Federal Register: December 13, 2002 (Volume 67, Number 240)
DOCID: FR Doc 02-31521
FEDERAL ELECTION COMMISSION
Treasury Department
CFR Citation: 11 CFR Parts 100, 110, 111, and 113
DOCUMENT ID: [Notice 2002-25]
NOTICE: Part VII
DOCUMENT ACTION: Final rules and transmittal of regulations to Congress.
SUBJECT CATEGORY:
Disclaimers, Fraudulent Solicitation, Civil Penalties, and Personal Use of Campaign Funds
DOCUMENT SUMMARY:
The Federal Election Commission is issuing final rules regarding disclaimers in political communications, fraudulent solicitations, civil penalties, personal use of campaign funds, and a technical amendment under the Federal Election Campaign Act of 1971, as amended (``FECA'' or ``the Act''). The final rules implement portions of the Bipartisan Campaign Reform Act of 2002 (``BCRA'') that govern new requirements for disclaimers accompanying radio, television, print, and other campaign communications, expand the FECA's fraudulent misrepresentation prohibition, increase the FECA's civil penalties for violating the prohibition on contributions made in the name of another, and codify the ``irrespective'' test regarding the personal use of campaign funds by candidates and Federal office holders.
The Commission had planned to address BCRArelated rules for inaugural committees in this rulemaking; however, inaugural committees will now instead be addressed in a future rulemaking. Further information is provided in the supplementary information that follows.
SUMMARY:
Federal Election Commission,
SUPPLEMENTAL INFORMATION
The Bipartisan Campaign Reform Act of 2002 (``BCRA''), Pub. L. 107155, 116 Stat. 81 (March 27, 2002), contains extensive and detailed amendments to the Federal Election Campaign Act of 1971 (``FECA'' or ``the Act''), as amended, 2 U.S.C. 431 et seq. This is one in a series of rulemakings the Commission is undertaking to implement the provisions of BCRA and to meet the rulemaking deadlines set out in BCRA.
Section 402(c)(1) of BCRA establishes a general deadline of 270 days for the Commission to promulgate regulations to carry out BCRA, which is December 22, 2002. The final rules do not apply with respect to runoff elections, recounts, or election contests resulting from the November 2002 general election. 2 U.S.C. 431 note.
Because of the brief period before the statutory deadline for promulgating these rules, the Commission received and considered public comments expeditiously. The Notice of Proposed Rulemaking (``NPRM''), on which these final rules are based, was published in the Federal Register on August 29, 2002. 67 FR 55348 (Aug. 29, 2002). Thirteen written comments were received. The names of the commenters and their comments are available at http:www.fec.gov/register.htm under ``Disclaimers, Fraudulent Solicitation, Civil Penalties, and Personal Use of Campaign Funds.'' A public hearing was not held.
Under the Administrative Procedures Act, 5 U.S.C. 553(d), and the
Congressional Review of Agency Rulemaking Act, 5 U.S.C. 801(a)(1),
agencies must submit final rules to the Speaker of the House of
Representatives and the President of the Senate, and publish them in
the Federal Register at least 30 calendar days before they take effect.
The final rules on disclaimers, fraudulent solicitation, civil
penalties, and personal use of campaign funds were transmitted to Congress on December 9, 2002.
Explanation and Justification
Introduction
These final rules address changes to: disclaimer requirements for campaign communications (2 U.S.C. 441d); fraudulent misrepresentations for purposes of soliciting contributions or donations (2 U.S.C. 441h); civil penalties for a particular knowing and willful violation of FECA (2 U.S.C. 437g); permissible uses of campaign funds by candidates and officeholders (2 U.S.C. 439a); and a technical amendment to the definition of ``Act'' to include BCRA amendments to FECA.
11 CFR 100.18 Act (2 U.S.C. 431(19))
PreBCRA, 11 CFR 100.18 defined ``Act'' to mean the Federal Election Campaign Act as amended by the 1974, 1976, and 1980 amendments. The final rules amend this definition to include the amendments to FECA within the Bipartisan Campaign Reform Act. 11 CFR 110.11 Communications; advertising; disclaimers (2 U.S.C. 441d)
Under 2 U.S.C. 441d, certain communications must include disclaimers identifying who paid for and, where applicable, who authorized the communication. In BCRA, Congress added new specificity to these requirements, expanded the disclaimer requirement to reach disbursements to finance ``any communication'' made by political committees through any type of general public political advertising, and required that ``electioneering communications'' include disclaimers. See 2 U.S.C. 441d. Congress also enacted ``stand by your ad'' requirements for certain radio and television communications. 2 U.S.C. 441d(d).
The Commission is implementing these statutory changes by deleting preBCRA 11 CFR 110.11 in its entirety, and adopting a new section 110.11 that is organized into a more easily understandable rule. As explained in detail below, revised section 110.11 incorporates many substantive provisions from the preBCRA version of the section. 11 CFR 110.11(a) Scope
Paragraph (a) sets out the scope of the section by specifying which
communications must carry disclaimers. Under 2 U.S.C. 441d(a), as
amended by Congress through BCRA section 311, disclaimers are required
whenever a person makes a disbursement for an electioneering
communication, whenever a political committee makes a disbursement for
the purpose of financing ``any communication through any broadcasting
station, newspaper, magazine, outdoor advertising facility, mailing, or
any other type of general public political advertising,'' or whenever
any person makes a disbursement for the purpose of financing
``communications expressly advocating the election or defeat of a
clearly identified candidate, or solicits any contribution through any
broadcasting station, newspaper, magazine, outdoor advertising
facility, mailing, or any other type of general public political
advertising.'' The descriptive list of ``through any broadcasting
station, newspaper, magazine, outdoor advertising facility, mailing, or
any other type of general public political advertising'' is similar to
the language used by Congress in BCRA to describe a ``public
communication,'' as defined in 2 U.S.C. 431(22). See also 11 CFR 100.26
(67 FR 49111 (July 29, 2002)). The two descriptive lists differ in
three respects. First, a ``public communication'' covers ``any
broadcast, cable, or satellite transmission,'' whereas section 441d(a)
refers only to communications through ``any broadcasting station.'' Second, a
[[Page 76963]]
``public communication'' includes a ``telephone bank to the general
public,'' as defined in 2 U.S.C. 431(24), whereas telephone banks are
not specifically mentioned in section 441d(a). Third, a ``public
communication'' includes a ``mass mailing,'' which is defined as more
than 500 pieces of substantially similar mail. 2 U.S.C. 431(22), (23).
Section 441d(a) refers to a ``mailing,'' without any numerical minimum.
Congress, through BCRA, removed the preBCRA reference to a ``direct mailing'' (emphasis added).
The Commission noted in the NPRM that the 2 U.S.C. 441d(a)
references to ``communication'' share a fundamental similarity with the
definition of ``public communication'' (2 U.S.C. 431(22)) in that both
contain the virtually identical and broadly inclusive phrase, ``or any
other type [form] of general public political advertising,'' to
describe what is encompassed by the respective definitions.\1\ Because
of the inclusion of this virtually identical phrase, the Commission interprets each term listed in the definition of ``public
communication'' or in 2 U.S.C. 441d(a) as a specific example of one
form of ``general public political advertising.'' In other words, the
universe of ``general public political advertising,'' as it has been
functionally defined by Congress through both the definition of
``public communication'' and in section 441d(a), encompasses all the
terms explicitly included by Congress, in addition to other potential
forms of general public political advertising not specifically listed.
