FederalElectionCommission

Annual Report 2000

FederalElectionCommission

Annual Report 2000

Federal Election CommissionWashington, DC 20463

CommissionersDanny L. McDonald, ChairmanDavid M. Mason, Vice ChairmanKarl J. Sandstrom, CommissionerBradley A. Smith, CommissionerScott E. Thomas, CommissionerDarryl R. Wold, Commissioner

Statutory OfficersJames A. Pehrkon, Staff DirectorLois G. Lerner, Acting General CounselLynne A. McFarland, Inspector General

The Annual Report is prepared by:Louise D. Wides, Assistant Staff Director,

Information DivisionGregory J. Scott, Deputy Assistant Staff Director,

Information DivisionKathleen K. Miller, Public Affairs Specialist,

Information DivisionRobert W. Biersack, Supervisory Statistician,

Data Division

Chapter SixLegislative Recommendations 35

Chapter SevenCampaign Finance Statistics 55

Appendices1. Biographies of Commissioners

and Officers 692. Chronology of Events 713. FEC Organization Chart 754. FEC Offices 775. Statistics on Commission Operations 816. 2000 Federal Register Notices 857. Summaries of Selected New Regulations 87

Introduction 1

Chapter OneKeeping the Public InformedPublic Disclosure 3Educational Outreach 6Office of Election Administration 8

Chapter TwoInterpreting and Enforcing the LawRegulations 9Advisory Opinions 9Enforcement 10Administrative Fines Program 11Alternative Dispute Resolution Program 13

Chapter ThreePresidential Public FundingShortfall 15Certification of Public Funds 15Use of Public Funds 17Public Funding Regulations 18Presidential Debate Lawsuits 18Repayment of Public Funds–1996 Election 19

Chapter FourLegal IssuesExpress Advocacy 21Corporate Contributions 22Coordination 23Use of Internet 26Soft Money 28American Indian Tribes 29

Chapter FiveThe CommissionCommissioners 31General Counsel 31Inspector General 31ADR and Administrative Fines Offices 31Equal Employment Opportunity 31Personnel 32The FEC’s Budget 32

Table of Contents

Table of Charts

Chapter OneKeeping the Public InformedChart 1-1:Size of Detailed Database by Election Cycle 5

Chapter TwoInterpreting and Enforcing the LawChart 2-1:Conciliation Agreements by Calendar Year 11Chart 2-2:Median Civil Penalty by Calendar Year 11Chart 2-3:Ratio of Active to Inactive Cases by Calendar Year 12Chart 2-4:Cases Dismissed under EPS 12Chart 2-5:Monthly Average Number of Respondents and

Pending Cases by Calendar Year 12Chart 2-6:Percentage of Reports Filed Late 13

Chapter ThreePresidential Public FundingChart 3-1:Matching Fund Certifications 16

Chapter FiveThe CommissionChart 5-1:Functional Allocation of Budget 32Chart 5-2:Divisional Allocation 33

Chapter SevenCampaign Finance StatisticsChart 7-1:Number of PACs, 1974-2000 55Chart 7-2:House Candidates’ Sources of Receipts:

Election Cycle 56Chart 7-3:Senate Candidates’ Sources of Receipts:

Election Cycle 57

Chart 7-4:House and Senate Activity by Election Cycle 58Chart 7-5:PAC Contributions to Candidates by Party

and Type of PAC 59Chart 7-6:PAC Contributions to House and Senate

Candidates by Party and Candidate Status 60Chart 7-7:PAC Contributions to House Candidates

by Type of PAC and Candidate Status 61Chart 7-8:Major Party Federal Account Receipts: 2000 62Chart 7-9:Party Federal and Nonfederal Receipts 63Chart 7-10:Sources of Party Receipts 64Chart 7-11:Receipts of Presidential Primary Campaigns

by Source 65Chart 7-12:2000 General Election: Funding Sources

of Candidates Receiving Public Grants 66Chart 7-13:Presidential Spending by 2000 General

Election Campaigns 67

1Introduction

The Federal Election Commission introduced anumber of innovations during the year designed toimprove disclosure, promote compliance and stream-line agency operations.

With respect to disclosure, new electronic filingregulations, effective January 1, 2001, require filers tosubmit their campaign finance reports electronically ifthey raise or spend over $50,000 in a calendar year,or expect to do so. Since reports filed electronicallyare publicly available almost instantaneously, the newregulations will result in more timely disclosure ofcampaign finance data.

During the 2000 campaign, all Presidential candi-dates who received public funding were required tofile their reports electronically. This process permittedimmediate comprehensive disclosure of informationfrom these reports. In addition, more than 1,000 othercommittees voluntarily filed electronically during 2000.

Other disclosure rules that take effect in 2001 re-quire candidates to disclose their campaign activity onan election-cycle basis, rather than the calendar-yearbasis used in the past. The change makes it easier forcampaigns, the public and the Commission to trackcandidates’ aggregate receipts and disbursements.

The Commission’s new Administrative Fines pro-gram streamlines the agency’s processing of violationsinvolving committees that file reports late or fail to file.Like the Commission’s enforcement process, the Ad-ministrative Fines program encourages complianceand, thereby, should improve disclosure. The rulesimplementing the program took effect July 14, 2000.

Another compliance-related initiative, theCommission’s new Alternative Dispute Resolution(ADR) program, encourages settlements outside thetraditional enforcement and litigation processes. TheCommission anticipates that the pilot program will helpreduce the agency’s burgeoning enforcement workload.

These innovations, combined with theCommission’s oversight of the financing of the Presi-dential and Congressional elections, made 2000 abusy and productive year at the FEC.

The material that follows details the Commission’sactivities during the year. Additional information con-cerning most matters may be found in the monthlyissues, published in 2000, of the FEC newsletter, theRecord.

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The FEC’s disclosure and educational outreachprograms work hand-in-hand to help educate theelectorate and promote compliance with the campaignfinance law. Public knowledge about who contributesand how candidates and committees spend theirmoney helps to create an informed electorate. At thesame time, public scrutiny of campaign financerecords encourages the regulated community to com-ply with the law, while educational outreach to theregulated community helps promote compliance byfostering understanding of the law.

As detailed below, new regulations and other inno-vations introduced during 2000 promise to enhanceand streamline the disclosure and educational out-reach programs.

Public DisclosureDisclosing the sources and amounts of funds spent

on federal campaign activity continued to be the cen-terpiece of the Commission’s work during 2000. TheCommission received the reports filed by committees,reviewed them to ensure compliance with the law,entered the data into the FEC’s computer databaseand made the reports available to the public within 48hours of receipt.

New disclosure regulations, combined with contin-ued advances in computer technology, greatly en-hanced the disclosure process during 2000. As de-tailed below, these changes are expected to benefitboth the public and the regulated community.

New RegulationsDuring 2000, the Commission promulgated regula-

tions to implement four disclosure-related legislativeamendments. The first mandates electronic filing forfilers whose financial activity exceeds a certainthreshold. The second requires authorized candidatecommittees to report on an election-cycle (rather thancalendar-year) basis. The third relieves committees ofthe obligation to file copies of their FEC reports withstate election offices in certain states. The fourth ex-pands the Freedom of Information Act (FOIA) to in-clude electronic records.

Electronic FilingBeginning with the reporting periods that start on or

after January 1, 2001, all persons required to file re-ports with the FEC who receive contributions or makeexpenditures in excess of $50,000 in a calendar year,or who expect to do so, must submit their campaignfinance reports electronically. Any filers who are re-quired to file electronically, but who file on paper, willbe considered nonfilers and may be subject to en-forcement action.

The new rules, approved by the Commission onJune 15, will provide faster disclosure of filed reportsand streamline operations for both filers and the Com-mission. The Commission estimates, based on datafrom the 1996 and 1998 election cycles, that, with the$50,000 threshold, 96 to 98 percent of all financialactivity reported to the FEC will be available almostimmediately on the FEC’s Web site.

Mandatory electronic filing comes on the heels ofthe Commission’s successful voluntary electronicfiling program. Launched in January 1997, the volun-tary program permitted filers to submit reports to theCommission by modem and via the Internet, using theagency’s free FECFile software or compatible com-mercial software applications.

The growth of voluntary electronic filing has beensmooth and impressive. In April 1998, 50 committeeshad filed electronically. Now, just two years later, thatnumber has increased to 1,033 committees, morethan half of whom began filing electronically in 2000.To date, electronic filers have transmitted reports tothe Commission disclosing over $1 billion in transac-tions. Careful planning has ensured that this growth,and the rapid expansion that will occur when manda-tory electronic filing begins, will not stress the elec-tronic filing system.

Building on this success, the Commission intro-duced an additional on-line filing system in October2000. In order to reduce the number of faxed, mailedand hand-delivered 48-hour notices (disclosing last-minute contributions of $1,000 or more), the Commis-sion developed a Web-based filing system to enablecandidate committees to create and submit their 48-hour notices entirely on line. Using the new system,even campaigns that do not file electronically andthose that use software that does not generate the

Chapter OneKeeping the Public Informed

Chapter One4

48-Hour disclosure form (FEC Form 6) can file their48-Hour Notices on line.

As part of the Commission’s effort to ease the tran-sition from paper to electronic filing, the FEC’s Elec-tronic Filing Office conducted classes in electronicfiling. The classes covered FECFile basics, data entryrequirements for all types of transactions and proce-dures for reviewing and filing reports. In addition tothe classes, which were held at the Commission, staffalso presented information on electronic filing at FECconferences throughout the country.

A complete summary of the new electronic filingregulations appears in Appendix 7.

Election Cycle ReportingOn July 5, 2000, the Commission approved new

regulations requiring authorized committees of federalcandidates to aggregate and report receipts and dis-bursements on an election-cycle basis rather than onthe traditional calendar-year basis. These revisedregulations affect reports covering periods that beginon or after January 1, 2001. The new rules do notaffect PACs or party committees.

The change to election cycle reporting is intendedto simplify recordkeeping and reporting. Under the oldrules, candidate committees monitored contributionlimits on a per-election basis, but disclosed their fi-nancial activity on a calendar-year-to-date basis. Un-der the new system, committees report all of theirreceipts and disbursements on an election-cycle ba-sis. 11 CFR 104.3. For example, campaigns mustitemize a donor’s contributions once they exceed$200 for the election cycle, rather than for the calen-dar year. Likewise, candidate committees must item-ize disbursements to a person once they aggregate inexcess of $200 within the election cycle.

Under FEC regulations, an election cycle typicallybegins the day after the general election for a seat oroffice and ends on the day of the next general elec-tion for that seat or office. The length of the electioncycle, thus, depends on the office sought: the electioncycle is two years for House candidates, six years forSenate candidates and four years for Presidentialcandidates.

A complete summary of the new regulations ap-pears in Appendix 7.

State Filing WaiversOn March 16, 2000, the Commission approved

revisions to its rules governing the filing of campaignfinance reports with state officers and the duties ofstate officers concerning the reports. The regulations,which took effect June 7, 2000, codify theCommission’s state waiver program that began inOctober 1999.

Under the program, filers whose reports are avail-able on the FEC Web site need not file duplicate cop-ies of their reports in states that provide adequatepublic access to the Commission’s site.

Initially, the waiver did not apply to Senate commit-tees because their reports—which are filed with theSecretary of the Senate—were not available on theFEC Web site. Thanks to a joint effort by the Commis-sion and Secretary of the Senate, the Commissionwas able to extend the State Filing Waiver Program toinclude campaigns for U.S. Senate and other politicalcommittees that support only U.S. Senate candidates.

At the close of 2000, 46 states/territories had quali-fied for the state filing waiver.1

EFOIAIn another disclosure-related regulatory project, on

February 17, 2000, the Commission approved rulesimplementing the Electronic Freedom of InformationAct Amendments of 1996 (EFOIA). The Freedom ofInformation Act (FOIA) provides public access to allfederal agency records except those that are pro-tected from release by specified exemptions. TheEFOIA extends that access to electronic records and

1 As of December 31, 2000, the Commission had certi-fied that the following states and territories qualify for filingwaivers: Alabama, American Samoa, Arkansas, California,Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii,Idaho, Illinois, Indiana, Kansas, Kentucky, Louisiana,Maine, Maryland, Michigan, Minnesota, Mississippi, Mis-souri, Nebraska, New Hampshire, New Jersey, NewMexico, New York, North Carolina, North Dakota, Ohio,Oklahoma, Oregon , Pennsylvania, Rhode Island, SouthCarolina, South Dakota, Tennessee, Texas, Utah, Vermont,Virginia, Virgin Islands, Washington, West Virginia, Wiscon-sin and Wyoming.

Keeping the Public Informed 5

makes other changes in FOIA procedures that aredesigned to expedite and streamline the process bywhich agencies disclose information generally. TheEFOIA requires each agency to make reasonableefforts to ensure that its records can be reproducedand searched electronically, except when such effortswould significantly interfere with the operation of theagency’s automated information system. The Com-mission has amended its FOIA rules to apply thesestatutory changes to its electronic records and proce-dures.

New Disclosure Forms for 2001In light of the new electronic filing and election

cycle reporting requirements, the Commission up-dated its campaign finance disclosure forms during2000. Some of the forms were reformatted so thatstaff could process them faster and more easily andso that they could eventually be read electronicallythrough optical character recognition (OCR), in antici-pation of the Commission’s future use of this technol-ogy. The Commission plans to make the new formsavailable for use in the first reporting periods coveringactivity in 2001.

Imaging and Processing Campaign Finance DataFor several years, the Commission has scanned all

of the paper reports filed with the agency to createdigital images of the documents. Since Senate com-mittees file with the Secretary of the Senate ratherthan the FEC, their reports have not been scanned. InSeptember 2000 that changed, thanks to a joint effortof the Commission and the Secretary’s office. Now,the Secretary of the Senate scans all of the paperreports it receives and makes the images available tothe FEC. As a result, the public can view digital im-ages of all types of reports in the FEC’s PublicRecords Office or on the Commission’s Web site.

In addition to the digital imaging system, the Com-mission codes and enters information taken fromcampaign finance reports into the agency’s disclosuredatabase, which contains data from 1977 to thepresent. Information is coded so that committees areidentified consistently throughout the database. Con-sistency is crucial to maintaining records of which

committees received contributions from individualsand which PACs made contributions to a specificcandidate. For example, if a PAC’s report states that itmade a contribution to the Smith for Congress com-mittee with a Washington address, staff must deter-mine which candidate committee, among those withthe name Smith and operating in Washington, thereport referred to.

CHART 1-1Size of Detailed Database by Election Cycle

Year Number of Detailed Entries*

1990 767,0001991 444,000†1992 1,400,0001993 472,0001994 1,364,0001995 570,0001996 1,887,1601997 619,1701998 1,652,9041999 840,2412000 2,390,837

* Figures for even-numbered years reflect the cumulativetotal for each two-year election cycle.† The FEC began entering nonfederal account data in 1991.

Public Access to Campaign DataDuring 2000, the Commission continued to expand

access to campaign finance data via its Web site—www.fec.gov. In September, the agency enhancedthe site’s query system by offering visitors quick ac-cess to summary statistical information on candidates,PACs and political party committees. Visitors couldselect by state, by political party or by candidate sta-tus (incumbent, challenger or open-seat), then simplyclick to access detailed lists of individual or PAC con-tributions. These new features supplement the site’s

Chapter One6

existing query system, which allows visitors to accessthe name and contribution amount of any individualwho contributed $200 or more to a federal politicalcommittee; to access lists of PACs or party commit-tees that contributed to specific candidates; and toview lists of candidates to whom selected PACs andparties contributed.

The Commission’s disclosure database, whichcontains millions of transactions, enables researchersto select information in a flexible way. For example,the database can instantly produce a profile of acommittee’s financial activity for each election cycle.As another example, researchers can customize theirsearches for information on contributions by using avariety of elements (e.g., donor’s name, recipient’sname, date, amount or geographic location).

Visitors to the Public Records Office used com-puter terminals to inspect digital images of reportsand to access the disclosure database and more than25 different campaign finance indices that organizethe data in different ways. Visitors could also accessthe FEC’s Web site, which offers search and retrievalof more than 3 million images of report pages datingback to 1993 and over 2 million database entriessince 1997. Those outside Washington, DC, alsoaccessed the information via the Internet or the DirectAccess Program, or ordered it using theCommission’s toll-free number.

The Public Records Office continued to make avail-able microfilmed copies of all campaign finance re-ports, paper copies of reports from Congressionalcandidates and Commission documents such aspress releases, audit reports, closed enforcementcases (MURs) and agenda documents.

Review of ReportsThe Commission’s Reports Analysis Division

(RAD) reviews all reports to ensure that the publicrecord provides a full and accurate portrayal of cam-paign finance activity and to track compliance with thestatute and regulations. When reports analysts findthat a report contains errors or suggests violations ofthe law, they send the reporting committee a requestfor additional information (RFAI). The committee trea-surer can then make additions or corrections to the

report, which are added to the public record. Apparentviolations, however, may be referred to the Audit Divi-sion or to the Office of General Counsel for possibleenforcement action.

During 2000, reports analysts reviewed thousandsof reports, which disclosed significantly more financialactivity than was reported in 1998. Although severalhundred committees voluntarily filed electronically,most committees continued to file paper reports. Withthe advent of mandatory electronic filing, the Commis-sion will be able to further automate its review pro-cess. During 2000, RAD staff worked with a contrac-tor to develop such a program.

Educational OutreachThe Commission continued to promote voluntary

compliance with the law by educating committeesabout the law’s requirements.

Home Page (www.fec.gov)In its fifth year of operation, the Commission’s Web

site continued to offer visitors a variety of resources.On February 1, 2000, the FEC added agenda docu-ments for its public meetings to the site. In addition,visitors could continue to search for advisory opinions(AOs) on the Web by using words or phrases or byentering the year and AO number, and could access avariety of rulemaking documents, including Notices ofProposed Rulemaking and final rules. Visitors couldalso access brochures on a variety of topics, readagency news releases, review national election re-sults and voter registration and turnout statistics, lookup reporting dates and download the national mailvoter registration form, FEC registration and reportingforms, copies of the Record newsletter, the CampaignGuides for PACs, parties and candidates and otheragency publications.

The site averaged about 2 million hits per month in2000, but logged more than 10 million hits in October,the highest monthly usage ever.

Telephone AssistanceA committee’s first contact with the Commission is

often a telephone call to the agency’s toll-free infor-

Keeping the Public Informed 7

mation hotline. In answering questions about the law,staff research relevant advisory opinions and litiga-tion, as needed. Callers receive, at no charge, FECdocuments, publications and forms. In 2000, the Infor-mation Division responded to 54,178 callers with com-pliance questions.

FaxlineThe Commission’s automated Faxline continued to

be a popular method for the public to obtain publica-tions or other documents quickly and easily.

During 2000, 1,714 callers sought information fromthe 24-hour Faxline and received 2,319 documents.

Reporting AssistanceDuring 2000, reports analysts, assigned to review

committee reports, were also available to answercomplex reporting and compliance-related questionsfrom committees calling on the toll-free line.

The Commission continued to encourage timelycompliance with the law by mailing committees re-minders of upcoming reporting deadlines three weeksbefore the due dates. The Record, the Commission’snewsletter, and the FEC’s Web site also listed report-ing schedules and requirements.

RoundtablesThe FEC continued its roundtable sessions for the

regulated community. The roundtables, limited to 10-12 participants per session, focused on a range oftopics from soliciting funds via the Web to completingFEC reports.

ConferencesDuring 2000, the agency conducted a full program

of conferences to help candidates and committeesunderstand and comply with the law. The Commissionhosted conferences in Washington, DC, for candi-dates, corporations and labor organizations, andmembership and trade associations. In addition, theagency held a regional conference in Miami for alltypes of committees.

The conferences featured hands-on workshops onthe fundamental areas of the law and specializedsessions on the Commission’s electronic filing pro-

gram and on the impact of recent court decisions onthe federal election law.

Tours and VisitsVisitors to the FEC during 2000, including student

groups and foreign delegations, listened to presenta-tions about the campaign finance law and, in somecases, toured the agency’s Public Records office.

Media AssistanceThe Commission’s Press Office continued to field

questions from the press and navigate reportersthrough the FEC’s vast pool of information. PressOffice staff responded to 16,714 calls and visits frommedia representatives and prepared 84 news re-leases. Many of these releases alerted reporters tonew campaign finance data and illustrated the statis-tics in tables and graphs.

PublicationsDuring 2000, the Commission published several

documents to help committees, the press and thegeneral public understand the law and find informa-tion about campaign finance. All of the new publica-tions were available both in print and on the FEC Website.

Among the new publications was a brochure on theCommission’s new Alternative Dispute Resolution(ADR) Program (discussed in Chapter Two). Thebrochure offers a step-by-step description of the ADRprocess.

As in past years, the Commission continued toprovide more than 10,000 free subscriptions to itsmonthly newsletter, the Record. The newsletter sum-marizes recent advisory opinions, compliance cases,audits, litigation and changes in regulations. It alsoincludes graphs and charts on campaign finance sta-tistics. During 2000, the Commission published aspecial Record Supplement summarizing regulatorychanges since 1995.

The Combined Federal/State Disclosure Directory2000 directs researchers to federal and state officesthat provide information on campaign finance, candi-

Chapter One8

dates’ personal finances, lobbying, corporate registra-tion, election administration and election results. TheCommission also published a new edition ofPacronyms, an alphabetical list of acronyms, abbre-viations, common names and locations of federalPACs. The publication lists PACs’ connected, spon-soring or affiliated organizations and helps research-ers identify PACs and locate their reports. Both thedisclosure directory and PAC listing were availablenot only in print and on the Web, but also on com-puter disks formatted for popular hardware and soft-ware. The Web page version of the Disclosure Direc-tory includes hyperlinks to the Web pages of stateoffices and e-mail addresses for state officials.

The Commission also published a supplement toCampaign Finance Law 2000—a summary of statecampaign finance laws—and posted “quick referencecharts” from it on the FEC Web site. The report sum-marizes the campaign finance laws of the U.S. territo-ries and possessions of American Samoa, Guam, theCommonwealth of the Northern Mariana Islands, theCommonwealth of Puerto Rico and the U.S. VirginIslands.

Office of Election AdministrationIn 2000, the Office of Election Administration (OEA)

continued its work in updating the Voting SystemsStandards. During the first half of the year, staff at-tended three public meetings with the members of theNational Association of State Election Directors(NASED) Voting Systems Board, vendors of votingsystems and team members from American Manage-ment Systems (AMS), contractors to the FEC onStandards, to discuss pertinent issues, to listen toconcerns from the vendor community, and to refineand review initial drafts of the Standards.

OEA staff also assisted the National Taskforce onElection Accessibility in its study of polling place ac-cessibility for the elderly and disabled; it mailed sur-vey forms to approximately 8,000 local election offi-cials across the U.S.

On August 10, 2000, the OEA convened a one daymeeting of its Advisory Panel of state and local elec-tion officials in Washington, DC. The meeting featured

lectures and discussion on the Supreme Court rulingin California Democratic Party v. Jones and its effecton blanket primaries. Other agenda items included areview of legislation concerning polling place accessi-bility, internet voting and a briefing on the status of theVoting Systems Standards update.

Over the course of the year, staff also worked tomake a significant amount of new information avail-able through the FEC Web site (www.fec.gov). Thisinformation included:• Answers to frequently asked questions about voter

registration, state election day and voting proce-dures, and absentee voting;

• Voter registration and turnout demographics fromthe 1998 general election;

• Constitutional provisions relating to elections;• Statutory provisions relating to elections;• The administrative structure of state election offices;

and• Updates to the National Mail Voter Registration form.

During the hectic pre-election season, OEA staffconducted briefings on U.S. election procedures forover 1,100 foreign journalists, legislators and electionofficials.

9

As part of its mission to administer and enforce theFederal Election Campaign Act, the Commission pro-mulgates regulations and issues advisory opinions topromote voluntary compliance with the law. The regu-lations explain the law in detail, sometimes incorporat-ing interpretations of the law that the Commissionmade in advisory opinions. Advisory opinions, in turn,clarify how the statute and regulations apply to real-life situations.

The agency’s enforcement actions also promotecompliance by correcting past violations and demon-strating to the regulated community that violations canresult in civil penalties and remedial action. During2000, the Commission introduced two new pro-grams—Administrative Fine and Alternative DisputeResolution—that should similarly foster compliance.

RegulationsThe rulemaking process generally begins when the

Commission votes to publish proposed rules in theFederal Register and seeks public comment on them.The agency may also invite those making writtencomments to testify at a public hearing. The Commis-sion considers the comments and testimony whendeliberating on the final rules in open meetings. Onceapproved, the text of the final regulations and theaccompanying Explanation and Justification are pub-lished in the Federal Register and sent to the U.S.House of Representatives and Senate. The Commis-sion publishes a notice of effective date after the finalrules have been before Congress for 30 legislativedays.

Rulemakings Completed in 2000The Commission completed work on the following

new rules during 2000:• Rules mandating electronic filing for committees

whose financial activity exceeds $50,000 per year.Took effect January 1, 2001. (See page 3.)

• Rules changing the reporting aggregation require-ments for candidate committees from a calendar-year to an election-cycle basis. Took effect January1, 2001. (See page 4.)

Chapter TwoInterpreting andEnforcing the Law

• Rules granting certain states a waiver from the re-quirement to receive and maintain copies of reportsand statements filed by federal committees. Tookeffect June 7, 2000 . (See page 4.)

• Rules implementing an Administrative Fine Programfor committees that fail to file reports or file late.Took effect July 14, 2000. (See page 11.)

• Amendments to the FEC’s Freedom of InformationAct regulations to comply with the Electronic Free-dom of Information Act Amendments of 1996(EFOIA), which were enacted to make governmentdocuments available by electronic means. Tookeffect March 27, 2000 . (See page 4.)

• Rules governing coordinated communications madein support of or in opposition to clearly identifiedcandidates by persons other than candidates, autho-rized committees and party committees. ApprovedNovember 30, 2000. (See page 24.)

Other Rulemakings in ProcessIn addition to completing the above rules, the Com-

mission took the following regulatory actions:• It reviewed and analyzed more than 1,200 com-

ments received in response to a Notice of Inquiryregarding the use of the Internet to conduct cam-paign activity. (See page 26.)

