99-23578. Public Financing of Presidential Primary and General Election Candidates  

  • [Federal Register Volume 64, Number 176 (Monday, September 13, 1999)]
    [Rules and Regulations]
    [Pages 49355-49365]
    From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
    [FR Doc No: 99-23578]
    
    
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    FEDERAL ELECTION COMMISSION
    
    11 CFR PARTS 9003, 9004, 9008, 9032, 9033, 9034, 9035, and 9036
    
    [Notice 1999-17]
    
    
    Public Financing of Presidential Primary and General Election 
    Candidates
    
    AGENCY: Federal Election Commission.
    
    ACTION: Final Rule and Transmittal of Regulations to Congress.
    
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    SUMMARY: The Commission is revising its regulations governing publicly 
    financed Presidential primary and general election candidates. These 
    regulations implement the provisions of the Presidential Election 
    Campaign Fund Act (``Fund Act'') and the Presidential Primary Matching 
    Payment Account Act (``Matching Payment Act''), which establish 
    eligibility requirements for Presidential candidates seeking public 
    financing, and indicate how funds received under the public financing 
    system may be spent. They also require the Commission to audit publicly 
    financed campaigns and seek repayment where appropriate. The revised 
    rules reflect the Commission's experience in administering this program 
    during several previous Presidential election cycles and also seek to 
    resolve some questions that may arise during the 2000 Presidential 
    election cycle. Further information is provided in the supplementary 
    information that follows.
    
    DATES: Further action, including the publication of a document in the 
    Federal Register announcing an effective date, will be taken after 
    these regulations have been before Congress for 30 legislative days 
    pursuant to 26 U.S.C. 9009(c) and 9039(c).
    
    FOR FURTHER INFORMATION CONTACT: Ms. Rosemary C. Smith, Acting 
    Assistant General Counsel, 999 E Street, NW, Washington, DC 20463, 
    (202) 694-1650 or toll free (800) 424-9530.
    
    SUPPLEMENTARY INFORMATION: The Commission is publishing today the final 
    text of revisions to its regulations governing the public financing of 
    Presidential campaigns, 11 CFR Parts 9001 through 9039, to more 
    effectively administer the public financing program during the year 
    2000 election cycle. These rules implement 26 U.S.C. 9001 et. seq. and 
    26 U.S.C. 9031 et. seq. On December 16, 1998, the Commission issued a 
    Notice of Proposed Rulemaking (NPRM) in which it sought comments on 
    proposed revisions to these regulations. 63 FR 69524 (Dec. 16, 1998).
        In response to the NPRM, written comments were received from 
    Aristotle Publishing, Inc.; America Online, Inc.; Philadelphia 2000; 
    Perot for President '96; James Madison Center for Free Speech; Common 
    Cause and Democracy 21 (joint comment); Brennan Center for Justice; Lyn 
    Utrecht, Eric Kleinfeld, and Patricia Fiori (joint comment); Democratic 
    National Committee; Hervey W. Herron (two comments); Republican 
    National Committee; the Internal Revenue Service, and Carl P. Leubsdorf 
    and twenty nine executives of news organizations (joint comment). The 
    Internal Revenue Service stated that it has reviewed the NPRM and finds 
    no conflict with the Internal Revenue Code or regulations thereunder. 
    Subsequently, the Commission reopened the comment period and held a 
    public hearing on March 24, 1999, at which the following eight 
    witnesses presented testimony on the issues raised in the NPRM: Kim 
    Hume (Fox News), George Condon (Copley News Service), Lyn Utrecht 
    (Ryan, Phillips, Utrecht & MacKinnon), Joseph E. Sandler (Democratic 
    National Committee), Thomas J. Josefiak (Republican National 
    Committee), David Eisner and Trevor Potter (America Online, Inc.), and 
    James Bopp, Jr. (James Madison Center for Free Speech).
        Please note that the Commission has already published separately 
    final rules modifying the candidate agreement provisions so that 
    federally-financed Presidential committees must electronically file 
    their reports. See Explanation and Justification of 11 CFR 9003.1 and 
    9033.1, 63 FR 45679 (August 27, 1998). Those regulations took effect on 
    November 13, 1998. See Announcement of Effective Date, 63 FR 63388 
    (November 13, 1998). In addition, the Commission has issued final rules 
    governing the matchability of contributions made by credit and debit 
    cards, including those transmitted over the Internet. See Explanation 
    and Justification of 11 CFR 9034.2 and 9034.3, 64 FR 32394 (June 17, 
    1999). An effective date for the matching fund rules will be announced 
    once those regulations have been before Congress for thirty legislative 
    days. Final rules concerning coordinated party committee
    
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    expenditures in the pre-nomination period and reimbursement by the news 
    media for travel expenses are also pending before Congress. See 
    Explanation and Justification of 11 CFR 110.7, 9004.6 and 9034.6, 64 FR 
    42579 (Aug. 5, 1999).
        The NPRM discussed several other topics that are not included in 
    the attached final rules. The Commission expects to address the 
    following areas at a later date: (1) Coordination between candidates 
    and party committees on political ads, polling, media production, 
    consulting services and sharing of employees; (2) Modifications to the 
    audit process; (3) Bases for primary repayment determinations; 4) The 
    ``bright line'' between primary expenses and general election expenses; 
    and (5) Pre-nomination formation of Vice Presidential committees.
        Sections 9009(c) and 9039(c) of Title 26, United States Code, 
    require that any rules or regulations prescribed by the Commission to 
    carry out the provisions of Title 26 of the United States Code be 
    transmitted to the Speaker of the House of Representatives and the 
    President of the Senate 30 legislative days before they are finally 
    promulgated. The final rules that follow were transmitted to Congress 
    on September 7, 1999.
    