\1\ Section 431(22) uses the word ``form,'' while section
441d(a) uses the word ``type;'' the Commission discerns no
substantive differences arising from the choice of synonyms.
The Commission sought comment on whether the description of
``communication'' in 2 U.S.C. 441d(a) should be equated with the term
``public communication,'' as defined in 2 U.S.C. 431(22). The
Commission noted that one effect of using the consistent terminology of ``public communication'' to describe the 2 U.S.C. 441d(a)
communications would be that ``telephone banks to the general public''
would be subject to the disclaimer requirements. Another effect of
using the consistent terminology of ``public communication'' would be
to harmonize the meaning of ``mailing'' with ``mass mailing,'' and the
coverage of ``any broadcasting station'' with ``any broadcast, cable, or satellite transmission.''
The Commission received two comments on this issue. Both commenters argued that the terms ``public communication'' and ``communication,'' as used in the section 441d(a) context, should be treated as distinct terms with separate definitions. One commenter, advised against any interpretation that would have the effect of making the disclaimer requirements applicable to telephone banks. That commenter asserted that the existence of several state laws limiting or prohibiting taped phone messages are already sufficient to deter abuse in this area, and disclaimer requirements would only serve to chill speech.
The Commission does not agree with this commenter that state laws regarding taped calls are sufficient to supplant the statutory disclaimer requirement, even in those few states that do have laws limiting taped calls. Requiring a caller to identify himself or herself serves important disclosure functions consistent with Congressional intent to broaden the reach of the previous laws regarding disclaimers and would likely complement state laws limiting the use of taped calls.
The other commenter stated that treating the term ``communication'' in 2 U.S.C. 441d(a) the same as ``public communication'' would ``conflate and confuse two separate concepts that Congress established to meet two distinct purposes.'' That commenter also asserted that the inclusion of other forms of ``general public political advertising'' does not indicate that the two terms share the same meaning. The commenter supported this assertion by citing to the Commission's previous explanation that ``general language following a listing of specific terms * * * does not evidence Congressional intent to include a separate and distinct term that is not listed * * *'' See Final Rules and Explanation and Justification, ``Prohibited and Excessive Contributions: NonFederal Funds or Soft Money,'' 67 FR 49072 (July 29, 2002).
The Commission notes that its prior statement cited by the
commenter was made in the context of a decision not to include Internet
communications within the definition of ``public communication.''
Unlike the term ``telephone bank to the general public'' and the other
terms listed in the BCRA definition of ``public communication,''
communications over the Internet were not specifically listed as one of
the forms of ``general public political advertising.'' But while
general language following a list of specific terms may not, by itself,
provide sufficient evidence of Congressional intent, the Commission
believes that such intent can be found where Congress has provided
additional guidance as to the proper interpretation of that general
language elsewhere in the same statute. In the Commission's judgment,
the use of the phrase ``or any other type [form] of general public
political advertising,'' which is used in BCRA only in the two
locations specified above,\2\ should be interpreted in a virtually
identical manner. Therefore, each form of communication specifically
listed in the definition of ``public communication,'' as well as each
form of communication listed with reference to a ``communication'' in 2
U.S.C. 441d(a), must be a form of ``general public political
advertising.'' To include the term ``telephone bank to the general
public'' within the meaning of ``general public political advertising''
in one part of the statute but not the other would be to provide two different meanings to the term ``general public political
advertising.'' Rather than conflating and confusing two separate
concepts, the Commission, when appropriate, is establishing a
consistent meaning from the repeated use of a single statutory phrase
in order to promote simplicity and symmetry between the various statutory provisions and within the regulations.
\2\ See the definition of ``public communication'' in BCRA
section 101 (2 U.S.C. 431(22)) and with reference to the scope of
the disclaimer provisions in BCRA section 311 (2 U.S.C. 441d(a).)
This approach also incorporates Congressional intent, apparent in 2
U.S.C. 441d(d), to regulate communications by radio and television, and
the Commission's judgment that it would be unsupportable to require a
disclaimer for a television communication that was broadcast, while not
requiring a disclaimer for the same communication merely because it was
carried on cable or satellite. It is also consistent with other uses
(or proposed uses) of the term ``public communication'' in its
regulations. The Commission has used the term ``public communication''
to clarify the definition of ``generic campaign activity,'' \3\ see 11
CFR 100.25, and has proposed the use of ``public communication'' in a
separate and ongoing rulemaking to describe communications that may be
coordinated with a candidate, authorized committee, or political party
committee. See proposed 11 CFR 109.21(c) and 109.37(a)(2), Notice of
Proposed Rulemaking on Coordinated and Independent Expenditures, 67 FR [[Page 76964]]
60042, 60065 and 60068 (Sept. 24, 2002).
\3\ Congress defined ``generic campaign acitivity'' in BCRA as a
``campaign activity'' that promotes a political party and does not
promote a candidate or nonFederal candidate. Pub. L. 107155, sec. 101 (March 27, 2002) emphasis added).
In addition, by employing the term ``public communication'' in the section 110.11 disclaimer rules, the Commission avoids assigning different meanings to the term ``mailing'' in 2 U.S.C. 441d(a) and ``mass mailing,'' the term used in the definition of ``public communication'' and defined by Congress in BCRA as more than 500 pieces of substantially similar mail. See 2 U.S.C. 431(23). In BCRA, Congress amended 2 U.S.C. 441d(a)(1) by removing the adjective ``direct'' from the preBCRA term ``direct mailing,'' thereby removing a term that had been defined differently than the BCRA definition of ``mass mailing.'' In the NPRM in this rulemaking, however, the Commission proposed a definition of the term ``mailing'' for purposes of the disclaimer requirements that would have treated ``mailing'' differently than the term ``mass mailing.'' The Commission has reconsidered this separate definition of ``mailing'' in light of its efforts to promote simplicity and symmetry within its regulations. Both ``mass mailing'' and ``mailing'' are examples of ``general public political advertising,'' as set forth in the definition of ``public communication'' at 2 U.S.C. 431(22) and at 2 U.S.C. 441d(a). Congress did not provide a separate definition of ``mailing.'' Therefore, in the Commission's judgment, the statutory term ``mailing'' used in 2 U.S.C. 441d(a) should not be given a separate meaning from ``mass mailing'' in the Commission's regulations. As a result, disclaimers would not be required for mailings unless the mailings are comprised of more than 500 pieces of substantially similar mail. See 2 U.S.C. 431(23).
While the term ``public communication'' serves generally to describe the proper reach of the disclaimer rules, the Commission has decided that certain Internetbased communications also should be covered. The Commission has for years interpreted the statute to require disclaimers on electronic mail and Internet website communications. See, e.g., Advisory Opinions 19959 and 199937. In view of the widespread use of this technology in modern campaigning, and the relatively nonintrusive nature of disclaimer requirements, the Commission has concluded that the interests served by prompt public disclosure warrant application of the disclaimer provisions.