• It began consideration of final rules on allocation ofexpenses between federal and nonfederal accounts.(Soft Money, see page 28.)

• It declined to act on a rulemaking petition filed by theProject on Government Oversight (POGO) that rec-ommended changes to the rules governing reportingby political action committees.

Advisory OpinionsThe Commission responds to questions about how

the law applies to specific situations by issuing advi-sory opinions. When the Commission receives a validrequest for an advisory opinion, it generally has 60days to respond. If, however, a candidate’s campaignsubmits a valid request within 60 days before an elec-tion, and the request directly relates to that election,the Commission must respond within 20 days. The

Chapter Two10

Office of General Counsel prepares a draft opinion,which the Commissioners discuss and vote uponduring an open meeting. A draft opinion must receiveat least four favorable votes to be approved.

The Commission issued 41 advisory opinions in2000. Of that number, seven involved use of theInternet, and at least one examined party committees’use of “soft money.” These and other 2000 advisoryopinions are discussed in Chapter Four, “Legal Is-sues.”

Enforcement

The Enforcement ProcessThe Commission learns of possible election law

violations in three ways. The first is the agency’smonitoring process—potential violations are discov-ered through a review of a committee’s reports orthrough a Commission audit. The second is the com-plaint process—anyone may file a complaint, whichalleges violations and explains the basis for the alle-gations. The third is the referral process—possibleviolations discovered by other agencies are referredto the Commission.

Each of these can lead to the opening of a MatterUnder Review (MUR). Internally generated casesinclude those discovered through audits and reviewsof reports and those referred to the Commission byother government agencies. Externally generatedcases spurred by a formal, written complaint receive aMUR number once the Office of General Counsel(OGC) determines whether the document satisfiesspecific criteria for a proper complaint.

The General Counsel recommends whether theCommission should find “reason to believe” and openan investigation. If the Commission finds there is “rea-son to believe” the respondents have committed aviolation, it notifies the respondents and begins toinvestigate the matter. The Commission has authorityto subpoena information and can ask a federal courtto enforce a subpoena. At the end of an investigation,the General Counsel prepares a brief, which statesthe issues involved and recommends whether the

Commission should find “probable cause to believe” aviolation has occurred. Respondents may file briefssupporting their positions.

If the Commission finds “probable cause to believe”the respondents violated the law, the agency attemptsto resolve the matter by entering into a conciliationagreement with them. (Some MURs, however, areconciliated before the “probable cause” stage.) If con-ciliation attempts fail, the agency may file suit in dis-trict court. A MUR remains confidential until the Com-mission closes the case with respect to all respon-dents in the matter and releases the information to thepublic.

Enforcement InitiativesDuring 2000, the Commission continued to use a

prioritization system to focus its limited resources onmore significant enforcement cases.

Now in its eighth year of operation, the Enforce-ment Priority System (EPS) has helped the Commis-sion manage a heavy caseload involving thousands ofrespondents and complex financial transactions. TheCommission instituted the system after recognizingthat the agency did not have sufficient resources topursue all of the enforcement matters that came be-fore it. Under the system, the agency uses formalcriteria to decide which cases to pursue. Among thosecriteria are: the intrinsic seriousness of the allegedviolation, the apparent impact the alleged violationhad on the electoral process, the topicality of the ac-tivity and the development of the law and the subjectmatter. The Commission continually reviews the EPSto ensure that the agency uses its limited resources tobest advantage.

In addition, during 2000, OGC continued to use acomputerized system to image documents and createa searchable database. Developed with help from asupport contractor, the system is designed to helpstreamline the investigation of cases that involve largecollections of documents.

Also during the year, the Counsel’s office entereddata into a computerized case management systemdesigned to help manage and track the agency’s en-forcement and litigation cases, as well as other

Interpreting and Enforcing the Law 11

projects in OGC. OGC hopes eventually to use thesystem to develop an offense profile database thatwould inform Commissioners, policy makers and thepublic about emerging enforcement trends.

Statistics: Civil Penalties, Active/Inactive Casesand Number of Respondents

Chart 2-1 compares civil penalties negotiated in2000 conciliation agreements with those of previousyears. In Chart 2-2, the median civil penalty negoti-ated in 2000 is compared with the median civil penaltyof previous years. Chart 2-3 (next page) tracks theratio of active to inactive enforcement cases over thelast three years. Chart 2-4 examines the number andtypes of cases dismissed under the EPS over the lastseven years. Chart 2-5 tracks the monthly averagenumber of respondents and pending enforcementactions during each of the last six years.

Administrative Fine ProgramBeginning with the July 15, 2000, quarterly reports,

the Commission implemented a new program for as-sessing civil money penalties for violations involving:• Failure to file reports on time;• Failure to file reports at all; and• Failure to file 48-hour notices.

The regulations implementing the AdministrativeFine program are based on legislative amendmentsthat permit the FEC to impose civil money penalties,based on schedules of penalties, for violations of re-porting requirements that occur between January 1,2000, and December 31, 2001.

The July 2000 Quarterly Report was the first reportfiled under the new program, and the number of latefilers dropped significantly. While 30 percent of filerswere late for the April 2000 quarterly filing, only 18

0

50

100

150

200

250

300

009998979695949392919089888786850

500

1000

1500

2000

Number of Agreeements

Total Civil Penalty Amount

0

2000

4000

6000

8000

10000

00999897969594939291908988878685

CHART 2-1Conciliation Agreementsby Calendar Year

CHART 2-2Median Civil Penaltyby Calendar Year

Number Thousands of Dollars

Dollars

Chapter Two12

0

50

100

150

200

250

2000199919981997199619951994

Stale Cases

Low-Rated Cases

0

500

1000

1500

2000

2500

3000

200019991998199719961995

Cases

Respondents

CHART 2-4Cases Dismissed under EPS

CHART 2-5Monthly Average Number of Respondentsand Pending Cases by Calendar Year

20001999199819971996

Active Cases

Inactive Cases

CHART 2-3Ratio of Active to Inactive Cases by Calendar Year

(271 Cases) (296 Cases) (189 Cases) (193 Cases) (207 Cases)

Interpreting and Enforcing the Law 13

percent of filers were late for the July report. A similartrend emerges when comparing the 2000 reports tothose filed in previous years. As illustrated in Chart 2-6, the percentage of reports filed late in the latterstages of the election cycle decreased in 2000 ascompared with the previous two election cycles.

Chart 2-6Percentage of Reports Filed Late

Type of Report 1996 1998 2000

July Quarterly 25% 25% 18%October Quarterly 25% 24% 22%12-Day Pre-General 18% 17% 13%30-Day Post-General 22% 22% 17%

How the Program WorksIn the past, the FEC handled reporting violations

(late filers, nonfilers and committees that failed to file48-hour notices) under its regular enforcement proce-dures, described above. Under the new rules, if theCommission finds “reason to believe” that a commit-tee violated the applicable reporting provisions, theCommission provides written notification to the com-mittee and its treasurer (the respondents) containingthe factual and legal basis of its finding and theamount of the proposed civil money penalty. The re-spondents have 40 days from the date of the reason-to-believe finding to either pay the civil money penaltyor submit to the Commission a written response, withsupporting documentation, outlining the reasons whyit believes the Commission’s finding and/or penalty isin error. If the committee submits such a response, itis forwarded to the Office of Administrative Review,for consideration by an impartial reviewing officer whowas not involved in the original reason-to-believerecommendation.

After reviewing the Commission’s reason-to-believefinding and the respondent’s written response, thereviewing officer forwards a recommendation to theCommission, along with the original reason-to-believefinding, the respondent’s written response and anysupporting documentation. Respondents have anopportunity to submit a written response to the re-

viewing officer’s recommendation. The Commissionthen makes a final determination as to whether therespondent violated the law and, if so, assesses acivil money penalty based on schedules of penalties.

Should a respondent fail to pay the civil moneypenalty or submit a challenge within the original 40days, the Commission will issue a final determinationwith an appropriate civil money penalty. The respon-dent will then have 30 days to pay the civil moneypenalty or seek judicial review.

When a respondent fails to pay the civil moneypenalty after the Commission makes a final determi-nation, the Commission may transfer the case to theU.S. Department of Treasury for collection. Alterna-tively, the Commission may decide to file suit in theappropriate U.S. district court to collect owed civilmoney penalties under 2 U.S.C. §437g(a)(6).

Calculating PenaltiesUnder the program, respondents may face admin-

istrative penalties ranging from $125 to $16,000 (ormore for repeat late- and nonfilers). The interaction ofseveral factors determines the size of the penalty:

1. Election sensitivity of the report;2. Whether the committee is a late filer (and the

number of days late) or a nonfiler;3. The amount of financial activity in the report; and4. Prior civil money penalties for reporting viola-

tions.For more detailed information on the Administrative

Fine Program, see Appendix 7.

Alternative Dispute ResolutionProgram

On July 25, 2000, the Commission approved a pilotAlternative Dispute Resolution (ADR) program, de-signed to promote compliance by encouraging settle-ments outside the agency’s regular enforcement con-text. By expanding the tools for resolving complaintsand Title 2 audit referrals, the program aims to:• Resolve complaints and audit referrals faster;• Increase the number of complaints and referrals

processed;

Chapter Two14

• Reduce costs for respondents;• Ensure greater satisfaction for the respondents in-

volved; and• Enhance FEC enforcement efforts by freeing up

resources from less compelling complaints and Title2 audit referrals.1

Overview of the ADR ProcessThe ADR program aspires to bring complaints and

Title 2 audit referrals to resolution expeditiouslythrough both direct and, when necessary, mediatednegotiations between the parties. The speed withwhich each case is settled is contingent upon:• The willingness of respondents to engage and coop-

erate in the process;• The complexity of the case in question; and• The availability of resources.

Taking these contingencies into account, the ADRoffice expects to process complaints and Title 2 auditreferrals within five months following the receipt of thecomplaint or the referral.

After OGC makes an initial determination that cer-tain cases are suitable for the ADR program, it—orthe Commission—refers them to the ADR office. Thatoffice then evaluates the cases to determine whetherthey meet the requirements for the ADR program. Inorder to have a case considered for treatment withinthe ADR program, the respondent must:• Express a willingness to engage in the ADR pro-

cess;• Agree to set aside the statute of limitations while the

complaint is pending in the ADR Office; and• Agree to participate in bilateral negotiations and, if

necessary, mediation.After the Commission concurs that the case can be

dealt with through ADR procedures, the ADR officenotifies the respondent and forwards an agreement toengage in bilateral negotiations and/or mediation.

The ADR ProcessBilateral Negotiations. The bilateral negotiation

phase involves direct negotiations between the re-spondent and a representative from the ADR office ofthe FEC. Any resolution reached in negotiations issubmitted to the Commission for final approval. If aresolution is not reached in bilateral negotiations, thecase proceeds to mediation.

Mediation. The mediation phase begins with theselection of a mediator agreed upon by the respon-dent and the representative from the ADR office. Un-der the pilot program, the Commission pays for allmediation costs, unless the respondent wants to splitthem with the ADR Office.

The mediator meets with the parties both jointlyand separately as needed. Information disclosed inmediation remains strictly confidential. Informationdiscussed in closed “caucus” meetings between themediator and a single party cannot be shared with theother party unless that party has given the mediatorexpress permission to do so. Nor can such informa-tion be used in a later enforcement proceeding,should one take place. In those instances when noagreement is reached, the case is returned to OGCfor processing.

If an agreement is reached in mediation, the ADRoffice sends the agreement to the Commission forapproval. All approved agreements are a matter ofpublic record. Settlements cannot serve as a prece-dent for the settlement of future cases.

1 In its first four months of operation (October 2000through January 2001), the ADR office resolved six com-plaints. All of those settlements were negotiated directlywith the respondents or their attorneys.

15

Public funding has been a key part of our Presiden-tial election system since 1976. The program isfunded by the $3 tax checkoff and administered bythe Federal Election Commission. Through the publicfunding program, the federal government providesmatching funds to qualified candidates for their pri-mary campaigns, federal funds to major and minorparties for Presidential nominating conventions, andgrants to Presidential nominees for their general elec-tion campaigns.

ShortfallA shortfall in the Presidential Election Campaign

Fund resulted in partial matching fund payments toPresidential primary candidates during the first sixmonths of 2000. The temporary shortfall was the re-sult of several factors:• Payments from the Fund are adjusted for inflation,

but Fund receipts are not.• Three parties participated in the public funding pro-

gram in 2000.• Open races for the 2000 nomination occurred in

both major parties.• Taxpayer participation in the tax checkoff remained

low. On 1999 tax returns, the participation rate forthe checkoff was only 11.83 percent.

• Under Treasury rules, funds must be set aside forgeneral election and convention financing beforeany monies can be used for primary matching pay-ments. This year, $147.2 million was set aside foruse by the general election candidates and $28.9million was set aside for convention grants.

Early projections for 2000 had indicated that pri-mary candidates might initially receive as little as 32percent of their entitlement in January 2000, and thatthe shortfall might persist until early 2001. (See An-nual Report 1999.) However, Texas GovernorGeorge W. Bush announced that he would foregofederal matching funds, and Republican candidateElizabeth Dole rejected matching funds after with-drawing from the race. Both of these events de-creased the severity of the shortfall, although it re-mained significant.

The actual payment process began at the end of1999. On December 22, 1999, the Commission certi-fied eight primary candidates as being eligible to re-ceive a total of more than $34 million in federalmatching funds.1 With the amounts previously setaside for the general election and convention commit-tees, however, only $16.9 million remained in theFund. As a result, the Treasury Department’s Janu-ary 3, 2000, payments to the candidates amounted toroughly 50 cents on the dollar. Eligible candidates didnot receive 100 percent of the matching funds theywere due until June 2000.

For several years, the Commission has urged Con-gress to help alleviate the shortfall problem. Possiblesolutions include a revision of the “set aside” provi-sions and an increase in the checkoff amount. Evenassuming that one major party nominee does not takefederal matching funds in the primaries, FEC projec-tions indicate that initial payments to eligible candi-dates in the 2004 election cycle could be less than 20percent of that certified. In addition, the Commissionprojects that, although payments would reach 90 per-cent of that certified by the close of 2004, the shortfallof payments due would not be made whole until Aprilof 2005.

Certification of Public Funds

Primary Matching FundsPresidential candidates eligible to participate in the

matching fund program receive matching federal dol-lars for a portion of the contributions they raise. Toestablish eligibility, a candidate must submit docu-mentation showing that he or she has raised morethan $5,000 in matchable contributions in each of atleast 20 states (i.e., over $100,000). The FEC reviewsthis threshold submission to determine whether thecandidate has met the eligibility requirements. Thecandidate must also agree to comply with the law in aletter of agreement and certification. Once the Com-mission has determined a candidate to be eligible, the

Chapter ThreePresidential Public Funding

1 Two additional candidates, John Hagelin and RalphNader, were later certified to receive matching funds.

Chapter Three16

federal government will match up to $250 per con-tributor, but only contributions from individuals qualifyfor matching.

Presidential candidates may establish their eligibil-ity during the year before the election (i.e., in 1999 forthe 2000 primaries) and, once eligible, they may sub-mit additional contributions for matching funds (calledmatching fund submissions) on specified dates.

Chart 3-1 lists the 2000 Presidential primary candi-dates who qualified for matching funds and the totalamount of matching funds certified to each.

Convention FundsFederal election law permits all eligible national

committees of major and minor parties to receivepublic funds to pay the official costs of their Presiden-tial nominating conventions.

Under the statute, major party conventions are fullyfunded at $4 million, plus an adjustment for inflationsince 1974. On June 28, 1999, the 2000 DemocraticNational Convention Committee, Inc., and the Com-

mittee on Arrangements for the 2000 Republican Na-tional Convention each received payments of$13,224,000.

On March 28, 2000, the Commission approved anadditional payment of $288,000 to each of the majorparties’ convention committees to reflect an adjust-ment in the consumer price index, bringing the totalreceived by each committee to $13,512,000.

The Presidential Election Campaign Fund Act alsoallows a minor party to receive some federal fundingto run its convention, based on its Presidentialcandidate’s performance in the previous election. In2000, the National Committee of the Reform Party,USA, and its convention committee qualified as aminor party for purposes of convention financing andeligibility. A minor party is defined as a political partywhose candidate for the Presidency in the precedingPresidential election received more than 5 percent,but less than 25 percent, of the total popular votescast. In the 1996 general election, the Reform Partycandidate, Ross Perot, received 8.4 percent of thepopular vote. Accordingly, the Reform Party was

CHART 3-1Matching Fund Certifications

Candidate Cumulative Certifications through 12/31/00

Gary L. Bauer (R)* $4,925,216.40Bill Bradley (D)** $ 12,462,047.69Patrick J. Buchanan (Reform) $ 4,407,422.64Al Gore (D) $ 15,456,083.75John Hagelin (NL) $690,477.06Alan L. Keyes (R) $ 4,871,773.88Lyndon H. LaRouche, Jr. (D) $ 1,422,014.83John S. McCain (R)** $14,635,685.69Ralph Nader (G) $723,307.60Dan Quayle (R)† $2,102,525.00

*Gary Bauer withdrew from the race in February 2000.**John McCain and Bill Bradley withdrew from the race in March 2000.†Dan Quayle withdrew from the race in September 1999 and actually received only $2,087,749.86.

Presidential Public Funding 17

entitled to partial convention funding for 2000. In1999, the FEC certified $2,468,921 to the ReformParty 2000 Convention Committee, and in 2000added an additional cost-of-living payment ($53,769),bringing the total amount to $2,522,690.2

General Election GrantsThe Presidential nominee of each major party may

become eligible for a public grant of $20 million (plusa cost-of-living adjustment (COLA)) for the generalelection campaign. In addition, minor and new partycandidates may qualify for partial general electionfunding based on their party’s electoral performance.Minor party candidates (nominees of parties whosePresidential candidates received between 5 and 25percent of the vote in the preceding election) mayreceive public funds based on the ratio of their party’svote in the previous Presidential election to the aver-age vote for the major party candidates in that elec-tion. New party candidates may receive public fundsafter the election if they receive 5 percent or more ofthe vote. The amount is based on the ratio of the newparty candidate’s vote to the average vote for the twomajor party candidates in the election.

In 2000, the general election committees of the twomajor party candidates, George W. Bush and Al Gore,each received $67.56 million in federal funds to runtheir campaigns for the general election. In doing so,each campaign agreed to abide by the overall spend-ing limit and other legal requirements, including apost-campaign audit. Additionally, as major partycandidates, they agreed to limit campaign spending tothe amount of the public funding grant and not to ac-cept private contributions for their campaign.

Reform Party Presidential candidate Patrick J.Buchanan received $12,613,452 in federal funds torun his general election campaign.3 Mr. Buchananwas eligible to receive funds as the candidate of aminor party because the Reform Party’s 1996 candi-date, Ross Perot, had won more than 5 percent of thepopular vote. In order to receive funding in a givenelection, a minor party’s nominee must provide evi-dence showing that he or she has qualified to appearon the ballot as the candidate of that party in at least10 states. Pre-election minor party funding has oc-curred only once before, in 1996, when Ross Perotreceived $29,055,400 based on the popular vote forhim in the 1992 election.

Use of Public Funds

Use of Federal Convention FundsIn AO 2000-06, the Commission determined that

the Reform Party could use federal convention fundsto pay for the development of a voter data base andballoting system to choose the party’s presidentialnominee. The data base included the names of allmembers of the Reform Party as well as others whowanted to participate in the Reform Party’s primaryprocess. A national vote was scheduled to take placewhen those voters cast their ballots by telephone,mail or e-mail, and the party planned to announce theresults at the Reform Party National Convention in

2 The Reform Party’s convention funds were depositedand held in a United States district court registry pendingthe outcome of a leadership dispute within the Party. InReform Party of the United States v. Gargan (89 F.Supp.2d751 (W.D.Va. 2000)), the court ruled that the rightful PartyChairman and Treasurer were Pat Choate and TomMcLaughlin, respectively, and that the Party had duly re-moved John Gargan and Ronn Young from those positionsat a meeting on February 12, 2000. Having resolved theleadership dispute, the court released the public funds toGerald Moan as the duly appointed Chairman of the Party’sconvention committee.

3 A controversy took place between two factions of theReform Party, one led by John Hagelin and the other by PatBuchanan, as to which of them was the official ReformParty Presidential candidate. On September 12, 2000, theCommission, after reviewing documents submitted by Mr.Buchanan and Mr. Hagelin, made an initial determinationthat Mr. Buchanan was the official Reform Party candidateentitled to receive federal funds. The next day, September13, 2000, a California superior court enjoined Mr. Hagelinand his running mate, Nat Goldhaber, from representingthemselves to the public as the Reform Party’s Presidentialand Vice-Presidential nominees. (Reform Party of theUnited States v. Hagelin, No. NC 028469 (Cal.Super.Ct.,L.A.County)) The Commission confirmed its decision with afinal determination on September 14, 2000.

Chapter Three18

August 2000. The Commission found that both thedata base and balloting system were integral to theprocess of choosing the party’s nominee, and thus thecosts associated with them were permissible conven-tion expenses. As a result, the Reform Party couldpay for them with federal convention funds.

Using Campaign Funds to Pay ConventionExpenses of Former Candidates

In AO 2000-12, the Commission allowed formerPresidential candidates Bill Bradley and John McCainto use federal matching funds to pay for travel andother expenses associated with their parties’ nationalconventions, so long as their convention expenseswere “qualified campaign expenses” directed towardfundraising efforts to pay down their campaigns’ out-standing obligations. Under the Matching Fund Act, acommittee may use matching funds to pay for “quali-fied campaign expenses,” which include any lawfulpurchases, payments or anything of value incurred bythe candidate or committee in connection with hiscampaign for nomination. 26 U.S.C. §9032(9). Forexample, Mr. Bradley and Senator McCain could usefederal matching funds to pay for travel to the conven-tion and for activities at the convention that were apart of their committees’ “winding down” expenses,such as gifts and “thank-you” receptions for commit-tee employees, consultants and volunteers. Theycould also use federal funds to pay the costs offundraising to retire debts from their campaigns.

Public Funding RegulationsOver the years, the Commission has developed

and refined its regulations explaining the require-ments and procedures for public funding. After eachPresidential cycle, the agency revises the regulationsto clarify the law and address problems that arose inthe previous cycle. During 2000, regulations in thefollowing areas became effective:• Bright Line Between Primary and General.

Amendments establish a “bright line” between pri-mary and general election expenses and apply tocandidates who accept public funds in either theprimary or general election, or both. Under the re-vised rule, the “exclusive use” exception only applies

if the expenses in question do not fit into the specificcategories listed in the regulations. The amend-ments also establish that salary and overhead costsincurred between June 1 of the Presidential electionyear and the date of the nomination are treated asprimary expenses. However, Presidential campaigncommittees have the option of attributing to the gen-eral election an amount of salary and overhead ex-penses incurred during this period of up to 15 per-cent of the primary election spending limit. 11 CFR9034.4(e)(1) and (e)(3).

• Aggregating Presidential and Vice PresidentialCandidate Spending. New FEC rules require aVice Presidential committee to begin aggregating itscontributions and expenditures with those of thePresidential nominee on the date that either thefuture Presidential or Vice Presidential nomineepublicly indicates that the two candidates intend torun on the same ticket. Alternatively, aggregation ofcontributions would begin when the Vice Presidentialcandidate accepts an offer to be the running mate,or when the committees of these two candidatesbecome affiliated. 11 CFR 9035.3.

• Preliminary Audit Report. Amended rules modifythe Presidential audit process to include Commis-sion approval of the Preliminary Audit Report beforeit is provided to the audited committee following theexit conference. This preliminary audit report re-places the exit conference memorandum. 11 CFR9007.1(b)(2)(iii), (c) and (d)(1), and 9038.1(b)(2)(iii),(c) and (d)(1).

Presidential Debate LawsuitsUnder FEC regulations, certain nonprofit corpora-

tions may stage or sponsor candidate debates, ex-empt from the prohibition against corporate contribu-tions, so long as the corporations follow specific rules(“safe harbor”). For example, the debates must bebetween at least two candidates, and must be stagedso as not to promote or advance one candidate overanother. A debate sponsor must also use “pre-estab-lished objective criteria” for choosing which candi-dates will participate. 11 CFR 110.13. In 2000, fourlawsuits were filed challenging these debate regula-tions.

Presidential Public Funding 19

Becker v. FEC and Committee for a UnifiedIndependent Party v. FEC

These two cases primarily challenged FEC regula-tions at 11 CFR 114.4(f), which allow corporate spon-sorship of the debates.

In Becker v. FEC, the U.S. District Court for theDistrict of Massachusetts rejected a challenge to theCommission’s debate regulations filed by independentvoter Heidi Becker, candidate Ralph Nader, the GreenParty and others (collectively, “Becker”). The plaintiffshad argued that the debate regulations:• Exceed the FEC’s statutory authority by permitting

corporations to help stage debates; and• Allow corporations to fund debates (between the

major party candidates) that exclude independentand ballot-qualified third party candidates.

The court found that the regulations did not exceedthe FEC’s statutory authority. The court also foundthat, while Mr. Nader and his political party had stand-ing to challenge the debate regulations, the individual-voter plaintiffs did not. The plaintiffs appealed, but theFirst Circuit Court of Appeals affirmed the districtcourt’s decision on November 1, 2000. 230 F.3d381.A.1 (Mass.), 2000.

In the other case, the Committee for a Unified Inde-pendent Party and other plaintiffs filed a lawsuit con-tending that the debate regulations permitted corpora-tions and labor unions to make prohibited contribu-tions to the major party candidates by allowing themto stage partisan debates. On December 15, 2000, aMagistrate Judge in the Southern District of New Yorkruled in favor of the FEC, concluding that the FEC’sregulations reflected a reasonable interpretation of thestatute.

Patrick J. Buchanan, et al. v. FEC and Natural LawParty v. FEC

These cases primarily challenged theCommission’s dismissal of complaints concerning thecandidate-selection criteria chosen by the Commis-sion on Presidential Debates (CPD), the not-for-profitcorporation that has staged all of the presidential de-bates since 1988. In 2000, the CPD included onlythose candidates who had at least a 15 percent levelof support in the national electorate, as indicated innationwide polls.