    Explanation and Justification
    
    Part 9003--Eligibility for Payments
    
    Section 9003.3  Allowable Contributions; General Election Legal and 
    Accounting Compliance Fund
    
    1. Pre-nomination Formation of a GELAC
        Section 9003.3 contemplates that a nominee of a major political 
    party who accepts public financing for the general election may 
    establish a privately funded General Election Legal and Accounting 
    Compliance Fund (``GELAC'') for certain limited purposes. A GELAC may 
    be set up before the candidate is actually nominated for the office of 
    President or Vice President. The Commission sought comments on several 
    changes to this section to address problems that have arisen when 
    primary candidates established GELACs relatively early in the primary 
    campaign but subsequently failed to win their party's nomination. One 
    difficulty is that candidates who do not receive their party's 
    nomination must return all private contributions received by the GELAC. 
    However, if some of those funds have been used to defray overhead 
    expenses or to solicit additional contributions for the GELAC, a total 
    refund has presented difficulties. Another problem has been ensuring 
    that the GELAC is not improperly used to make primary election 
    expenditures. In particular, this may become an issue when a candidate 
    secures the nomination well in advance of the convention and has almost 
    completely exhausted the spending limits for the primary. To avoid a 
    recurrence of these situations, the NPRM sought comments on the 
    following five alternative amendments to paragraph (a)(1)(i) of section 
    9003.3:
        (1) Bar GELAC fundraising prior to the candidate's nomination at 
    the party's national nominating convention. Under this approach, a 
    candidate may establish a GELAC before the date of nomination, but only 
    for the limited purpose of receiving correctly redesignated 
    contributions that would otherwise have to be refunded as excessive 
    primary contributions.
        (2) Bar GELAC fundraising before a specified date, such as April 15 
    of the Presidential election year. Under this alternative, starting on 
    April 15 of the Presidential election year, candidates may begin 
    soliciting contributions for the GELAC. However, if the candidate does 
    not become the nominee, all contributions accepted for the GELAC, 
    including redesignated contributions, must be refunded within sixty 
    (60) days of the candidate's date of ineligibility.
        (3) Allow GELAC fundraising beginning 90 days before each 
    candidate's date of nomination. This approach means that the nominees 
    of the two major parties will begin GELAC fundraising on different 
    dates.
        (4) Bar Presidential candidates from establishing a GELAC until the 
    date of the last Presidential primary before the national nominating 
    convention. A variation on this approach is to allow the eventual 
    nominee to form a GELAC at an earlier point, but to prohibit GELAC 
    fundraising before the last Presidential primary.
        (5) Allow any Presidential primary candidate to establish and to 
    raise funds for a GELAC at any time. Under this approach, those who do 
    not win their party's nomination do not have to return all the funds 
    they raise. Instead, they could offset their fundraising and 
    administrative expenses, and would only need to refund the amount 
    remaining in their account as of the date their party selects a 
    nominee. The NPRM asked whether all contributors should receive a 
    proportional refund or whether a first-in-first-out method should be 
    used to determine which contributions have been spent, with refunds 
    going to the most recent contributors. The NPRM noted that this 
    alternative is significant departure from the treatment of general 
    election contributions received by losing primary candidates in 
    Congressional races.
        The two witnesses who addressed this topic stressed the importance 
    of implementing policies that encourage candidates to spend money to 
    achieve voluntary compliance with the campaign financing laws. Hence, 
    they both urged the Commission to make no changes that would create a 
    disincentive to spend money on compliance. They urged the Commission to 
    continue to allow candidates to have the discretion to determine when 
    to form a GELAC and begin GELAC solicitations. Thus, they both 
    supported alternative 5, under which losing primary candidates only be 
    required to refund or obtain donor redesignation for funds remaining in 
    the account.
        The Commission has decided to adopt a modified version of 
    alternative 2. Under this approach, paragraph (a)(1)(i) continues to 
    permit GELACs to be established at any time. However, new language 
    indicates that before June 1 of the Presidential election year, the 
    GELAC may only be used for the deposit of primary election 
    contributions that exceed the contributors' contribution limits and are 
    properly redesignated under 11 CFR 110.1. Please note that overhead and 
    reporting expenses incurred by the GELAC may be defrayed from interest 
    received on the account. The modifications to these regulations also 
    specify that the GELAC may not solicit contributions before June 1 of 
    the Presidential election year. This date has been selected because, 
    barring unforeseen circumstances, this is the point when a party's 
    prospective nominee can be reasonably assured that he or she will need 
    to raise funds for a GELAC. This time frame also gives the prospective 
    nominee sufficient time to raise the funds that will be needed. Please 
    note that revisions to the rules governing joint fundraising between 
    the primary campaign and the GELAC are discussed below in section 
    9034.4.
        Paragraph (a)(1)(i) of this section is also being revised to state 
    more clearly that a GELAC may be established by an individual who is 
    seeking his or her party's nomination, but who is not yet a general-
    election candidate as defined in section 9002.2.
        The Commission is also amending paragraph (a)(1)(i) of section 
    9003.3 to indicate that if the candidate does not become the nominee, 
    all contributions accepted for the GELAC, including redesignated 
    contributions, must be refunded within sixty (60) days of the 
    candidate's date of ineligibility. Such refunds are consistent with the 
    Commission's decision in the last
    
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    Presidential election cycle to require refunds within 60 days of the 
    date on which the political party of the unsuccessful primary candidate 
    selects its nominee. These refunds are also consistent with the 
    policies applicable to non-publicly funded Congressional candidates who 
    accept designated general election contributions, but who thereafter 
    lose their parties' primaries. See 11 CFR 102.9(e)(2), and Advisory 
    Opinions 1992-15 and 1986-17. Please note that if contributors do not 
    cash the refund checks, the provisions of section 9007.6 governing 
    stale dated checks will apply.
    2. Transfers from the Primary Campaign Committee to the GELAC
        The regulations at 11 CFR 9003.3(a)(1)(i) through (v) place certain 
    restrictions on transferring funds from a Presidential candidate's 
    primary committee to a GELAC. The purpose of these limitations is to 
    ensure that the GELAC is not used as a way to increase a candidate's 
    entitlement to matching funds or to decrease a candidate's repayment 
    obligations. The NPRM sought suggestions as to how these provisions 
    could be strengthened, and whether it is advisable to do so. The sole 
    comment that addressed this issue stated that the current regulations 
    at 11 CFR 9003.3(a)(1) are more than adequate to ensure that the GELAC 
    is not used to increase candidate entitlement or decrease repayments. 
    The Commission has decided not to amend these transfer regulations 
    because it agrees that the current rules adequately fulfill these 
    objectives.
    
    Section 9003.5  Documentation of Disbursements
    
        Section 9003.5(b)(1) sets forth the documentation publicly financed 
    general election committees must provide for disbursements in excess of 
    $200. The documentation includes a canceled check that has been 
    negotiated by the payee. However, paragraph (b)(1)(iv) of this section 
    refers back to this canceled check without specifically restating that 
    it must be negotiated by the payee. To avoid possible confusion, the 
    Commission is amending section 9003.5(b)(1)(iv) by adding the words 
    ``negotiated by the payee.'' This change is consistent with the recent 
    judicial decision in Fulani v. Federal Election Commission, 147 F.3d 
    924 (D.C. Cir. 1998). A cross reference is also being added to assist 
    the reader in locating the reporting regulations that list examples of 
    acceptable and unacceptable descriptions of ``purpose.'' See 11 CFR 
    104.3(b)(3)(i)(B). None of the public comments or testimony addressed 
    these changes.
    