Nonetheless, to avoid overreaching in this area, and to maintain
some symmetry with the definition of ``public communication,'' the
Commission is limiting the coverage of electronic mail to situations involving more than 500 substantially similar unsolicited
communications. This approach would not require a disclaimer on
electronic mail where the recipients have taken some affirmative step
to be on a list used by the sender, such as responding positively to a
request to be on such list. Moreover, regarding websites, the
Commission is extending the disclaimer requirements only to political
committee websites. This will assure, for example, that a website
created and paid for by an individual will not have to include a
disclaimer. At the same time, arguably, the most significant use of
electronic mail and websites to conduct campaign activity will have to provide the public notice of who is responsible.
In order to incorporate the foregoing Internetbased applications in the final disclaimer rules, 11 CFR 110.11(a) provides that for purposes of the section, the term ``public communication'' also covers more than 500 unsolicited electronic mail communications and websites of political committees. This is the Commission's only divergence from the 11 CFR 100.26 definition of ``public communication.''
The Commission notes that it has initiated a separate rulemaking regarding several Internetrelated issues. The disclaimer provisions may be revisited in that rulemaking.
Paragraphs (a)(1) through (4) of the final rules in 11 CFR 110.11 enumerate the particular types of such communications to which the disclaimer requirements apply. For the reasons described above and unless otherwise specified, the term ``communications'' is used in the preceding sentence and the remainder of the narrative below as a shorthand reference that encompasses both ``public communications'' and ``electioneering communications.'' Throughout revised section 110.11, the word ``type'' is used, rather than ``form,'' as in the preBCRA version of the regulation. This change has no substantive effect and only serves to conform the regulation to the language of the statute. See 2 U.S.C. 441d; see also 11 CFR 100.27.
In BCRA, Congress provided that ``any communication'' for which a political committee makes a disbursement must include a disclaimer, expanding the scope of the disclaimer requirement for political committees beyond communications constituting express advocacy and communications soliciting contributions. Compare pre and postBCRA versions of 2 U.S.C. 441d(a). Revised paragraph (a)(1) of section 110.11 reads, ``[a]ll public communications for which a political committee makes a disbursement.''
In contrast, revised paragraph (a)(2) of section 110.11 requires that ``[a]ll public communications by any person that expressly advocate the election or defeat of a clearly identified candidate'' must include a disclaimer. 2 U.S.C. 441d(a). The revised rule does not substantively change the disclaimer requirement for express advocacy communications from the preBCRA version of the regulation because BCRA does not alter the reach of the disclaimer requirements for persons that are not political committees, except with regard to electioneering communications (see below).
Similarly, paragraph (a)(3) of section 110.11 requires ``[a]ll public communications by any person'' that solicit a contribution must include a disclaimer. 2 U.S.C. 441d(a). Here, too, the revised rule does not change the disclaimer requirement for solicitations from the preBCRA version of the rule because BCRA makes no changes in this regard.
Congress amended 2 U.S.C. 441d(a) to require that ``electioneering communications'' include disclaimers. In paragraph (a)(4) of section 110.11, the Commission requires that ``[a]ll electioneering communications by any person'' include a disclaimer. The term ``electioneering communication'' is defined in 11 CFR 100.29(a). See Electioneering Communications Final Rules and Explanation and Justification 67 FR 65190 (Oct. 23, 2002).
The Internal Revenue Service (``IRS'') commented generally on the
scope of the Commission's proposed rules and found no direct conflict
with the Internal Revenue Code or the regulations thereunder. The IRS
noted that the Commission proposed at 11 CFR 110.11(a)(1)(iii) to
require a disclaimer statement for all types of ``general public
political advertising'' by any person soliciting contributions. The IRS
also requested that for the benefit of taxexempt organizations the
Commission should restate certain requirements of section 6113 of the
Internal Revenue Code (26 U.S.C. 6113). The IRS stated that section
6113 provides that certain taxexempt organizations that are not
eligible to receive tax deductible charitable contributions, and whose
gross annual receipts normally exceed $100,000, must disclose in an
``express statement (in a conspicuous and easily recognizable format)''
that contributions to the organization are not deductible for Federal
income tax purposes as charitable contributions. This provision [[Page 76965]]
applies to organizations that are not eligible to receive deductible
charitable contributions and are described in section 501(c), section
501(d), or section 527. The Internal Revenue Service issued Notice 88
120 to provide safe harbors for meeting the requirements of section 6113.
11 CFR 110.11(b) General Content Requirements
Paragraph (b) of section 110.11 sets out the general content requirements for disclaimers, depending on who paid for the communication and, where applicable, who authorized the communication. PreBCRA paragraphs (a)(1)(i) and (ii) of section 110.11, which applied to communications authorized and paid for by a candidate and communications authorized by a candidate but paid for by another person, respectively, are redesignated as paragraphs (b)(1) and (2) in the revised regulation, respectively, without substantive revision.
Paragraph (b)(3) of section 110.11 applies to a communication, including any solicitation, that is not paid for or authorized by a candidate. The provisions of preBCRA 11 CFR 110.11(a)(1)(iii) are replaced with paragraph (b)(3), with one substantive change. In BCRA, Congress provided that a covered communication not authorized by a candidate, his or her authorized committees or agents must have a disclaimer that includes the ``permanent street address, telephone number, or World Wide Web address'' of the person who paid for the communication. 2 U.S.C. 441d(a)(3). Similar language is being added in paragraph (b)(3).
The Commission is not including preBCRA 11 CFR 110.11(a)(1)(iv) in
revised section 110.11. This paragraph applied to ``solicitations
directed to the general public on behalf of a political committee which
is not an authorized committee of a candidate'' and required that these
solicitations only state the name of the person who paid for the
communication. In the NPRM the Commission proposed deleting paragraph
(a)(1)(iv). Given that Congress amended 2 U.S.C. 441d(a) to extend the
disclaimer requirements to apply ``whenever a political committee makes
a disbursement for the purpose of financing any communication'' through
any type of general public political advertisement, and given that
Congress did not create a specific exception for authorization language
in solicitations by unauthorized committees, the Commission is not retaining preBCRA 11 CFR 110.11(a)(1)(iv).
11 CFR 110.11(c) Disclaimer Specifications
A. Specifications for All Disclaimers
In BCRA, Congress created a number of specific requirements for disclaimers to be included in communications covered by the statute. These statutory requirements vary, depending on whether the communication is printed or broadcast through radio or television, and on whether a candidate or another person pays for the communication. 2 U.S.C. 441d(c), (d). Paragraph (c) combines the disclaimer requirements in preBCRA 11 CFR 110.11(a)(5) with the new requirements Congress added in BCRA.
Paragraph (c)(1) sets forth a general, ``clear and conspicuous'' requirement applicable to all disclaimers, regardless of the medium in which the communication is transmitted. Paragraph (c)(1) is a slightly revised version of the ``clear and conspicuous'' requirement in pre BCRA 11 CFR 110.11(a)(5). The final sentence of paragraph (c)(1) provides that a disclaimer is not clear and conspicuous if it is difficult to read or hear, or if its placement is easily overlooked. This modifies the corresponding preBCRA provision, which was focused on print communications only, by generalizing it to apply to communications made through other media as well. This generalization is justified by BCRA's revision to section 441d, which broadened the scope of the statute. No commenters addressed this paragraph.
