.S. at 558-59. The Commission believes that the lack of 
financial or organizational attachments, as well as the failure to 
provide for members in its bylaws, led to the Court's conclusion that 
the asserted members did not so qualify.
    One commenter, noting that it is possible to buy a single share of 
stock over the telephone, and sell it later that same day, argued that 
the analogy to stock ownership did not necessarily imply a strong bond. 
However, ownership of even a single share of stock permits the owner to 
attend stockholder meetings and thereby participate in the governance 
of the corporation during whatever time period the stock is held.
    Some commenters argued that the Commission should look to the laws 
of the individual states where membership associations are incorporated 
to determine who qualifies as their members. The NRWC Court assumed, 
``since there is no body of federal law of corporations, [] Congress 
intended at least some reference to the laws of the various states 
dealing with nonprofit corporations.'' Id. at 558 (citation omitted). 
However, that statement was in response to the argument that the 
Commission should have acted without reference to state law. The Court 
explained that, ``[g]iven the wide variety of treatment of the subject 
of membership in state incorporation laws,

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and the focus of the Commission's regulation on the corporation's own 
standards, we think it was entirely permissible for the Commission in 
this case to look to NRWC's corporate charter under the laws of 
Virginia and the bylaws adopted in accordance with that charter.'' Id. 
Far from requiring the Commission to take that action, the Court merely 
said this was a permissible option under the former ``member'' 
definition.
    The Commission is now proposing to revise this definition, to 
provide greater guidance to the regulated community in light of the 
NRWC decision. While under that decision the Commission may choose to 
examine state law in connection with a particular situation, it does 
not believe this is an appropriate standard to include in the 
regulatory language.

Overview

    The current rules set out three preliminary requirements that 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; it must expressly solicit members; and it 
must 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 three 
requirements were not challenged in the litigation and the Commission 
is not proposing any changes to this language.
    The current rules also recognize as members those who have a 
stronger financial interest in an association than paying dues (for 
example, the ownership of a stock exchange seat). 11 CFR 
100.8(b)(4)(iv)(B)(1), 114.1(e)(2)(i). The Commission is not proposing 
that these rules be changed. However, it is proposing three 
alternatives (Alternatives A, B, and C) to the other requirements 
contained in the current rules.

Preliminary Requirements

    The Chamber of Commerce and some of the commenters argued that the 
three general requirements should in and of themselves be sufficient to 
confer membership status. However, the Commission questions whether 
these attachments, standing alone, are sufficient to meet the 
``relatively enduring and independently significant financial or 
organizational attachment'' standard articulated by the NRWC Court. 
While that Court did not discuss what it considered to be a significant 
financial attachment, these three requirements contain no financial 
attachment. With reference to organizational attachments, the Court 
cited such attachments as the right to play some part in the operation 
or administration of the corporation; the right to elect corporate 
officers; and the right of members to exercise control over the 
expenditure of their contributions. 459 U.S. at 558. The three 
requirements fall far short of any such attachments. For this reason 
none of the alternatives would provide that these three requirements, 
standing alone, be sufficient to confer membership status.

Financial Attachments

    All three alternatives would also retain the current rule 
recognizing as members persons who have a stronger financial interest 
in an association than the payment of annual dues, such as those owning 
seats on stock exchanges or boards of trade. 11 CFR 
100.8(b)(4)(iv)(B)(1); 114.1(e)(2)(i). While in most instances such 
persons would qualify under the other proposed requirements, the 
Commission believes it is appropriate to retain this separate category.
    On May 16, 1997, the Commission determined in Advisory Opinion 
(``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, because only one seat was 
involved, only one membership in the Exchange existed with respect to 
each leased membership.
    The Commission sought comments in the ANPRM on whether to include 
the holding of AO 1997-5 in the regulatory text. While both the Chicago 
Board of Trade and the Chicago Mercantile Exchange urged the Commission 
to do this, the Commission has determined that this is unnecessary, 
since the proposed rules would so clearly cover both owned and leased 
memberships. Further, AO 1997-5 remains in effect, should the regulated 
community require additional guidance on this point. Therefore, the 
Commission has not included language to this effect in the text of the 
proposed rules.