    Part 9004--Entitlement of Eligible Candidates to Payments; Use of 
    Payments
    
    Section 9004.4
    
    1. Winding Down Costs
        Two technical changes are being made to the winding down provisions 
    found in paragraph (a)(4) of section 9004.4. First, the ``or'' at the 
    end of paragraph (a)(4)(i) is being changed to ``and,'' to clarify that 
    the expenses listed in both paragraphs (a)(4)(i) and (a)(4)(ii) are 
    considered winding down costs. Second, paragraph (a)(4)(ii) is being 
    amended to more clearly indicate that the winding down costs described 
    in this paragraph are costs associated with the general election 
    campaign.
    2. Lost, Misplaced, or Stolen Items
        Paragraph (b)(8) of this section addresses situations where 
    equipment in the possession of general election committees is lost or 
    damaged. As a general matter, the cost of lost or misplaced items may 
    not be defrayed with public funds. However, given that there are 
    varying degrees of responsibility in this area, the rules provide that 
    certain factors should be considered, such as whether the committee 
    demonstrates that it made conscientious efforts to safeguard the 
    missing equipment; whether the committee sought or obtained insurance 
    on the items; the type of equipment involved; and the number and value 
    of items that were lost.
        The Commission has decided to modify this paragraph to include 
    stolen items and to add as another factor whether a police report was 
    filed. There were no public comments on this portion of the 
    regulations.
    
    Section 9004.9  Net Outstanding Qualified Campaign Expenses
    
        The amendments to the provisions governing the disposition of 
    capital assets in section 9004.9(d)(1) are discussed below. See the 
    Explanation and Justification for 11 CFR 9034.5(c)(1).
    
    Part 9008--Federal Financing of Presidential Nominating Conventions 
    and Host Committees
    
    Section 9008.7  Use of Funds
    
        New paragraph (c) is being added to section 9008.7 to address 
    situations where equipment in the possession of convention committees 
    is lost, misplaced, or stolen. The rule indicates that as a general 
    matter, the cost of lost, misplaced, or stolen items may not be 
    defrayed with public funds. However, the Commission recognizes that 
    there are varying degrees of responsibility in this area. Accordingly, 
    the regulation also provides that certain factors should be considered, 
    such as whether the committee demonstrates that it made conscientious 
    efforts to safeguard the missing equipment; whether the committee 
    sought or obtained insurance on the items; whether the committee filed 
    a police report; the type of equipment involved; and the number and 
    value of items that were lost. This approach is consistent with the 
    Commission's treatment of items lost or misplaced by, or stolen from, 
    publicly funded candidates. See 11 CFR 9004.4(b)(8) and 9034.4(b)(8). 
    None of the public comments or testimony specifically addressed this 
    aspect of the convention regulations.
    
    Section 9008.14  Petitions for Rehearings; Stays of Repayment 
    Determinations
    
        In section 9008.14, the term ``final repayment determinations'' is 
    being replaced by ``repayment determinations.'' This amendment conforms 
    with the changes in terminology made when the rules setting out audit 
    and repayment procedures were last revised in 1995.
    
    Section 9008.52  Receipts and Disbursements of Host Committees
    
    1. Local Banks and Local Individuals
        The NPRM sought comments on amending section 9008.52(c)(1), which 
    addresses the receipt of donations by host committees. Specifically, 
    the NPRM sought to allow local banks to donate funds and make in-kind 
    donations for the limited purposes described in these rules. The two 
    commenters who addressed this topic supported the proposed amendment. 
    They found no rationale for the long standing distinction in the rules 
    between donations from local corporations and donations from local 
    branches of national banks. One of the commenters argued that local 
    branches of national banks have the same interest as other local 
    businesses in promoting the city and supporting commerce.
        The Commission agrees with these comments. Consequently this 
    amendment is being included in the attached final rules that follow. 
    Please note that the revised rules supersede, in part, Advisory Opinion 
    1995-31 regarding local branches of national banks.
        The second changes to section 9008.52(c)(1) concerns the categories 
    of individuals who may donate funds or
    
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    make in-kind donations to host committees, government agencies and 
    municipal corporations. The revisions restrict these donations to 
    individuals who either maintain a local residence or who work for a 
    business's local office, or a labor organization's local office, or 
    another organization's local office. This new language is consistent 
    with AO 1995-32 with respect to donations by individuals.
        Two commenters opposed restricting donations to ``local'' 
    individuals on several grounds. They argued that the Commission 
    misinterpreted its own regulation in AO 1995-32. In addition, one 
    commenter stated that the policy concerns regarding corporate 
    aggregation of wealth are not applicable to individuals. This comment 
    appears to overlook the compelling governmental purposes--preventing 
    corruption and the appearance of corruption--that underlie the 
    statutory restrictions on individual contributions. One of the 
    commenters also asserted that this change to the regulation 
    impermissibly infringes upon the First Amendment's guarantee of freedom 
    of speech. Given that the FECA's contribution limitations were upheld 
    in Buckley v. Valeo, 424 U.S. 1 (1976), in the face of a First 
    Amendment challenge, this argument is not persuasive. In addition, one 
    commenter also argued that there are compelling reasons why individuals 
    residing outside the metropolitan area of the convention city would 
    want to support the host committee. However, the comment failed to 
    indicate what such reasons might be.
        Consequently, the Commission does not find the commenters' 
    arguments persuasive. Therefore, this change is being included in the 
    final rules.
    2. Permissible Host Committee Expenses
        During the audits of the 1996 convention and host committees, a 
    number of questions were raised as to the scope of expenses that may be 
    paid by a host committee instead of a convention committee. Section 
    9008.52(c)(1) enumerates the types of expenses that host committees may 
    defray with donated funds. Section 9008.7(a) lists the types of 
    convention expenses that may be paid for using public funds. These two 
    sections of the regulations are not mutually exclusive. Nor do they 
    cover every conceivable type of expense that may arise. Consequently, 
    the NPRM sought comments on amending one or both of these provisions to 
    provide greater specificity regarding allowable or nonallowable 
    expenses for convention or host committees. Disputed items have 
    included: (1) Badges, passes or other types of credentials used to gain 
    entry to the convention hall or specific locations within the hall; (2) 
    electronic vote tabulation systems; and (3) lighting and rigging costs, 
    including paying stagehands, riggers, projectionists, electricians, and 
    producers. The NPRM noted that with respect to lighting and rigging 
    expenses, in particular, it can be difficult to distinguish between the 
    costs associated with improving the infrastructure of the convention 
    hall and the costs of producing and broadcasting the convention 
    proceedings to the general public or to those within the convention 
    hall. Specific changes to these regulations were not included in the 
    NPRM.
        One host committee and two national party committees urged the 
    Commission to defer consideration and implementation of any significant 
    changes regarding permissible host committee expenditures until after 
    the year 2000 Presidential elections because the host committees and 
    national party committees have already finalized their contractual 
    arrangements for the year 2000 Presidential nominating conventions. One 
    of these witnesses observed that the purpose and functions of host 
    committees are nonpartisan, namely to maximize the economic benefit to 
    the city. This party committee witness argued that the current rules 
    are adequate and provide the flexibility necessary to accommodate the 
    unique circumstances found in different host cities and in light of 
    swiftly changing technology. Consequently, this witness opposed new 
    restrictions on the goods and services that a host committee may 
    provide. The other party committee witness indicated that it is 
    contemplating selective use of the advisory opinion process to obtain 
    clarification, as needed, of the existing regulations.
        Given that the party committees have already entered into 
    contractual agreements with the sites selected, the Commission has 
    decided not to modify the existing regulations at this time with regard 
    to the division of expenses between convention committees and host 
    committees. Please note also that the Commission's decisions regarding 
    the audits of the 1996 convention and host committees serve to provide 
    additional guidance for the 2000 election cycle.
    