On July 25, 2000, Presidential candidate PatrickBuchanan, Buchanan Reform (his principal campaigncommittee) and Angela Buchanan asked the U.S.District Court for the District of Columbia to requirethe FEC to reconsider its dismissal of their March2000 administrative complaint against the CPD.Plaintiffs argued that the CPD’s staging of presidentialdebates did not fall within the Act’s “safe harbor” forcorporate sponsorship of nonpartisan candidate de-bates because:• It was a bipartisan organization, organized by and

supporting the Democratic and Republican parties,and therefore did not qualify as a nonpartisan orga-nization; and

• Its criterion of including only those candidates whodemonstrated at least a 15 percent level of supportin the national electorate, as measured by the aver-age of 5 national polls, was subjective rather thanobjective because it was designed to exclude thirdparty candidates.

The Natural Law Party filed a lawsuit making simi-lar claims. In both cases, the U.S. District Court forthe District of Columbia ruled in favor of the FEC andstated that, although the plaintiffs had standing tochallenge the FEC’s dismissal of their administrativecomplaint against the CPD, they failed to show thatthe FEC’s interpretation of the debate regulations wasarbitrary and capricious. The U.S. Court of Appealsfor the District of Columbia Circuit affirmed the districtcourt’s decisions in both cases. 112 F.Supp.2d 58(D.D.C., 2000) (Buchanan), 111 F.Supp.2d 33(D.D.C.,2000) (Natural Law Party).

Repayment of Public Funds—1996Election

Once a Presidential election is over, the Commis-sion audits all of the candidates and committees thatreceived public funds to ensure that they used thosefunds only for qualified campaign expenses and thatthey maintained proper records and filed accuratereports. These audits are mandated under the Presi-dential Election Campaign Fund Act. Sometimes anaudit finds that a candidate or committee exceeded itsexpenditure limits, spent public funds on nonqualified

Chapter Three20

expenses or ended the campaign with a surplus. Inthose cases, the Commission may require the candi-date or committee to make a repayment to the U.S.Treasury.

Repayments may also stem from Commission de-terminations that contributions that were initiallythought to be matchable were later determined tohave been nonmatchable. Such determinations mayor may not result from the FEC’s audit of the commit-tee. During 2000, the Commission made final deter-minations that two 1996 campaigns had to make re-payments.

Dole CommitteesThe Commission determined that former Senator

Bob Dole’s 1996 primary committee, Dole for Presi-dent, Inc. (the Committee), had to repay $6,255 to theTreasury. This amount represented public funds thatthe Committee used to pay for nonqualified campaignexpenses. These expenses included $1,237 for the“refund” of an unpaid contribution, $930 for paymentfor services to prepare financial statements and$4,088 for unchallenged nonqualified campaign ex-penses. In addition, the Commission found that theCommittee had to repay the Treasury $225,536 forstale-dated checks.

The Commission also made a repayment determi-nation that Senator Dole’s general election commit-tee, Dole/Kemp ’96, Inc., had to repay a total of$1,416,093 to the Treasury. This amount represented$1,369,583 for expenses incurred in excess of theexpenditure limit for 1996 ($61.82 million) and$46,510 received in interest income. The Commis-sion found that a major factor in the excessive spend-ing related to overbilling the press for many expenses,including those for events and airline travel.

Buchanan CommitteeThe Commission made a determination, upon ad-

ministrative review, that Patrick J. Buchanan’s 1996primary committee, Buchanan for President, Inc. (theCommittee), had to make repayments of $63,750 and$29,328 to the Treasury. The first amount repre-sented matching funds received by the Committee forcontributions that were later determined to be

nonmatchable—$62,116 for improperly reattributedcontributions and $1,634 for contributions that theCommittee later refunded. The second amount repre-sented $12,159 for inadequately documented dis-bursements and $17,169 for duplicate payments andnoncampaign-related expenditures. In addition, theCommission found that the Committee owed $27,431for stale-dated checks.

21

As the independent regulatory agency responsiblefor administering and enforcing the Federal ElectionCampaign Act (the Act), the Federal Election Com-mission promulgates regulations explaining the Act’srequirements and issues advisory opinions that applythe law to specific situations. The Commission alsohas jurisdiction over the civil enforcement of the Act.This chapter examines major legal issues confrontingthe Commission during 2000 as it considered regula-tions, advisory opinions, litigation and enforcementactions.

Express AdvocacyThe FEC’s regulatory definition of express advo-

cacy continued to receive attention in the courts andat the Commission during 2000. To understand theissue, it is necessary to examine earlier court deci-sions. In FEC v. Massachusetts Citizens for Life(MCFL) (479 U.S. 238 (1986)), the Supreme Court,citing First Amendment concerns, held that the Act’sban on corporate and labor organization independentexpenditures could only be constitutionally applied ininstances where the money was used to expresslyadvocate the election or defeat of a clearly identifiedcandidate for federal office. In response to this deci-sion, in 1995 the Commission prescribed a new regu-latory definition of express advocacy. 11 CFR 100.22.The definition was based largely on two court opin-ions: the Supreme Court’s opinion in Buckley v. Valeoand the Ninth Circuit Court of Appeals opinion in FECv. Furgatch.

Paragraph (a) of the definition in section 100.22includes the examples of phrases that constitute ex-press advocacy that were listed in the Buckley opin-ion: “vote for,” “elect,” “support,” “cast your ballot for,”“vote against,” “defeat,” “reject.”

Paragraph (b) of section 100.22—often referred toas the “reasonable person” test—is largely based,inter alia, on the Furgatch decision. Under paragraph(b), language may be said to expressly advocate acandidate’s election or defeat if, when taken in con-text and with limited reference to external events, itcan have no other reasonable interpretation.

Since the Commission promulgated this definition,it has faced several legal challenges, virtually all of

which have focused on paragraph (b) of the definition,the “reasonable person test.” During 2000, one districtcourt examined paragraph (b) of the FEC’s expressadvocacy definition, another court evaluated a politi-cal committee’s flyers to determine if they containedexpress advocacy and the Commission declined toopen a rulemaking on the subject.

Virginia Society for Human Life, Inc. (VSHL) v. FECIn its January 4, 2000, ruling on this case, the U.S.

District Court for the Eastern District of Virginia found11 CFR 100.22(b) to be “blatantly unconstitutional”under Buckley, and issued an order prohibiting theFEC from enforcing it “against the VSHL or againstany other party in the United States of America.”

VSHL—a nonprofit, tax-exempt membership corpo-ration, which accepts corporate contributions—planned to distribute voter guides to the general pub-lic in connection with federal elections. The guideswould outline VSHL’s stance on abortion-related is-sues and tabulate candidates’ positions on those is-sues. Although VSHL contended that the guideswould not expressly advocate the election or defeat ofa particular candidate, it acknowledged that recipientsof the voter guide could reasonably determine VSHL’spreference for one of the candidates over the others.

The district court said that the Buckley court de-fined express advocacy as “communications that inexpress terms advocate the election or defeat of aclearly identified candidate for federal office,” and thusfunds spent on such advocacy could be regulated bythe FEC. On the other hand, the district court said,funds spent on issue advocacy could not be regulatedby the FEC because “discussion of public issues anddebate on the qualifications of candidates are integralto the operation of the system of government estab-lished by our Constitution.” According to the districtcourt, the Buckley court stated that, although the dis-tinction between express advocacy and issue advo-cacy could be “fuzzy,” express advocacy should notbe classified “according to an audience’s reasonableinterpretations of the communication at issue.”

The district court held that, by allowing the FEC toregulate advocacy based upon the understanding ofthe audience rather than the actual message of theadvocate, the regulation at 100.22(b) fails the Buckley

Chapter FourLegal Issues

Chapter Four22

test. Moreover, the district court concluded, the regu-lation empowers the FEC to regulate issue advocacy,which was “clearly forbidden by Buckley.” The districtcourt also pointed out that even the Ninth Circuit’sdecision in Furgatch “acknowledges that expressadvocacy must contain a ‘clear plea for action,’ butthe regulation contains no such requirement—it in factis broader than Furgatch, which itself runs afoul ofBuckley.”

Finally, concluding that “First Amendment protec-tions do not cease at the boundaries of the EasternDistrict,” the court stated that it is “unwilling to per-petuate the state of uncertainty faced across the landby potential participants in the public arena” andtherefore enjoined the FEC from enforcing paragraph(b) “against VSHL or any other party in the UnitedStates of America.”

In February, the Commission voted to appeal thecourt’s decision that the VSHL had standing to suethe FEC and the court’s order prohibiting the FECfrom enforcing 11 CFR 100.22(b) against any party inthe United States.

FEC v. Freedom’s Heritage ForumOn April 28, 2000, the U.S. District Court for the

Western District of Kentucky handed down its latestruling in the FEC’s suit against the Freedom’s Heri-tage Forum political committee, its President and acandidate the Forum supported. The FEC had allegedthat seven flyers the Forum had distributed in connec-tion with federal elections contained express advo-cacy, but lacked the disclaimers required by 2 U.S.C.§441d(a).

As in its September 1999 decision in this case (seeAnnual Report 1999), the court stated that, “althougha communication does not have to contain specific‘magic words’ to constitute express advocacy, it willordinarily contain some functional equivalent of anexhortation, directive, or imperative for it to expresslyadvocate the election or defeat of a candidate.” Addi-tionally, the court distinguished between a messagethat urges the reader to vote for or against a candi-date and a message that merely urges the reader tocontribute time or money to the candidate. Only theformer, in the court’s view, constitutes express advo-cacy.

Applying these standards, the court concluded that,in sum, three of the seven flyers the Forum distributedcontained express advocacy. The parties continue tolitigate other issues in this case.

Rulemaking ProposalOn February 9, the Commission failed to approve a

motion by Commissioner David Mason that theagency initiate a rulemaking to repeal paragraph (b)of the express advocacy definition. CommissionerMason made the motion in connection with theCommission’s discussion on whether or not to appealthe decision in Virginia Society for Human Life, Inc. v.FEC. He reasoned that, if the Commission were torepeal paragraph (b), there would be no need to ap-peal the decision. As noted above, the Commissionsubsequently decided to appeal the case.

Corporate ContributionsThe Act prohibits corporations and labor organiza-

tions from using their treasury funds to make contribu-tions or expenditures in connection with federal elec-tions. 2 U.S.C. §441b. During 2000, a number of law-suits challenged the constitutionality of that ban andrelated provisions of FEC regulations. Two of thecases are described below.

Christine Beaumont, et al. v. FECOn October 3, 2000, the U.S. District Court for the

Eastern District of North Carolina, Northern Division,found that provisions of the Act and FEC regulationsprohibiting corporate independent expenditures andcontributions on behalf of federal candidates violatedthe plaintiffs’ First Amendment rights. On October 26,2000, the court imposed a preliminary injunction bar-ring the FEC from enforcing the provisions against theplaintiffs.1

The suit, brought by the North Carolina Right toLife, Inc. (NCRL), members of its board of directorsand an unaffiliated individual, challenged not only

1 On January 24, 2001, the court permanently enjoinedthe Commission from enforcing this provision against theplaintiffs.

Legal Issues 23

Section 441b’s ban on corporate contributions andexpenditures (and the comparable regulations at 11CFR 114.2(b)), but also an FEC regulation that cre-ates an exemption from the ban on corporate expen-ditures for certain nonprofit corporations, pursuant tothe Supreme Court’s decision in FEC v. Massachu-setts Citizens for Life. 11 CFR 114.10.

Commission regulations at 11 CFR 114.10 providethat certain “qualified nonprofit corporations” may beexempt from the prohibition on corporate independentexpenditures. To be considered a “qualified nonprofitcorporation,” a corporation must meet the followingcriteria:• Its only express purpose is the promotion of political

ideas;• It does not engage in business activities;• It has no shareholders or other individuals who re-

ceive a benefit that might discourage an individualfrom disassociating from the corporation on the ba-sis of that corporation’s political positions; and

• It was not established by a business corporation orlabor organization and does not accept direct orindirect donations from business corporations.

NCRL argued that it failed to meet this exemptiononly because it accepted a small amount of corporatecontributions and participated in “minor business ac-tivities incidental and related to its advocacy of is-sues.” NCRL further argued that, even though theFEC had conceded that a Fourth Circuit decision inan earlier case between NCRL and North Carolinaover a similar provision in a North Carolina statutebarred enforcement of the Act’s prohibition againstNCRL, its officers remained subject to criminal liabilityand, as a result, their First Amendment rights werecensored.

NCRL also argued that, in this case, the Act’s banon corporate contributions to political candidates in-fringed on the organization’s right to association.While the FEC argued that NCRL’s ability to contrib-ute through a separate segregated fund minimizedthis infringement, NCRL contended that the mainte-nance of such a fund was a burden.

The court found no compelling justification for de-nying NCRL (a nonprofit, ideological organization) theright to make contributions and independent expendi-tures solely because it was an incorporated entity.

Moreover, the court was not persuaded by the FEC’sargument that a ban on corporate contributions wasconstitutional, as applied to NCRL, while a ban oncorporate independent expenditures might not be.2

The court found the distinction between contributionsand independent expenditures immaterial.

The court declared that the provisions in questionwere unconstitutional as applied to NCRL.

On December 21, 2000, the Commission appealedthe district court’s preliminary injunction to the U.S.Court of Appeals for the Fourth Circuit.

Renato P. Mariani v. USAIn another challenge to the ban on corporate contri-

butions, on May 18, 2000, the U.S. Court of Appealsfor the Third Circuit rejected Renato P. Mariani’s con-stitutional challenge to §441b.3

Mr. Mariani—who was the subject of criminal pros-ecution concerning the very provisions he challengedin this case—argued that the development of issueadvocacy and the increasing role of unregulated “softmoney” in the electoral process have “so eroded thetheoretical distinction between hard and soft money”that §441b’s prohibition against corporate contribu-tions has become “fatally underinclusive.” As such, heasserted, it should be struck down. He also chal-lenged the ban as a violation of corporations’ FirstAmendment rights.

In response, the court acknowledged that “[t]hepractical distinctions between hard and soft moneymay have diminished in the past decade with the riseof issue advocacy, but not to such an extent that thereis no practical distinction between the two.” The courtwent on to note, “If hard and soft money were equiva-lent, it would be hard to imagine why Mariani wouldhave gone to the lengths he allegedly went to in orderto give hard money instead of soft.” Noting that Con-gress can act incrementally—and referencing legal

2 The Supreme Court’s decision in FEC v. Massachu-setts Citizens for Life, permitting qualified nonprofit corpora-tions to make independent expenditures, extends only tocorporate expenditures and not to corporate contributions.

3 The court also rejected Mr. Mariani’s challenge to§441f’s ban on contributions in the names of others.

Chapter Four24

precedents—the court concluded that the corporateban “is not fatally underinclusive.”

The court also rejected the First Amendment chal-lenge, citing the U.S. Supreme Court’s decisions inFEC v. National Right to Work Committee, FEC v.National Conservative PAC and Austin v. MichiganChamber of Commerce. Though the court stated thatnone of these cases directly addressed the constitu-tionality of the corporate ban, their “strong implica-tions” led the court “to reject Mr. Mariani’s facial chal-lenge to §441b(a).”

CoordinationDuring 2000, the Commission approved new regu-

lations regarding coordination between campaignsand persons making communications that influencefederal elections.4 Coordination was also an issue in acourt decision handed down in 2000—FEC v. Colo-rado Republican Federal Campaign Committee. 236F.3d 1174 (10th Cir. 2000).

Coordination is important because, in its landmarkBuckley v. Valeo decision, the Supreme Court ruledthat expenditures made in coordination with a cam-paign are in-kind contributions. As such, coordinatedexpenditures are subject to the Act’s contribution lim-its and prohibitions. By contrast, independent expen-ditures—while generally subject to the prohibitions ofthe Act—are not limited.

RegulationsOn November 30, 2000, the Commission approved

new rules addressing coordinated communicationsmade to the general public that refer to clearly identi-fied candidates and are paid for by persons other thancandidates, candidates’ authorized committees orparty committees.5

The new rules at 11 CFR 100.23 apply only to“general public political communications,” i.e., com-munications made through a broadcasting station,newspaper, magazine, outdoor advertising facility,mailing or any electronic medium and that are in-tended for an audience of more than 100 people.

Other than the requirement that covered communi-cations include a clearly identified candidate, the rulesdo not establish a content standard.6 Instead, the newregulations generally define “coordinated generalpublic political communications” according to the stan-dard set by the district court in FEC v. The ChristianCoalition (see Annual Report 1999). 52 F.Supp.2d45, 85 (D.D.C.1999).7

Under the new rules, an expenditure for a generalpublic political communication is considered to becoordinated with a candidate or party committee if thecommunication is paid for by any person other thanthe candidate’s authorized committee or a party com-mittee and is created, produced or distributed:• At the request or suggestion of the candidate, the

candidate’s authorized committee, a party commit-tee or their agents;

• After one of these persons or parties has exercisedcontrol or decision-making authority over the con-tent, timing, location, mode, intended audience, vol-ume of distribution or frequency of placement of thatcommunication; or

4 The rules do not apply to coordination between a candi-date and a party committee.

5 The Commission notes that coordinated communica-tions are not the only type of coordinated expenditure. Infact, coordinated expenditures can include many othertypes of expenses incurred by candidates, including costsfor staff, polling and other services.

6 The Commission may revisit the issue of a contentstandard for all coordinated communications when it consid-ers the other portion of this rulemaking—dealing with coor-dination between a candidate and his/her political party—which is being held in abeyance until the Supreme Courtaddresses the dollar limits on the amount party committeesmay spend in coordination with their candidates in FEC v.Colorado Republican Federal Campaign Committee (Colo-rado II).

7 The Commission uses the phrase “expenditures forgeneral public political communications” in place of “ex-pressive expenditure,” the term used by the Christian Coali-tion court, because it more precisely describes the types ofcommunications covered by these rules. See 11 CFR100.23(a)(1).

Legal Issues 25

• After substantial discussion or negotiation betweenthe purchaser, creator, producer or distributor of thecommunication and the candidate, the candidatecommittee, the party committee or their agents thatresults in collaboration or agreement about the con-tent, timing, location, mode, intended audience, vol-ume of distribution or frequency of placement of thecommunication.

The regulations define “substantial discussion ornegotiation” to include one or more meetings, conver-sations or conferences about the value or importanceof a communication for a particular election. TheCommission clarified that whether these discussionsor negotiations qualify as “substantial” depends upontheir substance—whether they contain specific infor-mation about how to communicate an issue in a waythat is valuable to the campaign—rather than upontheir frequency or duration.

As part of this rulemaking, the Commission alsorevised its definition of “independent expenditure” at109.1(b)(4) to conform with the new coordinationstandard, and it stated that the rulemaking super-seded several advisory opinions that relied on abroader definition of coordination than that stated inthe new rules.

The remaining portion of this rulemaking, involvingcoordinated party expenditures, was on hold pendingthe Supreme Court’s decision in FEC v. ColoradoRepublican Campaign Committee.

FEC v. Colorado Republican Federal CampaignCommittee

On May 5, 2000, the U.S. Court of Appeals for the10th Circuit affirmed a district court decision that thecoordinated party expenditure limits at 2 U.S.C.§441a(d)(3) are unconstitutional.

The case—on remand from the U.S. SupremeCourt—involves $15,000 worth of expenditures theColorado Republican Party made in 1986 for adver-tisements critical of Democratic Senate candidate TimWirth. The Commission argued that the ads, whichcontained an “electioneering message” related to aclearly identified candidate, represented coordinatedexpenditures by the party. (The Commission furthermaintained that these expenditures, when aggregated

with previous coordinated expenditures by the party,exceeded the statutory limits of 441(a)(d).) The partycontended that the ads did not contain express advo-cacy and were not coordinated party expendituressubject to the 441a(d) limits. The party further arguedthat the 441a(d) limits violated its First Amendmentrights.

Colorado I. In the first ruling on this case, the U.S.District Court for the District of Colorado concludedthat the ads were not subject to the 441a(d) limitsbecause they did not contain express advocacy. Hav-ing already ruled in the party’s favor, the court did notaddress the party’s constitutional challenge.

On appeal, the U.S. Court of Appeals for the 10th

Circuit, agreeing with the FEC that a 441(a)(d) expen-diture need only depict a clearly identified candidateand convey an electioneering message, reversed thedistrict court’s decision. The appeals court also heldthat the 441a(d) limits did not violate the party’s FirstAmendment rights.

The U.S. Supreme Court agreed to hear the caseprincipally to resolve the constitutional question. In itsJune 26, 1996, plurality decision, the Court concludedthat the Party’s expenditures had not been coordi-nated with a candidate, and were instead independentexpenditures. The Court then also concluded that the441a(d) limits were unconstitutional as applied topolitical parties’ independent expenditures on behalfof congressional candidates. The Court did not ruleon the constitutionality of the limits as applied to coor-dinated party expenditures but, instead, remanded thecase to the district court for further proceedings onthat issue.

Colorado II. On remand, the district court ruledthat the coordinated expenditure limits were unconsti-tutional. The court concluded that the FEC had failedto offer evidence that there was a compelling need forlimits on coordinated party expenditures. In its opin-ion, the court equated coordinated party expenditureswith a candidate’s own campaign expenditures which,based on the Supreme Court’s ruling in Buckley, can-not be limited.

Court of Appeals Decision. On May 5, 2000, theU.S. Court of Appeals for the 10th Circuit affirmed thelower court’s decision. In defending the constitutional-

Chapter Four26

ity of the 441a(d) limits, the Commission had offeredthree principal arguments that the limits prevent cor-ruption or the appearance of corruption.

The court, in a 2-1 decision, rejected all three of theCommission’s arguments. It noted that—based onthe Supreme Court’s earlier ruling in this case—partycommittees can already make unlimited independentexpenditures. The court refused to consider the po-tential corrupting influence of unregulated “softmoney” contributions, since those funds cannot le-gally be spent to influence federal elections.

The court further held that “there is nothing perni-cious” about a party “shaping the views of its candi-dates.” The court added that, “Parties are simply toolarge and too diverse to be corrupted by any one fac-tion.”

Having found no persuasive evidence that coordi-nated party expenditures corrupt or appear to corruptthe electoral process, the appeals court concludedthat “441a(d)(3)’s limit on party spending . . . consti-tutes an ‘unnecessary abridgment’ of First Amend-ment freedoms.” The court stated explicitly that itsanalysis and holding apply only to party spending inconnection with Congressional races.

In dissent, Chief Judge Seymour said that thepanel majority “substitute[d] its judgment for that ofCongress on quintessentially political matters theSupreme Court has cautioned courts to leave to thelegislative process. In so doing, the majority createsa special category for political parties based on itsview of their place in American politics, a view at oddswith history and with legislation drafted by politicians.”

Appeal to Supreme Court. The Commissionvoted to appeal the decision to the Supreme Court,and the Court agreed to hear the case. In addition,the Commission issued a statement indicating that itwould not file any action in the courts in the 10th Cir-cuit to enforce section 441a(d)(3), but would continuethe administrative processing of matters concerningthe section. The Commission’s statement explainedthat “only the Tenth Circuit has found section441a(d)(3) unconstitutional, and its decision is notcontrolling outside that court’s geographic jurisdiction.Furthermore, if the United States Supreme Courtoverrules the Tenth Circuit, the Court’s decision up-holding section 441a(d)(3) will apply retroactively to

any activities in the interim that violate section441a(d)(3), even in the Tenth Circuit. . . . Therefore,anyone who chooses to act in contravention of sec-tion 441a(d)(3)—within or without the Tenth Circuit—before the Supreme Court rules in Colorado could besubject to liability for violating the statute if the Colo-rado decision is reversed.”

Use of the InternetThe FEC first addressed Internet campaigning in

1995. Since that time, the Commission has re-sponded to an increasing number of inquiries regard-ing the use of the Internet. During 2000, the Commis-sion issued seven advisory opinions (AOs) on thesubject.

Advisory OpinionsElectronic Checks. In AO 1999-36, the Commis-

sion determined that candidates could collect contri-butions (including matchable contributions to Presi-dential candidates) via electronic check transmittedover the Internet, using a system developed by Ad-vantage, a Maryland corporation. The Commissionbased this conclusion, in part, on AO 1999-9, whichallowed Bill Bradley for President, Inc., to receivematchable credit and debit card contributions over theInternet. In both cases, screenings would be done forimpermissible or nonmatchable contributions througha series of measures, including required electronicinformation provided by the contributor. See also AO1999-22.

Independent Expenditures Via Web Site and E-Mail. In AO 1999-37, the Commission concluded thatX-PAC, a nonconnected committee, could post com-munications containing express advocacy on its Website and distribute them through e-mail without makinga contribution to any candidate. Since the communi-cations expressly advocated the election or defeat ofspecific federal candidates but were made withoutconsulting any candidate’s campaign, they qualifiedas independent expenditures. The communications,which were created specifically for electronic distribu-tion, were developed “in-house” by X-PAC using com-mercially available software and would be hosted on

Legal Issues 27

its Web site at no additional cost. The Commissionrequired X-PAC to follow all FEC regulations regard-ing disclaimers and reporting.

Corporate PAC’s Use of Internet and E-Mail.Under the Act, a corporation is able to solicit moneyfor its PAC only from a restricted class of individuals.In AO 2000-07, the Commission determined thatAlcatel USA, Inc., could post certain messages refer-ring to its PAC on the company’s government rela-tions intranet Web site (accessible to all Alcatel em-ployees, including those outside the PAC’s restrictedclass). The PAC messages did not solicit contribu-tions, nor did they encourage them. They also in-cluded a statement that Alcatel would not accept con-tributions from those outside the restricted class.

In addition, the Commission concluded that AlcatelPAC could use its Web site and the company’s e-mailsystem to solicit contributions. Since the Web sitewas available only to the restricted class through theuse of a password, there was no danger of solicitingbeyond the restricted class. See AO 1995-33.