B. Specific Requirements for Printed Communications
Several of the specific disclaimer requirements added by BCRA apply only to printed communications. 2 U.S.C. 441d(c)(1). Paragraph (c)(2) of section 110.11 implements the new statutory specifications, and also incorporates three of the printspecific provisions of preBCRA 11 CFR 110.11.
One commenter suggested that the preBCRA disclaimer regulations work well and should not be changed except where required under BCRA. For the most part, the Commission agrees, but with the recognition that Congress has in fact required a number of changes in the disclaimer provisions through BCRA. For example, the preBCRA requirement that a disclaimer be ``clear and conspicuous'' was limited to printed communications. In BCRA, Congress added a new requirement that the disclaimer in a printed communication be of ``sufficient typesize to be clearly readable by the recipient of the communication.'' 2 U.S.C. 441d(c)(1). Given the specificity of the statutory requirements added by BCRA, new paragraph (c)(2)(i) restates the ``sufficient type size'' requirement verbatim, while new paragraphs (c)(2)(ii) and (c)(2)(iii) also precisely track 2 U.S.C. 441d(c)(2) and (3), respectively.
The Commission sought comment on whether the term ``sufficient type size'' requires additional clarification or a ``safe harbor'' provision. Three commenters responded and each stated that the Commission should provide some additional guidance or ``safe harbor'' in the form of an ``objective'' standard for type size. One commenter advocated a typesize requirement related to the smallest font size of a communication, but a different commenter warned that such a requirement could be easily circumvented by reducing the typesize of one sentence, or even one word, in the communication. Two commenters also expressed concerns that a typesize requirement based on the size of the largest font size in the communication would be ``unworkable'' or ``overly complex.'' One commenter supported an approach that would set a fixed minimum type size.
The Commission shares the concerns expressed by the commenters
regarding formulas fixed to the smallest or largest type size in a
communication's core message text. However, the Commission is also
reluctant to set one fixed minimum type size for all communications
because a type size that can be easily read in a newspaper might be
completely unreadable when included on a billboard or other large,
printed communication. Therefore, in 11 CFR 110.11(c)(2)(i), the
Commission is creating a ``safe harbor'' provision that establishes a
fixed, twelvepoint type size as a sufficient size for disclaimer text in newspapers, magazines, flyers, signs and other printed
communications that are no larger than the common poster size of 24
inches by 36 inches. However, no specific safe harbor provision would
apply to larger printed communications because the Commission concludes
that the vast differences in the potential size and manner of display
of larger printed communications would render fixed typesize examples
ineffective and inappropriate. Whether a disclaimer on a larger printed
communication is of sufficient type size to be clearly readable is
therefore to be determined on a casebycase basis, taking into account
the vantage point from which the communication is intended to be seen or read as well as the actual size of the disclaimer text.
[[Page 76966]]
Paragraph (c)(2)(ii) of section 110.11 specifies that the disclaimer included in printed communications must be contained within a printed box set apart from the other contents of the communication. 2 U.S.C. 441d(c)(2). Paragraph (c)(2)(iii) specifies that the text of the disclaimer must be printed with a reasonable degree of color contrast between the background and the printed statement. 2 U.S.C. 441d(c)(3). Both of these requirements apply regardless of the size of the printed material under paragraph (c)(2)(i).
In the NPRM, the Commission sought comment on whether the statutory phrase ``reasonable degree of color contrast'' should be further defined, and specifically whether the color contrast for the disclaimer notice should be related to the color contrast of the core message text. One commenter drew a distinction between the statutory requirement of color contrast between the ``background and printed statement,'' 2 U.S.C. 441d(c)(3), and the Commission's suggestion in the narrative of the NPRM that a color contrast is required between the disclaimer text and the core message text. The Commission notes that color contrast between the disclaimer text and the core message text is not required by the statute, and is not required by the final rules. This should alleviate the commenter's concern that such an additional requirement might require three different colors (a background color, a core message text color, and a disclaimer text color), thereby effectively prohibiting simple black and white communications and possibly raising the cost for the communication. Therefore, paragraph (c)(2)(iii) addresses only the contrast between the text and background of a communication, and provides two ``safe harbor'' examples that, when followed, comply with the colorcontrast requirement. First, paragraph (c)(2)(iii) specifies that the color contrast requirement is met if the disclaimer is printed in black text on a white background. Second, paragraph (c)(2)(iii) specifies that the color contrast requirement is met if the degree of contrast between the background color and the disclaimer text color is at least as great as the degree of contrast between the background color and the color of the largest text in the communication. Please note that these two examples do not constitute the only ways to satisfy the color contrast requirements, and that they are safe harbors, not mandatory requirements. This approach is intended to provide a clear, flexible safe harbor that will ensure that the disclaimer does not blend in with the background of the communication any more than a headline or other key part of the core message text, and thereby providing certainty to persons making communications needing disclaimers.
Paragraphs (c)(2)(iv) and (v) incorporate preBCRA regulatory
provisions specific to print communications. Paragraph (c)(2)(iv), to
which the provisions of preBCRA paragraph (a)(5)(i) are redesignated
without substantive revision, states that a disclaimer need not appear on the front or cover page of a communication, except for
communications that only contain a front face, such as billboards.
Paragraph (c)(2)(v), to which the provisions of preBCRA paragraph
(a)(5)(ii) are redesignated without substantive change, states that a
communication that would require a disclaimer if distributed
separately, and that is included in a package of materials, must contain the required disclaimer.
C. Specific Requirements for Radio and Television Communications That Are Authorized by Candidates
In BCRA, Congress added new requirements for disclaimers in radio and television communications paid for by candidates or persons authorized by candidates. 2 U.S.C. 441d(d)(1). Paragraph (c)(3) implements these specific statutory requirements as described below.
Paragraph (c)(3)(i) tracks the new statutory language requiring that a communication that is paid for or authorized by a candidate or the candidate's authorized committee and transmitted through radio must include an audio statement spoken by the candidate himself or herself. 2 U.S.C. 441d(d)(1)(A). The statement must identify the candidate, and state that the candidate has approved the communication. Id.
Likewise, paragraphs (c)(3)(ii) tracks the new statutory language requiring that a communication that is paid for or authorized by a candidate or the candidate's authorized committee and transmitted through television have an oral disclaimer spoken by the candidate himself or herself. 2 U.S.C. 441d(d)(1)(B). The provision requires the candidate to identify himself or herself, and to state that he or she has approved the communication. In addition, Congress specified that the candidate must convey that message in one of two ways: through a fullscreen view of the candidate making the statement or through a ``clearly identifiable photographic or similar image of the candidate'' that appears during the candidate's voiceover statement. Paragraph (c)(3)(ii)(A) sets forth the first option, while paragraph (c)(3)(ii)(B) sets forth the second option and provides additional guidance regarding the meaning of ``clearly identifiable.'' The only commenter who specifically addressed this issue suggested that the picture of the candidate should only be considered ``clearly identifiable'' if it is displayed in a fullscreen view. However, the Commission notes that although Congress specifically required a full screen view when the candidate is shown making the statement, Congress did not require a fullscreen view for the still picture. The Commission views this as an intentional distinction that contemplated an alternative to the fullscreen view. Therefore, the Commission is establishing a safe harbor provision whereby a still picture of the candidate shall be considered ``clearly identifiable'' if it occupies at least 80% of the vertical screen height. That size is, in the Commission's judgment, a meaningful alternative to the fullscreen requirement, and complies with Congress's mandate that the picture be ``clearly identifiable.''