    Section 9008.53  Receipts and Disbursements of Government Agencies and 
    Municipal Corporations
    
        The changes being made to 11 CFR 9008.53(b)(1), which governs the 
    receipt of donations by government agencies and municipal corporations, 
    generally follow the revisions to section 9008.52(c)(1). Consequently, 
    a separate fund or account of a government agency or municipality may 
    accept donations from local banks and individuals who either maintain a 
    local residence or who work for a business's local office, or a labor 
    organization's local office, or another organization's local office.
    
    Part 9032--Definitions
    
    Section 9032.11  State
    
        The definition of ``State'' in section 9032.11 is being updated by 
    deleting the Canal Zone and by adding American Samoa, which holds 
    Presidential primaries consisting of caucuses. There is no 
    corresponding provision in the general election rules.
    
    Part 9033--Eligibility for Payments
    
    Section 9033.11 Documentation of Disbursements
    
        The revisions to section 9033.11 follow the amendments to section 
    9003.5 discussed above. No public comments were received regarding 
    these changes.
    
    Part 9034--Entitlements
    
    Section 9034.4  Use of Contributions and Matching Payments
    
    1. Winding Down Costs
        The regulations at 11 CFR 9034.4(a)(3) permit candidates to receive 
    contributions and matching funds, and to make disbursements, for the 
    purpose of defraying winding down costs over an extended period after 
    the candidate's date of ineligibility (``DOI''). However, after the 
    implementation of the ``bright line'' rules in 1995, questions arose as 
    to whether all salary and overhead incurred after the date of the 
    candidate's nomination must be attributed to the general election, 
    including those associated with winding down the primary campaign. See 
    11 CFR 9034.4(d)(3). Accordingly, the NPRM sought comments on revising 
    section 9034.4(a)(3)(i) and (iii) to indicate that for candidates who 
    win their parties' nominations, no salary and overhead expenses may be 
    treated as winding down costs until after the end of the expenditure 
    report period, which is thirty days after the general election takes 
    place.
        The written comments of two witnesses opposed this change. One 
    witness viewed the proposal as a ``success penalty'' for winning 
    primary candidates. This witness noted that all primary candidates, 
    whether they win or lose the nomination, must incur wind down costs. 
    Similarly, the other witness stated that general election candidates
    
