Federal Register: December 26, 2007 (Volume 72, Number 246)

DOCID: fr26de07-1 FR Doc E7-24797

SUBJECT CATEGORY:

Electioneering Communications

DATES: Effective Date: December 26, 2007.

DOCUMENT SUMMARY:

The Federal Election Commission is revising its rules governing electioneering communications. These revisions implement the Supreme Court's decision in FEC v. Wisconsin Right to Life, Inc., which held that the prohibition on the use of corporate and labor organization funds for electioneering communications is
unconstitutional as applied to certain types of electioneering communications. Further information is provided in the supplementary information that follows.

SUMMARY:

Electioneering communications; transmittal to Congress,

SUPPLEMENTAL INFORMATION

The Commission is revising 11 CFR parts 104 and 114 to implement the recent U.S. Supreme Court decision in FEC v. Wisconsin Right to Life, Inc., 127 S. Ct. 2652 (June 25, 2007). I. Background
A. Statutory and Regulatory Provisions Governing Electioneering Communications

The Bipartisan Campaign Reform Act of 2002 (``BCRA'') \1\ amended the Federal Election Campaign Act of 1971, as amended (the ``Act'' or ``FECA''),\2\ by adding a new category of political communications, ``electioneering communications,'' to those already governed by the Act. See 2 U.S.C. 434(f)(3). Electioneering communications (``ECs'') are broadcast, cable or satellite communications that refer to a clearly identified candidate for Federal office, are publicly distributed within sixty days before a general election or thirty days before a primary election, and are targeted to the relevant electorate. See 2 U.S.C. 434(f)(3)(A)(i). Individuals and entities that make ECs are subject to certain reporting obligations. See 2 U.S.C. 434(f)(1) and (2). Corporations and labor organizations are prohibited from using general treasury funds to finance ECs, directly or indirectly. See 2 U.S.C. 441b(b)(2). Finally, all ECs must include a disclaimer including the name of the individual or entity who paid for the EC and a statement as to whether or not the EC was authorized by a candidate. See 2 U.S.C. 441d(a).
\1\ Pub. L. 107155, 116 Stat. 81 (2002).

\2\ 2 U.S.C. 431 et seq.

The Act exempts certain communications from the definition of ``electioneering communication'' found in 2 U.S.C. 434(f)(3)(B)(i) to (iii), and specifically authorizes the Commission to promulgate regulations exempting other communications as long as the exempted communications do not promote, support, attack or oppose (``PASO'') a candidate. See 2 U.S.C. 434(f)(3)(B)(iv), citing 2 U.S.C.

431(20)(A)(iii).

The Commission promulgated regulations to implement BCRA's EC provisions. Final Rules and Explanation and Justification for Regulations on Electioneering Communications, 67 FR 65190 (Oct. 23, 2002) (``EC E&J'').\3\ See also 11 CFR 100.29 (defining
``electioneering communication''); 104.20 (implementing EC reporting requirements); 110.11(a) (requiring disclaimers in all ECs); 114.2 (prohibiting corporations and labor organizations from making ECs); 114.10 (allowing qualified nonprofit corporations (``QNCs'') to make ECs); 114.14 (restricting indirect corporate and labor organization funding of ECs). Commission regulations exempt five types of communications from the definition of ``electioneering communication.'' See 11 CFR 100.29(c).\4\
\3\ The Commission revised its rule defining ``electioneering communication'' in 2005, in response to Shays v. FEC, 337 F. Supp. 2d 28 (D.D.C. 2004), aff'd, 414 F.3d 76 (D.C. Cir. 2005), reh'g en banc denied, No. 045352 (D.C. Cir. Oct. 21, 2005). See Final Rules and Explanation and Justification for Regulations on Electioneering Communications, 70 FR 75713 (Dec. 21, 2005).
\4\ The exemptions in 11 CFR 100.29(c)(1) (nonbroadcast communications), 100.29(c)(2) (news stories, commentaries or editorials), 100.29(c)(3) (expenditures and independent
expenditures) and 100.29(c)(4) (candidate debates or forums) are based on the express language of the Act. See 2 U.S.C.
434(f)(3)(B)(i) to (iii). Section 100.29(c)(5) exempts
communications paid for by State or local candidates that do not PASO any Federal candidate.
B. U.S. Supreme Court Precedent Regarding Electioneering Communications

In McConnell v. FEC, 540 U.S. 93 (2003) (``McConnell''), the U.S. Supreme Court upheld all of BCRA's EC provisions against various constitutional challenges. Id. at 194, 20102, 20708. Specifically, the Supreme Court held that the prohibition on the use of general treasury funds by corporations and labor organizations to pay for ECs in 2 U.S.C. 441b(b)(2) was not facially overbroad. Id. at 20406. In Wisconsin Right to Life, Inc. v. FEC, 546 U.S. 410 (2006) (``WRTL I''), the U.S. Supreme Court explained that McConnell's upholding of section 441b(b)(2) against a facial constitutional challenge did not preclude further asapplied challenges to the corporate and labor organization funding prohibitions. See WRTL I, 546 U.S. at 41112.

Subsequently, in FEC v. Wisconsin Right to Life, Inc., 127 S. Ct. 2652 (2007) (``WRTL II''), the Supreme Court reviewed an asapplied challenge brought by a nonprofit corporation seeking to use its own general treasury funds, which included donations it had received from other corporations, to pay for broadcast advertisements referring to Senator Feingold and Senator Kohl during the EC period before the 2004 general election, in which Senator Feingold, but not Senator Kohl, was on the ballot. The plaintiff argued that these communications were genuine issue advertisements run as part of a grassroots lobbying campaign on the issue of Senate filibusters of judicial nominations. WRTL II, 127 S. Ct. at 266061. The Supreme Court held that section 441b(b)(2) was unconstitutional as applied to the plaintiff's advertisements because the
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advertisements were not the ``functional equivalent of express advocacy.'' Id. at 2670, 2673. A communication is the ``functional equivalent of express advocacy'' only if it ``is susceptible of no reasonable interpretation other than as an appeal to vote for or against a specific candidate.'' Id. at 2667. Thus, WRTL II limited the reach of the EC funding prohibitions to communications that were the ``functional equivalent of express advocacy'' as determined under this newly articulated test.