Congress also established a third disclaimer requirement for communications paid for or authorized by a candidate and transmitted through television. In addition to the oral statement described above, each television communication must contain a ``clearly readable'' written statement that appears at the end of the communication ``for a period of at least four seconds'' with a ``reasonable degree of color contrast'' between the background and the disclaimer statement. See 2 U.S.C. 441d(d)(2)(B)(ii). These statutory requirements are implemented in new 11 CFR 110.11(c)(3)(iii).
The preBCRA regulations provided that a written disclaimer appearing on the screen of a television communication ``shall be considered clear and conspicuous if [it] appear[s] in letters equal to or greater than four (4) percent of the vertical picture height for not less than four (4) seconds.'' PreBCRA 11 CFR 110.11(a)(5)(iii). Two commenters urged the Commission to retain the fourpercent height provision as a ``safe harbor.'' However, the new Congressional color contrast requirement in 2 U.S.C. 441d(d)(2)(B)(ii) renders the preBCRA ``safe harbor'' incomplete because the fourpercentforfourseconds provision does not address color contrast.
The Commission is therefore setting forth the statutory ``clearly readable''
[[Page 76967]]
requirement in paragraph 11 CFR 110.11(c)(3)(iii) and is employing the
same four percent height provision and the foursecond duration
provision as two of the three specific criteria that will determine
whether a statement is ``clearly readable.'' Rather than providing a
``safe harbor,'' paragraphs 11 CFR 110.11(c)(3)(iii)(A), (B), and (C)
provide, respectively, that the statement will not be considered
``clearly readable'' unless it appears in letters equal to or greater
than four percent of the vertical picture height, it appears for at
least four seconds, and the statement contains a reasonable degree of color contrast with the background.
Paragraph (c)(3)(iii)(B) sets forth the foursecond duration requirement in accordance with the BCRA language. 2 U.S.C. 441d(d)(1)(B).
Paragraph 11 CFR 110.11(c)(3)(iii)(C) addresses the new color contrast requirement in BCRA, which is the third criterion used to determine whether a statement is clearly readable. Because the statute did not define ``reasonable degree of color contrast,'' the Commission requested comment on several different approaches. To continue the same ``safe harbor'' approach of preBCRA paragraph (a)(5)(iii), the regulations would have to describe ``reasonable degree of color contrast'' in an objective manner. The same commenter who addressed the color contrast issue in the context of printed communications also suggested that the Commission avoid overly complicated or cost incurring definitions of ``reasonable degree of color contrast'' in the context of television communications. For the same reasons stated above with reference to the color contrast requirements for printed communications, the Commission is providing ``safe harbors'' for disclaimers that are printed in black text on a white background, as well as disclaimers that have at least the same degree of contrast with the background color as the degree of contrast between the background color and the color of the largest text used in the communication. 11 CFR 110.11(c)(3)(iii)(C). Either of these disclaimer formats would satisfy the colorcontrast requirement, which is the third criterion used to determine whether the statement is ``clearly readable.''
The Commission received no comments on the two proposed examples of
spoken disclaimers that, if used by a candidate, will satisfy the
requirements of paragraphs (c)(3)(i), (ii) and (iii). These examples,
located in paragraph (c)(3)(iv), are not mandatory and are not the only
acceptable disclaimers. Paragraph (c)(3)(iv) is intended to provide a
clear ``safe harbor'' for candidates, authorized committees, and others required to include disclaimers in communications.
D. Specific Requirements for Radio and Television Communications Paid for by Other Persons and Not Authorized by Candidates
In BCRA, Congress set forth a scripted audio statement required for disclaimers in communications transmitted through radio or television and paid for by persons other than candidates or persons authorized by candidates. 2 U.S.C. 441d(d)(2). New paragraph (c)(4) tracks the statutory language by requiring the name of the political committee or other person responsible for the communication and any connected organization to be included in the communication. ``Connected organization'' is defined in 11 CFR 100.6. Paragraph (c)(4) also requires that communications transmitted through a telephone bank, as defined in 11 CFR 100.28, carry the same statement. See discussion regarding the inclusion of telephone banks within the term ``public communication,'' above, and the discussion of specific requirements for radio, telephone bank, and television communications authorized by candidates, above. The scripted statement is: ``XXX is responsible for the content of this advertising.'' 2 U.S.C. 441d(d)(2).
Furthermore, in the case of a television transmission, Congress required that the statement be conveyed by a ``fullscreen view of a representative of the political committee or other person making the statement,'' or in a ``voiceover'' by such representative. 2 U.S.C. 441d(d)(2). The Commission sought comment on whether the regulation should specify who may represent the payor for this purpose. One commenter urged the Commission to require an officer of the organization to make the statement, rather than a volunteer or paid celebrity. In contrast, another commenter argued that any restriction on who could make the statement ``would far exceed the scope of BCRA,'' which allows a ``representative of the committee or other person'' to make the statement. See 2 U.S.C. 441d(d)(2) (emphasis added). The Commission agrees with the latter commenter that the statute does not appear to contemplate any additional restrictions on the choice of the person making the disclaimer statement. Furthermore, the Commission sees no reason to remove additional flexibility where the plain emphasis of the relevant statutory provision is the content and conspicuousness of the disclaimer, not the individual speaking those words. The Commission also notes that where Congress clearly intended that a specific person convey the disclaimer message for an authorized radio or television communication, it did so explicitly by providing that the candidate must make the statement. Compare 2 U.S.C. 441d(d)(1) with 2 U.S.C. 441d(d)(2). Thus, 11 CFR 110.11(c)(4)(ii) does not include any specific limitation regarding who must speak the required message. In addition, unlike the requirements for television communications authorized by candidates, the audio statement required for television communications that are not authorized by candidates can be accomplished through voiceover without any requirement of a photograph or similar representation of the speaker.
Finally, as with authorized television communications, the
disclaimer statement for a television communication that is not
authorized by any candidate must also appear in writing at the end of
the communication in a clearly readable manner with a reasonable degree
of color contrast between the background and the printed statement for
a period of at least four seconds. 2 U.S.C. 441d(d)(2). Paragraphs 11
CFR 110.11(c)(4)(iii)(A), (B), and (C) are therefore identical to 11
CFR 110.11(c)(3)(iii)(A), (B), and (C). See above explanation of 11 CFR 110.11(c)(3)(iii).