Electronic Prior Approval. Under Commissionregulations, a trade association must obtain prior writ-ten authorization from a member corporation beforesoliciting the member’s restricted class. 11 CFR114.8(d) and (e). In AO 2000-10, the Commissionallowed America’s Community Bankers CommunityCampaign Committee (COMPAC), the separate seg-regated fund of America’s Community Bankers (ACB),to put a form on its “members only” Web page to ob-tain prior approval from corporate members to solicitcontributions from their restricted classes. In addition,COMPAC could put a notice on ACB’s public Webpage providing information about the PAC. The Com-mission concluded that both COMPAC’s notice and itsprior approval form were permissible because theydid not solicit or encourage contributions and becauseCOMPAC planned to employ safeguards to ensurethat no prohibited contributions would be received.

In a related opinion, AO 2000-22, the Commissiondetermined that corporate members of the Air Trans-portation Association of America and a number ofother incorporated trade associations could grant priorapproval using electronic signatures. In the past, theCommission has approved the use of an electronic

signature, concluding that, like a traditional signature,it is a unique identifier of the authorizing individual.See AOs 1999-3 and 1999-6. In this case, the asso-ciations had to verify that the permission-to-solicitforms were only available to authorized corporaterepresentatives, and that each electronically signedauthorization came from the corporate representative.

Internet Convention Coverage. In AO 2000-13,the Commission ruled that iNEXTV Corporation(iNEXTV), through its affiliate, EXBTV, could providegavel-to-gavel Internet video coverage of the Republi-can and Democratic national conventions withoutmaking a prohibited corporate contribution or expendi-ture. The proposed activities fell within the Act’s ex-emption for news stories and commentary. 2 U.S.C.§431(9)(B)(i). iNEXTV and EXBTV met the criteria forthe exemption because they qualified as press enti-ties both in their purpose and function; they were notowned by any political party, political committee orcandidate; and they would be acting in their capacityas press entities in undertaking this media coverage.

Ads on Internet for Academic Study. In AO2000-16, the Commission allowed Third Millennium:Advocates for the Future, Inc., (Third Millennium) toplace advertisements for Presidential candidates onthe Internet in order to study their effects on voterparticipation among young adults. Third Millenniumretained the services of an Internet service providerthat maintained demographic information on its sub-scribers. Using that data, Third Millennium intendedto randomly select subscribers to view ads supportingone or all of the Presidential candidates, and thenmeasure those subscribers’ voting patterns through apost-election survey. Third Millennium planned to useeither the content and design of advertisements cre-ated by each Presidential campaign or to create itsown advertisements from available materials. In do-ing so, Third Millennium would treat each candidateequally, giving none a qualitative or quantitative ad-vantage. It would not pay the campaigns for materialsprovided, and it reserved the right to reject materialthat mentioned or alluded to another candidate. TheCommission determined that Third Millenium’s pro-posed activities did not constitute a contribution andwere therefore permissible.

Chapter Four28

Status of RulemakingAlthough the Commission has issued a number of

advisory opinions on the application of the law toInternet activity, many issues remain unanswered. In2000, the Commission reviewed and analyzed some1,200 comments that it received in response to a1999 Notice of Inquiry on the use of the Internet incampaigning. These comments will help the agencydecide whether to proceed with further rulemaking onthis subject.

Soft MoneySoft money—funds raised and/or spent outside the

limitations and prohibitions of the Act—received con-siderable attention during 2000. Under FEC regula-tions, committees that have both federal andnonfederal accounts must allocate certain expenses,including administrative and generic voter drive ex-penses, based on an allocation formula. Committeesmust pay the federal portion of the expenses withfunds subject to the limitations and prohibitions of theAct, but may use soft money for the rest.

Advisory OpinionsThe Commission considered one advisory opinion

during 2000 that dealt with soft money issues. In AO2000-19, the Commission determined that the Repub-lican Party of Florida (RPF) could retroactively adjustits federal-to-nonfederal (hard-to-soft money) alloca-tion ratio—and reallocate its administrative expensesaccordingly—to reflect the addition of two state of-fices, which had become vacant earlier in the year.8

RFP was required to submit an amended scheduleH1 for the period in question and to transfer fundsbetween its federal and nonfederal accounts to cor-rect its prior allocation for this period.

EnforcementIn MUR 3774, an enforcement case, the Commis-

sion examined the failure of a party committee to allo-cate expenses between its federal and nonfederalaccounts. The National Republican Senatorial Com-mittee (the Party) and its treasurer paid a civil penaltyof $20,000 and transferred $88,207.60 from theParty’s federal account to its nonfederal account forfailing to allocate payments made to a third party toconduct get-out-the-vote drives (GOTV). BetweenOctober 31 and November 4, 1994, the Party dis-bursed a total of $175,000 from its nonfederal accountto the National Right to Life Committee (NRLC), whichthen made payments of at least $135,704 for GOTVphone calls targeting pro-life supporters in states withelections that included federal candidates.

The Commission determined that the Party knewand intended that the nonfederal funds it transferredto NRLC would be used for these purposes.

A national party committee, such as the Party,must allocate expenses for generic voter drive activi-ties9 between its federal and nonfederal accountsaccording to the formula set out at 11 CFR106.5(c)(2): a minimum of 65 percent of these costsmust be allocated to the federal account. The Com-mission found probable cause to believe that theParty’s disbursements of 100 percent nonfederalfunds to NRLC in 1994, which NRLC used to financeGOTV activities, was not in accordance with the Actor Commission regulations. The Party contended thatno violations occurred or were proven by the record,but, in order to settle the matter, the Party agreed notto further contest the Commission’s probable causefindings that it had violated 2 U.S.C. §§441a(f) and441b(a) and 11 CFR 102.5(a)(1)(i), 106.5(c) and106.5(g)(1)(i). (For a more complete discussion of thiscase, see the March 2000 Record.)

8 Under Commission regulations, state and local partycommittees are required to allocate their administrativeexpenses and costs of generic voter drives using the “ballotcomposition method,” which is based on the ratio of federaloffices expected on the ballot to total federal and nonfederaloffices expected on the ballot in the next general election tobe held in the committee’s state or geographic area. 11CFR 106.5(d).

9 Generic voter drives include voter identification, voterregistration and get-out-the-vote drives, or any other activitythat urges the general public to register, vote or supportcandidates of a particular party or associated with a particu-lar issue, without mentioning a specific candidate.106.5(a)(2)(iv).

Legal Issues 29

Status of RulemakingPlans for additional regulations on soft money re-

mained a priority for the Commission during 2000.The Office of General Counsel (OGC) completedanalysis of the comments and testimony that it re-ceived in response to the 1998 Notice of ProposedRulemaking (NPR), and it forwarded its recommenda-tions to the Commissioners on February 4, 2000.After Commission discussion of the rules, OGC for-warded alternative versions of the draft final rules onOctober 16, 2000, for further consideration.

American Indian TribesThe Commission addressed the issue of contribu-

tions from American Indian tribes in two separateadvisory opinions during 2000.

Advisory OpinionsAO 1999-32. The Commission said that the

Tohono O’odham Nation (the Nation) could makecontributions to influence federal elections eventhough its Utility Authority (TOUA) was a governmentcontractor. Under 2 U.S.C. §441c, it is unlawful for aFederal contractor to make contributions in connec-tion with a federal election. Based on a variety of fac-tors, the Commission determined, however, thatTOUA was a separate entity from the Nation and,consequently, the Nation was permitted to make con-tributions. The Nation would not, however, be able tomake contributions if it received any revenues fromTOUA.

AO 2000-05. In AO 2000-05, the Commissionruled that the Oneida Nation of New York (the Nation)could make contributions in support of federal candi-dates totaling in excess of $25,000 in a calendar year.The Act states that no “individual” can make contribu-tions of more than $25,000 in a calendar year. 2U.S.C. §441a(a)(3). While the Nation qualifies as a“person”—which is defined to include various types oforganizations, as well as individuals—the Commis-sion concluded that it is an organization and not anindividual. Therefore, it is not subject to the $25,000limit.

31

CommissionersPresident Clinton nominated Bradley A. Smith to theCommission on February 9, 2000, and the U.S. Sen-ate confirmed the nomination on May 24, 2000.

Prior to his appointment, Commissioner Smith wasProfessor of Law at Capital University Law School inColumbus, Ohio, where he taught Election Law, Com-parative Election Law, Jurisprudence, Law & Econom-ics and Civil Procedure.

During 2000, Darryl R. Wold served as Chairmanof the Commission and Danny L. McDonald as itsVice Chairman. On December 14, 2000, the Commis-sion elected Mr. McDonald to be its Chairman andDavid M. Mason to be its Vice Chairman in 2001. Forbiographies of the Commissioners and statutory offic-ers, see Appendix 1.

General CounselLawrence M. Noble, the FEC’s General Counsel,

resigned from the agency in order to accept a positionas the Executive Director and General Counsel of theCenter for Responsive Politics, a nonpartisan, non-profit research group. Mr. Noble, who joined the FECin 1977 and served as the Commission’s GeneralCounsel from 1987 through 2000, left the Commissionon December 30, 2000.

The Commission appointed Lois G. Lerner to serveas Acting General Counsel for a period of six months,during which time the Commission will conduct anopen selection process to fill the General Counsel’sposition. Ms. Lerner joined the staff of the FEC’s Of-fice of General Counsel in 1981 and most recentlyserved as the FEC’s Associate General Counsel forEnforcement.

Inspector GeneralUnder the Inspector General Act, the Commission’s

Office of the Inspector General (OIG) is authorized toconduct audits and investigations of FEC programs tofind waste, fraud and abuse, and to promoteeconomy, effectiveness and efficiency within theCommission. The OIG audited several facets ofagency operations in 2000, focusing particular atten-

tion on the FEC’s procurement procedures. The officealso received and responded to a Congressional re-quest concerning the types of information availablefrom the FEC’s Web site, conducted unannouncedquarterly cash counts of the FEC’s imprest fund andbegan to develop an OIG Policy and Procedurespamphlet to help FEC employees understand theOIG’s role.

Also during 2000, the President’s Council on Integ-rity and Efficiency and the Executive Council on Integ-rity and Efficiency presented OIG senior auditorJonathan Hatfield with an award for individual accom-plishment.

ADR and Administrative FinesOffices

During 2000, the Commission established newoffices—under the direction of the Staff Director—toadminister its Alternative Dispute Resolution (ADR)and Administrative Fine programs.

The ADR pilot program is designed to promotecompliance with the federal election law by encourag-ing settlements outside the traditional enforcement orlitigation processes. For additional information aboutthe program, see page 13.

The Administrative Fine program streamlines theCommission’s processing of violations involving late-filing and failure to file reports. For more informationon the program, see page 11.

Equal Employment Opportunity(EEO)

The FEC’s Office of Equal Employment Opportu-nity has been a leader in the area of Alternative Dis-pute Resolution (ADR), establishing and successfullyutilizing mediation to informally resolve EEO matterssince March 1994.

Jointly administered by the EEO Director, Person-nel Director and three EEO Counselors, the ADRprogram or Early Intervention program seeks to re-solve employee concerns that might otherwise resultin formal EEO complaints. Prior to filing an EEO com-plaint, employees may voluntarily agree to meet,

Chapter FiveThe Commission

Chapter Five32

CHART 5-1Functional Allocation of Budget

FY 2000 FY 2001

Personnel $25,530,642 27,757,000

Travel/Transportation 700,839 507,500

Space Rental 3,398,336 3,544,000

Phones/Postage 402,972 441,000

Printing 293,791 375,500

Training/Tuition 93,258 218,000

Administrative Expenses 127,339 108,500

Contracts/Services 2,881,266 2,721,500

Maintenance/Repairs 573,563 986,500

Software/Hardware 2,053,512 2,312,000

Federal Agency Service 646,597 414,000

Supplies 380,646 357,500

Publications 402,892 421,000

Equipment 789,412 246,900

Total $38,275,065 40,410,900

separately or jointly, with the EEO Director or Person-nel Director, an EEO Counselor and/or the party al-legedly responsible for the discrimination or wrongdo-ing. If resolution attempts fail, the employee may pro-ceed with EEO counseling and may file a formal EEOcomplaint or grievance, if applicable.

During the period March 1994 through December2000, the Commission informally resolved 100 per-cent of the complaints employees voluntarily broughtbefore the EEO Director.

In addition to this accomplishment, during 2000,the EEO office presented cultural diversity training tostaff of the Office of General Counsel, sponsored anAfrican-American Fashion Show and hosted Asian-Pacific Islander and Hispanic Heritage luncheons.

PersonnelAmong the Personnel Office’s accomplishments

during 2000 were:• Implementing new oversight procedures for the

Commission’s Performance Management System toensure that employee performance appraisals areappropriate and timely;

• Providing training to managers regarding Perfor-mance Standards development and their responsi-bilities under the labor relations laws; and

• Providing pre-retirement training to approximately 35employees.

The FEC’s Budget

Fiscal Year 2000The Commission received a $38.152 million FY

2000 appropriation, supporting a total FTE level of351.5. When combined with a $270,000 carryoverfrom FY 99 and a $144,000 rescission, the Commis-sion netted a $38.278 million budget for FY 2000.Congress earmarked nearly $5 million of the budgetfor computerization initiatives.

Fiscal Year 2001In the spring of 2000, Danny L. McDonald, then

Vice Chairman of the Commission and chairman ofthe FEC’s finance committee, presented the FEC’s

FY 2001 budget request to members of a House Ap-propriations subcommittee and to the Committee onHouse Administration. The Commission requested$40.96 million and 356 FTE for FY 2001, a modestincrease of 7.5 percent and 4 additional personnelover FY 2000. Vice Chairman McDonald noted thatthe majority of the requested budget increase wasneeded to cover inflation in operating costs, but wouldalso provide additional resources in core programareas.

In the end, the Commission received a $40.5 mil-lion FY 2001 appropriation. After a .22 percent gov-ernment-wide rescission, the FEC netted a $40.41appropriation for FY 2001.

Budget Allocation: FYs 2000 and 2001Budget allocation comparisons for FYs 2000 and

2001 appear in the table and charts that follow.

The Commission 33

Allocation of Budget

Allocation of Staff

Commissioners

Inspector General

Staff Director

Administration

Audit

Information

Office of Election Administration

Office of General Counsel

Data Systems Development

Public Disclosure Division

Reports Analysis Division

IT/Electronic Filing/Internet

Commissioners

Inspector General

Staff Director

Administration

Audit

Information

Office of Election Administration

Office of General Counsel

Data Systems Development

Public Disclosure Division

Reports Analysis Division

0 5 10 15 20 25 30 35

0 5 10 15 20 25 30 35

CHART 5-2Divisional Allocation

FY 2000 Actual

FY 2001 Projected

35

Chapter SixLegislative Recommendations

In late February and early March 2001, the FederalElection Commission submitted to Congress and thePresident two sets of legislative recommendations.The first set contained two priority recommendations.The second set comprised 32 additional recommen-dations, including technical changes and amend-ments that addressed problems that the regulatedcommunity and the Commission have encountered.The entire collection of 34 recommendations follows.

Part I: Priority Recommendations

ComplianceExtending Administrative Fine Program forReporting Violations (2001)1

Section: 2 U.S.C. §437g

Recommendation: The Commission recommends thatCongress extend the Commission’s authority to as-sess administrative fines for straightforward violationsof the law requiring the timely reporting of receiptsand disbursements. Congress should extend theadministrative fine authority to cover violations thatrelate to reporting periods that begin on or after Janu-ary 1, 2002, and that end on or before December 31,2003.

Explanation: Congress amended the Act in 1999 topermit the Commission to impose civil money penal-ties for violations of filing requirements that occurbetween January 1, 2000, and December 31, 2001.Public Law 106-58. Accordingly, the Commissionpromulgated new regulations at 11 CFR Part 111,Subpart B, to implement a new Administrative Fineprogram for violations of reporting deadlines. See 64FR 31787 (May 19, 2000). Under the program inplace, when a committee files a late report, or fails tofile a report, the Commission assesses a civil penalty

based on a schedule of penalties that takes into ac-count the committee’s level of financial activity in thereporting period, the election sensitivity of the report,the number of days late and the number of previousviolations. Committees have the option to either paythe civil penalty assessed or challenge theCommission’s finding and/or proposed penalty.

The Administrative Fine program has introducedgreater certainty about the consequences of noncom-pliance with the Act’s filing requirements, with theresult that compliance has increased. For example,the number of late filers dropped significantly with theJuly quarterly report, the first report handled under thenew program. While 30 percent of filers were late forthe 2000 April quarterly filing, only 18 percent of filerswere late for the 2000 July quarterly filing.

Because the program is scheduled to end in Decem-ber 2001, the Commission has only a limited numberof reporting periods in which to evaluate theprogram’s effectiveness. Also, new legislation andregulations on mandatory electronic filing becameeffective on January 1, 2001. (See Public Law 106-58, section 639, and 65 FR 38415 (June 21, 2000).)Extending the duration of the Administrative Fine pilotwould give the Commission and Congress an oppor-tunity to evaluate the effects of the impact of the pilotprogram on one full cycle of reporting—the final reportfor the current cycle is due January 31, 2003. Addi-tionally, the extension would allow the agency toevaluate the effects of mandatory electronic filingupon the ability of filers to meet reporting deadlinesand avoid administrative penalties. The new manda-tory electronic filing program began on January 1,2001.

Election AdministrationDuties of the Office of Election Administration,Advisory Panel (2001)Section: 2 U.S.C. §438(a)(10)

Recommendation: The Commission recommendsthat Congress amend 2 U.S.C. §438(a)(10), both toclarify that the responsibilities of the Office of ElectionAdministration (OEA) include the periodic update and

1 The recommendation to implement an administrativefines program was also made by Pricewaterhouse CoopersLLP in its Technology and Performance Audit and Manage-ment Review of the Federal Election Commission, pages 4-78 and 5-2.

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enhancement of the voluntary Voting System Stan-dards (VSS) program, and to establish statutorily anAdvisory Panel. The state and local officials whoserve on the Commission’s Advisory Panel counselthe Commission on the most useful allocation of re-sources and advise the Commission and electionofficials on consensus best practices in the adminis-tration of elections. A statutorily-chartered AdvisoryPanel specifically would be responsible for advisingthe Commission on the VSS program, including is-sues relating to the scope and frequency of updatesto the VSS, and the independent testing authority thatwould use the VSS to test voting equipment.

Explanation: The FEC’s Office of Election Administra-tion was established as part of the Commission by theFederal Election Campaign Act Amendments of 1974(codified at 2 U.S.C. §438(a)(10)), which mandatedthat the Federal Election Commission serve as a na-tional clearinghouse for the compilation of informationand review of procedures with respect to the adminis-tration of federal elections. In connection with theOEA’s duties, the Commission established an Advi-sory Panel of state and local officials by administrativeaction in 1976. The OEA has served as a nationalclearinghouse for 25 years, gathering information onthe voting process and other election administrationpractices and issues, establishing voluntary standardsfor voting equipment and providing guidance to stateand local election administrators throughout theUnited States. The Office has acquired a wealth ofexperience and expertise. It successfully helped toimplement the Polling Place Accessibility for the Eld-erly and Handicapped Act and the National VoterRegistration Act (“Motor Voter”), and recently hasoverseen a multiyear project to revise the voluntaryVoting System Standards. Since 1975, the OEA hasadministered more than 30 studies in the field of elec-tion administration and, as a result, has published 65volumes on these matters.

The OEA’s expertise in voting system standards, vot-ing equipment and election administration practicesand issues is well established. Building upon both thisexpertise and the credibility it has established withstate and local election officials, the FEC’s Office of

Election Administration could immediately and effi-ciently undertake an expanded role in this field. Withno need for start-up time, the OEA, with the assis-tance of its Advisory Panel, could help fulfill the in-creased demand for “the compilation of informationand the review of procedures with respect to the ad-ministration of Federal elections” (2 U.S.C.§438(a)(10)) to directly benefit the conduct of elec-tions in 2002. Specifically, the OEA would:• Continue to update the VSS first developed in 1990,

and expand the VSS program beyond technicalstandards to include voluntary management stan-dards and voluntary performance/design standardsthat will optimize ease of use and minimize voterconfusion;

• Increase outreach efforts to state and local jurisdic-tions (and vendors of voting equipment) regardingthe VSS;

• Work with existing association and membershiporganizations to provide training and technical assis-tance opportunities for election officials;

• Develop and maintain a current data bank on elec-tion voting equipment;

• Facilitate the timely exchange of information amongstate and local officials on issues relating to electionadministration;

• Consult with other government agencies havingresponsibility for the conduct of federal elections;and

• Compile information about funding needs of stateand local officials relating to voting equipment, train-ing of poll workers, voter education, and other areasthat might be appropriate for a federal grant pro-gram, if Congress chooses to fund state and localinitiatives in election administration.

Legislative Recommendations 37

Part II: (Valid and Technical)Supplemental Recommendations

Part A: Other Valid LegislativeRecommendations

DisclosureWaiver Authority (revised 2001)Section: 2 U.S.C. §434

Recommendation: The Commission recommends thatCongress give the Commission the authority to adjustthe filing requirements or to grant general waivers orexemptions from the reporting requirements of theAct.

Explanation: In cases where reporting requirementsare excessive or unnecessary, it would be helpful ifthe Commission had authority to suspend the report-ing requirements of the Act. For example, the Com-mission has encountered several problems relating tothe reporting requirements of authorized committeeswhose respective candidates were not on the electionballot. The Commission had to consider whether the12-day pre-election reporting requirements and 48-hour notice requirements for large last-minute contri-butions were fully applicable to candidate committeesoperating under one of the following circumstances:• The candidate withdraws from nomination prior to

having his or her name placed on the ballot.• The candidate loses the primary and therefore is not

on the general election ballot.• The candidate is unchallenged and his or her name

does not appear on the election ballot.

Unauthorized committees also face unnecessary re-porting requirements. For example, the Act requiresmonthly filers to file Monthly reports on the 20th dayof each month. If sent by certified mail, the reportmust be postmarked by the 20th day of the month.The Act also requires monthly filers to file a Pre-Gen-eral election report 12 days before the general elec-tion. If sent by certified or registered mail, the Pre-General report must be postmarked by the 15th day

before the election. As a result of these specific duedates mandated by the law, the 2002 OctoberMonthly report, covering September, will be requiredto be postmarked October 20. Meanwhile, the 2002Pre-General report, covering October 1 -16, will berequired to be postmarked October 21, one day afterthe October Monthly. A waiver authority would enablethe Commission to eliminate the requirement to filethe monthly report, as long as the committee includesthe activity in the Pre-General Election Report andfiles the report on time. The same disclosure wouldbe available before the election, but the committeewould only have to file one of the two reports.

In other situations, disclosure would be served if theCommission had the authority to adjust the filing re-quirements, as is currently allowed for special elec-tions. For example, runoff elections are often sched-uled shortly after the primary election. In many in-stances, the close of books for the runoff pre-electionreport is the day after the primary—the same day thatcandidates find out if there is to be a runoff and whowill participate. When this occurs, the 12-day pre-election report discloses almost no runoff activity. Insuch a situation, the Commission should have theauthority to adjust the filing requirements to allow for a7-day pre-election report (as opposed to a 12-dayreport), which would provide more relevant disclosureto the public.

Granting the Commission the authority to waive re-ports or adjust the reporting requirements would re-duce needlessly burdensome disclosure demands.

Monthly Reporting for Congressional Candidates(revised 2001)Section: 2 U.S.C. §434(a)(2)

Recommendation: The Commission recommends thatthe principal campaign committee of a Congressionalcandidate have the option of filing monthly reports inlieu of quarterly reports in both election and non-elec-tion years.

Explanation: Political committees, other than principalcampaign committees, may choose under the Act tofile either monthly or quarterly reports. Committees

Chapter Six38

choose the monthly option when they have a highvolume of activity. Under those circumstances, ac-counting and reporting are easier on a monthly basisbecause fewer transactions have taken place duringthat time. Consequently, the committee’s reportsmight be more accurate.

Principal campaign committees can also have a largevolume of receipts and expenditures. This is particu-larly true with Senatorial campaigns. These commit-tees should be able to choose a more frequent filingschedule so that their reporting covers less activityand is easier to do.

The Commission notes, however, that, in certain cir-cumstances, switching to a monthly reporting sched-ule would create a lag in disclosure directly before aprimary or runoff election or a nominating convention.1

In States where a primary (including a runoff or nomi-nating convention) is held in the beginning of themonth, the financial activity occurring the month be-fore the primary would not be disclosed until after theelection. To remedy this, Congress should specifythat Congressional committees continue to be re-quired to file a 12-day Pre-Primary report (or pre-runoff or pre-convention report), regardless ofwhether a campaign has opted to file quarterly ormonthly. However, where the timing of a primary willcause an overlap of reporting due dates between aregular monthly report and the Pre-election report,Congress should grant the Commission the authorityto waive one of the reports or adjust the reportingrequirements. (See the recommendation entitled“Waiver Authority.”) Congress should also clarify thatcampaigns must still file 48-hour notices disclosinglarge last-minute contributions of $1,000 or more dur-ing the period immediately before the primary, runoffor nominating convention, regardless of their reportingschedule.

Commission as Sole Point of Entry for DisclosureDocuments (revised 2001)2

Section: 2 U.S.C. §432(g)

Recommendation: The Commission recommends thatit be the sole point of entry for all disclosure docu-ments filed by federal candidates and political com-mittees. This would primarily affect Senate candidatecommittees, but would also apply to the Republicanand Democratic Senatorial Campaign Committees.Under current law, those committees alone file theirreports with the Secretary of the Senate, who thenforwards copies to the FEC.

Explanation: The Commission has offered this recom-mendation for many years. Public Law 104-79, effec-tive December 28, 1995, changed the point of entryfor reports filed by House candidates from the Clerk ofthe House to the FEC. However, Senate candidatesand the Senatorial Campaign Committees still mustfile their reports with the Secretary of the Senate, whothen forwards the copies on to the FEC. A single pointof entry is desirable because it would conserve gov-ernment resources and promote public disclosure ofcampaign finance information.

For example, Senate candidates sometimes file re-ports mistakenly with the FEC, rather than with theSecretary of the Senate. Consequently, the FEC mustship the reports back to the Senate. Disclosure to thepublic is delayed and government resources arewasted.