C. The Commission's Rulemaking After WRTL II

The Commission published a Notice of Proposed Rulemaking in August 2007 seeking public comment on alternative proposed rules implementing the WRTL II decision. See Notice of Proposed Rulemaking on Electioneering Communications, 72 FR 50261, 50262 (August 31, 2007) (``NPRM''). The Commission sought public comment generally regarding the effect of the WRTL II decision on the Commission's rules governing corporate and labor organization funding of ECs, the definition of ``electioneering communication,'' and the rules governing reporting of ECs, as well as comment on the specific requirements of the proposed rules. The Commission also requested public comment regarding specific examples of communications that should be covered by the proposed rules and those that should not be. Id. at 5026769. Finally, the Commission sought public comment regarding the impact, if any, of the WRTL II decision on other parts of the Commission's regulations, such as the definition of ``express advocacy'' in 11 CFR 100.22. Id. at 50263. The comment period ended on October 1, 2007. The Commission received twentyseven written comments on the proposed rules. The Commission held a public hearing to discuss the proposed rules on October 17 and 18, 2007 at which fifteen witnesses testified. All written comments and hearing transcripts are available at http://www.fec.gov/law/law_rulemakings.shtml under the heading ``Electioneering Communications
(2007).'' For purposes of this document, the terms ``comment'' and ``commenter'' apply to both written comments and oral testimony at the public hearing.

After consideration of the comments, the Commission has decided to implement the WRTL II decision by promulgating an exemption from the corporate and labor organization funding prohibitions in part 114 of the Commission's rules. Under the final rule, ECs that qualify for the WRTL II exemption may be funded with corporate and/or labor organization funds, including general treasury funds, but are subject to EC reporting and disclaimer requirements. The EC reporting requirements in 11 CFR 104.20 are also being revised to accommodate both reporting by corporations and labor organizations for ECs permissible under the new exemption, and reporting the use of corporate and labor organization donations by individuals and unincorporated entities to pay for ECs permissible under the new exemption. The Commission has decided to leave open possible revisions to the definition of ``express advocacy'' in 11 CFR 100.22 and to address the issue at a later date.
II. Effective Date and Transmittal of Final Rules to Congress

The final rule is effective immediately upon publication under 5 U.S.C. 553(d)(1) and (d)(3). Typically, rules must be published not less than thirty days before their effective dates under the Administrative Procedure Act (``APA''). See 5 U.S.C. 553(d). However, a rule that ``grants or recognizes an exemption or relieves a restriction'' is exempted from this requirement under 5 U.S.C. 553(d)(1). This final rule grants an exemption and relieves the funding restrictions for certain communications that meet the definition of ``electioneering communications.'' Therefore, this final rule meets this exception to the APA, is not required to be published thirty days prior to its effective date, and will therefore be effective immediately upon publication. In addition, 5 U.S.C. 553(d)(3) states that an agency may make a rule effective immediately ``for good cause found and published with the rule.'' The U.S. Supreme Court's decision in WRTL II was issued on June 25, 2007, less than six months before the first EC periods began (thirty days before various state Presidential caucuses and primaries in January 2008). The Commission has worked diligently to promulgate the final rule in time to provide guidance to organizations as to the permissible funding and required reporting for communications broadcast within the EC periods, which began in early December 2007 for certain states. The final rule implementing the WRTL II decision should apply to all EC periods for the 2008 election cycle and it would be contrary to the public interest to delay the effective date of the final rule until some time after the first EC periods start. Therefore, the Commission has ``good cause'' under section 553(d)(3) to make the final rule effective immediately.

Under 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 before they take effect. The final rule that follows was transmitted to Congress on December 17, 2007.
III. Explanation and Justification
A. Scope of the WRTL II Electioneering Communications Exemption

The NPRM included two alternative proposals implementing the WRTL II decision in the rules governing ECs. Alternative 1 incorporated the new exemption into the rules prohibiting the use of corporate and labor organization funds for ECs in 11 CFR part 114. See NPRM at 50262. This alternative required corporations and labor organizations to comply with the reporting and disclaimer requirements for all ECs that qualify for the exemption. Alternative 2 incorporated the new exemption into the definition of ``electioneering communication'' in 11 CFR 100.29. This alternative removed all reporting and disclaimer requirements for these communications, whether run by corporations and labor organizations, or individuals and unincorporated entities not subject to the funding prohibitions in part 114. See NPRM at 5026263.

The commenters were divided in their support for each alternative. Commenters supporting Alternative 1 pointed out that the plaintiffs in WRTL II did not challenge the EC reporting and disclaimer requirements, the Court did not address the issue of whether the EC reporting requirements were constitutional as applied to genuine issue advertisements, and the EC reporting requirements had been upheld against a facial challenge in McConnell. These commenters also contended that disclosure requirements are held to a less rigorous constitutional standard than funding prohibitions, and that a broader exemption would violate the Commission's statutory authority. In contrast, commenters supporting Alternative 2 argued that WRTL II held that the communications at issue were protected from any regulation (including disclosure), that the constitutionality of disclosure requirements is linked to the constitutionality of the funding restrictions on the communication, and that the costs of compliance with reporting obligations would chill speech by small nonprofit organizations. Some commenters stated their policy preference would be to adopt Alternative 2 and remove reporting
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requirements for communications qualifying for the WRTL II exemption, but argued that the Commission's authority was confined to creating an exemption from the funding restrictions on ECs unless the EC reporting and disclaimer provisions are successfully challenged in court.

After consideration of the comments, the Commission has decided to adopt a revised version of Alternative 1 and create an exemption solely from the prohibition on the use of corporate and labor organization funds to finance ECs. Accordingly, the revisions to 11 CFR 114.2 and new section 114.15 do not create (1) an exemption from the overall definition of ``electioneering communication'' in section 100.29, (2) an exemption from the EC reporting requirements in section 104.20, or (3) an exemption from the EC disclaimer requirements in section 110.11. Corporations and labor organizations are permitted to use general treasury funds for ECs that are permissible under section 114.15, but are also required to file EC disclosure reports once they spend more than $10,000 in a calendar year on such communications. See revised 11 CFR 104.20.