Dues

    The ANPRM suggested that a certain level of annual dues might be 
considered in and of itself sufficient to establish membership. Those 
who paid this amount would be considered members regardless of whether 
they had any organizational attachments to the association. The ANPRM 
suggested that any amount of annual dues set by an association might be 
a sufficient financial attachment, regardless of amount; or, 
alternatively, that $200 per year might be an appropriate 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 contributions to a political committee.
    Some commenters supported the proposal that any amount of dues set 
by an association would be sufficient to confer membership; while 
others suggested that a nominal amount, such as $5 per year, should be 
sufficient. No commenter who addressed this part of the ANPRM agreed 
with the proposed $200 per year figure.
    The Chamber of Commerce stated that a $200 cut-off would exclude 
approximately 58% of its members, who pay annual dues ranging from $65 
through tens of thousands of dollars. ASAE pointed out that an 
association may charge an initial rate for the first person who joins 
from an organization, and a reduced rate for subsequent joiners. AAMP 
noted that membership associations sometimes offer a reduced rate for 
the first year of membership, in hopes of attracting members who will 
continue their membership notwithstanding the higher dues for 
subsequent years.
    The three alternatives take different approaches to this question. 
Alternative A would set this level at $50 per year; Alternative B would 
retain the $200 level proposed in the ANPRM for those entities not 
formed to further business or economic interests; while under 
Alternative C any amount of annual dues set by the association would be 
sufficient.
    Alternative A, which proposes that $50 in annual dues be sufficient 
to confer membership status, if no organizational attachments exist 
other than the three preliminary requirements, reflects the Supreme 
Court's language in the NRWC decision making it clear that more than a 
token commitment is required to qualify as a significant financial 
attachment. The

[[Page 66835]]

Commission notes that it is also likely that many persons with lesser 
dues obligations would qualify as members through the organizational 
attachments discussed below.
    Alternative B would distinguish between the types of organizations 
addressed by the Chamber of Commerce decision and ideological, social 
welfare, and political organizations. The first category would include 
organizations formed to further business or economic interests or to 
implement a system of self-discipline or self-regulation within a line 
of commerce, such as business leagues, trade associations, labor 
organizations, and self-regulating professional associations. These 
types of organizations clearly provide, as enunciated by the Supreme 
Court in the NRWC case, ``some relatively enduring and independently 
significant financial or organizational attachment.'' 459 U.S. at 204. 
Persons paying regular dues of any amount could be treated as members 
of these organizations without doing violence to the intent of the 
statute. Such persons join to foster their business or economic 
interests and, thus, create an attachment that is independent of any 
political attachment. This is in contrast to persons who join 
ideological, social welfare, or political organizations. In the latter 
case, there is a far greater risk that ``dues'' are nothing more than 
political support indistinguishable from such support from the general 
public. In other words, there is a far greater risk that the Commission 
would ``open the door to all but unlimited corporate solicitation and 
thereby render meaningless the statutory limitation to members.'' NRWC, 
459 U.S. at 204.
    For organizations that do not fall in the categories of ``business 
leagues, trade associations, labor organizations, or self-regulating 
professional associations,'' this alternative would provide that a dues 
payment obligation by itself would suffice as an indication of 
``relatively enduring and independently significant financial or 
organizational attachment'' if it exceeds $200 per year. This is the 
amount Congress chose as the associational level of significance for 
donor disclosure. Also, although this ``$200 dues alone'' provision for 
organizations other than business leagues, trade associations, labor 
organizations, and self-regulating professional associations would be 
more restrictive than Alternative A, it still would be more forgiving 
than the current rule whereunder there is no allowance for ``member'' 
status based solely on a dues obligation.
    Alternative C would provide that an organization that qualified as 
a membership association could consider as ``members'' all persons who 
paid the amount of annual dues set by the association, regardless of 
amount. This alternative would not distinguish between economic and 
ideological associations, reasoning that, for example, an emotional 
commitment to an organization such as Mothers Against Drunk Driving 
(``MADD'') is as significant to their members as the economic 
attachments discussed with regard to Alternative B, supra. Also, a 
number of organizations that clearly qualify as membership 
associations, including the American Association of Retired Persons 
(``AARP''), have annual dues of less than $50 and provide none of the 
organizational attachments discussed below.