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    must incur primary campaign wind down costs during the general election 
    period for such activities as paying debts, filing FEC reports, making 
    matching fund submissions, and responding to FEC auditor requests in 
    preparation for the audit. Consequently, this witness argued that the 
    primary committees of the candidates who win the nomination should be 
    able to pay these expenses. This comment also noted that the proposed 
    rule would lower the amount of matching funds that could be received 
    for these legitimate primary expenses, thereby treating winning primary 
    candidates differently from those who lose their party's nomination.
        The Commission has concluded that this area needs to be clarified. 
    During the general election campaign, there are significant 
    distinctions between the winding down activities of candidates who win 
    their parties' nominations and those who do not, particularly with 
    regard to legal and accounting compliance expenses. Accordingly, the 
    revised rules indicate that a publicly funded primary candidate who 
    does not run in the general election may begin to treat 100% of salary 
    and overhead expenses as compliance after the candidate's date of 
    ineligibility. However, federally financed primary candidates who 
    continue on to the general election, as well as non-federally financed 
    primary candidates who accept general election funding, must wait until 
    after the end of the expenditure report period for the general election 
    before they may begin treating all salary and overhead expenses as 
    compliance expenses. Please note that the 100% figure applies to the 
    salaries of those who continue to provide substantial services to the 
    committee after the end of the expenditure report period. Compliance 
    expenses between the date of nomination and the end of the expenditure 
    report period are covered by the revisions to section 9035.1(c)(1), 
    discussed below.
    2. Lost, Misplaced, or Stolen Items
        The revisions to paragraph (b)(8) of section 9034.4 follow the 
    changes made to section 9004.4(b)(8). None of the public comments or 
    testimony addressed this provision.
    3. ``Bright Line'' Distinction Between Primary and General Election 
    Expenses
        Paragraph (e) of section 9034.4 sets forth certain ``bright line'' 
    distinctions as to which expenses should be attributed to a candidate's 
    primary campaign and which ones should be considered general election 
    expenses. Revisions are being made to this paragraph to reflect that 
    not all candidates may accept public funding in both the primary and 
    the general election. Nevertheless, candidates accepting federal 
    financing for only the general election will also need guidance in 
    attributing their expenditures between their primary election 
    committees and their general election committees. Accordingly, 
    paragraph (e) is being amended to indicate that it applies to 
    Presidential campaign committees that accept federal funds for either 
    election.
        As noted above, the Commission expects to address a variety of 
    other issues involving the bright line in a separate set of final rules 
    to be issued at a later date.
    4. Joint Primary/GELAC Solicitations
        Paragraph (e)(6)(i) of section 9034.4 addresses situations where a 
    candidate's GELAC and his or her primary committee issue joint 
    solicitations for contributions. Under the revised rules that took 
    effect for the 1996 elections, the costs of such solicitations were 
    divided equally between the two committees, regardless of how much 
    money is actually raised for each. One difficulty with this, however, 
    was that in some situations it enabled the GELAC to absorb a relatively 
    high portion of fundraising costs while receiving a relatively low 
    proportion of the funds raised. Thus, this provision was at odds with 
    the joint fundraising rules applicable to other types of joint 
    fundraising conducted by publicly funded Presidential primary 
    committees under 11 CFR 9034.8. In effect, section 9034.4(e)(6)(i) 
    could permit the GELAC to subsidize fundraising expenses that would 
    otherwise be paid by the primary committee and subject to spending 
    limits. Questions were also raised as to whether the rule should cover 
    only the cost of a solicitation, or whether it would be more 
    appropriate to include other fundraising costs, such as staff salaries, 
    consulting fees, catering, facilities rental, and the candidate's 
    travel to the event site. Consequently, the NPRM suggested the 
    following four alternatives to paragraph (e)(6)(i):
        (1) Allocate solicitation expenses and the distribution of net 
    proceeds from a fundraiser in the same manner as described in 11 CFR 
    9034.8(c)(8) (i) and (iii), which are the provisions that apply to 
    unaffiliated committees.
        (2) Prohibit joint fundraising between the primary and the GELAC. 
    If each committee performs its own fundraising, the difficulties 
    inherent in apportioning expenses do not arise. This approach 
    eliminates the problem that the recipient committees may not know which 
    of several solicitation letters or fundraising events generated a given 
    contribution.
        (3) Treat all expenses incurred by the GELAC prior to the 
    candidate's date of ineligibility or date of nomination as qualified 
    campaign expenses for the primary election. This approach avoids GELAC 
    subsidization of the primary campaign, and is easy to work with.
        (4) Specify in Sec. 9003.3(a)(2)(i)(E) that the GELAC may only pay 
    for the following solicitation costs: printing invitations and 
    solicitations, mailing, postage and telemarketing expenses. This 
    approach excludes GELAC payment for catering, facilities rental, 
    fundraising consultants, employee salaries, and travel to the event 
    site.
        Two witnesses addressed this topic in their written comments. They 
    both supported the current 50/50 rule for its simplicity. One commenter 
    specifically urged that this rule be expanded to cover all types of 
    fundraising costs, including event and travel costs. The other witness 
    indicated that it would also make sense to follow the already-
    established joint fundraising rules.
        The Commission has decided to implement the first alternative, 
    which treats joint primary/GELAC fundraising the same as joint 
    fundraising by unaffiliated committees. The joint fundraising rules in 
    Sec. 9034.8 are well-established and have proved to work well in other 
    contexts. Under the revisions to 9034.4(e)(6)(i), the GELAC and the 
    primary committee must apportion their fundraising costs, including 
    printing invitations and solicitations, mailing, postage, telemarketing 
    expenses, catering, facilities rental, fundraising consultants, and 
    employee salaries, using the percentage of contributions each committee 
    receives from the joint fundraising effort. Given the unique 
    relationship between the primary campaign and the GELAC, and the fact 
    that the candidate's primary committee receives public financing in 
    exchange for voluntary compliance with spending limits, it is important 
    to ensure that costs are correctly apportioned and net proceeds are 
    properly distributed. Under this new provision, for example, if the 
    GELAC receives 25% of the net proceeds, it may only pay 25% of the 
    fundraising expenses, and no more than that amount.
    
    Section 9034.5  Net Outstanding Campaign Obligations
    
        In determining a Presidential primary committee's net outstanding 
    campaign obligations (``NOCO''), Sec. 9034.5(c)(1) permits candidates 
    to deduct 40% of the
    
    [[Page 49360]]
    
    original cost of capital assets for depreciation. Similarly, 
    Sec. 9004.9(d)(1) provides for a straight 40% depreciation figure for 
    capital assets purchased by general election campaign committees for 
    purposes of the general election committee's statement of net 
    outstanding qualified campaign expenses (``NOQCE''). At one time, the 
    Commission had permitted federally financed Presidential campaign 
    committees to demonstrate that a higher depreciation was appropriate 
    for capital assets. In 1995, as part of an effort to streamline the 
    audit process and to establish ``bright lines'' between primary 
    expenses and general election expenses, the Commission adopted the 
    straight 40% depreciation figure for all assets purchased after the 
    change in the regulations took effect. It was believed that situations 
    where the 40% figure was too low would be counterbalanced by situations 
    where the figure was too high. Experience during the 1996 Presidential 
    audits has shown that the 40% depreciation figure is unrealistically 
    low for capital assets such as vehicles, computer systems, telephone 
    systems, and other equipment that is heavily used during a Presidential 
    primary campaign.
        For this reason, the NPRM sought comments on the amending 
    Sec. 9034.5(c)(1) to allow primary candidates to demonstrate a higher 
    depreciation figure through documentation of the fair market value. A 
    similar amendment was proposed for the corresponding general election 
    provision in 11 CFR 9004.9(d). Two comments addressed this proposed 
    change. Both of them agreed that candidates should be allowed to 
    demonstrate a higher depreciation. As the Commission concurs, this 
    amendment is being included in both sections of the final rules.
        The NPRM also contemplated the establishment of a minimum fair 
    market value of 60% of the purchase price in situations where a 
    candidate's primary committee transfers or sells capital assets to his 
    or her publicly financed general-election committee. Both comments 
    argued that the price for assets transferred from primary to general 
    election committee should be based on actual fair market value, which 
    may be less, rather than an artificial percentage applicable to all 
    types of capital assets.
        The final rules include the ``bright line'' approach, whereby the 
    value of transferred assets is 60% of original purchase price. The 
    Commission has concluded that it would be too complex to determine the 
    fair market values of every capital asset actually transferred. The 60% 
    figure is intended to reflect that while some capital assets are worth 
    less, others are worth more. Sixty percent is reasonable in light of 
    the fact that capital assets such as computer systems or 
    telecommunications systems are customized and configured specifically 
    to meet the needs of that particular campaign organization. It may also 
    be of added value to the campaign staff to continue to work with 
    familiar equipment, and to avoid the disruption that would occur if new 
    equipment were obtained, instead. With respect to the sale of non-
    capital assets from the primary to the general election committee, new 
    language in paragraph (d)((1)(iii) indicates that an inventory must be 
    prepared. This is needed to verify the valuation included on the 
    primary committee's NOCO statement as well as the amount listed on the 
    general election committee's NOQCE statement.
        The revised regulations in 11 CFR 9004.9(d) indicate that once the 
    general election campaign is over, the value of assets obtained from 
    the primary campaign committee shall be listed on the NOQCE statement 
    as 20% of the original cost to the primary committee. Please note that 
    campaigns do not have the option of demonstrating that an amount less 
    than 20% is appropriate. Based on past experience, the Commission has 
    concluded that a 20% residual value is a realistic figure for equipment 
    that has been used throughout both the primary and general election 
    campaigns.
        The commenters argued that this figure should also be based on 
    actual fair market value, which may be less, rather than an artificial 
    percentage applicable to all types of capital assets. Nevertheless, the 
    Commission has concluded that this is another area where it would be 
    too complex to determine the fair market values of every capital asset 
    on hand. Some capital assets may be worth less, while others may be 
    worth more. Accordingly, the revisions to 11 CFR 9004.9(d) incorporate 
    the 20% residual value figure. Please note that the general election 
    committee may, if it wishes, sell these capital assets to the GELAC for 
    the 20% residual value.
        Another revision included in 11 CFR 9004.9 and 9034.5 is a 
    clarification of the term ``capital asset.'' A new sentence is being 
    added to sections 9004.9(d) and 9034.5(c)(1) to indicate that when the 
    components of a system, such as a computer system or a 
    telecommunications system, are used together and the total cost of the 
    components exceeds $2000, the entire system is considered a capital 
    asset. This new language conforms to the Commission's previous 
    interpretation of its rules. See Explanation and Justification for 11 
    CFR 9034.5, 60 FR 31868 (June 16, 1995). The NPRM sought comments on 
    whether computer software should be treated as a capital asset. One 
    commenter argued that software should not be considered to be a capital 
    asset because the vendors' licensing agreements may bar transfer of the 
    software. The Commission notes that some software programs may be sold 
    as a package together with a computer system, thus making it 
    impracticable to list them as separate capital assets on a NOCO 
    statement.
        Lastly, please note that an incorrect reference to the date of 
    ineligibility in paragraph (d)(1)(i) of section 9004.9 has been changed 
    to refer to the end of the expenditure report period.
    