The plaintiff in WRTL II challenged only BCRA's corporate and labor organization funding restrictions in section 441b(b)(2) and did not contest either the separate statutory definition of ``electioneering communication'' in section 434(f)(3), the separate reporting requirement in section 434(f)(1), or the separate disclaimer requirement in section 441d. See WRTL II, 127 S. Ct. at 265859; see also Verified Complaint for Declaratory and Injunctive Relief, ] 36 (July 28, 2004) in Wisconsin Right to Life, Inc. v. FEC (No. 041260), available at http://fecds005.fec.gov/law/litigation_related.shtml#wrtl_dc (``WRTL does not challenge the reporting and
disclaimer requirements for electioneering communications, only the prohibition on using its corporate funds for its grassroots lobbying advertisements.''). Nor did any of the four separate opinions issued by the Justices in WRTL II discuss the EC reporting or disclaimer requirements. Accordingly, the Commission agrees with the commenters who argued that WRTL II's holding that the Act's EC funding restrictions are unconstitutional as applied to certain advertisements does not extend to the EC reporting or disclaimer requirements.

Because WRTL II did not address the issue, McConnell continues to be the controlling constitutional holding regarding the EC reporting and disclaimer requirements. McConnell held that the overall definition of ``electioneering communication'' in section 434(f)(3) is facially valid. McConnell, 540 U.S. at 19394. Moreover, eight Justices in McConnell voted to uphold the EC reporting requirements (including three Justices who separately voted to strike down the EC funding prohibitions). Id., 540 U.S. at 196 (Stevens, J.) and 321 (Kennedy, J.). The EC disclaimer requirements were similarly upheld as constitutional by a vote of 81. McConnell, 540 U.S. at 230 (Rehnquist, C.J., joined by all Justices except Thomas, J.). Thus, because McConnell has upheld the definition of ECs, as well as the reporting and disclaimer requirements, as facially valid, and because WRTL II did not address these provisions, the Commission has no mandate to revise the underlying definition of ``electioneering communication'' or remove the reporting and disclaimer requirements. WRTL II requires that the Commission implement an asapplied exemption to the EC funding requirements and nothing more. By adopting a revised version of Alternative 1, the Commission is acting in accordance with WRTL II.

The Commission disagrees with the comments that contended that Alternative 2 is more consistent with the Congressional intent because they believed BCRA did not contemplate reporting by corporations and labor organizations. While it is true that under BCRA, corporations and labor organizations were prohibited from funding any ECs, the statute requires every ``person'' (which by definition includes corporations and labor organizations) funding ECs over the reporting threshold to report. 2 U.S.C. 431(11). Moreover, incorporating the WRTL II exemption into the regulatory definition would remove certain ECs that are currently subject to reporting and disclaimer requirements when run by individuals, QNCs, or unincorporated entities from public disclosure entirely. While Congress provided for certain possible effects of judicial review of the definition of ``electioneering communication'' (see 2 U.S.C. 434(f)(3)(A)(ii)), Congress did not expressly address the consequences for the reporting provisions in the event of a successful as applied challenge to the funding restrictions. Thus, the Commission cannot conclude that Congress has spoken directly to this issue.

Finally, while understanding that some nonprofit organizations and their donors have privacy interests and that some donors request to remain anonymous, the Commission disagrees with the commenters who argue the only constitutional way to protect those interests is to adopt Alternative 2, thereby allowing all ECs that qualify for the WRTL II exemption to be run without any disclaimers or reporting. First, under revised section 104.20 described below, the reporting requirements for corporations and labor organizations funding ECs that qualify for the WRTL II exemption are narrowly tailored to address many of the commenters' concerns regarding individual donor privacy. See Section D below. Second, as some commenters noted, there are other ways of protecting donor privacy. When upholding the EC reporting requirements, McConnell recognized that these privacy interests are adequately protected on a casebycase basis for certain organizations that espouse positions such that their donors or members might be subject to reprisal or harassment. See McConnell, 540 U.S. at 19899 (citing Brown v. Socialist Workers '74 Campaign Comm. (Ohio), 459 U.S. 87, 9899 (1982)). Organizations with significant and serious threats of reprisal or harassment may seek asapplied exemptions to the disclosure requirements under Socialist Workers through advisory opinions and court filings. See, e.g., Advisory Opinion 200302 (Socialist Workers Party). Therefore, the Commission believes that the carefully designed reporting requirements detailed below do not create unreasonable burdens on the privacy rights of donors to nonprofit organizations.

The Commission notes that the final rule does not affect the coordinated communications rules in section 109.21, because ECs that are permissible under section 114.15 would still meet the
``electioneering communication'' content standard in 11 CFR 109.21(c)(1).\5\ Thus, an EC that may be paid for with corporation or labor organization funds under the new exemption in section 114.15 may nevertheless be a prohibited corporate or labor organization inkind contribution to a candidate or political party if that EC is coordinated with a candidate or party under the coordinated communications rules. In
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addition, the revisions to section 114.14 clarify that individuals and unincorporated entities may receive and spend corporate or labor organization funds for ECs that are permissible under new section 114.15. However, individuals and unincorporated entities are still subject to the general prohibition on using such funds to pay for any EC that is not permissible under section 114.15.
\5\ The coordinated communication rules set forth a threeprong test: A payment prong, a content prong and a conduct prong. See 11 CFR 109.21(a). If a communication meets one of the standards under the content or conduct prong, it is deemed to have met that prong. Any communication that meets all three prongs is considered an in kind contribution to the candidate or political party with which the coordination occurs. See 11 CFR 109.21(b). Portions of the coordination regulations at 11 CFR 109.21 were held invalid in Shays v. FEC, 508 F. Supp.2d 10 (2007). However, the Commission is appealing the ruling and the current regulations remain in full force and effect pending the outcome of the proceeding.
B. Revised 11 CFR 114.2General Prohibition on Corporations and Labor Organizations Making Electioneering Communications

Section 114.2(b)(2)(iii) implements the funding restrictions of 2 U.S.C. 441b(b)(2) by prohibiting corporations and labor organizations from ``[m]aking payments for an electioneering communication to those outside the restricted class.'' However, as explained in the NPRM, placing a detailed exemption based on the WRTL II decision within section 114.2(b) could be confusing and difficult for the reader to locate. See id. Therefore, in the NPRM, the Commission proposed to place the exemption in new section 114.15. None of the commenters opposed the placement of the exemption in new section 114.15.