Public Law 104-79 also authorized the electronic filingof disclosure reports with the FEC. As of January1997, political action committees, political party com-mittees (except for the Senatorial Campaign Commit-tees), House campaigns and Presidential campaignsall could opt to file FEC reports electronically. More-over, Public Law 106-58, section 639, mandated elec-

1 In several states, a nominating convention is held inlieu of or in addition to a primary election, and has the abilityto determine the general election nominee.

2 This recommendation was also made byPricewaterhouseCoopers LLP in its Technology and Perfor-mance Audit and Management Review of the Federal Elec-tion Commission, pages 4-37 and 5-2.

Legislative Recommendations 39

tronic filing for committees who meet certain thresh-olds as specified by the Commission. Senate candi-dates and the Senatorial Campaign Committees,however, do not have the official authority to file elec-tronic reports because the point of entry for their re-ports is the Secretary of the Senate (not the FEC). Itshould be noted, however, that such committees mayfile unofficial electronic copies of their reports with theFEC. It is also important to note that the FEC hasworked closely with the Secretary of the Senate toimprove disclosure within the current law. For ex-ample, the FEC and the Secretary of the Senate haveimplemented digital imaging of Senate reports andhave developed the capacity of the Secretary’s officeto accept electronically filed reports. While thesemeasures have undoubtedly improved disclosure,absent mandatory electronic filing for Senate cam-paigns and Senatorial Campaign Committees, asingle point of entry remains desirable. It is importantto note as well that, if the Congress adopted manda-tory electronic filing for Senate campaigns and Sena-torial Campaign Committees, the recommendation tochange the point of entry for Senate filers would berendered moot.

We also reiterate here the statement we have madein previous years because it remains valid. A singlepoint of entry for all disclosure documents filed bypolitical committees would eliminate any confusionabout where candidates and committees are to filetheir reports. It would assist committee treasurers byhaving one office where they would file reports, ad-dress correspondence and ask questions. At present,conflicts may arise when more than one office sendsout materials, makes requests for additional informa-tion and answers questions relating to the interpreta-tion of the law. A single point of entry would also re-duce the costs to the federal government of maintain-ing two different offices, especially in the areas ofpersonnel, equipment and data processing.

The Commission has authority to prepare and publishlists of nonfilers. It is extremely difficult to ascertainwho has and who has not filed when reports mayhave been filed at or are in transit between two differ-ent offices. Separate points of entry also make it diffi-

cult for the Commission to track responses to compli-ance notices. Many responses and/or amendmentsmay not be received by the Commission in a timelymanner, even though they were sent on time by thecandidate or committee. A single point of entry wouldeliminate this confusion. Finally, the Commissionnotes that the report of the Institute of Politics of theJohn F. Kennedy School of Government at HarvardUniversity, An Analysis of the Impact of the FederalElection Campaign Act, 1972-78, prepared for theHouse Administration Committee, recommended thatall reports be filed directly with the Commission (Com-mittee Print, 96th Cong., 1st Sess., at 122 (1979)).

Fraudulent Solicitation of FundsSection: 2 U.S.C. §441h

Recommendation: Section 441h prohibits fraudulentmisrepresentation such as speaking, writing or actingon behalf of a candidate or committee on a matterwhich is damaging to such candidate or committee. Itdoes not, however, prohibit persons from fraudulentlysoliciting contributions. The Commission recommendsthat a provision be added to this section prohibitingpersons from fraudulently misrepresenting them-selves as representatives of candidates or politicalparties for the purpose of soliciting contributions.

Explanation: The Commission has received a numberof complaints that substantial amounts of money wereraised fraudulently by persons or committees purport-ing to act on behalf of candidates. Candidates havecomplained that contributions which people believedwere going for the benefit of the candidate were di-verted for other purposes. Both the candidates andthe contributors were harmed by such diversion. Thecandidates received less money because people de-sirous of contributing believed they had already doneso. The contributors’ funds were used in a mannerthey did not intend. The Commission has been unableto take any action on these matters because the stat-ute gives it no authority in this area.

Chapter Six40

Draft CommitteesSection: 2 U.S.C. §§431(8)(A)(i) and (9)(A)(i),

441a(a)(1) and 441b(b)

Recommendation: The Commission recommends thatCongress consider the following amendments to theAct in order to prevent a proliferation of “draft” com-mittees and to reaffirm Congressional intent that draftcommittees are “political committees” subject to theAct’s provisions.

1. Bring Funds Raised and Spent for Undeclared butClearly Identified Candidates Within the Act’s Pur-view. Section 431(8)(A)(i) should be amended to in-clude in the definition of “contribution” funds contrib-uted by persons “for the purpose of influencing aclearly identified individual to seek nomination forelection or election to Federal office....” Section431(9)(A)(i) should be similarly amended to includewithin the definition of “expenditure” funds expendedby persons on behalf of such “a clearly identified indi-vidual.”

2. Restrict Corporate and Labor Organization Supportfor Undeclared but Clearly Identified Candidates. Sec-tion 441b(b) should be revised to expressly state thatcorporations, labor organizations and national banksare prohibited from making contributions or expendi-tures “for the purpose of influencing a clearly identi-fied individual to seek nomination for election or elec-tion...” to federal office.

3. Limit Contributions to Draft Committees. The lawshould include explicit language stating that no per-son shall make contributions to any committee (in-cluding a draft committee) established to influence thenomination or election of a clearly identified individualfor any federal office which exceed the contributionlimits applicable to federal candidates (e.g., in thecase of individuals, $1,000 per election). Further, thelaw should clarify that a draft committee is separatefrom a campaign committee, for purposes of the con-tribution limits.

Explanation: These proposed amendments wereprompted by the decisions of the U.S. Court of Ap-peals for the District of Columbia Circuit in FEC v.

Machinists Non-Partisan Political League and FEC v.Citizens for Democratic Alternatives in 1980 and ofthe U.S. Court of Appeals for the Eleventh Circuit inFEC v. Florida for Kennedy Committee. The U. S.Court of Appeals for the District of Columbia Circuitheld that the Act, as amended in 1979, regulated onlythe reporting requirements of draft committees. TheCommission sought review of this decision by theSupreme Court, but the Court declined to hear thecase. Similarly, the Eleventh Circuit found that “com-mittees organized to ‘draft’ a person for federal office”are not “political committees” within the Commission’sinvestigative authority. The Commission believes thatthe appeals court rulings create a serious imbalancein the election law and the political process because anonauthorized group organized to support someonewho has not yet become a candidate may operatecompletely outside the strictures of the Federal Elec-tion Campaign Act. However, any group organized tosupport someone who has in fact become a candidateis subject to the Act’s registration and reporting re-quirements and contribution limitations. Therefore, thepotential exists for funneling large aggregations ofmoney, both corporate and private, into the federalelectoral process through unlimited contributionsmade to nonauthorized draft committees that supporta person who has not yet become a candidate. Theserecommendations seek to avert that possibility.

Registration of Candidates and PrincipalCampaign Committees (revised 2001)Section: 2 U.S.C. §§432(e)(1) and 433(a)

Recommendation: The Commission recommends thatCongress revise section 433(a) to require a principalcampaign committee to file its Statement of Organiza-tion at the same time that the candidate is required,under section 432(e)(1), to file his or her Statement ofCandidacy.

Explanation: An individual becomes a candidate un-der the FECA once he or she crosses the $5,000threshold in raising contributions or making expendi-tures. Under current law, the candidate has 15 daysto file his/her Statement of Candidacy, designatingthe principal campaign committee, which will subse-

Legislative Recommendations 41

quently disclose all of the campaign’s financial activ-ity. This committee, in turn, has 10 days from thecandidate’s designation to file a Statement of Organi-zation, the document that officially registers the com-mittee. This schedule allows 25 days to pass beforethe committee’s reporting requirements are triggered.

Consequently, the financial activity that occurred priorto the registration is not disclosed until thecommittee’s first report. During an election year, thisperiod can be so long that it interferes with effectivedisclosure. For example, if a candidate triggered can-didate status 44 days before his or her primary, he orshe would be required to file the Statement of Candi-dacy 29 days before the primary. The committee inturn would not be required to register (i.e., file theStatement of Organization) until 19 days before theprimary. This would allow the committee to avoid filingthe pre-primary report (which covers financial activityup through 20 days before the primary and is due 12days before the primary). Although the committeewould have to file 48-hour notices of last-minute largecontributions received between 19 days and 48 hoursbefore the primary, it would not provide completefinancial disclosure of contributions and expendituresuntil after the primary election because thecommittee’s first required financial report would be thequarterly report (not due possibly for 2 more months).

By requiring simultaneous registration of both thecandidate and the principal campaign committeewithin 15 days of the date that the candidate triggeredcandidate status under the Act, the public would beassured of more timely disclosure of the campaign’sactivity. Applying this principle to the example above,the candidate and committee in question would regis-ter with the Commission 29 days before the primary,and the committee would file the pre-primary reportdue 12 days before the primary, assuring completedisclosure of financial activity before the election.

Reporting Deadlines for Semiannual, Year-Endand Monthly FilersSection: 2 U.S.C. §§434(a)(3)(B) and (4)(A) and (B)

Recommendation: The Commission recommends thatCongress change the reporting deadline for all semi-annual, year-end and monthly filers to 15 days afterthe close of books for the report.

Explanation: Committees are often confused becausethe filing dates vary from report to report. Dependingon the type of committee and whether it is an electionyear, the filing date for a report may fall on the 15th,20th or 31st of the month. Congress should requirethat monthly, quarterly, semiannual and year-endreports are due 15 days after the close of books ofeach report. In addition to simplifying reporting proce-dures, this change would provide for more timely dis-closure, particularly in an election year. In light of theincreased use of computerized recordkeeping by po-litical committees, imposing a filing deadline of thefifteenth of the month would not be unduly burden-some.

Contributions and ExpendituresApplication of $25,000 Annual Limit (revised 2001)Section: 2 U.S.C. §441a(a)(3)

Recommendation: The Commission recommends thatCongress modify the provision that limits individualcontributions to $25,000 per calendar year so that anindividual’s contributions count against his or her an-nual limit for the year in which they are made.

Explanation: Section 441a(a)(3) now provides that acontribution to a candidate made in a nonelectionyear counts against the individual donor’s limit for theyear in which the candidate’s election is held. Forexample, a contributor wishing to support CandidateSmith in an election year contributes to her in Novem-ber of the year before the election. The contributorassumes that the contribution counts against his limitfor the year in which he contributed. Unaware thatthe contribution actually counts against the year inwhich Candidate Smith’s election is held, the contribu-tor makes other contributions during the election year

Chapter Six42

and inadvertently exceeds his $25,000 limit. (Forexample, see FEC Matters Under Review (MURs)4790 (Democratic contributor paid $13,989 civil pen-alty for exceeding annual limit in one calendar year)and 3929 (Republican contributor paid $32,000 civilpenalty for exceeding annual limit in three calendaryears).)

By requiring contributions to count against the limit ofthe calendar year in which the donor contributes, con-fusion would be eliminated and fewer contributorswould inadvertently violate the law. Such an amend-ment would not alter the per candidate, per electionlimits.

The change would also offer the added advantage ofenabling the Commission to better monitor the annuallimit. Through the use of our data base, we couldmore easily monitor contributions made by one indi-vidual regardless of whether they were given to retirethe debt of a candidate’s previous campaign, to sup-port an upcoming election (two, four or six years inthe future) or to support a PAC or party committee.

Contributions by Foreign NationalsSection: 2 U.S.C. §441e

Recommendation: The Commission recommendsthat Congress explicitly clarify that section 441e of theAct applies to both contributions and expendituresreceived and made in connection with both federaland nonfederal elections.

Explanation: The Commission has consistently inter-preted and enforced section 441e of the Act, banningcontributions by foreign nationals, as applying to bothfederal and nonfederal elections. Although two dis-trict court decisions have rejected this interpretation,the U.S. Court of Appeals for the District of Columbiainterpreted section 441e to apply to both federal andnonfederal elections (United States v. Trie, 21F.Supp.2d 7 (DDC 1998); 23 F.Supp.2d 55 (DDC1998); United States v. Kanchanalak et al., 37F.Supp.2d 1 (DDC 1999); rev’d., 192 F.3d 1037 (D.C.Cir. 1999). While the Commission continues to be-lieve that the statute permits, and the legislative his-

tory supports, application of section 441e tononfederal elections, statutory clarification of thispoint would be useful. Congress could clarify section441e either by changing the term “contribution” to“donation,” or by explicitly applying the definition ofcontribution included in section 441b(b)(2) to section441e. In this regard, Congress may also wish to notethat, while section 441b (banning corporate, nationalbank and union spending in connection with elections)prohibits both “contributions” and “expenditures,” sec-tion 441e (foreign nationals) prohibits “contributions”only. The Commission has sought to clarify this ap-parent discrepancy through its regulation at 11 CFR110.4(a), which prohibits both contributions and ex-penditures by foreign nationals. A statutory clarifica-tion would make clear Congress’s intent.

Election Period Limitations for Contributions toCandidates (revised 2001)Section: 2 U.S.C. §441a

Recommendation: The Commission recommends thatlimits on contributions to candidates be placed on anelection cycle basis, rather than the current per elec-tion basis.

Explanation: The contribution limitations affectingcontributions to candidates are structured on a “perelection” basis, thus necessitating dual bookkeepingor the adoption of some other method to distinguishbetween primary and general election contributions.The Commission has had to adopt several rules toclarify which contributions are attributable to whichelection and to assure that contributions are reportedfor the proper election. Many enforcement cases havebeen generated where contributors’ donations areexcessive vis-a-vis a particular election, but not vis-a-vis the $2,000 total that could have been contributedfor the cycle. Often this is due to donors’ failure tofully document which election was intended. Some-times the apparent “excessives” for a particular elec-tion turn out to be simple reporting errors where thewrong box was checked on the reporting form. Yet,substantial resources must be devoted to examinationof each transaction to determine which election isapplicable. Further, several enforcement cases have

Legislative Recommendations 43

been generated based on the use of general electioncontributions for primary election expenses or viceversa.

Most of these complications would be eliminated withadoption of a “per cycle” contribution limit. Thus,multicandidate committees could give up to $10,000and all other persons could give up to $2,000 to anauthorized committee at any point during the electioncycle. The Commission and committees could get outof the business of determining whether contributionsare properly attributable to a particular election, andthe difficulty of assuring that particular contributionsare used for a particular election could be eliminated.

Moreover, Public Law No. 106-58 (the fiscal 2000appropriations bill) amended the Federal ElectionCampaign Act to require authorized candidate com-mittees to report on a campaign-to-date basis, ratherthan on a calendar year basis, as of the reportingperiod beginning January 1, 2001. Placing the limitson contributions to candidates on an election cyclebasis would complement this change and streamlinecandidate reporting.

It would be advisable to clarify that if a candidate par-ticipates in more than two elections (e.g., in a post-primary runoff as well as a primary and general), thecampaign cycle limit would be $3,000. In addition,because Presidential candidates might opt to takepublic funding for the general election, but not theprimary, and thereby be precluded from acceptinggeneral election contributions, the $1,000/5,000 “perelection” contribution limits should be retained forPresidential candidates.

A campaign cycle contribution limit would allow con-tributors to give more than $1,000 toward a particularprimary or general election, but this would be bal-anced by the tendency of campaigns to plan theirfundraising and manage their resources so as not tobe left without fundraising capability at a crucial time.Moreover, adoption of this recommendation wouldeliminate the current requirement that candidates wholose the primary election refund or redesignate anycontributions made for the general election after theprimary is over.

Distinguishing Official Travel from CampaignTravelSection: 2 U.S.C. §431(9)

Recommendation: The Commission recommends thatCongress amend the FECA to clarify the distinctionsbetween campaign travel and official travel.

Explanation: Many candidates for federal office holdelected or appointed positions in federal, state or localgovernment. Frequently, it is difficult to determinewhether their public appearances are related to theirofficial duties or whether they are campaign related. Asimilar question may arise when federal officials whoare not running for office make appearances thatcould be considered to be related to their official du-ties or could be viewed as campaign appearances onbehalf of specific candidates.

Another difficult area concerns trips in which bothofficial business and campaign activity take place.There have also been questions as to how extensivethe campaign aspects of the trip must be before partor all of the trip is considered campaign related. Con-gress might consider amending the statute by addingcriteria for determining when such activity is campaignrelated. This would assist the committee in determin-ing when campaign funds must be used for all or partof a trip. This will also help Congress determine whenofficial funds must be used under House or SenateRules.

Contributions from MinorsSection: 2 U.S.C. §441a(a)(1)

Recommendation: The Commission recommends thatCongress establish a minimum age of 16 for makingcontributions.

Explanation: The Commission has found that contri-butions are sometimes given by parents in theirchildren’s names. Congress should address this po-tential abuse by establishing a minimum age of 16 forcontributors, or otherwise provide guidelines ensuringthat parents are not making contributions in the nameof another.

Chapter Six44

Broader Prohibition Against Force and ReprisalsSection: 2 U.S.C. §441b(b)(3)(A)

Recommendation: The Commission recommends thatCongress revise the FECA to make it unlawful for acorporation, labor organization or separate segre-gated fund to use physical force, job discrimination,financial reprisals or the threat thereof to obtain acontribution or expenditure on behalf of any candidateor political committee.

Explanation: Current §441b(b)(3)(A) could be inter-preted to narrowly apply to the making of contribu-tions or expenditures by a separate segregated fundwhich were obtained through the use of force, jobdiscrimination, financial reprisals and threats. Thus,Congress should clarify that corporations and labororganizations are prohibited from using such tactics inthe solicitation of contributions for the separate segre-gated fund. In addition, the FEC has revised its rulesto clarify that it is not permissible for a corporation ora labor organization to use coercion, threats, force orreprisal to urge any individual to contribute to a candi-date or engage in fundraising activities. See 60 FR64260 (December 14, 1995). However, Congressshould include language to cover such situations.

ComplianceEnsuring Independent Authority of FEC inSupreme Court Litigation (2001)Section: 2 U.S.C. §§437c(f)(4), 437d(a)(6),

437g(a)(9) and 437h

Recommendation: Congress should clarify that theCommission is authorized to initiate and/or conductSupreme Court litigation on matters arising under Title2 of FECA.

Explanation: The Commission, rather than the Solici-tor General’s Office, should be responsible for initiat-ing and/or conducting Supreme Court litigation onmatters arising under Title 2 of the Federal ElectionCampaign Act (FECA). This would include civil en-forcement actions brought by the agency, actionsagainst the agency for its dismissal or failure to act on

enforcement matters, subpoena enforcement actionsand actions challenging or construing the constitution-ality of the FECA.

The statute clearly provides Supreme Court litigationauthority to the Commission under the Title 26 presi-dential public funding provisions. The Commissionhad conducted its own Supreme Court litigation, evenunder Title 2, for 18 years. In 1994, however, theSupreme Court interpreted the statute to preclude theFEC from having authority to conduct Supreme Courtlitigation without the prior authorization of the SolicitorGeneral’s Office. See FEC v. NRA Political VictoryFund, cert. dismissed for want of jurisdiction, 513 U.S.88 (1994) (“NRA”). Under this ruling, the SolicitorGeneral may decline to authorize action even incases where the six-member Commission believesSupreme Court review is advisable. Indeed, on sev-eral cases since the NRA decision, the Commission’srequests have been denied. This has occurred eventhough the Commission clearly had authority to con-duct the litigation in the lower courts.

The Commission should be able to determine whichissues merit Supreme Court resolution. Some difficultlegal questions for which the Commission soughtSupreme Court review might have been resolved bynow, one way or another, if the Solicitor General’sOffice had not declined the Commission’s requests.

The Commission is a unique federal agency thatregulates those persons seeking election to the Presi-dency and the political parties that support them. Nomore than three commissioners may be from any onepolitical party; thus, the required majority vote to takeany action cannot be controlled by any one party.This insures that any Commission litigation decisionsin the Title 2 area are not subject to an appearance ofconflict. This certainly underlies the legislative historyindicating that Congress intended the Commission tohave broad independent litigation authority. In theCommission’s view, the difference in language be-tween the Title 26 provisions and the Title 2 provi-sions was not intended by Congress to deprive theCommission of Supreme Court litigating authorityunder Title 2.

Legislative Recommendations 45

Addition of Commission to the List of AgenciesAuthorized to Issue Immunity Orders According tothe Provisions of Title 18Section: 18 U.S.C. §6001(1)

Recommendation: The Commission recommendsthat Congress revise 18 U.S.C. §6001(1) to add theCommission to the list of agencies authorized to issueimmunity orders according to the provisions of title 18.

Explanation: Congress has entrusted the Commis-sion with the exclusive jurisdiction for the civil enforce-ment of the Federal Election Campaign Act of 1971,as amended, the Presidential Election CampaignFund Act and the Presidential Primary Matching Pay-ment Account Act. The Commission is authorized, inany proceeding or investigation, to order testimony tobe taken by deposition and to compel testimony andthe production of evidence under oath pursuant tosubpoena. See 2 U.S.C. §437d(a)(3) and (4). How-ever, in some instances, an individual who has beencalled to testify or provide other information refuses todo so on the basis of his privilege against self-incrimi-nation. There is currently no mechanism whereby theCommission, with the approval of the Attorney Gen-eral, can issue an order providing limited criminalimmunity for information provided to the Commission.A number of other independent agencies do haveaccess to such a mechanism.

Federal immunity grants are controlled by 18 U.S.C.§§6001-6005. 18 U.S.C. §§6002 and 6004(a) providethat if a witness asserts his Fifth Amendment privilegeagainst self-incrimination and refuses to answer ques-tions at any “proceeding before an agency of theUnited States,” the agency may seek approval fromthe Attorney General to immunize the witness fromcriminal prosecution for testimony or information pro-vided to the agency (and any information directly orindirectly derived from such testimony or information).If the Attorney General approves the agency’s re-quest, the agency may then issue an order immuniz-ing the witness and compelling his testimony. Oncethat order is issued and communicated to the witness,he cannot continue to refuse to testify in the inquiry.

The order issued by the agency only immunizes thewitness as to criminal liability, and does not precludecivil enforcement action. The immunity conferred is“use” immunity, not “transactional” immunity. Thegovernment also can criminally prosecute the witnessfor perjury or giving false statements if the witness liesduring his immunized testimony, or for otherwise fail-ing to comply with the order.

Only “an agency of the United States,” as that term isdefined in 18 U.S.C. §6001(1), can avail itself of themechanism described above. The term is currentlydefined to mean an executive department or militarydepartment, and certain other persons or entities,including a large number of enumerated independentfederal agencies. The Commission is not one of theenumerated agencies. When the provision wasadded to title 18 in 1970, the enumerated agencieswere those which already had immunity grantingpower, but additional agencies have been substitutedor added since then. Adding the Commission as oneof the enumerated agencies in 18 U.S.C. §6001(1)would facilitate its obtaining of information relevant tothe effective execution of its enforcement responsibili-ties.

Referral of Criminal ViolationsSection: 2 U.S.C. §437g(a)(5)(C) and (d)

Recommendation: The Commission recommends thatit have the ability to refer appropriate matters to theJustice Department for criminal prosecution at anystage of a Commission proceeding.

Explanation: The Commission has noted an upsurgeof §441f contribution reimbursement schemes thatmay merit heavy criminal sanction. Although there isno prohibition preventing the Department of Justicefrom initiating criminal FECA prosecutions on its own,the vehicle for the Commission to bring such mattersto the Department’s attention is found at§437g(a)(5)(C), which provides for referral only afterthe Commission has found probable cause to believe

Chapter Six46

that a criminal violation of the Act has taken place.3

Thus, even if it is apparent at an early stage that acase merits criminal referral, the Commission mustpursue the matter to the probable cause stage beforereferring it to the Department for criminal prosecution.To conserve the Commission’s resources, and toallow the Commission to bring potentially criminalFECA violations to the Department’s attention at theearliest possible time, the Commission recommendsthat consideration be given to explicitly empower theCommission to refer apparent criminal FECA viola-tions to the Department at any stage in the enforce-ment process.

Audits for CauseSection: 2 U.S.C. §438(b)

Recommendation: The Commission recommends thatCongress expand the time frame, from 6 months to 12months after the election, during which the Commis-sion can initiate an audit for cause.

Explanation: Under current law, the Commission mustinitiate audits for cause within 6 months after the elec-tion. Because year-end disclosure does not takeplace until almost 2 months after the election, andbecause additional time is needed to computerizecampaign finance information and review reports,there is little time to identify potential audits and com-plete the referral process within that 6-month window.

Public FinancingAverting Impending Shortfall in PresidentialPublic Funding Program (revised 2001)Section: 26 U.S.C. §§6096, 9008(a) and 9037(a)

Recommendation: The Commission strongly recom-mends that Congress take immediate action to avert aprojected impending shortfall in the Presidential publicfunding program in the 2004 election year.

Explanation: The Presidential public funding programexperienced a shortfall for the election of 2000 be-cause participation in the checkoff program is declin-ing and the checkoff is not indexed to inflation whilepayouts are indexed. This shortfall impacted fore-most upon primary candidates. In January 2000,when the U.S. Treasury made its first payment for the2000 election, it was only able to provide approxi-mately 50 percent of the public funds that qualifiedPresidential candidates were entitled to receive. Spe-cifically, only $16.9 million was available for distribu-tion to qualified primary candidates on January 1,2000, after the Treasury paid the convention grantsand set aside the general election grants.4 However,the entitlement (i.e., the amount that the qualifiedcandidates were entitled to receive) on that date was$34 million, twice as much as the amount of availablepublic funds. By January 2001, total payments madeto primary candidates was in excess of $61 million.

Moreover, FEC staff predict that an even more signifi-cant shortfall will exist in the 2004 election cycle. Thebalance in the Presidential Election Campaign Fundin January 2004 is estimated to be approximately $8.5million while demand is estimated to be $37 million.Based on those estimates, candidates will receiveapproximately 23 cents on the dollar with the firstpayment, and it is estimated that the shortfall will ex-tend until March 2005. The Commission recom-mends that Congress take appropriate action to re-duce the impact of this shortfall.

4 The Commission has certified a total of $28.9 million inconvention grants, and $147.2 million will be set aside foruse by general election candidates.