Organizational Attachments

    The ANPRM proposed that, for a lesser dues obligation than that 
which would automatically confer membership, the rules might specify 
other factors the Commission would consider per se sufficient to 
provide the required organizational attachment, provided that some 
level of dues was also required. Suggested factors included 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 could be subject to disciplinary action by the 
association. The right to vote directly for all members of the highest 
governing body, contained in current 11 CFR 100.8(b)(4)(A)(3) and 
114(e)(1)(iii), was not included in this listing because the other 
proposed attachments would cover this situation. No commenter suggested 
additional attachments for inclusion in this list.
    Alternative A proposes that, consistent with the NRWC decision, 
certain organizational attachments be considered per se sufficient for 
membership, even where the association charges no dues. Of the above 
listing, this alternative would provide that the right to vote on 
policy matters, taken alone, does not provide the significant 
attachment envisioned by the NRWC Court. However, each of the other 
organizational attachments would be sufficient to confer membership 
status even where no dues are required. As noted, under this 
alternative, payment of less than $50 per year in predetermined annual 
dues, coupled with a lesser organizational attachment, such as the 
right to vote on policy issues of interest to the membership 
association, also would be sufficient to confer membership status.
    Under Alternative B, persons affiliated with ideological, social 
welfare, or political organizations who paid less than $200 per year in 
annual dues would be considered members for purposes of these rules if 
they had some right to participate in the governance of the 
organization. Such rights would include a right to vote for at least 
one individual on the highest governing body or for the officers of the 
organization; a right to vote on policy questions where the highest 
governing body is obligated to abide by the results (a binding 
referendum, for example, rather than a mere informational survey) or to 
approve or disapprove the results (a resolution that must be acted 
upon, for example); a right to join (not just the opportunity to be 
selected for) a committee, board, or section within the organization 
that can make policy recommendations which the highest governing body 
must approve or disapprove (a resolution that must be acted upon, for 
example); or (if the opportunity to be selected for such a committee, 
board, or section is involved) the right to participate on such 
committee, board or section because of being selected. To round out the 
rules, this alternative would provide that even without any dues 
obligation, persons could be considered ``members'' if they have the 
right to vote for at least a majority of the individuals on the highest 
governing body.
    These ``dues plus governance rights'' provisions, although not as 
loose as Alternative A, would be more forgiving than the current rule 
because several options other than voting for at least one member of 
the highest governing body would suffice. The ``vote for a majority 
alone'' rule would be more forgiving than the current rule because 
voting for all persons on the highest governing body would not be 
required.
    The standards proposed in Alternative B would permit virtually all 
the organizations represented by the commenters to treat those they 
consider members as ``members'' under federal election law. At the same 
time, they would screen out ideological/social welfare/political 
organizations that are not willing to provide for a dues requirement 
and minimal governance rights. These organizations must be held to a 
standard that clearly demonstrates that members have a ``relatively 
enduring and independently significant financial or organizational 
attachment.''
    Alternative C does not address the situation where persons pay no 
dues but have significant organizational attachments to an association.

[[Page 66836]]

Case by Case Determinations

    The current rules at 11 CFR 100.8(b)(4)(iv)(C) and 114.1(e)(3) 
provide that persons who do not meet the precise membership 
requirements set out elsewhere in the rules may nevertheless be 
considered members on a case by case basis. The examples given include 
student members who pay a lower amount of dues while in school or long 
term dues paying members who qualify for lifetime membership status 
with little or no dues obligation. However, the current rules require 
that such persons may qualify as members only if they retain voting 
rights in the association. Consistent with the Chamber decision, the 
Commission is proposing that this voting requirement be dropped. The 
language would also be modified to refer to an organizational or 
financial attachment, rather than an organizational and financial 
attachment. This approach is included only in Alternatives A and B, as 
it would not be needed if Alternative C were adopted.