The final rule follows the approach proposed in the NPRM by setting forth the WRTL II exemption in new section 114.15, and amending section 114.2(b) to include a crossreference to this new section. Revised section 114.2(b) states that corporations and labor organizations are prohibited from making ECs ``unless permissible under 11 CFR 114.10 or 114.15.'' See revised 11 CFR 114.2(b)(3) (adding the new WRTL II exemption reference to the existing reference to the QNC exemption in section 114.10).\6\ The language of the final rule is slightly changed from the proposed rule to conform the crossreference in section 114.2(b)(3) to similar revisions in other sections of part 114. See, e.g., revised 11 CFR 104.20(c)(7) and 114.14(a)(1) discussed below. \6\ To increase clarity and readability, the final rule also revises the title of section 114.2 to include ECs explicitly, and to renumber paragraph (b)(2)(iii) as paragraph (b)(3) with conforming changes as necessary in the text of that paragraph.
C. New 11 CFR 114.15Permissible Use of Corporate and Labor Organization Funds for Certain Electioneering Communications

The exemption proposed in the NPRM was substantively the same under both Alternative 1 and 2. See NPRM at 50264. Under Alternative 1, proposed section 114.15(a) set forth the general standard for determining whether the use of corporate and labor organization funds for an EC is permissible under WRTL II. Proposed section 114.15(b) included safe harbor provisions for two common types of ECs: Grassroots lobbying communications and commercial and business advertisements. The NPRM explained that the safe harbors were intended to provide additional guidance as to which ECs would qualify for the general exemption and that an EC that did not qualify for the safe harbor could still come within the general exemption. See id. Finally, proposed section 114.15(c) addressed reporting obligations for corporations and labor organizations that choose to use general treasury funds to pay for ECs permissible under section 114.15. See id.

Some commenters favored the proposed rule's approach of including both a general exemption and one or more safe harbors. A few commenters suggested that the final rule should include not only safe harbors, but also ``capture nets or red flags'' that would indicate when an EC would generally be considered to be the functional equivalent of express advocacy and therefore not qualify for the general exemption. Other commenters were concerned that the safe harbors would become the de facto rule and groups would feel chilled from making ECs that do not qualify for one of the safe harbors without additional guidance in the general rule. Some commenters thought that the safe harbor provisions were too narrow to be useful. Some commenters also suggested that the Commission include a list of those factors that the Commission would consider in determining whether an EC qualifies for the exemption.

After consideration of the comments, the Commission has decided to modify the NPRM's proposed approach by adopting a rule that both incorporates a safe harbor for certain types of EC and sets forth a multistep analysis for determining whether ECs that do not qualify for the safe harbor nevertheless qualify for the general exemption. First, the final rule includes a revised articulation of the general exemption in new section 114.15(a). Second, the Commission is broadening the safe harbor to provide more detailed guidance as to which ECs qualify for the exemption under the safe harbor. See 11 CFR 114.15(b). Third, the final rule contains a provision explaining the Commission's rules of interpretation for determining if an EC that does not qualify for the safe harbor in section 114.15(b) is nonetheless permissible under the general exemption in section 114.15(a). See 11 CFR 114.15(c). The final rule also includes three additional paragraphs. First, new paragraph (d) explains what contextual information the Commission may consider in its analysis of ECs under the general exemption and safe harbor. Second, new paragraph (e) indicates that a list of examples of ECs analyzed under the general exemption and safe harbor will be placed on the Commission's Web site. Lastly, new paragraph (f) states that corporations and labor organizations funding ECs that are permissible under section 114.15(a) are subject to certain reporting requirements under 11 CFR 104.20.

1. 11 CFR 114.15(a)Articulation of the WRTL II Exemption

In the NPRM, proposed section 114.15(a) provided that corporations and labor organizations may make an EC (as defined in 11 CFR 100.29) without violating the prohibition in section 114.2(b)(3), ``if the communication is susceptible of a reasonable interpretation other than as an appeal to vote for or against a clearly identified Federal candidate.'' See NPRM at 50264. Many commenters agreed with this proposed implementation of the WRTL II test as a general exemption. However, some commenters urged the Commission to use the exact words used in the WRTL II decision and phrase the general exemption so that corporations or labor organizations may make an EC ``unless the communication is susceptible of no reasonable interpretation other than as an appeal to vote for or against a clearly identified Federal candidate.'' These commenters argued that the NPRM's formulation of the standard shifted the burden of proving whether an EC qualifies for the exemption from the Commission to the speaker making the EC.

While the Commission disagrees with those commenters who argued that the effect of the NPRM's language was to shift the burden of proof, it appears that the formulation proposed in the NPRM could be misunderstood. Therefore, in the final rule, paragraph (a) tracks the WRTL II decision's language: ``Corporations or labor organizations may make an electioneering communication, as defined in 11 CFR 100.29, to those outside the restricted class unless the communication is susceptible of no reasonable interpretation other than as an appeal to vote for or against a clearly identified Federal candidate.'' See 11 CFR 114.15(a).
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2. 11 CFR 114.15(b)Safe Harbor Provision

As proposed in the NPRM, the final rule supplements the general exemption in section 114.15(a) with a safe harbor provision in section 114.15(b). Satisfying the safe harbor provision demonstrates that the EC is susceptible of a reasonable interpretation other than as an appeal to vote for or against a Federal candidate. Accordingly, an EC that qualifies for the safe harbor would be deemed to be permissible under section 114.15(a) and may be paid for with corporate or labor organization funds. However, an EC that does not qualify for the safe harbor may still come within the general exemption under the analysis described below in section 114.15(c).