11 CFR 110.11(d) Coordinated and Independent Expenditures by Political Party Committees
Paragraph (d) of section 110.11 covers disclaimers for communications that constitute coordinated party expenditures and independent expenditures by national, state, district, and local political party committees. The relevant preBCRA provisions of 11 CFR 110.11(a)(2) are being redesignated as paragraph (d)(1), with one minor grammatical change and without substantive change.
Although the Commission did not propose any significant substantive
changes for disclaimer requirements related to coordinated party
expenditures, one commenter expressed concern that a communication paid
for by a political party committee with funds subject to the 2 U.S.C.
441a(d) coordinated expenditure limits would, solely by virtue of being
a 2 U.S.C. 441a(d) coordinated expenditure, be considered to be
``authorized'' communications subject to the requirements of 11 CFR 110.11(c)(3).
[[Page 76968]]
The Commission does not intend such a result and believes that such an
interpretation would be contrary to its longstanding policy of
permitting political party committees to avail themselves of the 2
U.S.C. 441a(d) limits, both before and after a party's primary, without
any showing of candidate authorization or actual ``coordination'' with a candidate. See ``Party Expenditures vs. Contributions:
Similarities,'' Campaign Guide for Political Party Committees at p.16
(1996) (``It is up to the party committee to decide.'') Therefore, the
Commission is adding new paragraph (d)(2) to 11 CFR 110.11 to make it
clear that a communication paid for by a political party committee
through a section 441a(d) expenditure will not be considered to be
authorized by a candidate solely by virtue of using the funds subject
to the section 441a(d) limits. 11 CFR 110.11(d)(3). Please note,
however, that while this clarification recognizes a political party
committee's freedom to characterize its payment as a ``coordinated
expenditure'' even when no actual coordination occurred, the
communication would be considered authorized by the candidate (and
would therefore require an authorization statement to that effect) if
the candidate approves the communication. The Commission is also making
clear that communications made by a political party committee pursuant
to 2 U.S.C. 441a(d) that are distributed prior to the date the party
committee's candidate is nominated need not carry disclaimers
indicating that the communication was authorized by any candidate, but only must indicate who paid for the communication. 11 CFR
110.11(d)(1)(ii).
Paragraph (d)(3) covers communications that constitute independent expenditures by political party committees. It states that the disclaimer provisions apply to such communications, and that a ``non authorization notice'' is required, as with any other independent expenditure communication. See preBCRA 11 CFR 109.3 and proposed 11 CFR 109.10(e) (as proposed in a separate Notice of Proposed Rulemaking on Consolidated Reporting, 67 FR 64555 (October 21, 2002).) 11 CFR 110.11(e) Exempt Activities
The Commission is redesignating the provisions of preBCRA 11 CFR 110.11(a)(4), pertaining to communications that qualify as ``exempt activities,'' as paragraph (e) of section 110.11. In the NPRM, the Commission proposed to make only minor, nonsubstantive revisions. 67 FR 55351. Although not so expressly stated in the NPRM, the Commission based this proposal on the tentative conclusion that Congress did not intend, in BCRA, to overturn the Commission's longstanding approach to disclaimers for exempt activities. The Commission received no comments on this proposal.
The Commission has concluded that no substantive revisions are necessary. The Commission has, however, rewritten the paragraph to make it clear that public communications that constitute exempt activities are covered by the requirements of paragraphs (a), (b), (c)(1), and (c)(2) of section 110.11, but are not subject to the new ``stand by your ad'' requirements in paragraphs (c)(3) and (c)(4) of section 110.11. This revision is not intended to change the rule substantively; rather, it is only intended to clarify the rule in light of the new provisions added by BCRA.
11 CFR 110.11(f) Exceptions
Exceptions to the disclaimer requirements are set out in paragraph (f). The exceptions in preBCRA paragraphs (a)(6)(i), (ii), and (iii) are being redesignated as paragraphs (f)(1)(i), (ii), and (iii), respectively, with only grammatical, nonsubstantive revision.
The Commission is incorporating the provisions of preBCRA 11 CFR
110.11(a)(7), regarding certain communications by a separate segregated
fund or its connected organization, in paragraph (f)(2), because this
provision is essentially an exception. In addition, in paragraph
(f)(2), the word ``form'' is being changed to ``type.'' This change has
no substantive effect, and is being done only to conform to the
language of the statute. See 2 U.S.C. 441d(a). In addition, the
reference ``general public political advertising'' in preBCRA 11 CFR 110.11(a)(7) is replaced with a reference to a ``public
communication.'' 11 CFR 110.11(f)(2). No commenters addressed this provision.
11 CFR 110.11(g) Comparable Rate for Campaign Purposes
Paragraph (g) of section 110.11 continues the preBCRA rule
pertaining to comparable rates for print advertising. That is, the
contents of preBCRA 11 CFR 110.11(b) are being redesignated as
paragraph (g). Other than the addition of a heading for the paragraph,
there are no revisions to the preBCRA rule. Paragraph (g) tracks 2
U.S.C. 441d(b), as did its preBCRA predecessor. No commenters addressed this provision.
11 CFR 110.16 Prohibitions on Fraudulent Misrepresentations
BCRA adds a subsection to the fraudulent misrepresentation statute
at 2 U.S.C. 441h. The new provision, 2 U.S.C. 441h(b), prohibits a
person from fraudulently misrepresenting that the person is speaking,
writing or otherwise acting for, or on behalf of, a Federal candidate
or political party, or an employee or agent of either, for the purpose
of soliciting contributions or donations. It also prohibits persons
from participating in, or conspiring to participate in, plans, schemes,
or designs to make such fraudulent misrepresentations in soliciting
contributions and donations. BCRA also nonsubstantively amends the
existing fraudulent misrepresentation statute by redesignating it as
subsection (a) of 2 U.S.C. 441h. The regulation implementing this
provision, together with the preBCRA fraudulent misrepresentation
regulation formerly found at 11 CFR 110.9(b),\4\ is combined in new 11 CFR 110.16.
\4\ Another BCRA rulemaking amended 11 CFR 110.9, formerly
entitled ``Miscellaneous Provisions,'' to address only violations of
the contribution limits and was retitled accordingly. See Final
Rules and Explanation and Justification for Contribution Limitations
and Prohibitions, 67 FR 69928 (Nov. 19, 2002). Other provisions previously addressed in 11 CFR 110.9 include fraudulent
misrepresentation, price index increase and voting age population. This rulemaking redesignates and amends the fraudulent
misrepresentation provision. The ``Contribution Limitations and
Prohibitions'' rulemaking redesignates and amends the price index
increase provision. See id. A third BCRA rulemaking project entitled ``Coordination and Independent Expenditures'' proposes to
redesignate and amend the voting age population provision. See NPRM at 67 FR 60042, 60060 (Sept. 24, 2002).