Multi-tiered Associations

    The current 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 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 do not presently qualify for cross-tier 
solicitation would likely be able to do so. In addition, all three 
alternatives would provide that direct membership in any level of a 
multi-tiered association be construed as membership in all tiers of the 
association for purposes of these rules. ASAE, in recommending this 
approach, noted that a person who joins one tier of a multi-tiered 
association clearly demonstrates an intention to associate with the 
entire organization. This approach would also make enforcement easier 
and prevent what could otherwise be a large number of requests for 
advisory opinions from multi-tiered associations.
    The Commission is therefore proposing that new general language for 
this purpose replace that currently found at 11 CFR 100.8(b)(4)(iv)(D) 
and 114.1(e)(4). Current 11 CFR 114.7(k) and 114.8(g) would be 
repealed. However, Alternative B would in addition retain the 
Commission's long-standing regulations regarding federations of labor 
organizations. See 11 CFR 100.8(b)(4)(iv)(D) and 114.1(e)(4). Those 
rules relate to a situation where the federation is not affiliated with 
the member organizations (i.e., according to explicit legislative 
history, the PACs of the federation do not have to share contribution 
limits with the PACs of the member unions, just as the PACs of a 
business league or trade association do not have to share limits with 
the PACs of member corporations, yet the federation is allowed to 
solicit the members of the member organizations). See, e.g., H.R. Rep. 
917, 94th Cong., 2d Sess. 8 (1976); FEC v. Sailors' Union of the 
Pacific Political Fund, 624 F.Supp. 492, 495 (N.D. Cal. 1986), aff'd 
828 F.2d 502 (9th Cir. 1987). This rule for labor federations is needed 
to preserve a balance with trade associations which are given explicit 
allowances to solicit persons associated with member corporations.
    AO 1991-24 addressed the efforts of the Credit Union National 
Association, Inc. (``CUNA'') and the Wisconsin Credit Union League to 
make partisan communications across multiple tiers of the organization. 
While the Commission approved the proposed procedures, these draft 
rules would increase the options available to these and comparably-
situated multi-tiered organizations. In AO 1993-24, the Commission 
determined that certain persons were not members of the National Rifle 
Association for purposes of the current rules because they did not have 
the required voting rights. The draft rules, if approved, would 
supersede that portion of the AO that requires voting rights to 
establish membership.
    The Commission also welcomes comments on any related topic.

Certification of No Effect Pursuant to 5 U.S.C. 605(b) (Regulatory 
Flexibility Act)

    These proposed rules would not, if promulgated, have a significant 
economic impact on a substantial number of small entities. The basis 
for this certification is that the rules would broaden the current 
definition of who qualifies as a member of a membership association, 
thus expanding the opportunity for such associations to send electoral 
advocacy communications and solicit contributions to their separate 
segregated funds, but do not require any expenditure of funds. 
Therefore, no significant impact would result for purposes of this 
requirement.

List of Subjects

11 CFR Part 100

    Elections.

11 CFR Part 114

    Business and industry, Elections, Labor.

    For the reasons set out in the preamble, it is proposed to amend 
Subchapter A, Chapter I of Title 11 of the Code of Federal Regulations 
as follows:

PART 100--SCOPE AND DEFINITIONS (2 U.S.C. 431)

    1. The authority citation for Part 100 would continue to read as 
follows:

    Authority: 2 U.S.C. 431, 438(a)(8).

    2. Section 100.8 would be amended by revising paragraph (b)(4)(iv) 
to read as follows:


Sec. 100.8  Expenditure (2 U.S.C. 431(9))

* * * * *
    (b) *  *  *
    (4) *  *  *
    (iv) (A) For purposes of paragraph (b)(4) of this section 
membership association means a membership organization, trade 
association, cooperative, corporation without capital stock, or a 
local, national, or international labor organization that:
    (1) Expressly provides for ``members'' in its articles and by-laws;
    (2) Expressly solicits members; and
    (3) Expressly acknowledges the acceptance of membership, such as by

[[Page 66837]]