The NPRM's proposed safe harbor provisions for grassroots lobbying communications and commercial and business advertisements each contained four prongs, all of which would have had to be met for an EC to qualify for the proposed safe harbor. The first two prongs of both proposed safe harbors would have focused on the content of the communication, while the last two prongs of both safe harbors would have focused on the presence of ``indicia of express advocacy'' as described in the WRTL II decision. See NPRM at 50265, 50269.

In order to simplify the final rule, the Commission has adopted one safe harbor provision with three prongs. An EC qualifies for the safe harbor if it (1) does not mention ``any election, candidacy, political party, opposing candidate, or voting by the general public;'' (2) does not take a position on the candidate's ``character, qualifications, or fitness for office;'' and (3) either ``focuses on a legislative, executive or judicial matter or issue'' or ``proposes a commercial transaction.'' See 11 CFR 114.15(b)(1)(3). An EC will qualify for the safe harbor only if it satisfies all three prongs. The safe harbor provision in the final rule applies both to ECs that would have been considered ``grassroots lobbying communications'' and to ECs that would have been considered ``commercial and business advertisements'' under the rule proposed in the NPRM.
a. 11 CFR 114.15(b)(1) and (2)Mentioning an Election or Candidacy and Taking a Position on Character or Qualifications

The Supreme Court determined that WRTL's advertisements were not the ``functional equivalent of express advocacy'' because the communications' content was ``consistent with that of a genuine issue ad'' and the communications lacked ``indicia of express advocacy.'' WRTL II, 127 S. Ct. at 2667. The Court found that WRTL's communications lacked ``indicia of express advocacy'' because they did not mention ``an election, candidacy, political party, or challenger,'' and the communications did not ``take a position on a candidate's character, qualifications, or fitness for office.'' Id. The first two prongs of the safe harbor in the final rule incorporate the factors the Court used to determine whether a communication lacks ``indicia of express advocacy.'' In order to satisfy the safe harbor's first prong, the EC must not ``mention any election, candidacy, political party, opposing candidate, or voting by the general public.'' See 11 CFR 114.15(b)(1). To satisfy the safe harbor's second prong, the EC must not ``take a position on any candidate or officeholder's character, qualifications, or fitness for office.'' See 11 CFR 114.15(b)(2).

The NPRM included these same provisions as the last two prongs of the proposed safe harbors for grassroots lobbying communications and commercial and business advertisements. See NPRM at 5026667, 50270. Some commenters believed that these provisions adequately limited the scope of the proposed rule. A few commenters urged the Commission to refrain from adding anything to the list of references in the WRTL II decision, such as the reference to ``voting by the general public'' proposed in the NPRM. However, the final rule retains this addition, which applies to ECs that include tag lines that suggest voting by the general public in elections, such as ``Vote. It's important to your future,'' but does not apply to other references to voting such as ``ask Congressman Smith to support the Voting Rights Bill.''

The NPRM sought public comment on whether certain examples constitute ``mentioning'' elections, candidacy, political parties, or opposing candidates, or take a position on a candidate's character, qualifications or fitness for office sufficient to transform an EC into the functional equivalent of express advocacy or to remove them from the proposed new safe harbors. See NPRM at 5026667. Some commenters noted that many of the examples were actually references to officeholder status or to an officeholder's conduct of his or her official duties and should not be construed as mentioning a ``candidacy'' or taking a position on ``character.'' Other commenters believed that everything in the proposed list of references that would constitute indicia of express advocacy should be allowed in an EC so long as the EC focuses on issue advocacy. Some commenters argued that issue advocacy groups should be free to run ECs that comment on officeholders' character and fitness for office in order to hold those officeholders accountable. Other commenters argued that condemning the record or past actions of a candidate or officeholder should automatically disqualify an EC from the exemption.

The following is a nonexclusive list of examples that will be considered to ``mention'' an election, candidacy, political party, opposing candidate or voting by the general public under section 114.15(b)(1), thereby causing an EC to fail to satisfy the first prong of the safe harbor. The Commission notes that because these examples only apply to the safe harbor provisions and to one factor in the rules of interpretation for the general exemption, use of these words or phrases will not necessarily disqualify any EC from the general exemption in section 114.15(a).

Specific references to an election date such as ``Support gun rights this November 5'' or references to electionrelated themes, such as pictures of a ballot or voting booth.

General references to voting such as ``Remember to vote to protect the environment.''

Specific references to the named candidate's office or candidacy, such as ``Bob Jones is running for Senate.''

References to political parties by official names, such as ``Democrats,'' or by nicknames or proxy descriptions such as ``GOP.''

Comparative references to incumbent and opposing candidate, such as ``Bob Smith supports our troops; Bill Jones cut veteran's benefits by 20%.''

Implied references to incumbents such as ``It's time to take out the trash, select real change with Bob Smith'' or ``This November, we can do better.''

The Commission agrees with the many commenters who argued that a reference to the past voting record of the officeholder or candidate on a particular issue does not by itself constitute taking a position on a candidate's or officeholder's character, qualifications, or fitness for office. Therefore, in determining whether an EC takes a position on the candidate's or officeholder's ``character, qualifications, or fitness for office'' under section 114.15(b)(2) the Commission will examine the entirety of the content of the EC. The Commission is providing examples of ECs below (see section 114.15(e)) that illustrate this analysis. [[Page 72904]]
b. 11 CFR 114.15(b)(3)Lobbying Communications or Commercial Advertisements

The third prong of the final rule's safe harbor combines the first two prongs of the NPRM's proposed grassroots lobbying communications safe harbor and the commercial and business advertisements safe harbor. In order to satisfy the third prong, an EC must meet either section 114.15(b)(3)(i) describing certain lobbying communications or section 114.15(b)(3)(ii) describing certain commercial advertisements.