    Part 9035--Expenditure Limitations
    
    Section 9035.1 Campaign Expenditure Limitation; Compliance and 
    Fundraising Exemptions
    
        The rules at 11 CFR 9035.1(c)(1) set forth an exemption from the 
    overall spending limit for legal and accounting compliance costs 
    incurred by federally financed Presidential primary committees. In the 
    past, to claim this exemption, campaign committees have had to keep 
    detailed records of salary and overhead expenses, including records 
    indicating which duties are considered compliance and the percentage of 
    time each person spends on such activities. The NPRM sought to amend 
    this regulation to provide a simpler and easier method of calculating 
    the compliance exemption. Accordingly, comments were sought on revising 
    this paragraph to state that an amount equal to 10% of all operating 
    expenditures for each reporting period may be treated as compliance 
    expenses not subject to the candidate's spending limit. The NPRM noted 
    that this amount could be readily derived from line 23, Operating 
    Expenses, on the committee's reports.
        Several commenters and witnesses stressed the importance of 
    implementing policies that encourage candidates to spend money to 
    achieve voluntary compliance with the campaign financing laws. 
    Consequently, some of these opposed establishing an upper limit of 10% 
    of operating costs that could be spent for compliance costs, arguing 
    that the Commission should not discourage spending more money on 
    compliance. They also pointed out that compliance costs may be 
    unrelated to the overall amount of operating costs, and that committees
    
    [[Page 49361]]
    
    having low operating costs could be disadvantaged. One witness urged 
    the Commission to let committees demonstrate that their actual legal 
    and accounting costs are higher than the standard percentage.
        The Commission agrees that it is not sound policy to artificially 
    limit or discourage compliance spending. Nevertheless, establishing a 
    ``standard deduction'' for compliance has the advantage of simplicity 
    and ease of application. Consequently, the Commission has decided to 
    modify the initial proposal so that an amount equal to 15% of the 
    candidate's overall expenditure limit may be excluded as exempt legal 
    and accounting compliance costs under 11 CFR 100.8(b)(15). A review of 
    previous Presidential campaigns indicates that this figure approximates 
    the upper amount publicly funded primary committees have spent in 
    previous election cycles. Unlike the initial proposal, this approach is 
    not tied to monthly operating expenditures. Thus, it allows for greater 
    flexibility in earlier reporting periods when committees may be setting 
    up their legal and accounting systems. A similar approach has worked 
    well with respect to fundraising expenses. See 11 CFR 100.8(b)(21) and 
    9035.1(c)(2). Note that the final rule does not permit committees to 
    demonstrate that they have actually incurred a higher amount because 
    the Commission is seeking to move away from its previous resource-
    intensive system that required the creation, maintenance, and review of 
    considerable paperwork to document compliance costs. However, as 
    explained above, in addition to the 15% of the overall spending limits, 
    publicly funded primary candidates may also treat 100% of their 
    overhead and salary expenses as exempt compliance costs after their 
    date of ineligibility or after the end of the expenditure report 
    period. These changes to the regulations are intended to decrease the 
    time it takes for the Commission to verify compliance costs during the 
    audit process. They should also reduce the resources campaign 
    committees must devote to tracking compliance costs.
        Please note that the title of section 9035.1 is also being revised 
    and subheadings for each paragraph are being added to assist readers in 
    locating the material in this section more easily.
    
    Part 9036--Review of Matching Fund Submissions and Certification of 
    Payments by Commission
    
    Section 9036.1  Threshold Submission
    
        During the 1996 Presidential election cycle, the Commission 
    instituted a new program whereby primary campaign committees may submit 
    contributions for matching fund payments through the use of digital 
    imaging technology such as computer CD ROMs, instead of submitting 
    paper photocopies of checks and deposit slips. For the 2000 election 
    cycle, the Commission is expanding this program to permit the use of 
    digital imaging for primary committees' threshold submissions. See new 
    language in paragraph (b)(3) of section 9036.1. Please note that 
    committees wishing to submit paper records and documentation, instead 
    of digital images, may do so. The only written set of comments to 
    address this topic supported the submission of this documentation via 
    CD ROM.
    