sending a membership card or inclusion on a membership newsletter list.
    (B) For purposes of paragraph (b)(4) of this section, the term 
members includes all persons who are currently satisfying the 
requirements for membership in a membership association, affirmatively 
accept the membership association's invitation to become a member, and 
either:
    (1) Have some significant financial attachment to the membership 
association, such as a significant investment or ownership stake (but 
not merely the payment of dues);
    Alternative A  for paragraphs (b)(4)(iv)(B)(2)-(4).
    (2) Are required to pay on a regular basis a specific amount of 
dues of at least $50 per year that are predetermined by the 
association;
    (3) Have a significant organizational attachment to the membership 
association. Such attachments include the right to vote directly either 
for at least one member who has full participatory and voting rights on 
the highest governing body of the membership association, or for those 
who select at least one member of those on the highest governing body 
of the membership association; the right to serve on policy-making 
boards of the membership association; eligibility to be elected to 
governing positions in the membership association; and the possibility 
of disciplinary action against the member by the membership 
association; or
    (4) Are required to pay on a regular basis a specific amount of 
dues of less than $50 per year that are predetermined by the 
association and who have a lesser organizational attachment to the 
membership association than those set forth in paragraph (b)(iv)(B)(3) 
of this section, such as the right to vote on policy issues of interest 
to the association.
    Alternative B for paragraphs (b)(4)(iv)(B)(2)-(4).
    (2) Are required to pay on a regular basis a specific amount of 
dues of at least $200 per year that are predetermined by the membership 
association;
    (3) Are required to pay on a regular basis a specific amount of 
dues less than $200 per year that are predetermined by the membership 
association and either the association is a business league, trade 
association, labor organization, or self-regulating professional 
association or such persons also have:
    (a) A right to vote for at least one individual on the highest 
governing body of, or for the officers of, the membership association;
    (b) A right to vote on policy questions where the highest governing 
body of the membership association is obligated to abide by the results 
(a binding referendum, for example, rather than a mere informational 
survey) or to approve or disapprove the results (a resolution that must 
be acted upon, for example);
    (c) A right to join (not just the opportunity to be selected for) a 
committee, board, or section within the membership association that can 
make policy recommendations which the highest governing body must 
approve or disapprove (a resolution that must be acted upon, for 
example); or
    (d) A right to participate by virtue of being selected to serve on 
a committee, board, or section within the membership association that 
can make policy recommendations which the highest governing body must 
approve or disapprove (a resolution that must be acted upon, for 
example); or
    (4) Have the right to vote for at least a majority of the 
individuals on the highest governing body.
    Alternative C for paragraph (b)(4)(iv)(B)(2).
    (2) Are required to pay on a regular basis a specific amount of 
annual dues that are predetermined by the association.
    Alternatives A and B for paragraph (b)(4)(iv)(C).
    (C) Notwithstanding the requirements of paragraph (b)(4)(iv)(B) of 
this section, the Commission may determine, on a case by case basis, 
that persons seeking to be considered members of a membership 
association for purposes of this section have a significant 
organizational or financial attachment to the association under 
circumstances that do not precisely meet the requirements of the 
general rule. For example, student members who pay a lower amount of 
dues while in school or long term dues paying members who qualify for 
lifetime membership status with little or no dues obligation may be 
considered members.
    Alternatives A, B and C for paragraph (b)(4)(iv)(D).
    (D) In the case of a membership association which has a national 
federation structure or has several levels, including, for example, 
national, state, regional and/or local affiliates, a person who 
qualifies as a member of any entity within the federation or of any 
affiliate by meeting the requirements of paragraphs (b)(4)(iv)(B)(1), 
(2), (3) or (4) of this section shall also qualify as a member of all 
affiliates for purposes of paragraph (b)(4)(iv) of this section. The 
factors set forth at 11 CFR 100.5(g)(4) shall be used to determine 
whether entities are affiliated for purposes of this paragraph.
* * * * *
    Alternative B for paragraph (b)(4)(iv)(E).
    (E) Notwithstanding the requirements of paragraphs (b)(4)(iv)(B)(1) 
through (4) of this section, members of a local union are considered to 
be members of any national or international union of which the local 
union is a part and of any federation with which the local, national, 
or international union is affiliated.
* * * * *

PART 114--CORPORATE AND LABOR UNION ACTIVITY

    3. The authority citation for Part 114 would continue to read as 
follows:

    Authority: 2 U.S.C. 431(8)(B), 431(9)(B), 432, 437d(a)(8), 
438(a)(8), and 441b.

    4. Section 114.1 would be amended by revising paragraph 114.7(e) to 
read as follows:


Sec. 114.1  Definitions.