The preBCRA fraudulent misrepresentation provision, now codified
at 2 U.S.C. 441h(a), is aimed at fraudulent misrepresentation of
campaign authority. For additional background, see Legislative History
of Federal Election Campaign Act Amendments of 1974 at 521. The statute
prohibits a candidate, his or her employee or agent, or an organization
under the candidate's control, from purporting to speak, write, or act
for another candidate or political party on a matter that is damaging
to the other candidate or party. Section 441h(a) encompasses, for
example, a candidate who distributes letters containing statements
damaging to an opponent and who fraudulently attributes them to the
opponent. The Commission has determined that ``on a matter that is
damaging'' includes actions or spoken or written communications that
are intended to suppress votes for the candidate or party who has been [[Page 76969]]
fraudulently misrepresented. A violation of section 441h(a) does not
depend on whether the candidate or party who is fraudulently
represented goes on to win an election. While the precise harm may be
difficult to quantify, harm is presumed from the nature of the communication. Proof of financial damages is unnecessary.
Because the language and purpose of the preBCRA misrepresentation statute encompasses only misrepresentations by a candidate or the candidate's employee or agent, the Commission has historically been unable to take action in enforcement matters where persons unassociated with a candidate or candidate's authorized committee have solicited funds by purporting to act on behalf of a specific candidate or political party. Candidates have complained that contributions that contributors believed were going to benefit the candidate were diverted to other purposes, harming both the candidate and contributor. Consequently, the Commission has frequently included in its annual legislative recommendations to Congress a recommendation that 2 U.S.C. 441h be amended to specifically prohibit any person from fraudulently misrepresenting a candidate or political party in solicitations. See Federal Election Commission Annual Reports for 2000 at 39, for 1999 at 4748, for 1998 at 52, and 1997 at 47. BCRA's prohibition on fraudulent solicitations of contributions and donations implements those legislative recommendations. 2 U.S.C. 441h(b); see 148 Cong. Rec. S3122 (daily ed. March 29, 2001) (statement of Sen. Nelson).
The Commission received one comment on the proposed rules to implement BCRA's fraudulent solicitation provision and to redesignate the preBCRA fraudulent misrepresentation rule. The commenter expressed support for combining these two provisions in a new rule. The commenter agreed that an antifraud provision aimed at fraudulent fundraising and applicable to a broader range of persons was needed.
The final rule at 11 CFR 110.16(a) remains unchanged from the proposed rule in the NPRM. Paragraph (a) amends the preBCRA fraudulent misrepresentation regulation, formerly found at 11 CFR 110.9(b), by adding the title, ``In general.'' This change follows BCRA, which added a similar heading to section (a) of 2 U.S.C. 441h. Technical amendments also make the wording of paragraph (a) genderneutral. Finally, paragraph (a)(2) has been amended from the preBCRA rule to include the word ``scheme'' so that it tracks the statute.
The final rule at 11 CFR 110.16(b) tracks the statutory language in BCRA. No changes are being made from the proposed rule. Paragraph (b)(1) prohibits a person from fraudulently misrepresenting that the person speaks, writes, or otherwise acts for or on behalf of a candidate, political party, or an employee or agent of either, in soliciting contributions or donations. As used in section 110.16(b)(1), ``donation'' has the same meaning as in 11 CFR 300.2(e). See Final Rules for Prohibited and Excessive Contributions: NonFederal Funds or Soft Money, 67 FR 49064, 49122 (July 29, 2002). Paragraph (b)(2) prohibits a person from willfully and knowingly participating in, or conspiring to participate in, any plan, scheme, or design to violate proposed paragraph (b)(1).
The Commission notes that the fraudulent misrepresentations prohibited in both 11 CFR 441h(a) and (b) and 11 CFR 110.16(a) and (b) differ from common law fraud. Unlike common law fraudulent misrepresentation, section 441h gives rise to no tort action. Section 441h is part of a Federal statute designed to address campaign finance abuses, not common law fraud. See generally Buckley v. Valeo, 424 U.S. 1, 2627 (1976).
The Supreme Court has recognized that statutes that address schemes to defraud, such as sections 441h(a)(2) and (b)(2), do not require proof of the common law requirements of ``justifiable reliance'' and ``damages.'' Neder v. United States, 527 U.S. 1, 2425 (1999) (``The common law requirements of `justifiable reliance' and `damages,' for example, plainly have no place in federal fraud statutes * * *'' ``By prohibiting the `scheme to defraud' rather than the completed fraud, the elements of reliance and damage would clearly be inconsistent with the statutes Congress enacted''), citing United States v. Stewart, 872 F.2d 957, 960 (10th Cir. 1989).
Another indication that the fraudulent misrepresentations
prohibited by section 441h differ from common law fraud is that section
441h(a) states that the fraudulent misrepresentation must be ``on a
matter which is damaging to [the misrepresented] candidate or political
party.'' If the statute were to require proof of damage in common law
fraudulent misrepresentation, then the phrase ``on a matter which is
damaging'' is superfluous. Courts construe statutes so ``as to avoid
rendering superfluous any parts thereof.'' Astoria Fed. Sav. & Loan
Ass'n v. Solimino, 501 U.S. 104 (1991); see also Federal Election
Commission v. Arlen Specter '96, 150 F. Supp.2d 797, 806 (2001), quoting Bennett v. Spear, 520 U.S. 154, 173 (1997).
11 CFR 111.24 Civil Penalties (2 U.S.C. 437g(a)(5), (6), (12), 28 U.S.C. 2461 nt.).
The Act imposes civil penalties on anyone violating any portion of FECA or the Presidential Election Campaign Fund Act (``Fund Act'') or the Presidential Primary Matching Payment Account Act (``Matching Payment Act''). The Act's civil penalties, found at 2 U.S.C. 437g(a)(5), (6), and (12), are organized into two tiers of monetary penalties; one tier of penalties for violations of the Act, and a second tier of penalties for ``knowing and willful'' violations of the Act.
BCRA amends sections 437g(a)(5)(B) and 437g(a)(6)(C) by separating out and increasing the penalties for a subset of knowing and willful violations, namely, contributions that are made in the name of another. See 2 U.S.C. 441f. Such contributions are often made through a conduit to circumvent the contribution limits. The amendment to 2 U.S.C. 437g(a)(5)(B) increases the civil penalties for such violations to ``not less than 300 percent of the amount involved in the violation'' and ``not more than the greater of $50,000 or 1,000 percent of the amount involved in the violation.''
Section 437g(a)(6)(C) of FECA, authorizing a court to impose civil penalties on a person who knowingly and willfully violates the Act, has been similarly amended by BCRA. Accordingly, the Commission amends 11 CFR 111.24 to implement these amendments to FECA.
Specifically, the Commission is dividing 11 CFR 111.24(a) into
paragraphs (a)(1), and (a)(2)(i) and (ii). Paragraph (a)(1) contains
the unchanged language of the preBCRA regulation for civil penalties
for violations of the Act or the Fund Act or Matching Payment Act.
Paragraph (a)(2) addresses ``knowing and willful'' violations and is
further divided into paragraphs (a)(2)(i) and (ii). Paragraph (a)(2)(i)
contains the unchanged language of the preBCRA regulation for civil
penalties for knowing and willful violations of FECA or the Fund Act or
the Matching Payment Act. 11 CFR 111.24(a)(2)(ii) implements BCRA's
amendments to FECA increasing civil penalties for knowing and willing
violations involving contributions made in the name of another. In the
case of a knowing and willful violation of the prohibition on
contributions in the name of another, the civil penalty is not [[Page 76970]]
less than an amount that is equal to 300 percent of the amount of the
violation, and the civil penalty is not more than $50,000 or an amount
equal to 1,000 percent of the amount of the violation, whichever is
greater. The Commission received no comments on these amended rules,
which are identical to the proposed rules, previously published.