In addition to finding an absence of ``indicia of express advocacy,'' the WRTL II decision concluded that WRTL's communications contained content ``consistent with that of a genuine issue ad'' because they ``focus on a legislative issue, take a position on the issue, exhort the public to adopt the position, and urge the public to contact public officials with respect to the matter.'' See WRTL, 127 S. Ct. at 2667. Based on the Court's analysis, the NPRM's proposed safe harbor for grassroots lobbying communications covered any EC that ``exclusively discusses a pending legislative or executive matter or issue'' and ``urges an officeholder to take a particular position or action with respect to the matter or issue, or urges the public to adopt a particular position and to contact the officeholder with respect to the matter or issue.'' See NPRM at 5026566.

Many commenters argued that the first prong of the safe harbor would be too narrow in several respects, including: (1) It required that the EC discuss the issue ``exclusively;'' (2) it required that the issue be ``pending;'' and (3) it was limited to ECs discussing ``legislative or executive'' issues. Some commenters also argued that the second prong of the safe harbor would be too narrow because it would be limited to officeholders and would not cover ECs that urged the public to contact the candidate simply to ascertain the candidate's position on a particular issue. Other commenters supported the proposed safe harbor's prongs as written and urged the Commission to limit the scope of the safe harbor. These commenters noted that a safe harbor should be narrower than the general exemption.

In response to some of these comments, the final rule incorporates certain modifications in the third prong of the safe harbor. Section 114.15(b)(3)(i) covers any EC that ``focuses on a legislative, executive or judicial matter or issue'' and either ``urges a candidate to take a particular position or action with respect to the matter or issue'' or ``urges the public to adopt a particular position and to contact the candidate with respect to the matter or issue.'' See 11 CFR 114.15(b)(3)(i)(A)(B). This formulation adopts the WRTL II decision's language that describes issue advertisements as ECs that ``focus'' on an issue rather than the NPRM's more narrow language that limits the safe harbor to ECs that ``exclusively discuss'' the issue. Thus, under this prong, an EC may qualify for the safe harbor even if it mentions other issues in addition to focusing on matters or issues listed in the safe harbor. In addition, the Commission agrees with the commenters that the safe harbor should cover not only legislative and executive issues as proposed in the NPRM, but also judicial matters. Furthermore, the final rule does not, as did the proposed rule, limit the subject matter of the EC to ``pending'' issues or matters. Instead, the new rule covers ECs that focus on any legislative, executive or judicial issue regardless of whether it is pending before one or more branches of government. This revision allows organizations to address, for example, issues that they believe should be placed on the legislative, executive, or judicial agenda in the future.

Finally, the Commission agrees with those commenters who pointed out that issue advocacy groups may urge a candidate who is not a sitting officeholder to take a certain position on a legislative, executive, or judicial issue, not because they want to advocate the candidate's election or defeat, but because they want the candidate to commit to taking action on a certain issue if the candidate is elected. Therefore, unlike the rule proposed in the NPRM, the final rule includes not only references to sitting officeholders but also references to any Federal candidates. However, in order to qualify for the safe harbor, the EC must either urge the candidates themselves to take a position, or urge the public to take a position and contact the candidates. General appeals to the public to ``educate themselves'' or to contact an organization to learn more about the issue will not satisfy this prong of the safe harbor. Appeals to the public to donate to the organization to help spread the word about the issue will not alone satisfy this prong of the safe harbor. However, such appeals to learn more or contribute will not disqualify from the safe harbor a communication which also includes exhortations to candidates or to the public to contact candidates. In addition, an appeal to learn about issues or to raise awareness (such as asking for donations to ``help spread the word'') may qualify as a ``call to action or other appeal'' under 11 CFR 114.15(c)(2)(iii) (see below).

The second part of the safe harbor's third prong in section 114.15(b)(3)(ii) is also based upon the safe harbor for commercial and business advertisements proposed in the NPRM, but includes slightly revised language. The NPRM proposed a safe harbor for any EC that ``exclusively advertises a Federal candidate's or officeholder's business or professional practice or any other product or service'' and that ``is made in the ordinary course of business of the entity paying for the communication.'' See NPRM at 50270. Many commenters supported the creation of a commercial and business advertisements safe harbor as consistent with the WRTL II decision. However, some commenters supporting the safe harbor argued that the proposed provision was too narrow to be useful to the business community. Specifically, a few commenters argued that the Commission should remove the ``ordinary course of business'' prong in the proposed rule. Another commenter criticized the proposed safe harbor as too ambiguous and difficult for advertisers to apply when deciding whether a particular EC may be run.

Other commenters urged the Commission not to adopt any additional safe harbors besides one for grassroots lobbying communications as specifically addressed in the WRTL II decision. However, the language of the Supreme Court's general test for determining whether an EC is exempt from the EC funding restrictions is not limited just to grassroots lobbying advertisements but covers any EC that is susceptible of a reasonable interpretation other than as an appeal to vote. As explained in the NPRM, many ECs could reasonably be interpreted as having a nonelectoral, business or commercial purpose. Therefore, the Commission believes that explaining how the WRTL II exemption applies to commercial and business advertisements is helpful to provide adequate guidance to those seeking to comply with the EC provisions.

Accordingly, the last part of the safe harbor's third prong applies to an EC that ``proposes a commercial transaction, such as purchase of a book, video or other product or service, or such as attendance (for a fee) at a film exhibition or other event.'' See 11 CFR
114.15(b)(3)(ii). The final rule substitutes ``proposes a commercial transaction'' for the ``in the ordinary course of business'' requirement proposed in the NPRM. As several
[[Page 72905]]
commenters pointed out, determining whether an EC is made in the ordinary course of business would require the Commission to look beyond the four corners of the EC and probe into the outside business affairs of the speaker. By contrast, the new ``proposes a commercial transaction'' language appropriately focuses the Commission's inquiry on the objective meaning of the content of the EC.