* * * * *
    (e) (1) Membership association means a membership organization, 
trade association, cooperative, corporation without capital stock, or a 
local, national, or international labor organization that:
    (i) Expressly provides for ``members'' in its articles and by-laws;
    (ii) Expressly solicits members; and
    (iii) Expressly acknowledges the acceptance of membership, such as 
by sending a membership card or inclusion on a membership newsletter 
list.
    (2) The term members includes all persons who are currently 
satisfying the requirements for membership in a membership association, 
affirmatively accept the membership association's invitation to become 
a member, and either:
    (i) Have some significant financial attachment to the membership 
association, such as a significant investment or ownership stake (but 
not merely the payment of dues);
    Alternative A for paragraphs (e)(2)(ii)-(iv).
    (ii) Are required to pay on a regular basis a specific amount of 
dues of at least $50 per year that are predetermined by the 
association;
    (iii) Have a significant organizational attachment to the 
membership association. Such attachments include the right to vote 
directly either for at least one member who has full participatory and 
voting rights on the highest governing body of the membership 
association, or for those

[[Page 66838]]

who select at least one member of those on the highest governing body 
of the membership association; the right to serve on policy-making 
boards or vote on policy issues of interest to the membership 
association; eligibility to be elected to governing positions in the 
membership association; and the possibility of disciplinary action 
against the member by the membership association; or
    (iv) Are required to pay on a regular basis a specific amount of 
dues of less than $50 per year that are predetermined by the 
association and who have a lesser organizational attachment to the 
membership association than those set forth in paragraph (e)(2)(iii) of 
this section, such as the right to vote on policy issues of interest to 
the association.
    Alternative B for paragraphs (e)(2)(ii)-(iv).
    (ii) Are required to pay on a regular basis a specific amount of 
dues of at least $200 per year that are predetermined by the membership 
association;
    (iii) Are required to pay on a regular basis a specific amount of 
dues less than $200 per year that are predetermined by the membership 
association and either the association is a business league, trade 
association, labor organization, or self-regulating professional 
association or such persons also have:
    (A) A right to vote for at least one individual on the highest 
governing body of, or for the officers of, the membership association;
    (B) A right to vote on policy questions where the highest governing 
body of the membership association is obligated to abide by the results 
(a binding referendum, for example, rather than a mere informational 
survey) or to approve or disapprove the results (a resolution that must 
be acted upon, for example);
    (C) A right to join (not just the opportunity to be selected for) a 
committee, board, or section within the membership association that can 
make policy recommendations which the highest governing body must 
approve or disapprove (a resolution that must be acted upon, for 
example); or
    (D) A right to participate by virtue of being selected to serve on 
a committee, board, or section within the membership association that 
can make policy recommendations which the highest governing body must 
approve or disapprove (a resolution that must be acted upon, for 
example); or
    (iv) Have the right to vote for at least a majority of the members 
on the highest governing body.
    Alternatives A and B for paragraph (e)(3).
    (3) Notwithstanding the requirements of paragraph (e)(2) of this 
section, the Commission may determine, on a case by case basis, that 
persons seeking to be considered members of a membership association 
for purposes of this section have a significant organizational or 
financial attachment to the association under circumstances that do not 
precisely meet the requirements of the general rule. For example, 
student members who pay a lower amount of dues while in school or long 
term dues paying members who qualify for lifetime membership status 
with little or no dues obligation may be considered members.
    Alternatives A, B and C for paragraph (e)(4).
    (4) In the case of a membership association which has a national 
federation structure or has several affiliated levels, including, for 
example, national, state, regional and/or local affiliates, a person 
who qualifies as a member of any entity within the federation or of any 
affiliate by meeting the requirements of paragraphs (e)(2)(i), (ii), 
(iii) or (iv) of this section shall qualify as a member of all 
affiliates for purposes of paragraph (e)(1) of this section. The 
factors set forth at 11 CFR 100.5(g)(4) shall be used to determine 
whether entities are affiliated for purposes of this paragraph.
* * * * *
    Alternative B for paragraph (e)(5).
    (5) Notwithstanding the requirements of paragraphs (e)(2)(i) 
through (iv) of this section, members of a local union are considered 
to be members of any national or international union of which the local 
union is a part and of any federation with which the local, national or 
international union is affiliated.
* * * * *


Sec. 114.7  [Amended]

    5. In Section 114.7, paragraph (k) would be removed.


Sec. 114.8  [Amended]

    6. In section 114.8, paragraph (g) would be removed and reserved.

    Dated: December 17, 1997.
John Warren McGarry,
Chairman, Federal Election Commission.
[FR Doc. 97-33305 Filed 12-19-97; 8:45 am]
BILLING CODE 6715-01-U


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