3 The Commission has the general authority to reportapparent violations to the appropriate law enforcementauthority (see 2 U.S.C. §437d(a)(9)), but read together with§437g, §437d(a)(9) has been interpreted by the Commis-sion to refer to violations of law unrelated to theCommission’s FECA jurisdiction.

Legislative Recommendations 47

Qualifying Threshold for Eligibility for PrimaryMatching FundsSection: 26 U.S.C. §9033

Recommendation: The Commission recommends thatCongress raise the qualifying threshold for eligibilityfor publicly funded Presidential primary candidatesand make it adjustable for inflation.

Explanation: The present law sets a very low bar forcandidates to qualify for federal primary matchingfunds: $100,000 in matchable contributions ($5,000 ineach of at least 20 states from individual donations of$250 or less). In other words, to qualify for matchingfunds, a candidate needs only 400 individual contribu-tors, contributing $250 each. The threshold wasnever objectively high; now, a quarter century of infla-tion has effectively lowered it yet by two thirds. Con-gress needs to consider a new threshold that wouldnot be so high as to deprive potentially late bloomingcandidates of public funds, nor so low as to permitindividuals who are clearly not viable candidates toexploit the system.

Rather than establishing a new set dollar threshold,which would eventually require additional inflationaryadjustments, Congress may wish to express thethreshold as a percentage of the previous Presidentialprimary election spending limit, which itself is adjustedfor inflation. For example, a percentage of 5% of the1996 spending limit would have computed to a thresh-old of a little over $1.5 million. In addition, the test forbroad geographic support might be expanded to re-quire support from at least 30 states, as opposed to20, along with an increase in the amount to be raisedfrom within each state, which is the current statutoryrequirement.

State Expenditure Limits for Publicly FinancedPresidential Primary Campaigns (revised 2001)Section: 2 U.S.C. §441a(b)(1)(A)

Recommendation: The Commission recommends thatthe state-by-state limitations on expenditures for pub-licly financed Presidential primary candidates beeliminated.

Explanation: The Commission has now administeredthe public funding program in five Presidential elec-tions. Based on our experience, we believe that thelimitations could be removed with no material impacton the process.

Our experience has shown that, in past years, thelimitations have had little impact on campaign spend-ing in a given state, with the exception of Iowa andNew Hampshire. In most other states, campaignshave been unable or have not wished to expend anamount equal to the limitation. In effect, then, theadministration of the entire program has resulted inlimiting disbursements in these two primaries alone.

With an increasing number of primaries vying for acampaign’s limited resources, however, it would notbe possible to spend very large amounts in theseearly primaries and still have adequate funds avail-able for the later primaries. Thus, the overall nationallimit would serve as a constraint on state spending,even in the early primaries. At the same time, candi-dates would have broader discretion in the running oftheir campaigns.

Our experience has also shown that the limitationshave been only partially successful in limiting expen-ditures in the early primary states. The use of thefundraising limitation, the compliance cost exemption,the volunteer service provisions, the unreimbursedpersonal travel expense provisions, the use of a per-sonal residence in volunteer activity exemption and acomplex series of allocation schemes have developedinto an art which, when skillfully practiced, can par-tially circumvent the state limitations.

Finally, the allocation of expenditures to the stateshas proven a significant accounting burden for cam-paigns and an equally difficult audit and enforcementtask for the Commission. For all these reasons, theCommission decided to revise its state allocationregulations for the 1992 Presidential election. Many ofthe requirements, such as those requiring distinctionsbetween fundraising and other types of expenditures,were eliminated. However, the rules could not undothe basic requirement to demonstrate the amount of

Chapter Six48

expenditures relating to a particular state. Given ourexperience to date, we believe that this change to theAct would still be of substantial benefit to all partiesconcerned.

Eligibility for Public Funding Following Violationsof the Public Finance Laws (revised 2001)Section: 26 U.S.C. §§9003 and 9033

Recommendation: The Commission recommends thatCongress amend the eligibility requirements for pub-licly funded Presidential candidates to make clear thatcandidates who have been convicted of a knowingand willful (criminal) violation of the Presidential Pri-mary Matching Payment Account Act (26 U.S.C.§9042), the Presidential Election Campaign Fund Act(26 U.S.C. §9012), or other offenses relating to publicfunding—or who have failed to make repayments inconnection with a past campaign—will not be eligiblefor public funding in subsequent elections.

Explanation: Neither Presidential public financingstatute expressly restricts eligibility for funding be-cause of a candidate’s prior violations of law, no mat-ter how severe. In LaRouche v. FEC, 996 F.2d 1263(D.C. Cir. 1993), cert. denied, 510 U.S. 992 (1993),the court held that the Commission could not denyfunding to a candidate who had been convicted offraud involving election-related activities. The courtreasoned that the Matching Payment Act did not au-thorize the Commission to evaluate a candidate’s“good faith” as part of the funding process. The samereasoning would seemingly apply to the Fund Act.

There is a risk of serious erosion in the public confi-dence in the integrity of the public financing system ifthe U.S. Government were to provide public funds tocandidates who had been convicted of crimes relatedto the public funding process, or additional funds tothose who had not made past repayments. Congressshould therefore amend the eligibility requirements toensure that such candidates do not receive publicfinancing for their Presidential campaigns. Theamendments should make clear that a candidatewould be ineligible for public funds if he or she hadbeen convicted of fraud with respect to raising funds

for a campaign that was publicly financed, or if he orshe had failed to make repayments in connection witha past publicly funded campaign.

Some criminal violations of the public finance laws areclassified as felonies, while others are misdemeanors.(Under federal law, a misdemeanor is any crime forwhich the maximum penalty is one year’s imprison-ment or less, and a felony is any crime for which themaximum penalty is more than one year’s imprison-ment. See 18 U.S.C. §3559.) Accordingly, we recom-mend that this prohibition encompass all criminal vio-lations covered by these Acts, be they misdemeanorsor felonies.

Part B: TechnicalRecommendations

DisclosureElection Cycle Reporting of OperatingExpenditures and Other DisbursementsSection: 2 U.S.C. §434(b)(5) and (6)

Recommendation: The Commission recommendsthat Congress make technical amendments to sec-tions 434(b)(5) and (6) to require itemization of oper-ating expenditures by authorized committees on anelection-cycle basis rather than on a calendar-yearbasis and to clarify the basis for itemization of otherdisbursements. More specifically, Congress shouldmake a technical amendment to section 434(b)(5)(A)to ensure that authorized committees (i.e., candidatecommittees) itemize operating expenditures on anelection-cycle basis. Section 434(b)(6)(A) should bemodified to address only election cycle reporting sincethe subparagraph applies only to authorized candi-date committees. Finally, section 434(b)(6)(B)(iii) and(v) should be amended to address only calendar-yearreporting since these subparagraphs apply only tounauthorized political committees (i.e., PACs andparty committees).

Explanation: In 1999, Congress amended the statuteat section 434(b) to require authorized candidatecommittees to report on an election-cycle basis,

Legislative Recommendations 49

rather than on a calendar-year basis, with respect toreporting periods beginning after December 31, 2000.Pub. Law No. 106-58, Section 641. However, the1999 amendment did not include section 434(b)(5)(A),which states that operating expenditures must beitemized on a calendar-year basis and details theinformation required in that itemization. The result isthat, under section 434(b)(4), operating expenditureswill be required to be aggregated on an election-cyclebasis, while under section 434(b)(5), they are stillrequired to be itemized on a calendar-year basis.

To establish consistency within the Act, the Commis-sion recommends that Congress make a technicalamendment to section 434(b)(5)(A) by inserting “(orelection cycle in the case of an authorized committeeof a candidate for Federal office)” after “calendaryear”. This amendment would require authorizedcommittees to itemize operating expenditures on anelection-cycle basis.

Congress also should tighten up the language in sec-tion 434(b)(6)(B)(iii) and (v) by striking “(or electioncycle, in the case of an authorized committee of acandidate for Federal office).” The references to au-thorized committees are unnecessary as section434(b)(6)(B) applies solely to unauthorized politicalcommittees. Similarly, in section 434(b)(6)(A), Con-gress should strike “calendar year (or election cycle,in the case of an authorized committee of a candidatefor Federal office)” and insert in its place the phrase,“election cycle,” as section 434(b)(6)(A) only appliesto authorized committees.

Point of Entry for Pseudonym ListsSection: 2 U.S.C. §438(a)(4)

Recommendation: The Commission recommends thatCongress make a technical amendment to section438(a)(4) by deleting the reference to the Clerk of theHouse.

Explanation: Section 438(a)(4) outlines the process-ing of disclosure documents filed under the Act. Thesection permits political committees to “salt” their dis-closure reports with 10 pseudonyms in order to detectmisuse of the committee’s FEC reports and protect

individual contributors who are listed on the reportfrom unwanted solicitations. The Act requires commit-tees who “salt” their reports to file the list of pseud-onyms with the appropriate filing office.

Public Law No. 104-79 (December 28, 1995) changedthe point of entry for House candidate reports fromthe Clerk of the House to the FEC, effective Decem-ber 31, 1995. As a result, House candidates mustnow file pseudonym lists with the FEC, rather than theClerk of the House. To establish consistency withinthe Act, the Commission recommends that Congressamend section 438(a)(4) to delete the reference to theClerk of the House as a point of entry for the filing ofpseudonym lists.

Contributions and ExpendituresCertification of Voting Age Population Figures andCost-of-Living AdjustmentSection: 2 U.S.C. §441a(c) and (e)

Recommendation: The Commission recommends thatCongress consider removing the requirement that theSecretary of Commerce certify to the Commission thevoting age population of each Congressional district.At the same time, Congress should establish a dead-line of February 15 for supplying the Commission withthe remaining information concerning the voting agepopulation for the nation as a whole and for eachstate. In addition, the same deadline should apply tothe Secretary of Labor, who is required under the Actto provide the Commission with figures on the annualadjustment to the cost-of-living index.

Explanation: In order for the Commission to computethe coordinated party expenditure limits and the state-by-state expenditure limits for Presidential candidates,the Secretary of Commerce certifies the voting agepopulation of the United States and of each state. 2U.S.C. §441a(e). The certification for each Congres-sional district, also required under this provision, isnot needed.

In addition, under 2 U.S.C. §441a(c), the Secretary ofLabor is required to certify the annual adjustment inthe cost-of-living index. In both instances, the timely

Chapter Six50

receipt of these figures would enable the Commissionto inform political committees of their spending limitsearly in the campaign cycle. Under present circum-stances, where no deadline exists, the Commissionhas sometimes been unable to release the spendinglimit figures before June.

HonorariumSection: 2 U.S.C. §431(8)(B)(xiv)

Recommendation: The Commission recommends thatCongress should make a technical amendment, delet-ing 2 U.S.C. §431(8)(B)(xiv), now contained in a list ofdefinitions of what is not a contribution.

Explanation: The 1976 amendments to the FederalElection Campaign Act gave the Commission jurisdic-tion over the acceptance of honoraria by all federalofficeholders and employees. 2 U.S.C. §441i. In 1991,the Legislative Branch Appropriations Act repealed§441i. As a result, the Commission has no jurisdictionover honorarium transactions taking place after Au-gust 14, 1991, the effective date of the law.

To establish consistency within the Act, the Commis-sion recommends that Congress make a technicalchange to §431(8)(B)(xiv) deleting the reference tohonorarium as defined in former §441i. This woulddelete honorarium from the list of definitions of what isnot a contribution.

Acceptance of Cash ContributionsSection: 2 U.S.C. §441g

Recommendation: The Commission recommends thatCongress modify the statute to make the treatment of2 U.S.C. §441g, concerning cash contributions, con-sistent with other provisions of the Act. As currentlydrafted, 2 U.S.C. §441g prohibits only the making ofcash contributions which, in the aggregate, exceed$100 per candidate, per election. It does not addressthe issue of accepting cash contributions. Moreover,the current statutory language does not plainly pro-hibit cash contributions in excess of $100 to politicalcommittees other than authorized committees of acandidate.

Explanation: Currently this provision focuses only onpersons making the cash contributions. However,these cases generally come to light when a commit-tee has accepted these funds. Yet the Commissionhas no recourse with respect to the committee in suchcases. This can be a problem, particularly where pri-mary matching funds are received on the basis ofsuch contributions.

While the Commission, in its regulations at 11 CFR110.4(c)(2), has included a provision requiring a com-mittee receiving such a cash contribution to promptlyreturn the excess over $100, the statute does notexplicitly make acceptance of these cash contribu-tions a violation. The other sections of the Act dealingwith prohibited contributions (i.e., §§441b on corpo-rate and labor union contributions, 441c on contribu-tions by government contractors, 441e on contribu-tions by foreign nationals, and 441f on contributions inthe name of another) all prohibit both the making andaccepting of such contributions.

Secondly, the statutory text seems to suggest that theprohibition contained in §441g applies only to thosecontributions given to candidate committees. Thislanguage is at apparent odds with the Commission’sunderstanding of the Congressional purpose to pro-hibit any cash contributions which exceed $100 infederal elections.

ComplianceModifying Terminology of “Reason to Believe”Finding (revised 2001)Section: 2 U.S.C. §437g

Recommendation: The Commission recommends thatCongress modify the language pertaining to “reasonto believe,” contained at 2 U.S.C. §437g, so as toallow the Commission to open an investigation with asworn complaint, or after obtaining evidence in thenormal course of its supervisory responsibilities. Es-sentially, this would change the “reason to believe”terminology to “reason to open an investigation.”

Legislative Recommendations 51

Explanation: Under the present statute, the Commis-sion is required to make a finding that there is “reasonto believe a violation has occurred” before it may in-vestigate. Only then may the Commission requestspecific information from a respondent to determinewhether, in fact, a violation has occurred. The statu-tory phrase “reason to believe” is misleading anddoes a disservice to both the Commission and therespondent. It implies that the Commission has evalu-ated the evidence and concluded that the respondenthas violated the Act. In fact, however, a “reason tobelieve” finding simply means that the Commissionbelieves a violation may have occurred if the facts asdescribed in the complaint or referral are true. Aninvestigation permits the Commission to evaluate thevalidity of the facts as alleged. It would therefore behelpful to substitute words that sound less accusatoryand that more accurately reflect what, in fact, theCommission is doing at this early phase of enforce-ment.

In order to avoid perpetuating the erroneous conclu-sion that the Commission believes a respondent hasviolated the law every time it finds “reason to believe,”the statute should be amended. Note that the changein terminology recommended by the Commissionwould not change the standard that this finding simplyrepresents that the Commission believes a violationmay have occurred if the facts as described are accu-rate.

Public FinancingFundraising Limitation for Publicly FinancedPresidential Primary CampaignsSection: 2 U.S.C. §§431(9)(B)(vi) and 441a

Recommendation: The Commission recommends thatthe separate fundraising limitation provided to publiclyfinanced Presidential primary campaigns be com-bined with the overall limit. Thus, instead of acandidate’s having a $10 million (plus COLA 5) limit for

campaign expenditures and a $2 million (plus COLA)limit for fundraising (20 percent of overall limit), eachcandidate would have one $12 million (plus COLA)limit for all campaign expenditures.

Explanation: Campaigns that have sufficient funds tospend up to the overall limit usually allocate some oftheir expenditures to the fundraising category. Thesecampaigns come close to spending the maximumpermitted under both their overall limit and their spe-cial fundraising limit. Hence, by combining the twolimits, Congress would not substantially alter spend-ing amounts or patterns. For those campaigns whichdo not spend up to the overall expenditure limit, theseparate fundraising limit is meaningless. Manysmaller campaigns do not even bother to use it, ex-cept in one or two states where the expenditure limitis low, e.g., Iowa and New Hampshire. Assuming thatthe state limitations are eliminated or appropriatelyadjusted, this recommendation would have little im-pact on the election process. The advantages of therecommendation, however, are substantial. Theyinclude a reduction in accounting burdens and a sim-plification in reporting requirements for campaigns,and a reduction in the Commission’s auditing task.For example, the Commission would no longer haveto ensure compliance with the 28-day rule, i.e., therule prohibiting committees from allocating expendi-tures as exempt fundraising expenditures within 28days of the primary held within the state where theexpenditure was made.

Enforcement of Nonwillful Violations (revised 2001)Section: 26 U.S.C. §§9012 and 9042

Recommendation: The Commission recommends thatCongress consider amending the Presidential Elec-tion Campaign Fund Act and the Presidential PrimaryMatching Payment Account Act to clarify that theCommission has authority for civil enforcement ofnonwillful violations (as well as willful violations) of thepublic funding provisions. Congress should also con-sider amending the Presidential Election CampaignFund Act to clarify how unlawful uses of payments byconvention committees, if nonwillful, are to be penal-ized.

5 Spending limits are increased by the cost-of-living ad-justment (COLA), which the Department of Labor calculatesannually.

Chapter Six52

Explanation: Section 9012 of the Presidential ElectionCampaign Fund Act and §9042 of the PresidentialPrimary Matching Payment Account Act provide onlyfor “criminal penalties” for knowing and willful viola-tions of the spending and contribution provisions andthe failure of publicly funded candidates to furnish allrecords requested by the Commission. The lack of aspecific reference to nonwillful violations of theseprovisions has raised questions regarding theCommission’s ability to enforce these provisionsthrough the civil enforcement process.

In some limited areas, the Commission has invokedother statutes and other provisions in Title 26 to carryout its civil enforcement of the public funding provi-sions. It has relied, for example, on 2 U.S.C. §441a(b)to enforce the Presidential spending limits. Similarly,the Commission has used the candidate agreementand certification processes provided in 26 U.S.C.§§9003 and 9033 to enforce the spending limits, theban on private contributions and the requirement tofurnish records. Congress may wish to consider revis-ing the public financing statutes to provide explicitauthority for civil enforcement of these provisions.

Section 9012(c)(2) governs the unlawful use of pay-ments by a convention committee. The language of9012(c) fails, however, to specify the appropriatecriminal penalty for such violations. Since criminalpenalties are specified for all the other violations listedin section 9012(c), the absence of such a penalty forthe convention violation mentioned in (c)(2) may be astatutory oversight.

Alternatively, Congress may wish to clarify whetherthe unlawful use of payments by a convention com-mittee under section 9012(c)(2) is a criminal violation.This is unclear because the language of section9012(c)(2) does not contemplate a “knowing and will-ful” violation, This contrasts with other violations ofsection 9012. Also, as noted above, the penaltiesspecified in paragraph (c)(3) apply to other violationsof the section, but not to violations by conventioncommittees.

Deposit of RepaymentsSection: 26 U.S.C. §9007(d)

Recommendation: The Commission recommends thatCongress revise the law to state that: All paymentsreceived by the Secretary of the Treasury under sub-section (b) shall be deposited by him or her in thePresidential Election Campaign Fund established by§9006(a).

Explanation: This change would allow the Fund torecapture monies repaid by convention-related com-mittees of national major and minor parties, as well asby general election grant recipients. Currently theFund recaptures only repayments made by primarymatching fund recipients.

Contributions to Presidential Nominees WhoReceive Public Funds in the General ElectionSection: 26 U.S.C. §9003

Recommendation: The Commission recommends thatCongress clarify that the public financing statutesprohibit the making and acceptance of contributions(either direct or in-kind) to Presidential candidateswho receive full public funding in the general election.

Explanation: The Presidential Election CampaignFund Act prohibits a publicly financed general electioncandidate from accepting private contributions to de-fray qualified campaign expenses. 26 U.S.C.§9003(b)(2). The Act does not, however, contain aparallel prohibition against the making of these contri-butions. Congress should consider adding a sectionto 2 U.S.C. §441a to clarify that individuals and com-mittees are prohibited from making these contribu-tions.

MiscellaneousEx Officio Members of Federal ElectionCommission (revised 2001)Section: 2 U.S.C. §437c(a)(1)

Recommendation: The Commission recommends thatCongress amend section 437c by removing the Sec-retary of the Senate, the Clerk of the House and their

Legislative Recommendations 53

designees from the list of the members of the FederalElection Commission.

Explanation: In 1993, the U.S. Court of Appeals forthe District of Columbia ruled that the ex officio mem-bership of the Secretary of the Senate and the Clerkof the House on the Federal Election Commissionwas unconstitutional. (FEC v. NRA Political VictoryFund, 6 F.3d 821 (D.C. Cir. 1993), cert. dismissed forwant of jurisdiction, 513 U.S. 88 (1994).) This decisionwas left in place when the Supreme Court dismissedthe FEC’s appeal on the grounds that the FEC lacksstanding to independently bring a case under Title 2.

As a result of the appeals court decision, the FECreconstituted itself as a six-member body whosemembers are appointed by the President and con-firmed by the Senate. Congress should accordinglyamend the Act to reflect the appeals court’s decisionby removing the references to the ex officio membersfrom section 437c.

55Chapter SevenCampaign Finance Statistics

0

500

1000

1500

2000

009998979695949392919089888786858483828180797877767574

Corporate

Nonconnected

Trade/Membership/Health

Labor

Other

CHART 7-1Number of PACs, 1974-2000

Chapter Seven56

Individuals

PACs

Candidate

Other Receipts

CHART 7-2House Candidates’Sources of Receipts:Election Cycle

0

50

100

150

200

250

300

350

400

20001998199619941992

Challengers

Millions of Dollars

0

50

100

150

200

250

300

350

400

20001998199619941992

Incumbents

Millions of Dollars

0

50

100

150

200

250

300

350

400

20001998199619941992

Open Seat Candidates

Millions of Dollars

Campaign Finance Statistics 57

Individuals

PACs

Candidate

Other Receipts

0

50

100

150

200

250

20001998199619941992

Challengers

Millions of Dollars

0

50

100

150

200

250

20001998199619941992

Incumbents

Millions of Dollars

0

50

100

150

200

250

20001998199619941992

Open Seat Candidates

Millions of Dollars

CHART 7-3Senate Candidates’Sources of Receipts:Election Cycle

Chapter Seven58

0

200

400

600

800

1000

1200

200019981996199419921990

CHART 7-4House and Senate Activityby Election Cycle Disbursements

Receipts

Millions of Dollars

Campaign Finance Statistics 59

OtherPACs

Non-Connected

PACs

Trade/Member/HealthPACs

LaborPACs

Corp.PACs

0

20

40

60

80

100

OtherPACs

Non-Connected

PACs

Trade/Member/HealthPACs

LaborPACs

Corp.PACs

0

20

40

60

80

100

Democratic Candidates

Republican Candidates

CHART 7-5PAC Contributions to Candidatesby Party and Type of PAC

Millions of Dollars Millions of Dollars

1998 Election Cycle 2000 Election Cycle

Chapter Seven60

0

50

100

150

200

DemocratsRepublicans0

50

100

150

200

NonincumbentsIncumbents

2000

1998

1996CHART 7-6PAC Contributions to House and SenateCandidates by Party and Candidate Status

Millions of Dollars Millions of Dollars

Campaign Finance Statistics 61

0

20

40

60

80

100

TradeNoncon.LaborCorp.0

20

40

60

80

100

TradeNoncon.LaborCorp.

2000

1998

1996CHART 7-7PAC Contributions to House Candidatesby Type of PAC and Candidate Status

Percent Percent

Incumbents Challengers

Chapter Seven62

CHART 7-8Major Party FederalAccount Receipts: 2000

Millions of Dollars

0

50

100

150

200

250

RepublicansDemocrats

State/Local Committees

National Congressional Committee

National Senatorial Committee

National Committee

Campaign Finance Statistics 63

1999-00$262.7 million

1999-00$377.9 million

Democratic National Committee (DNC)

1997-98$178.8 million

1995-96$306.1 million

1993-94$132.27 million

1997-98$122.6 million

1995-96$210.3 million

1993-94$83.86 million

Republican National Committee (RNC)

CHART 7-9Party Federal andNonfederal Receipts

Nonfederal Receipts

Federal Receipts

Chapter Seven64

Individuals�$200 or less

Individuals�over $200

PACs��

Other

0 40 80 120

Individuals�$200 or less

Individuals�over $200

PACs��

Other

0 40 80 120

CHART 7-10Sources of Party Receipts

DNC Federal Receipts by Source RNC Federal Receipts by Source

Millions of Dollars Millions of Dollars

2000

1998

DNC Nonfederal Receipts by Source RNC Nonfederal Receipts by Source

Millions of Dollars Millions of Dollars

Individuals��

Other �Sources

0 20 40 60 80 100

20001998

Individuals��

Other �Sources

0 20 40 60 80 100

Campaign Finance Statistics 65

Millions of Dollars

CHART 7-11Receipts of Presidential PrimaryCampaigns by Source

0 20 40 60 80 100

Smith

Quayle

Nader

McCain

LaRouche

Keyes

Kasich

Hatch

Hagelin

Gore

Forbes

Dole

Bush

Buchanan

Browne

Bradley

Bauer

Alexander

Other

Candidate

Matching Funds

Individuals

Chapter Seven66

Millions of Dollars

CHART 7-122000 General Election:Funding Sources of CandidatesReceiving Public Grants

0

20

40

60

80

100

Buchanan/FosterGore/LiebermanBush/Cheney

Contributions to Compliance Fund

Individual Contributions

Party Expenditures

Federal Funds

Campaign Finance Statistics 67

0

5

10

15

20

25

30

August September Oct. 1 - Oct. 19 - Nov. 28 - Oct. 18 Nov. 27 Dec. 31

CHART 7-13Presidential Spending by 2000General Election Campaigns

Millions of Dollars

Nader/LaDuke

Buchanan/Foster

Gore/Lieberman

Bush/Cheney

69

Commissioners

Darryl R. Wold, ChairmanApril 30, 20011

Darryl Wold was nominated to the Commission byPresident Clinton on November 5, 1997, and con-firmed by the U.S. Senate on July 30, 1998. Prior tohis appointment, Commissioner Wold had been inprivate law practice in Orange County, California,since 1974. In addition to his own practice, he wascounsel, for election law litigation and enforcementdefense matters, to Reed and Davidson, a Californialaw firm. Mr. Wold’s practice included representingcandidates, ballot measure committees, political ac-tion committees and others with responsibilities underfederal, state and local election laws. Mr. Wold’sbusiness practice emphasized business litigation andcounseling closely-held companies.