This prong of the safe harbor will be satisfied regardless of whether the product or service is provided by a business owned or operated by, or employing, the candidate referred to in the EC.\7\ Both ECs advertising a Federal candidate's appearance to promote a business or other commercial product or service, and ECs in which the Federal candidate is referred to as the subject of a book, video, or movie will be eligible for the safe harbor. The final rule clarifies that an advertisement urging the public to attend a film exhibition or other commercial event for a fee is also eligible for the safe harbor. By contrast, advertisements for noncommercial events, such as for charities or political events, do not meet this prong and do not qualify for the safe harbor, although they may qualify for the general exemption.
\7\ The Commission notes that these communications may nevertheless be subject to the Commission's coordination

regulations. 11 CFR 109.21

The Commission is providing examples of ECs that illustrate the analysis of this third prong of the safe harbor provision below (see section 114.15(e)).
3. 11 CFR 114.15(c)Rules of Interpretation for Electioneering Communications That Do Not Qualify for the Safe Harbor

The Commission has added new section 114.15(c) to explain how the Commission will analyze ECs that do not qualify for the safe harbor, given that the safe harbor does not include every EC that is permissible under section 114.15(a). Specifically, paragraph (c) of the final rule states that if an EC does not qualify for the safe harbor in section 114.15(b), the Commission will consider: ``whether the communication includes any indicia of express advocacy and whether the communication has an interpretation other than as an appeal to vote for or against a clearly identified Federal candidate in order to determine whether, on balance, the communication is susceptible of no reasonable interpretation other than as an appeal to vote for or against a clearly identified Federal candidate.'' As with the three prongs of the safe harbor, this analysis is drawn from the WRTL II decision's analysis of ``indicia of express advocacy'' and the content of WRTL's

communications.

Sections 114.15(c)(1) and (c)(2) describe in more detail the two factors that the Commission will consider in determining whether an EC qualifies for the general exemption in section 114.15(a). The Commission will consider both factors in all cases and will balance the findings under both parts of the test to determine whether an EC has no reasonable interpretation other than as an appeal to vote and is therefore not permissible under section 114.15(a).

For example, even if the Commission found that an EC includes no ``indicia of express advocacy,'' it could still determine that the EC does not have content that would support a determination the EC has an interpretation other than as an appeal to vote, and conclude overall that the EC is not permissible under section 114.15(a) because, on balance, the EC has no reasonable interpretation other than as an appeal to vote. Conversely, even if the Commission found that an EC does include ``indicia of express advocacy,'' it could determine that the EC nevertheless has content that would support a determination that a EC has an interpretation other than a call to electoral action, and conclude overall that the EC is permissible under section 114.15(a) because, on balance, that interpretation is reasonable despite the presence of indicia of express advocacy. The Commission could also find no indicia of express advocacy in an EC, decide that there is content in the EC to support an interpretation of the EC as something other than a call to electoral action, but conclude overall that the EC is not permissible under section 114.15(a) because, on balance, that interpretation is not reasonable.

a. 11 CFR 114.15(c)(1)Indicia of Express Advocacy

Section 114.15(c)(1) states that under the first factor of this analysis, an EC ``includes indicia of express advocacy'' if it ``mentions any election, candidacy, political party, opposing candidate, or voting by the general public'' or ``takes a position on any candidate's or officeholder's character, qualifications, or fitness for office.'' See 11 CFR 114.15(c)(1)(i)(ii). This list is taken from the WRTL II decision, and is a combination of the two lists contained in the first two prongs of the safe harbor in section 114.15(b).

The Commission agrees with the many commenters who argued that mentioning an election or opposing candidate, referring to a candidate's qualifications, or commenting on a sitting officeholder's character should not by itself disqualify an EC from the general exemption in section 114.15(a). Thus, although an EC that includes any one of the references on the list is automatically disqualified from the safe harbor, such an EC may still qualify for the general exemption under the analysis in section 114.15(c).

b. 11 CFR 114.15(c)(2)Content of Communications

The second factor in paragraph (c)(2) states: ``Content that would support a determination that a communication has an interpretation other than as an appeal to vote for or against a clearly identified Federal candidate includes'' three types of content. See 11 CFR 114.15(c)(2). This list of the three types of content is nonexhaustive and the Commission may also consider other types of content to determine whether an EC has some other interpretation besides urging electoral action.

The first type of content that supports a determination that an EC has an interpretation other than as an appeal to vote is content that ``focuses on a public policy issue and either urges a candidate to take a position on the issue or urges the public to contact the candidate about the issue.'' See 11 CFR 114.15(c)(2)(i). This provision is broader than the issue advocacy provision of the safe harbor in section 114.15(b) in two ways. First, it considers whether the EC focuses on a ``public policy issue'' rather than, as required by the safe harbor, a ``legislative, executive, or judicial matter.'' Thus, an EC's content may support a determination that it has an interpretation other than as an appeal to vote if it discusses any matter of public importance even if the matter is not a ``legislative, executive, or judicial matter,'' but is instead, for example, a State action or an international event. Second, this provision considers whether an EC urges viewers to contact the candidate about the issue, rather than, as required by the safe harbor, urge viewers ``to adopt a particular position'' and contact the candidate about the issue.

Paragraph (c)(2)(ii) sets out the second type of content that supports a determination that an EC has an interpretation other than as an appeal to vote. This consists of content that ``proposes a commercial transaction, such as purchase of a book, video or other product or service, or such as attendance (for a fee) at a film exhibition
[[Page 72906]]
or other event.'' This provision is identical to the commercial transaction provision of the safe harbor in section 114.15(b)(3)(ii). However, the Commission might have to analyze an EC that satisfies the commercial transaction provision of the safe harbor under the rules of interpretation in section 114.15(c), because the EC included references to candidacies or elections that preclude qualification for the safe harbor. For example, a commercial advertisement for a book with the title ``50 Reasons Not to Vote for Congressman Smith'' would not satisfy the first prong of the safe harbor in section 114.15(b)(1). Therefore, the Commission would analyze such an advertisement under section 114.15(c)(2)(ii).

Section 114.15(c)(2)(iii) is a more general provision intended to apply to other types of ECs not covered by the public policy issue and commercial transaction provisions. The final rule states that an EC has content supporting a determination of an interpretation other than as an appeal to vote if it ``includes a call to action or other appeal that interpreted in conjunction with the rest of the communication as urging action other than voting for or against or contributing to a clearly identified Federal candidate or political party.'' See 11 CFR 114.15(c)(2)(iii). The Commission will look at the entire content of the EC to determine whether an EC includes such a ``call to action.''