11 CFR Part 113 Use of Campaign Accounts for NonCampaign Purposes (2 U.S.C. 439a)
Introduction
In BCRA, Congress deleted 2 U.S.C. 439a in its entirety, and replaced it with an entirely new section. Subsection (a) of the amended section sets forth the following four categories of ``permitted uses'' of campaign funds: (1) Otherwise authorized expenditures in connection with a candidate's campaign for Federal office; (2) ordinary and necessary expenses incurred in connection with a Federal officeholder's duties; (3) contributions to certain taxexempt organizations; and (4) transfers, without limitation, to national, state or local political party committees. 2 U.S.C. 439a(a)(1) through (4). Congress also included a list of nonexhaustive, per se prohibited personal uses of campaign funds, including home mortgage, rent or utility payments, clothing purchases, noncampaignrelated automobile expenses, country club memberships, vacations or other noncampaignrelated trips, household food items, tuition payments, noncampaignrelated admissions to entertainment events, such as sporting events, concerts, and theatres, and health club dues. 2 U.S.C. 439a(b)(2)(A) through (I).
Former 2 U.S.C. 439a was the statutory basis for the Commission's preBCRA ``personal use'' rules. It allowed candidates and Federal officeholders to use excess campaign funds to pay for ordinary and necessary expenses incurred in connection with their duties as Federal officeholders, certain contributions to taxexempt organizations, and other lawful purposes, including transfers, without limitation, to national, state or local political party committees. The former section 439a also generally prohibited candidates and Federal officeholders from converting their excess campaign funds to personal uses.
Two preBCRA regulations implemented the statutory conversionto personaluse prohibition. 11 CFR 113.1(g)(1)(i) set out a non exhaustive list of per se prohibited personal uses, and 11 CFR 113.1(g)(1)(ii) described uses that the Commission evaluated on a case bycase basis. In addition, the latter regulation stated that uses that would exist ``irrespective'' of a candidate's campaign or a Federal officeholder's duties constitute personal use. Finally, another pre BCRA regulation, which described the permissible uses of excess campaign funds, included the ``any other lawful purpose'' language from former section 439a. 11 CFR 113.2(d).
In the NPRM, the Commission proposed regulations that would implement amended section 439a. The Commission also requested comments on several issues. With regard to the personal use regulations, the Internal Revenue Service commented that it saw no direct conflict between the Commission's proposals and the Internal Revenue Code or the regulations thereunder. Other comments are addressed below. Unchanged Provisions of 11 CFR 113.1(e) and 11 CFR 113.2
1. Per se Personal Uses
The preBCRA version of 2 U.S.C. 439a contained a general prohibition against the personal use of campaign funds, but did not specify any particular impermissible uses. In contrast, the Commission's preBCRA personal use regulations specifically defined certain uses of campaign funds or donations as per se prohibited personal uses. 11 CFR 113.1(g)(1)(i).
When Congress enacted BCRA, it amended 2 U.S.C. 439a(b) to include a nonexhaustive list of prohibited personal uses of campaign funds. As one of BCRA's principal sponsors explained, amended section 439a ``[c]odifies FEC regulations relating to the personal use of campaign funds by candidates'' (emphasis added). 148 Cong. Rec. S19934 (daily ed. March 18, 2002) (statement of Sen. Feingold). However, the Commission noted in the NPRM that several of the personal use provisions in amended section 439a were not adopted verbatim, but were instead summaries of preBCRA personal use regulations. For example, the statute now prohibits the use of campaign contributions for ``a clothing purchase'' (2 U.S.C. 439a(b)(2)(B)); whereas the preBCRA corresponding regulation at 11 CFR 113.1(g)(1)(i)(C) prohibited the personal use of ``[c]lothing, other than items of de minimis value that are used in the campaign, such as campaign `Tshirts' or caps with campaign slogans.'' In addition, amended section 439a did not incorporate all of the preBCRA per se personal use rules in their entirety. Compare postBCRA 2 U.S.C. 439a(b)(2)(A) through (I) with preBCRA 11 CFR 113.1(g)(1)(i). In the NPRM, the Commission stated that it interpreted new subsection (b) of 2 U.S.C. 439a to provide an even firmer statutory foundation for the per se rules at 11 CFR 113.1(g)(1)(i) than did the preBCRA version of section 439a. No commenters opposed this interpretation, and two commenters supported it. Accordingly, aside from the exceptions noted below, the Commission is retaining its preBCRA per se personal use regulations.
2. Irrespective test
As the Commission noted in the NPRM, preBCRA section
113.1(g)(1)(ii) stated that a use that would exist ``irrespective'' of
a candidate's campaign or a Federal officeholder's duties would
constitute a prohibited personal use. In BCRA, Congress codified the
``irrespective'' test as part of new section 439a(b)(2) (``For the
purposes of paragraph (1), a contribution or donation shall be
considered to be converted to personal use if the contribution or
amount is used to fulfill any commitment, obligation, or expense of a
person that would exist irrespective of the candidate's election
campaign or individual's duties as a holder of Federal office * * *'')
As the Commission explained in the NPRM, BCRA's ``irrespective'' test
is virtually identical to the language in section 113.1(g)(1)(ii). The
Commission proposed to continue to apply the ``irrespective'' test as
it had done prior to BCRA. No comments were received specifically on
this issue, although one commenter cited BCRA's ``irrespective''
language in the context of the commenter's analysis of the ``noncampaignrelated trip'' language in proposed 11 CFR
113.1(g)(i)(K). (Noncampaignrelated trips are discussed below.)
Therefore, in the final rule, the Commission is not revising the ``irrespective'' test.
Amended Provisions of 11 CFR 113.1
1. 11 CFR 113.1(b) and (e)Excess Campaign Funds
In BCRA, Congress deleted the phrase ``in excess of any amount
necessary to defray'' campaign expenses from section 439a. Former
section 113.1(e) defined ``excess campaign funds'' to mean ``amounts
received by a candidate as contributions which he or she determines are
in excess of any amount necessary to defray his or her campaign
expenditures.'' In the NPRM, the Commission proposed not to change
section 113.1(e), but raised the issue of whether Congress intended to eliminate the discretion of candidates and Federal
[[Page 76971]]
officeholders to use these excess campaign funds ``for ordinary and
necessary expenses incurred in connection with duties of the individual
as a holder of Federal office.'' 2 U.S.C. 439a(a)(2). No commenters
opposed the Commission's proposal to leave section 113.1(e) u
FOR FURTHER INFORMATION CONTACT
Mr. John C. Vergelli, Acting Assistant General Counsel, or Attorneys, Ms. Ruth Heilizer (personal use), Ms. Dawn Odrowski (fraudulent solicitations and civil penalties), or Mr. Richard Ewell (disclaimers), 999 E Street, NW., Washington, DC, 20463, (202) 6941650 or (800) 4249530.