Commissioner Wold graduated cum laude fromClaremont McKenna College in California and earnedan LL.B. from Stanford University. He is a member ofthe California and U.S. Supreme Court bars.

Danny L. McDonald, Vice ChairmanApril 30, 2005

Now serving his fourth term as Commissioner,Danny McDonald was first appointed to the Commis-sion in 1981 and was reappointed in 1987, 1994 and2000. Before his original appointment, he managed10 regulatory divisions as the general administrator ofthe Oklahoma Corporation Commission. He had pre-viously served as secretary of the Tulsa County Elec-tion Board and as chief clerk of the board. He wasalso a member of the Advisory Panel to the FEC’sNational Clearinghouse on Election Administration.

A native of Sand Springs, Oklahoma, Mr.McDonald graduated from Oklahoma State Universityand attended the John F. Kennedy School of Govern-ment at Harvard University. He served as FEC Chair-man in 1983, 1989 and 1995.

David M. Mason, CommissionerApril 30, 2003

David Mason was nominated to the Commission byPresident Clinton on March 4, 1998, and confirmed bythe U.S. Senate on July 30, 1998. Prior to his appoint-ment, Mr. Mason served as Senior Fellow, Congres-sional Studies, at the Heritage Foundation. He joinedHeritage in 1990 as Director of Executive BranchLiaison. In 1995 he became Vice President, Govern-ment Relations, and in 1997 Mr. Mason was desig-nated Senior Fellow with a focus on research, writingand commentary on Congress and national politics.

Prior to his work at the Heritage Foundation, Com-missioner Mason served as Deputy Assistant Secre-tary of Defense and served on the staffs of SenatorJohn Warner, Representative Tom Bliley and then-House Republican Whip Trent Lott. He worked innumerous Congressional, Senate, Gubernatorial andPresidential campaigns, and was himself the Republi-can nominee for the Virginia House of Delegates inthe 48th District in 1982.

Commissioner Mason attended Lynchburg Collegein Virginia and graduated cum laude from ClaremontMcKenna College in California. He is active in politicaland community affairs at both the local and nationallevel. He and his wife reside in Lovettsville, Virginia,with their six children.

Karl J. Sandstrom, CommissionerApril 30, 2001

Karl Sandstrom was nominated to the Commissionby President Clinton on July 13, 1998, and confirmedby the U.S. Senate on July 30, 1998. Prior to his ap-pointment, Commissioner Sandstrom served asChairman of the Administrative Review Board at theDepartment of Labor. From 1988 to 1992 he was StaffDirector of the House Subcommittee on Elections,during which time he also served as the Staff Directorof the Speaker of the House’s Task Force on Elec-toral Reform. From 1979 to 1988, CommissionerSandstrom served as the Deputy Chief Counsel to theHouse Administration Committee of the House ofRepresentatives. In addition, he has taught publicpolicy as an Adjunct Professor at American University.

Appendix 1Biographies ofCommissionersand Officers

1 Term expiration date.

Appendices70

Commissioner Sandstrom received a B.A. degreefrom the University of Washington, a J.D. degree fromGeorge Washington University and a Masters of theLaw of Taxation from Georgetown University LawCenter.

Bradley A. SmithApril 30, 2005

Bradley Smith was nominated to the Commissionby President Clinton on February 9, 2000, and con-firmed by the U.S. Senate on May 24, 2000. Prior tohis appointment, Commissioner Smith was Professorof Law at Capital University Law School in Columbus,Ohio, where he taught Election Law, ComparativeElection Law, Jurisprudence, Law & Economics andCivil Procedure.

Prior to joining the faculty at Capital in 1993, hehad practiced with the Columbus law firm of Vorys,Sater, Seymour & Pease, served as United StatesVice Consul in Guayaquil, Ecuador, worked as a con-sultant in the health care field and served as GeneralManager of the Small Business Association of Michi-gan, a position in which his responsibilities includedmanagement of the organization’s political actioncommittee.

Commissioner Smith received his B.A. cum laudefrom Kalamazoo College in Kalamazoo, Michigan,and his J.D. cum laude from Harvard Law School.

Scott E. Thomas, CommissionerApril 30, 2003

Scott Thomas was appointed to the Commission in1986 and reappointed in 1991 and 1998. He servedas acting Chairman during the last four months of1998, and as Chairman throughout 1999. He previ-ously served as Chairman in 1987 and 1993. Prior toserving as a Commissioner, Mr. Thomas was theexecutive assistant to former Commissioner ThomasE. Harris. He originally joined the FEC as a legal in-tern in 1975 and later became an Assistant GeneralCounsel for Enforcement.

A Wyoming native, Mr. Thomas graduated fromStanford University and holds a J.D. degree fromGeorgetown University Law Center. He is a memberof the District of Columbia and U.S. Supreme Courtbars.

Statutory OfficersJames A. Pehrkon, Staff Director

James Pehrkon became Staff Director on April 14,1999, after serving as Acting Staff Director for eightmonths. Prior to that, Mr. Pehrkon served 18 years asthe Commission’s Deputy Staff Director with responsi-bilities for managing the FEC’s budget, administrationand computer systems. Among the agency’s first em-ployees, Mr. Pehrkon is credited with setting up theFEC’s data processing department and establishingthe Data Systems Development Division. He directedthe data division before assuming his duties asDeputy Staff Director.

An Austin, TX, native, Mr. Pehrkon received anundergraduate degree from Harvard University anddid graduate work in foreign affairs at GeorgetownUniversity.

Lawrence M. Noble, General CounselLawrence Noble became General Counsel in 1987,

after serving as Acting General Counsel. He joinedthe Commission in 1977, becoming the Deputy Gen-eral Counsel in 1983. He previously served as Assis-tant General Counsel for Litigation and as a litigationattorney. Before his FEC service, he was an attorneywith the Aviation Consumers Action Project.

A native of New York, Mr. Noble holds a degree inpolitical science from Syracuse University and a J.D.degree from the National Law Center at GeorgeWashington University. He is a member of the bars forthe U.S. Supreme Court and for the U.S. Court ofAppeals for the DC Circuit and the District of Colum-bia. He is also a member of the American and Districtof Columbia Bar Associations.

Lynne A. McFarland, Inspector GeneralLynne McFarland became the FEC’s first perma-

nent Inspector General in February 1990. She cameto the Commission in 1976, first as a reports analyst.Later, she worked as a program analyst in the Officeof Planning and Management.

A Maryland native, Ms. McFarland holds a sociol-ogy degree from Frostburg State College and is amember of the Institute of Internal Auditors.

71

January1 — Chairman Darryl R. Wold and Vice Chair-

man Danny L. McDonald begin their one-year terms of office.

14 — FEC issues semiannual PAC count.— Commission certifies ten additional states

for paper-filing waiver.24 — U.S. Supreme Court rules that Missouri’s

contribution limits are constitutional (Nixon v.Shrink Missouri Government PAC).

31 — 1999 year-end report due.

February2 — FEC adds open meeting agenda documents

to Web site.9 — President Clinton nominates Bradley A.

Smith and reappoints Danny L. McDonaldas FEC Commissioners.

10-11— FEC holds candidate conference in Wash-ington, DC.

15 — Commission certifies ten additional statesfor paper-filing waiver.

16 — Commission holds public hearing on pro-posed coordination rules.

23 — FEC conducts monthly roundtable on “Solic-iting Funds for Corporate/Labor/Trade PACsUsing Newsletters and Web Sites.”

29 — FEC submits $40.96 million FY 2001 budgetrequest to Congress.

March1 — FEC conducts monthly roundtable on “Re-

porting Basics for Corporate/Labor/TradeAssociation PACs.”

1 — Commission announces 2000 Presidentialspending limits and ß441a(d) limits.

8-10 — FEC holds regional conference in Miami, FL.10 — Commission releases statistics on Congres-

sional activity during 1999.13 — FEC submits six priority legislative recom-

mendations to Congress and the President.16 — Commission sends additional 32 recommen-

dations for legislative action to Congressand the President.

Appendix 2Chronology of Events

22 — Vice Chairman Danny L. McDonald testifiesbefore House Appropriations subcommitteeon $40.96 million FY 2001 budget request.

27 — Regulations on electronic Freedom of Infor-mation Act take effect.

28 — FEC certifies additional $288,000 cost-of-living payments to Democratic and Republi-can Parties for nominating conventions.

31 — FEC certifies John Hagelin eligible for pri-mary matching funds.

April6-7 — FEC holds corporate/labor conference in

Washington, DC.10 — Commission certifies three additional states

for paper-filing waiver.15 — Quarterly report due.19 — Revised regulations governing aspects of

the public funding of Presidential primaryand general election campaigns take effect.

May1 — FEC publishes 2000 Combined Federal/

State Disclosure and Election Directory.5 — U.S. Court of Appeals affirms district court

decision that coordinated party expenditurelimits are unconstitutional (FEC v. ColoradoRepublican Federal Campaign Committee).

16-17— FEC holds member/trade conference inWashington, DC.

18 — U.S. Court of Appeals rejects constitutionalchallenges to prohibitions on corporate con-tributions and contributions in the name ofanother (Mariani v. USA).

24 — Commission certifies two additional statesfor paper-filing waiver.

25 — Commission certifies additional $53,769cost-of-living payment to Reform Party fornominating convention.

25 — Senate confirms nomination of Bradley A.Smith and renomination of Danny L.McDonald as FEC Commissioners.

Appendices72

June1 — FEC issues Annual Report 1999.5 — Commission issues 15-month fundraising

figures of major parties.7 — FEC conducts monthly roundtable on “Part-

ner/Partnership Federal Election Activity.”7 — Regulations on state waiver program take

effect.14 — Danny L. McDonald sworn in for fourth term

as FEC Commissioner.15 — Commission approves final rules on manda-

tory electronic filing.26 — Bradley A. Smith sworn in as FEC Commis-

sioner.30 — FEC certifies Ralph Nader eligible for pri-

mary matching funds.

July5 — Commission approves final rules on election

cycle reporting.14 — Regulations on administrative fines take

effect.15 — Quarterly report due.25 — Commission approves pilot Alternative Dis-

pute Resolution program.

August2 — FEC conducts monthly roundtable on “Up-

date on New and Proposed FEC ReportingRegulations.”

4 — Commission certifies $67.56 million paymentof public funds to Bush/Cheney campaign.

18 — Commission certifies $67.56 million paymentof public funds to Gore/Lieberman cam-paign.

22 — FEC issues semiannual PAC count.

September1 — Commission publishes Campaign Guide

Supplement.11 — U.S. Court of Appeals rules that Missouri’s

limits on party contributions to candidatesare unconstitutional (Missouri RepublicanParty, et al. v. Charles F. Lamb, et al.).

12 — Commission votes to deny public funding toHagelin/Goldhaber campaign.

13 — FEC conducts monthly roundtable on “Pre-Election Reporting Tune-Up.”

14 — Commission certifies $12.6 million paymentof public funds to Buchanan/Foster cam-paign.

14 — District court rules that FEC’s debate regula-tions are not arbitrary or capricious(Buchanan et al. v. FEC).

15 — FEC publishes “Alternative Dispute Resolu-tion Program” brochure.

22 — FEC makes Senate candidates campaignfinance reports available on FEC Web site.

27 — Commission releases 18-month fundraisingfigures of PACs and major parties.

28 — FEC extends state filing waiver program toSenate candidates.

October1 — FEC launches Alternative Dispute Resolu-

tion program.2 — Commission certifies one additional state for

paper-filing waiver.3 — District court rules that prohibitions on contri-

butions and independent expenditures by anonprofit corporation are unconstitutional(Christine Beaumont, et al. v. FEC).

10 — U.S. Supreme Court grants FEC’s petitionfor certiorari in FEC v. Colorado RepublicanFederal Campaign Committee.

12 — FEC publishes list of Presidential candidateson state ballots.

15 — Quarterly report due.18 — FEC makes additions to its Web site ser-

vices, including on-line filing of 48-hour no-tices.

26 — Pre-General report due.

November2 — FEC releases statistics on 2000 House and

Senate campaign spending.7 — General Election.7 — Georgia holds special general election for

Senate seat.

73Appendices

20 — FEC General Counsel Lawrence Noble an-nounces resignation, effective January 1,2001.

30 — Commission approves final rules on coordi-nated communications and independentexpenditures.

December1 — Lois G. Lerner designated Acting General

Counsel, effective January 2, 2001.7 — Post-General report due.

14 — Commission elects Danny L. McDonaldChairman and David M. Mason Vice Chair-man for 2001.

21 — First case resolved and certified under theAlternative Dispute Resolution Program.

29 — Commission certifies one additional state forpaper-filing waiver.

Appendix 3FEC Organization Chart

General Counsel

Public Financing,Ethics and

Special Projects

Deputy Staff Directorfor Management

Data SystemsDevelopment

Planning andManagement

AdministrationEqual Employment

Opportunity

CommissionSecretary

PublicDisclosure

Audit

Inspector GeneralStaff Director

Information

CongressionalAffairs

PersonnelLabor/Management

Press Office

Policy 3

ReportsAnalysis

Litigation

Enforcement

The Commissioners

Darryl R. Wold, Chairman1

Danny L. McDonald, Vice Chairman2

David M. Mason, CommissionerKarl J. Sandstrom, CommissionerBradley A. Smith, CommissionerScott E. Thomas, Commissioner

1 Danny L. McDonald was elected 2001 Chairman.2 David M. Mason was elected 2001 Vice Chairman.3 Policy covers regulations, advisory opinions, legal review and administrative law.

Office ofAdministrative

Review

Office ofAlternative Dispute

Resolution

Office of ElectionAdministration

77

This appendix briefly describes the offices withinthe Commission, located at 999 E Street, NW, Wash-ington, DC 20463. The offices are listed alphabeti-cally, with local telephone numbers given for officesthat provide services to the public. Commission of-fices can also be reached toll-free on 800-424-9530and locally on 202-694-1100.

AdministrationThe Administration Division consists of a Finance

Office and an Administration Office. The Finance Of-fice administers the agency’s accounting and payrollprograms. The Administration Office is responsible forprocurement, contracting, space management,records management, telecommunications, buildingsecurity and maintenance. The office also handlesprinting, document reproduction and mail services.

AuditMany of the Audit Division’s responsibilities con-

cern the Presidential public funding program. Thedivision evaluates the matching fund submissions ofPresidential primary candidates and determines theamount of contributions that may be matched withfederal funds. As required by law, the division auditsall public funding recipients.

In addition, the division audits those committeeswhich, according to FEC determinations, have notmet the threshold requirements for substantial compli-ance with the law. Audit Division resources are alsoused in the Commission’s investigations of com-plaints.

Commission SecretaryThe Commission Secretary is responsible for all

administrative matters relating to Commission meet-ings, as well as Commission votes taken outside ofthe meetings. This includes preparing meeting agen-das, agenda documents, Sunshine Act notices, meet-ing minutes and vote certifications.

The Secretary also logs, circulates and tracks nu-merous materials not related to Commission meet-

ings, and records the Commissioner’s votes on thesematters. All matters on which a vote is taken areentrered into the Secretary’s database.

CommissionersThe six Commissioners—no more than three of

whom may represent the same political party—areappointed by the President and confirmed by the Sen-ate.

The Commissioners serve full time and are respon-sible for administering and enforcing the Federal Elec-tion Campaign Act. They generally meet twice aweek, once in closed session to discuss matters that,by law, must remain confidential, and once in a meet-ing open to the public. At these meetings, they formu-late policy and vote on significant legal and adminis-trative matters.

Congressional, Legislative andIntergovernmental Affairs

This office serves as primary liaison with Congressand Executive Branch agencies. The office is respon-sible for keeping Members of Congress informedabout Commission decisions and, in turn, for keepingthe agency up to date on legislative developments.Local phone: 202-694-1006; toll-free 800-424-9530.

Data Systems DevelopmentThis division provides computer support for the

entire Commission. Its responsibilities are divided intotwo general areas.

In the area of campaign finance disclosure, theData Systems Development Division enters informa-tion into the FEC database from all reports filed bypolitical committees and other entities. The division isalso responsible for the computer programs that sortand organize campaign finance data into indexes

These indexes permit a detailed analysis of cam-paign finance activity and, additionally, provide a toolfor monitoring contribution limits. The indexes areavailable online through the Data Access Program(DAP), a subscriber service managed by the division.

Appendix 4FEC Offices

Appendices78

The division also publishes the Reports on FinancialActivity series of periodic studies on campaign financeand generates statistics for other publications.

Among its duties related to internal operations, thedivision provides computer support for the agency’sautomation systems and for administrative functionssuch as management information, document tracking,personnel and payroll systems as well as the MURprioritization system.

Local phone: 202-694-1250; toll-free phone: 800-424-9530.

Equal Employment Opportunity(EEO) and Special Programs

The EEO Office advises the Commission on theprevention of discriminatory practices and managesthe agency’s EEO Program.

The office is also responsible for developing a Spe-cial Emphasis Program tailored to the training andadvancement needs of women, minorities, veterans,special populations and disabled employees and rec-ommending affirmative action recruitment, hiring, andcareer advancement. The office encourages the infor-mal resolution of complaints during the counselingstage.

Additionally, the office develops and manages avariety of agency-wide special projects. These includethe Combined Federal Campaign, the U.S. SavingsBonds Drive and workshops intended to improve em-ployees’ personal and professional lives.

General CounselThe General Counsel directs the agency’s enforce-

ment activities, represents and advises the Commis-sion in any legal actions brought before it and servesas the Designated Agency Ethics Official. The Officeof General Counsel handles all civil litigation, includ-ing Title 26 cases that come before the SupremeCourt. The office also drafts, for Commission consid-eration, advisory opinions and regulations as well asother legal memoranda interpreting the federal cam-paign finance law.

InformationIn an effort to promote voluntary compliance with

the law, the Information Division provides technicalassistance to candidates, committees and othersinvolved in elections through the World Wide Web,letters, phone conversations, publications and confer-ences. Responding to phone and written inquiries,members of the staff provide information on the stat-ute, FEC regulations, advisory opinions and courtcases. Staff also lead workshops on the law and pro-duce guides, pamphlets and videos on how to complywith the law. Located on the second floor, the divisionis open to the public. Local phone: 202-694-1100; toll-free phone: 800-424-9530 (press 1, then 3 on atouch-tone phone).

Inspector GeneralThe FEC’s Inspector General (IG) has two major

responsibilities: to conduct internal audits and investi-gations to detect fraud, waste and abuse within theagency and to improve the economy and effective-ness of agency operations. The IG is required to re-port to Congress on a semiannual basis the activitiesof the Office of Inspector General. The semiannualreport to Congress may describe any serious prob-lems or deficiencies in agency operations and anycorrective steps taken by the agency.

Law LibraryThe Commission law library, a government docu-

ment depository, is located on the eighth floor and isopen to the public. The library contains a basic refer-ence collection, which includes materials on cam-paign finance reform, election law and current politicalactivity. Visitors to the law library may use its comput-ers to access the Internet and FEC databases. FECadvisory opinions and computer indices of enforce-ment proceedings (MURs) may be searched in thelaw library or the Public Disclosure Division. Localphone: 202-694-1600; toll-free: 800-424-9530.

Appendices 79

Office of Administrative ReviewThe Office of Administrative Review (OAR) was

established in 2000 as a result of statutory amend-ments permitting the Commission to impose civilmoney penalties for violations of certain reportingrequirements occurring between January 1, 2000, andDecember 31, 2001. Under the program, if the Com-mission finds “reason to believe” (RTB) that a commit-tee failed to file a required report or notice, or filed itlate, the committee may within 40 days challenge thatfinding. OAR reviews these challenges and, based onits conclusions, may recommend that the Commissionuphold the RTB finding and civil money penalty; up-hold the RTB finding but modify or waive the civilmoney penalty; determine that no violation occurred;or terminate its proceedings. OAR also serves as theCommission’s liaison with the U.S. Department of theTreasury on debt collection matters involving unpaidcivil money penalties under this program.

Office of Alternative DisputeResolution

During 2000, the FEC established the AlternativeDispute Resolution (ADR) office to provide parties inenforcement actions with an alternative method forresolving complaints that have been filed againstthem or for addressing issues identified in the courseof an FEC audit. The pilot program is designed topromote compliance with the federal campaign fi-nance law and Commission regulations, and to re-duce the cost of processing complaints by encour-aging settlements outside the agency’s normal en-forcement track.

Office of Election AdministrationThe Office of Election Administration (OEA) assists

state and local election officials by responding to in-quiries, publishing research and conducting work-shops on all matters related to election administration.Additionally, the OEA answers questions from the

public and briefs foreign delegations on the U.S. elec-tion process, including voter registration and votingstatistics.

Local phone: 202-694-1095; toll-free phone: 800-424-9530 (press 4 on a touch-tone phone).

Personnel and Labor/ManagementRelations

This office provides policy guidance and opera-tional support to managers and staff in a variety ofhuman resource management areas. These includeposition classification, training, job advertising, recruit-ment and employment. The office also processespersonnel actions such as step increases, promo-tions, leave administration, awards and discipline,performs personnel records maintenance and offersemployee assistance program counseling. Addition-ally, Personnel administers the Commission’s labor-management relations program and a comprehensivepackage of employee benefits, wellness and family-friendly programs.

Planning and ManagementThis office develops the Commission’s budget and,

each fiscal year, prepares a management plan deter-mining the allocation and use of resources throughoutthe agency. Planning and Management monitors ad-herence to the plan, providing monthly reports mea-suring the progress of each division in achieving theplan’s objectives.

Press OfficeStaff of the Press Office are the Commission’s

official media spokespersons. In addition to publiciz-ing Commission actions and releasing statistics oncampaign finance, they respond to all questions fromrepresentatives of the print and broadcast media.Located on the first floor, the office also handles re-quests under the Freedom of Information Act. Localphone: 202-694-1220; toll-free 800-424-9530 (press 1on a touch-tone phone).

Appendices80

Public DisclosureThe Public Disclosure Division processes incoming

campaign finance reports from political committeesand candidates involved in federal elections andmakes the reports available to the public. Located onthe first floor, the division’s Public Records Office hasa library with ample work space and knowledgeablestaff to help researchers locate documents and com-puter data. The FEC encourages the public to reviewthe many resources available, which also includecomputer indexes, advisory opinions and closedMURs.

The division’s Processing Office receives incomingreports and processes them into formats which canbe easily retrieved. These formats include paper,microfilm and digital computer images that can beeasily accessed from terminals in the Public RecordsOffice and those of agency staff.

The Public Disclosure Division also managesFaxline, an automated faxing service for ordering FECdocuments, forms and publications, available 24hours a day, 7 days a week.

Local phone: 202-694-1120; toll-free phone: 800-424-9530 (press 3 on a touch-tone phone); Faxline:202-501-3413.

Reports AnalysisReports analysts assist committee officials in com-

plying with reporting requirements and conduct de-tailed examinations of the campaign finance reportsfiled by political committees. If an error, omission orprohibited activity (e.g., an excessive contribution) isdiscovered in the course of reviewing a report, theanalyst sends the committee a letter which requeststhat the committee either amend its reports or providefurther information concerning a particular problem.By sending these letters (RFAIs), the Commissionseeks to ensure full disclosure and to encourage thecommittee’s voluntary compliance with the law. Ana-lysts also provide frequent telephone assistance tocommittee officials and encourage them to call thedivision with reporting questions or compliance prob-lems. Local phone: 202-694-1130; toll-free phone800-424-9530 (press 2 on a touch-tone phone).

Staff Director and Deputy StaffDirector

The Staff Director carries the responsibilities ofappointing staff, with the approval of the Commission,and implementing Commission policy. The Staff Di-rector oversees the Commission’s public disclosureactivities, outreach efforts, review of reports and theaudit program, as well as the administration of theagency.

The Deputy Staff Director has broad responsibilityfor assisting in this supervision, particularly in theareas of budget, administration and computer sys-tems.

81

Appendix 5Statistics on CommissionOperations

Summary of Disclosure Files

Total FilersExisting in

2000

Gross Receiptsin 2000

(dollars)

ContinuingFilers as of

12/31/00

FilersTerminated

as of12/31/00

Number ofReports andStatements

in 2000

GrossExpenditures

in 2000(dollars)

Presidential CandidateCommittees 355 136 219 1,317 366,067,863 398,958,368

Senate Candidate Committees 644 250 394 2,696 345,635,717 415,712,646

House Candidate Committees 2,873 1,297 1,576 12,983 419,874,635 487,649,417

Party Committees 730 125 605 4,935 1,318,611,899 1,359,495,929

Federal Party Committees 578 125 453 4,289 844,998,175 850,749,609Reported Nonfederal Party Activity 152 0 152 646 473,613,724 508,746,320

Delegate Committees 16 9 7 54 305,465 317,799

Nonparty Committees 4,516 609 3,907 36,705 337,873,403 369,811,077

Labor Committees 350 33 317 3,117 76,431,245 82,222,294Corporate Committees 1,727 182 1,545 15,486 89,214,848 97,428,866Membership, Trade and Other Committees 2,439 394 2,045 18,102 172,227,310 190,159,917

Communication Cost Filers 270 0 270 170 0 22,157,913

Independent Expenditures byPersons Other Than 420 119 301 329 679,291 4,630,988Political Committees

Appendices82

Total

Administrative DivisionContracting and procurement transactions 1,118Publications prepared for print 16Pages of photocopying 14,800,000

Information DivisionTelephone inquiries 54,178Information letters 64Distribution of FEC materials 11,461Prior notices (sent to inform filers

of reporting deadlines) 40,663Other mailings 21,572Visitors 55Public appearances by Commissioners

and staff 141Roundtable workshops 6Publications 24

Press OfficeNews releases 84Telephone inquiries from press 14,998Visitors 1,716Freedom of Information Act

(FOIA) requests 33Fees for materials requested under FOIA

(transmitted to U.S. Treasury) $1,160

Office of Election AdministrationTelephone inquiries 9,769National surveys conducted 4Individual research requests 429Materials distributed * 49,256Election presentations/conferences 30Foreign briefings 101Publications 0

* Computer coding and entry of campaign finance informationoccur in two phases. In the first phase, Pass I, summary informa-tion is coded and entered into the computer within 48 hours of theCommission’s receipt of the report. During the second phase, PassIII, itemized information is coded and entered.