    Section 9036.2  Additional Submissions for Matching Fund Payments
    
        Paragraph (b)(1)(vi) of this section is being revised to enable 
    primary committees to submit digital images of contributor 
    redesignations, reattributions and supporting statements and materials 
    needed to establish the matchability of contributions. The single set 
    of written comments to address this topic indicated that it would be 
    burdensome for committees to maintain paper copies of original 
    documentation other than contributor cards and affidavits. The 
    Commission notes that the amendment to the regulations is only intended 
    to give Presidential primary committees the option, in lieu of paper 
    submissions, of electronically submitting digital images of contributor 
    redesignations, contributor reattributions and the types of supporting 
    statements commonly found on contributor cards. The requirements of 11 
    CFR 110.1(l) for maintaining the original documents are not being 
    changed. Hence, revised section 9036.2 does not impose additional 
    recordkeeping burdens on Presidential committees.
    
    Additional Issues
    
        During the course of this rulemaking, the Commission considered 
    other possible changes to the regulations that it did not ultimately 
    incorporate into the final rules. A summary of these proposals follows.
    
    1. Allocation of Presidential Travel Costs
    
        The Commission's regulations at 11 CFR 9004.7 and 9034.7 govern the 
    allocation of travel expenses when other candidates or elected 
    officials accompany a publicly funded Presidential candidate, or such 
    candidate's staff, on campaign-related trips. One commenter addressed 
    several differences between these rules and the provisions of 11 CFR 
    106.3 governing travel expenses for Congressional candidates and for 
    Presidential candidates who don't accept federal funds for their 
    campaigns.
        The Commission has concluded that these proposals are beyond the 
    scope of this rulemaking. At a later date, however, they may be 
    included in a new rulemaking addressing possible revisions to 11 CFR 
    106.3. Changes in this area would impact all federal candidates, not 
    just those who have or are running for President and have accepted 
    federal funding for their campaigns. Thus, the Commission would want to 
    have the benefit of obtaining comments from non-Presidential candidates 
    before promulgating new rules that would affect them. In addition, to 
    the extent possible, the Commission would need to closely consider 
    consistency with Congressional guidelines regarding travel.
    
    2. Aircraft Owned by Individuals and Charter Rates
    
        The Commission's regulations at 11 CFR 114.9(e) create exceptions 
    to the definitions of contribution and expenditure to allow candidates 
    and their campaign staff to travel on aircraft owned by corporations or 
    labor organizations if they provide reimbursement within specified time 
    periods. Similarly, 11 CFR 9004.7 and 9034.7 provide for reimbursement 
    for campaign-related travel on government aircraft such as Air Force 
    One or Air Force Two. However, no comparable provisions cover travel on 
    aircraft owned by individuals, partnerships or other unincorporated 
    entities. One commenter urged the Commission to amend its regulations 
    to apply the same first-class reimbursement requirement to travel on 
    private aircraft regardless of the nature of the owner of the aircraft. 
    With regard to travel between cities not having first class service, 
    the comment urged the Commission to let authorized committees use the 
    ``lowest available'' charter rate instead of the ``usual'' charter 
    rate.
        For some of the reasons mentioned above, the Commission has 
    concluded
    
    [[Page 49362]]
    
    that these proposals are beyond the scope of this rulemaking. They 
    could, however, be included in a new Notice of Proposed Rulemaking at a 
    later date. Changes of this nature would impact all federal candidates, 
    not just those who have are running for President and have accepted 
    federal funding for their campaigns. Thus, the Commission would want to 
    have the benefit of obtaining comments from non-Presidential candidates 
    before promulgating new rules that would affect them. In addition, this 
    complex area is also subject to regulation by the Federal Aviation 
    Administration, and consultation with that agency would be advisable 
    before issuing final rules. Similarly, the Commission would need to 
    carefully consider the consistency of its rules with Congressional 
    guidelines regarding travel.
    
    Certification of No Effect Pursuant to 5 U.S.C. 605(b) (Regulatory 
    Flexibility Act)
    
        The attached final rules will not, if promulgated, have a 
    significant economic impact on a substantial number of small entities. 
    The basis for this certification is that very few small entities will 
    be affected by these proposed rules, and the cost is not expected to be 
    significant. Further, any small entities affected have voluntarily 
    chosen to receive public funding and to comply with the requirements of 
    the Presidential Election Campaign Fund Act or the Presidential Primary 
    Matching Payment Account Act in these areas.
    
    List of Subjects
    
    11 CFR Part 9003
    
        Campaign funds, Reporting and recordkeeping requirements
    
    11 CFR Part 9004
    
    Campaign funds
    
    11 CFR Part 9008
    
        Campaign funds, Political committees and parties, Reporting and 
    recordkeeping requirements
        11 CFR Part 9032.
        Campaign funds.
        11 CFR Parts 9033--9035
        Campaign funds, Reporting and recordkeeping requirements.
        11 CFR Part 9036
        Administrative practice and procedure, Campaign funds, Reporting 
    and recordkeeping requirements.
    
        For the reasons set out in the preamble, Subchapters E and F of 
    Chapter I of Title 11 of the Code of Federal Regulations are amended as 
    follows:
    
    PART 9003--ELIGIBILITY FOR PAYMENTS
    
        1. The authority citation for Part 9003 continues to read as 
    follows:
    
        Authority: 26 U.S.C. 9003 and 9009(b).
    
        2. In Sec. 9003.3, the headings for paragraphs (a) and (a)(1) are 
    republished, and the section heading, the introductory text of 
    paragraph (a)(1)(i), and paragraph (a)(1)(i)(A) are revised to read as 
    follows:
    
    
    Sec. 9003.3  Allowable contributions; General election legal and 
    accounting compliance fund.
    
        (a) Legal and accounting compliance fund--major party candidates.
        (1) Sources.
        (i) A major party candidate, or an individual who is seeking the 
    nomination of a major party, may accept contributions to a legal and 
    accounting compliance fund if such contributions are received and 
    disbursed in accordance with this section. A general election legal and 
    accounting compliance fund (``GELAC'') may be established by such 
    individual prior to being nominated or selected as the candidate of a 
    political party for the office of President or Vice President of the 
    United States. Before June 1 of the calendar year in which a 
    Presidential general election is held, contributions may only be 
    deposited in the GELAC if they are made for the primary and exceed the 
    contributor's contribution limits for the primary and are lawfully 
    redesignated by the contributor for the GELAC pursuant to 11 CFR 110.1.
        (A) All solicitations for contributions to the GELAC shall clearly 
    state that Federal law prohibits private contributions from being used 
    for the candidate's election and that contributions will be used solely 
    for legal and accounting services to ensure compliance with Federal 
    law, and shall clearly state how contribution checks should be made 
    payable. Contributions shall not be solicited for the GELAC before June 
    1 of the calendar year in which a Presidential general election is 
    held. If the candidate does not become the nominee, all contributions 
    accepted for the GELAC, including redesignated contributions, shall be 
    refunded within sixty (60) days after the candidate's date of 
    ineligibility.
    * * * * *
        3. Section 9003.5 is amended by revising paragraphs (b)(1)(iv) and 
    (b)(3)(ii) to read as follows:
    
    
    Sec. 9003.5  Documentation of disbursements.
    