This third provision was added, in part, to respond to commenters who urged the Commission to create a safe harbor provision for other categories of ECs, such as public service announcements. See NPRM at 5027071. These commenters argued that public service announcements and charity advertisements can easily be interpreted as something other than an appeal to vote even though they simply provide information to the public without any specific ``call to action.'' For example, an EC that urges the public to sign up for a preventative screening for a particular type of cancer and includes a Federal candidate endorsing the organization's work on cancer research, would likely be deemed to have content that supports a determination that the EC has an interpretation other than as an appeal to vote.\8\ Another common example is an EC that urges viewers to ``find out more'' or visit a Web site for ``more information.'' In analyzing this type of EC, the Commission will look to the actual content of the EC itself to determine whether the ``find out more'' call to action can be interpreted as something other than a call to vote for or against a Federal candidate. Other possible ``calls to action'' under this provision are requests to donate money to a particular charitable organization or disaster relief fund. However, the final rule excludes from this provision requests to make contributions to any clearly identified Federal candidate or political party. Finally, as discussed above, the Commission will analyze ECs promoting charity events under this provision.
\8\ The Commission notes that these communications may nevertheless be subject to the Commission's coordination
regulations. 11 CFR 109.21.

c. 11 CFR 114.15(c)(3)Interpreting the Communication

Several commenters argued that in analyzing whether an EC qualifies for the WRTL exemption, the Commission should be guided by the principle, articulated by the Supreme Court in WRTL II, that ``[w]here the First Amendment is implicated, the tie goes to the speaker.'' See WRTL II, 127 S. Ct. at 2669. New section 114.15(c)(3) incorporates the principle that ``the tie goes to the speaker'' by providing that ``in interpreting a communication under paragraph (a), any doubt will be resolved in favor of permitting the communication.'' See 11 CFR 114.15(c)(3). The Commission intends to follow this principle in determining whether, on balance, the EC is susceptible of a reasonable interpretation other than as an appeal to vote and therefore is permissible under section 114.15(a).

4. 11 CFR 114.15(d)Information Permissibly Considered

As the NPRM explained, the exemption in section 114.15(a) is objective, focusing on the substance of the EC rather than ``amorphous considerations of intent and effect.'' WRTL II, 127 S. Ct. at 2666. In determining whether a particular EC is susceptible of a reasonable interpretation other than as an appeal to vote for or against a clearly identified Federal candidate, the Commission may consider ``basic background information that may be necessary to put an ad in context.'' Id. at 2669.\9\ According to the WRTL II decision, this information could include whether a communication ``describes a legislative issue that is either currently the subject of legislative scrutiny or likely to be the subject of such scrutiny in the near future.'' Id. (internal citation omitted). See also NPRM at 50264. However, the Court cautioned that inquiry into such relevant background should not require burdensome or broad inquiries with extensive discovery. See WRTL II, 127 S. Ct. at 2669.
\9\ The Commission must also consider certain basic facts such as the timing and targeting of the communication in order to determine whether a communication satisfies the basic definition of EC under BCRA and section 100.29(a) (i.e., whether the communication was broadcast within the last thirty or sixty days before a Federal election within the district of the referenced Federal candidate).

Many commenters urged the Commission to clarify in the rule the extent to which the Commission would consider contextual information outside the actual text and visuals of the EC itself when applying the WRTL II exemption. The final rule in new section 114.15 includes a new paragraph (d), which limits the contextual information the Commission will consider when analyzing ECs under the WRTL II exemption. Some commenters urged the Commission to include in the rule text a list of the types of information that the Commission would consider in evaluating ECs, such as legislative calendars and news stories, and a list of the types of contextual information that the Commission would not consider in its analysis, such as timing of the EC, prior communications or outside activities of the speaker, and the EC's actual effect on elections. Instead of attempting to create exhaustive lists that would fit every circumstance, the final rule sets forth general principles that will guide the Commission's consideration of ``external facts'' beyond the four corners of the EC.

Specifically, section 114.15(d) states that when evaluating an EC under the general exemption or the safe harbor, the Commission may consider only the EC itself and ``basic background information that may be necessary to put the communication in context and which can be established with minimal, if any, discovery.'' See 11 CFR 114.15(d). The rule provides the following examples of such basic background information: Whether a named individual is a candidate or whether an EC describes a public policy issue. The Commission will also consider similar background facts about the public policy issue, commercial product or service, or other topics discussed in the EC, so long as these facts may be established with minimal discovery.

5. 11 CFR 114.15(e)Examples of Communications

In the NPRM, the Commission included a number of examples of communications that would, and would not, qualify for the proposed grassroots
[[Page 72907]]
lobbying communications safe harbor. See NPRM at 5026769. The Commission sought public comment on whether the final rule should include such examples in the E&J or the rule text itself. See NPRM at 50267. The Commission also asked whether there were additional examples of communications that should be included in the list. The commenters that discussed the question of where examples of communications should be published all favored inclusion of those examples in the E&J instead of the rule text.

After consideration of the comments, the Commission has decided to include examples of communications in the E&J instead of the rule. In addition, section 114.15(e) includes a statement to direct readers of the regulation to the Commission's web site on which the Commission will place the examples discussed in this E&J. The Commission intends to update this web page to include examples from court cases, advisory opinions and enforcement matters that apply the WRTL II exemption in the future.

The following examples are illustrative only and are not intended to create a requirement for any particular words or phrases to be included before an EC will be permissible under the WRTL II exemption. These examples are drawn from past court cases and Commission advisory opinions and enforcement matters.
a. Examples of Communications that Qualify for the Safe Harbor in 11 CFR 114.15(b)
Example 1

FOR FURTHER INFORMATION CONTACT

Mr. Ron B. Katwan, Assistant General Counsel, Mr. Anthony T. Buckley, or Ms. Margaret G. Perl, Attorneys, 999 E Street, NW., Washington, DC 20463, (202) 6941650 or (800) 424 9530.

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