Total

Reports Analysis DivisionDocuments processed 68,359Reports reviewed 35,426Telephone assistance and meetings 11,431Requests for additional information (RFAIs) 13,475Second RFAIs 3,713Data coding and entry of RFAIs and

miscellaneous documents 19,354Compliance matters referred to Office

of General Counsel or Audit Division 27

Data Systems Development Division *Documents receiving Pass I coding 59,954Documents receiving Pass III coding 52,866Documents receiving Pass I entry 72,681Documents receiving Pass III entry 52,765Transactions receiving Pass III entry 1,753,458

• In-house 425,677• Contract 1,327,781

Public Records OfficeCampaign finance material processed

(total pages) 1,654,331Cumulative total pages of documents

available for review 17,546,103Requests for campaign finance reports 6,067Visitors 10,297Total people served 27,547Information telephone calls 11,183Computer printouts provided 33,654Faxline requests 1,714Total income (transmitted to U.S. Treasury) $35,534Contacts with state election offices 4,559Notices of failure to file with state

election offices 51

Divisional Statistics for Calendar Year 2000

* Figure includes National Voter Registration Act materials.

83Appendices

1976 3 1 41977 6 6 121978 98 ‡ 10 1081979 75 ‡ 9 841980 48 ‡ 11 591981 27 ‡ 13 401982 19 1 201983 22 0 221984 15 2 171985 4 9 131986 10 4 141987 12 4 161988 8 0 81989 2 7 91990 1 6 71991 5 8 131992 9 3 121993 10 2 121994 5 17 221995 12 0 121996 23 0 231997 7 6 131998 5 7 121999 20 7 272000 14 0 14Total 460 133 593

Audit Reports Publicly Released

Total

Office of General CounselAdvisory opinions

Requests pending at beginning of 2000 7Requests received 40Issued 41Not issued * 3Pending at end of 2000 3

Compliance cases †

Pending at beginning of 2000 201Opened 195Closed 160Pending at end of 2000 236

LitigationCases pending at beginning of 2000 26Cases opened 25Cases closed 15Cases pending at end of 2000 36Cases won 7Cases lost 3Cases won/lost 1Miscellaneous Cases‡ 4

Law Library Telephone inquiries 908 Visitors 613

* Three advisory opinion requests were withdrawn by the re-questers.

† In annual reports previous to 1994, the category “compliancecases” included only Matters Under Review (MURs). As a result ofthe Enforcement Priority System (EPS), the category has beenexpanded to include internally-generated matters in which theCommission has not yet made reason to believe findings.

‡ This category includes cases in which the Commission partici-pated only as an amicus curiae, or cases that were voluntarilywithdrawn prior to depository briefing.

Year Title 2 * Title 26 † Total

* Audits for cause: The FEC may audit any registered politicalcommittee: 1) whose reports do not substantially comply with thelaw; or 2) if the FEC has found reason to believe that the committeehas committed a violation. 2 U.S.C. §§438(b) and 437g(a)(2).

† Title 26 audits: The Commission must give priority to thesemandatory audits of publicly funded committees.

‡ Random audits: Most of these audits were performed underthe Commission’s random audit policy (pursuant to the former 2U.S.C. §438(a)(8)). The authorization for random audits was re-pealed by Congress in 1979.

Appendices84

Presidential 0 10 0 10Presidential Joint Fundraising 0 0 0 0Senate 1 0 0 1House 4 0 4 0Party (National) 0 0 0 0Party (Other) 8 10 5 13Nonparty (PACs) 1 2 3 0Total 14 22 12 24

Status of Audits, 2000

Pending Opened Closed Pendingat Beginning at End

of Year of Year

Audits Completed by Audit Division, 1975 – 2000

Total

Presidential 112Presidential Joint Fundraising 12Senate 23House 168Party (National) 47Party (Other) 147Nonparty (PACs) 84Total 593

85

2000-1Use of the Internet for Campaign Activity; Extensionof Comment Period (65 FR 1074, January 7, 2000)

2000-2Schedule of Matching Fund Submission Dates andSubmission Dates for Statements of Net OutstandingCampaign Obligations (NOCO) for 2000 PresidentialCandidates Post Date of Ineligibility (65 FR 3237,January 20, 2000)

2000-3Electronic Freedom of Information Act Amendments;Final Rules and Statement of Basis and Purpose (65FR 9201, February 24, 2000)

2000-4Filing Copies of Campaign Finance Reports andStatements with State Officers; Final Rules andTransmittal of Regulations to Congress (65 FR 15221,March 22, 2000)

2000-5Public Funding of Presidential Primary Candidates—Repayments; Notice of Disposition and Termination ofRulemaking (65 FR 15273, March 22, 2000)

Appendix 62000 Federal RegisterNotices

2000-6Administrative Fines; Notice of Proposed Rulemaking(65 FR 16534, March 29, 2000)

2000-7Electronic Filing of Reports by Political Committees;Notice of Proposed Rulemaking (65 FR 19339, April11, 2000)

2000-8Public Financing of Presidential Primary and GeneralElection Candidates; Final Rule; Announcement ofEffective Date (65 FR 20893, April 19, 2000)

2000-9Election Cycle Reporting by Authorized Committees,Notice of Proposed Rulemaking (65 FR 25672, May3, 2000)

2000-10Administrative Fines; Final Rules and Explanation andJustification—Transmittal to Congress (65 FR 31787,May 19, 2000)

2000-11Announcement of Changes to the Computerized Mag-netic Media Requirements for Presidential Primary,General Election and Convention Committees (65 FR32094, May 22, 2000)

2000-12Filing Copies of Campaign Finance Reports andStatements with State Officers; Final rules and An-nouncement of Effective Date (65 FR 36053, June 7,2000)

2000-13Mandatory Electronic Filing; Final Rules and Explana-tion and Justification—Transmittal to Congress (65 FR38415, June 21, 2000)

2000-14Guidance to Candidates and Political Party Commit-tees on Status of FEC Civil Enforcement ActionsPending Supreme Court Consideration of FEC v.Colorado Republican Federal Campaign Committee(65 FR 42365, July 10, 2000)

2000-15Election Cycle Reporting by Authorized Committees(Candidate Committees); Final Rules and Explanationand Justification—Transmittal to Congress (65 FR42619, July 11, 2000)

2000-16Notice of Filing Dates for the Georgia Senate SpecialElection (65 FR 48710, August 9, 2000)

2000-18Electronic Filing of Reports by Political Committees;Announcement of Effective Date (65 FR 63535, Octo-ber 24, 2000)

Appendices86

2000-19Rulemaking Petition; Reporting by Political ActionCommittees; Notice of Disposition (65 FR 66936,November 8, 2000)

2000-20Rules on Election-Cycle Reporting by AuthorizedCandidate Committees; Announcement of EffectiveDate (65 FR 70644, November 27, 2000)

2000-21General Public Political Communications Coordinatedwith Candidates and Party Committees; Final Rulesand Explanation and Justification—Transmittal toCongress (65 FR 76138, December 6, 2000)

87

Appendix 7Summaries of SelectedNew Regulations

Administrative Fine ProgramBeginning with the July 15, 2000, quarterly reports,

the Commission implemented a new program for as-sessing civil money penalties for violations involving:• Failure to file reports on time;• Failure to file reports at all; and• Failure to file 48-hour notices.

The Administrative Fine program is based onamendments to the Federal Election Campaign Act(the Act) that permit the FEC to impose civil moneypenalties, based on schedules of penalties, for viola-tions of reporting requirements that occur betweenJanuary 1, 2000, and December 31, 2001.

How the Program WorksIn the past, the FEC handled reporting violations

(late filers, nonfilers and committees that failed to file48-hour notices) under the same enforcement proce-dures it employs for other alleged campaign financeviolations, culminating in agreement on a civil penaltyor court action. Under the new rules, if the Commis-sion finds “reason to believe” that a committee vio-lated the law, the Commission will provide writtennotification to the committee containing the factualand legal basis of its finding and the amount of theproposed civil money penalty. The committee willhave 40 days from the date of the reason-to-believefinding to either pay the civil money penalty or submitto the Commission a written response, with support-ing documentation outlining the reasons why it be-lieves the Commission’s finding and/or penalty is inerror. (The Commission strongly encourages respon-dents to submit their documents in the form of affida-vits or declarations. Documents submitted in theseforms are generally given more weight and credibility.)If the committee submits such a response, it will beforwarded to the Office of Administrative Review(OAR), an FEC office that was not involved in theoriginal reason-to-believe recommendation.

After reviewing the Commission’s reason-to-believefinding and the committee’s written response, theOAR will forward a recommendation to the Commis-sion, along with the original reason-to-believe finding,the committee’s written response and any supporting

documentation. Respondents will have an opportunityto submit a written response to the reviewing officer’srecommendation. The Commission will then make afinal determination as to whether the committee vio-lated 2 U.S.C. §434a and, if so, assess a civil moneypenalty based on the schedules of penalties.

Committee treasurers may be liable for civil moneypenalties if reports are not filed on time.

Challenging Commission DeterminationsAs noted above, the new rules allow committees to

challenge the Commission’s reason-to-believe findingand to seek review by submitting documentation tothe OAR, which makes a recommendation to theCommission as to the final determination.

Should a committee fail to pay the civil money pen-alties or submit a challenge within the original 40days, the Commission will issue a final determinationwith an appropriate civil money penalty. The commit-tee will then have 30 days to pay the civil money pen-alty or seek judicial review through a U.S. districtcourt in the area where the committee resided or con-ducted business.1

Reports CoveredAll reports that committees are required to file are

covered under the Administrative Fine program. Thisincludes semi-annual, quarterly, monthly, pre-election,30-day post-general and special election reports, aswell as 48-hour notices that candidate committees arerequired to file for elections in which the candidateparticipates.

Calculating PenaltiesThe interaction of several factors will determine the

size of the penalty:• Election sensitivity of the report;• Committee as late filer, including the number of days

late, or nonfiler;• The amount of financial activity in the report; and• Prior civil money penalties for reporting violations.

1 The committee may also seek judicial review if it dis-agrees with a final determination made by the Commissionafter the committee submits a challenge.

Appendices88

One factor used to determine the amount of thecivil money penalty is the election sensitivity of thereport. Under the new rules, the following reports areconsidered election sensitive: the October quarterly,the October monthly and the pre-election reports forprimary, general and special elections. All other re-ports are considered nonsensitive.

The Commission will also consider whether thecommittee is a late filer or a nonfiler. In the case ofnonsensitive reports, a committee will be considereda late filer if it files its report within 30 days after thedue date, and a nonfiler if it files its report later thanthat.

In the case of election-sensitive reports, a commit-tee will be considered a late filer if it files a report afterits due date, but more than four days before the appli-cable election; a committee that files later than thatwill be considered a nonfiler.

The third factor is the amount of financial activity—that is, the total amount of receipts and disburse-ments in the report.

The final factor is the existence of prior civil moneypenalties for reporting violations under the Administra-tive Fine program.

Schedules of PenaltiesThe schedules of penalties, included in the new

regulations, are based on the factors describedabove.For Reports Other Than 48-Hour Notices

The calculation of the civil money penalties for latefilers and nonfilers of reports, other than 48-hour no-tices, has four components, as described below.1. Base Amount for Late Filers.

In calculating the penalty, the Commission beginswith the base amount, a prescribed figure that de-pends on the total amount of financial activity in thereport and the election sensitivity of the report. Forexample, on an election-sensitive report, if the totalamount of receipts and disbursements is $80,000, thebase amount will be $600. Or, if the total amount ofreceipts and disbursements is $500,000, the baseamount will be $3,750. The base amount ranges from$100 to $5,000 for nonsensitive reports and from$150 to $7,500 for election-sensitive reports.

2. Additional Set Amount for Late Filers.The Commission then adds to the base amount a

number that is calculated by multiplying a set amount,based on the financial activity in the report, by the num-ber of days the report is filed late (up to 30 days). Theset amount ranges from $25 to $200 per day, depend-ing on the total amount of receipts and disbursements.3. Base Amount for Nonfilers.

In the case of nonfilers, the Commission beginswith a base amount that depends on both the electionsensitivity of the nonfiled report and the estimatedlevel of activity based on the average activity in thecurrent or prior two-year election cycle. The baseamount will range from $900 to $12,000 for nonsensi-tive reports and from $1,000 to $16,000 for election-sensitive reports.4. Additional Premium for Previous Violation(s).

With regard to both late filers and nonfilers, theCommission adds a premium for prior civil moneypenalties assessed for failure to file timely reports.The premium is equal to 25 percent of the civil moneypenalty times the number of final civil money penaltiesassessed during the previous and current two-yearelection cycles under the Administrative Fine program.For 48-Hour Notices

The calculation of the civil money penalties forcommittees that fail to file timely 48-hour notices is$100 for each nonfiled notice plus 10 percent of thedollar amount of the contributions not timely reported.The civil money penalty increases by 25 percent foreach time a prior civil money penalty was assessedduring the previous and current two-year electioncycles under the Administrative Fine program.

The table on page 89 provides examples of howcivil money penalties are calculated.

Collecting Unpaid PenaltiesWhen a respondent fails to pay the civil money

penalty, the Commission will transfer the case to theU.S. Department of the Treasury for collection.2 Alter-natively, the Commission may decide to file suit inthe appropriate U.S. district court to collect owed civilmoney penalties, under 2 U.S.C. §437g(a)(6).

2 In compliance with the Debt Collection ImprovementAct of 1996 (31 U.S.C. §3711(g)).

89Appendices

Examples of Civil Money Penalty Calculations

EXAMPLE 1: Late Filer of Election-Sensitive Report. A committee files its October quarterly report (anelection-sensitive report) 10 days late. The level of financial activity on the report is $105,000, and the com-mittee has one prior violation in the current two-year election cycle.

Applicable formula:Penalty = [base amount + (set amount x number of days late)] x [1 + (.25 x number of previous violations)]Penalty = [$900 + ($125 x 10)] x [1 + (.25 x 1)]Penalty = $2687.50

EXAMPLE 2: Late Filer with Relatively Little Activity, No Prior Violations. A committee files its July quar-terly report on August 4. The report contains $500 in receipts and disbursements, and the committee has noprior violations.

Applicable formula:Penalty = The lesser of: the level of activity in the report; or

[base amount + (set amount x number of days late)]Penalty = The lesser of: $500 or [$100 + ($25 x 20)]Penalty = The lesser of: $500 or $600Penalty = $500

EXAMPLE 3: Nonfiler of Nonelection-Sensitive Report. A committee fails to file its July quarterly reportwithin 30 days of its due date. Based on its previous filings, the committee’s estimated level of activity is$50,000. The committee has one prior violation in the current two-year election cycle.

Applicable formula:Penalty = base amount x [1+ (.25 x number of previous violations)]Penalty = $2,700 x [1 + (.25 x 1)]Penalty = $3,375

EXAMPLE 4: Nonfiler of 48-Hour Notice. A House campaign committee fails to submit a 48-hour notice todisclose its receipt of a last-minute $5,000 PAC contribution. The campaign has two prior violations in thecurrent two-year election cycle.

Applicable formula:Penalty = [$100 + (.10 x amount of contribution(s) not timely reported)] x [1 + (.25 x number of previous

violations)]Penalty = [$100 + (.10 x $5,000)] x [1 + (.25 x 2)]Penalty = $900

Appendices90

1 For most campaigns, the first report under the newsystem will be the mid-year report, due July 31, 2001.

Election Cycle ReportingOn July 5, 2000, the Commission approved new

regulations requiring authorized committees of federalcandidates to aggregate and report receipts and dis-bursements on an election-cycle basis rather than ona calendar-year basis, which was the previous sys-tem. These revised regulations affect reports coveringperiods that begin on or after January 1, 2001. Thenew rules do not affect unauthorized committees,such as PACs and party committees.

The change to election cycle reporting, required byPublic Law 106-58, is intended to simplifyrecordkeeping and reporting. Under previous regula-tions, candidate committees monitored contributionlimits on a per-election basis, but disclosed their fi-nancial activity on a calendar-year-to-date basis. Un-der the new system, committees will report all of theirreceipts and disbursements on an election-cycle ba-sis. 11 CFR 104.3. For example, campaigns mustitemize a donor’s contributions once they exceed$200 for the election cycle, rather than for the calen-dar year. Likewise, candidate committees must item-ize disbursements to a person once they aggregate inexcess of $200 within the election cycle.

Election CycleUnder FEC regulations, an election cycle typically

begins the day after the general election for a seat oroffice and ends on the day of the next general elec-tion for that seat or office. 11 CFR 100.3(b). Thelength of the election cycle, thus, depends on theoffice sought. For example, the election cycle is twoyears for House candidates, six years for Senate can-didates and four years for Presidential candidates.

Transition to Election Cycle ReportingSince the new regulations took effect after the

close of post-general and year-end reporting periodsfor 2000, many candidates have already reportedreceipts and disbursements related to the 2002, 2004or 2006 election cycles under the previous reportingsystem. Committees will need to include the total ofthis previously-disclosed activity in their election-cycle-to-date figures, beginning with their first report

under the new system.1 In some cases, the activitymay span several years. For example, a Senate can-didate for a 2002 election who has been receivingcontributions and making disbursements since the1996 election for that seat will need to include theaggregate of that activity in his or her election-cycle-to-date totals. Since committees are only required toretain records for a period of three years, the Com-mission intends to provide Senate committees regis-tered for the 2002 and 2004 elections with their elec-tion cycle figures as of December 31, 2000. The fig-ures will be based on reports previously filed by thecommittees.

Electronic FilingOn June 15, the Commission approved the final

rules on mandatory electronic filing. Beginning withthe reporting periods that start on or after January 1,2001, all persons required to file their reports with theFEC who receive contributions or make expendituresin excess of $50,000 in a calendar year, or who ex-pect to do so, must submit their campaign financereports electronically. Any filers who are required tofile electronically, but who file on paper, will be con-sidered nonfilers and may be subject to enforcementaction.

The new rules, required by Public Law 106-58,provide faster disclosure of filed reports and stream-line operations for both filers and the Commission.The Commission estimates, based on data from the1996 and 1998 election cycles, that, with the $50,000threshold, 96 to 98 percent of all financial activity re-ported to the FEC will be available almost immediatelyon the FEC’s Web site.

Mandatory v. Voluntary FilingThe mandatory electronic filing regulations (11

CFR 104.18) apply to any political committee or otherperson required to file reports, statements or designa-tions with the FEC. This includes all filers except Sen-ate candidate committees (and other persons who

91Appendices

1 Senate candidates, however, are encouraged to volun-tarily file electronically an unofficial copy of their reports withthe FEC to ensure faster disclosure.

2 For more information on joint fundraising, see 11 CFR102.17 and the Campaign Guides for Congressional candi-dates and committees and for party committees.

support only Senate candidates), who are required tofile with the Secretary of the Senate.1

Since 1996, the Commission has encouraged vol-untary electronic filing. For those individuals and politi-cal committees that do not exceed (or do not expectto exceed) the $50,000 threshold, voluntary electronicfiling will still be encouraged.

Voluntary electronic filers must continue to file elec-tronically for the remainder of the calendar year un-less the Commission determines that unusual circum-stances make continued electronic filing impractical.11 CFR 104.18(b). No such waiver by the Commis-sion, however, has been established for mandatoryelectronic filers.

Who Must File ElectronicallyCandidate Committees. All committees authorized

by one candidate must file electronically if their com-bined total contributions or combined total expendi-tures exceed, or are expected to exceed, the $50,000threshold.

PACs and Party Committees. By contrast, eachunauthorized committee (PAC or party committee),whether or not it is affiliated, must file electronically ifits total contributions or total expenditures exceed, orare expected to exceed, the threshold.

Joint Fundraising Representatives. A jointfundraising representative must file electronically if itstotal contributions or total expenditures exceed, or areexpected to exceed, the $50,000 threshold.2

Independent Expenditures. Individuals and quali-fied nonprofit corporations whose independent expen-ditures exceed, or are expected to exceed, the$50,000 threshold must file electronically on FECForm 5. Because Form 5 must be notarized, filers arerequired to submit a paper copy of Form 5 bearing thenotarized seal and signature, or, if filing on diskette,

attach a digital version of the seal and signature as aseparate file when filing Form 5 electronically. 11 CFR104.18(h) and 109.2(a).

Calculating the ThresholdA committee (other than a Senate committee) must

file electronically if:• It has received contributions of more than $50,000 or

made expenditures of more than $50,000 during anycalendar year; or

• It has “reason to expect to exceed” the abovethreshold in any calendar year. 11 CFR 104.18(a)(1)and 104.18(a)(3)(i).

“Have Reason to Expect to Exceed.” Once filersactually exceed the threshold, they have “reason toexpect to exceed” the threshold in the following twocalendar years. 11 CFR 104.18 (a)(3)(i). This meansthey must continue to file electronically for the nexttwo years (January through December).

Exception for Candidate Committees. In somecases, a candidate committee that has exceeeded thethreshold and filed electronically may not have tocontinue filing electronically. This exception appliesto a candidate committee that:• Has $50,000 or less in net debts outstanding on

January 1 of the year following the election;• Anticipates terminating prior to the next election

year; and• Supports a candidate who has not qualified for the

next election and does not intend to become a can-didate in the next election. 11 CFR 104.18 (a)(3)(i).

Persons With No History. New political committeesor other persons with no history of campaign financeactivity may rely on one of the following formulas todetermine whether they will exceed, or should expectto exceed, the threshold:• The filer receives contributions or makes expendi-

tures that exceed one-quarter of the thresholdamount in the first calendar quarter of the calendaryear; or

• The filer receives contributions or makes expendi-tures that exceed one-half of the threshold amount inthe first half of the calendar year. 11 CFR 104.18(a)(3)(ii).

Appendices92

Other Considerations. When a committee calcu-lates whether it has exceeded, or expects to exceed,the $50,000 threshold, it should keep in mind the fol-lowing:•The calculation is based on either making $50,000 in

expenditures or receiving $50,000 in contributionsduring the calendar year; it is not based on a combi-nation of expenditures and contributions.

• Nonfederal funds are excluded from the calculation.• Cash on hand and outstanding debt at the beginning

of the calendar year are excluded from the calcula-tion.

(Also, see chart on page 93: Calculating the Elec-tronic Filing Threshold.)

Filing Reports and StatementsValidation of Report. Electronic filers (whether

mandatory or voluntary) must file all their reports elec-tronically. The reports must follow the FEC’s Elec-tronic Filing Specifications Requirements, availableonline or on paper from the FEC. 11 CFR 104.18(d).An electronic report is considered “filed” when it isreceived and validated by the Commission’s computersystem on or before 11:59 p.m. on the prescribedfiling date. Incomplete or inaccurate reports that donot pass the FEC’s validation program will not beconsidered filed. The Commission will notify the filerthat the report has not been accepted. 11 CFR104.18(e)(2).

Filing an Amendment. To amend an electronicallyfiled report, the filer must electronically resubmit theentire report, not just the amended portions. Addition-ally, the amendments must comply with the formattingrules contained in the FEC’s Electronic Filing Specifi-cations Requirements. 11 CFR 104.18(f).

Registration Documents (FEC Forms 1 and 2)If a committee has exceeded or expects to exceed

the $50,000 threshold, its Statement of Organization(FEC Form 1) and Statement of Candidacy (FECForm 2), and any amendments to either form, must befiled electronically. 11 CFR 102.2(a)(2) and 104.18(c).Note that all filers (whether electronic or paper) mustinclude on their Statement of Organization the URLfor their Web site, if they maintain one. Those commit-

tees that file electronically must also include their e-mail address on their Statement of Organization. 11CFR 102.2(a)(1)(vii).

Refiling Paper ReportsFilers will not be expected to refile any reports or

statements that were correctly filed on paper earlier inthe calendar year or election cycle. 11 CFR104.18(a)(2).

Signature RequirementsA committee’s treasurer (or other person respon-

sible for filing designations with the FEC) must verifythat all electronically filed documents have been ex-amined by the treasurer and (to the best of thatperson’s knowledge) are accurate and complete. Veri-fication may be:• Direct transmission of the filing, using the treasurer’s

personal password received from the FEC. (In orderto receive a password, treasurers should call theelectronic filing office at (202)208-5263); or

• If filing on diskette, a digitized copy of a signed certi-fication sent, as a separate file on the diskette, withthe electronically filed documents. 11 CFR104.18(g).

Availability of FormsFECFile software, available free from the FEC,

currently generates FEC forms 3 and 3X for disclo-sure of financial information. The software will alsogenerate forms 1 and 2.

Many commercially available software productsalso include electronic filing capabilities.

NonfilersThose filers who are required to file electronically

and who file on paper instead, or who fail to file, willbe considered nonfilers and may be subject to en-forcement action by the Commission, including publi-cation of their names and the imposition of civilmoney penalties under the new Administrative FineProgram.3 11 CFR 104.18(a)(2) and Part 111, SubpartB and 2 U.S.C §437g(a)(4) and (6)(A).

3 See page 11.

93Appendices

Calculating the Electronic Filing Threshold

Political committees should use the following formulas to determine if their total expenditures or total contributionsare over $50,000 per calendar year:

CANDIDATE COMMITTEESTotal Contributions Received1

– Refunds of ContributionsTotal Contributions (if over $50,000, must file electronically)

Total Operating Expenditures+ Contributions Made

Total Expenditures (if over $50,000, must file electronically)

PACSTotal Contributions Received

– Refunds of Contributions+ Transfers from affiliated federal committees

Total Contributions (if over $50,000, must file electronically)

Total Federal Operating Expenditures+ Transfers to affiliated federal committees+ Contributions Made+ Independent Expenditures

Total Expenditures (if over $50,000, must file electronically)

POLITICAL PARTY COMMITTEESTotal Contributions Received

– Refunds of Contributions+ Transfers from affiliated federal political party committees

Total Contributions (if over $50,000, must file electronically)

Total Federal Operating Expenditures+ Transfers to affiliated federal political party committees+ Contributions Made+ Independent Expenditures+ Coordinated Expenditures

Total Expenditures (if over $50,000, must file electronically)

1 Including the outstanding balance of any loans made, guaranteed or endorsed by the candidate or other person.