    * * * * *
        (b) * * *
        (1) * * *
        (iv) If the purpose of the disbursement is not stated in the 
    accompanying documentation, it must be indicated on the canceled check 
    negotiated by the payee.
    * * * * *
        (3) * * *
        (ii) Purpose means the full name and mailing address of the payee, 
    the date and amount of the disbursement, and a brief description of the 
    goods or services purchased. Examples of acceptable and unacceptable 
    descriptions of goods and services purchased are listed at 11 CFR 
    104.3(b)(3)(i)(B).
    * * * * *
    
    PART 9004--ENTITLEMENT OF ELIGIBLE CANDIDATES TO PAYMENTS; USE OF 
    PAYMENTS
    
        4. The authority citation for part 9004 continues to read as 
    follows:
    
        Authority: 26 U.S.C. 9004 and 9009(b).
    
        5. Section 9004.4 is amended by revising paragraphs (a)(4) and 
    (b)(8) to read as follows:
    
    
    Sec. 9004.4  Use of payments.
    
        (a) * * *
        (4) Winding down costs. The following costs shall be considered 
    qualified campaign expenses:
        (i) Costs associated with the termination of the candidate's 
    general election campaign such as complying with the post-election 
    requirements of the Act and other necessary administrative costs 
    associated with winding down the campaign, including office space 
    rental, staff salaries, and office supplies; and
        (ii) Costs associated with the candidate's general election 
    campaign and incurred by the candidate prior to the end of the 
    expenditure report period for which written arrangement or commitment 
    was made on or before the close of the expenditure report period.
    * * * * *
        (b) * * *
        (8) Lost, misplaced, or stolen items. The cost of lost, misplaced, 
    or stolen items may be considered a nonqualified campaign expense. 
    Factors considered by the Commission in making this determination shall 
    include, but not be limited to, whether the committee demonstrates that 
    it made conscientious efforts to safeguard the missing equipment; 
    whether the committee sought or obtained insurance on the items; 
    whether the committee filed a police report; the type of equipment 
    involved; and the number and value of items that were lost.
        6. Section 9004.9 is amended by revising paragraph (d)(1) to read 
    as follows:
    
    [[Page 49363]]
    
    Sec. 9004.9  Net outstanding qualified campaign expenses.
    
    * * * * *
        (d) (1) Capital assets and assets purchased from the primary 
    election committee.
        (i) For purposes of this section, the term capital asset means any 
    property used in the operation of the campaign whose purchase price 
    exceeded $2000 when acquired by the committee. Property that must be 
    valued as capital assets under this section includes, but is not 
    limited to, office equipment, furniture, vehicles and fixtures acquired 
    for use in the operation of the candidate's campaign, but does not 
    include property defined as ``other assets'' under paragraph (d)(2) of 
    this section. Capital assets include items such as computer systems and 
    telecommunications systems, if the equipment is used together and if 
    the total cost of all components that are used together exceeds $2000. 
    A list of all capital assets shall be maintained by the committee in 
    accordance with 11 CFR 9003.5(d)(1). The fair market value of capital 
    assets shall be considered to be 60% of the total original cost of such 
    items when acquired, except that items received after the end of the 
    expenditure report period must be valued at their fair market value on 
    the date acquired. A candidate may claim a lower fair market value for 
    a capital asset by listing that capital asset on the statement 
    separately and demonstrating, through documentation, the lower fair 
    market value.
        (ii) If capital assets are obtained from the candidate's primary 
    election committee, the purchase price shall be considered to be 60% of 
    the original cost of such assets to the candidate's primary election 
    committee. For purposes of the statement of net outstanding qualified 
    campaign expenses filed after the end of the expenditure report period, 
    the fair market value of capital assets obtained from the candidate's 
    primary election committee shall be considered to be 20% of the 
    original cost of such assets to the candidate's primary election 
    committee.
        (iii) Items purchased from the primary election committee that are 
    not capital assets, and also are not other assets under paragraph 
    (d)(2) of this section, shall be listed on an inventory that states 
    their valuation.
    * * * * *
    
    PART 9008--FEDERAL FINANCING OF PRESIDENTIAL NOMINATING CONVENTIONS
    
        7. The authority citation for part 9008 continues to read as 
    follows:
    
        Authority: 2 U.S.C. 437, 438(a)(8); 26 U.S.C. 9008 and 9009(b).
    
        8. Section 9008.7 is amended by adding new paragraph (c) to read as 
    follows:
    
    
    Sec. 9008.7  Use of funds.
    
    * * * * *
        (c) Lost, misplaced, or stolen items. The cost of lost, misplaced, 
    or stolen items may not be defrayed with public funds under certain 
    circumstances. Factors considered by the Commission in making this 
    determination shall include, but not be limited to, whether the 
    committee demonstrates that it made conscientious efforts to safeguard 
    the missing equipment; whether the committee sought or obtained 
    insurance on the items; whether the committee filed a police report; 
    the type of equipment involved; and the number and value of items that 
    were lost.
        9. Section 9008.14 is revised to read as follows:
    
    
    Sec. 9008.14  Petitions for rehearing; stays of repayment 
    determinations.
    
        Petitions for rehearing following the Commission's repayment 
    determination and requests for stays of repayment determinations will 
    be governed by the procedures set forth at 11 CFR 9007.5 and 9038.5. 
    The Commission will afford convention committees the same rights as are 
    provided to publicly funded candidates under 11 CFR 9007.5 and 9038.5.
        10. Section 9008.52 is amended by republishing the heading of 
    paragraph (c), and by revising the introductory text of paragraph 
    (c)(1) to read as follows:
    
    
    Sec. 9008.52  Receipts and disbursements of host committees.
    
    * * * * *
        (c) Receipt of donations from local businesses and organizations. 
    (1) Local businesses (including banks), local labor organizations, and 
    other local organizations or individuals who maintain a local residence 
    or who work for a local business, local labor organization, or local 
    organization may donate funds or make in-kind donations to a host 
    committee to be used for the following purposes:
    * * * * *
        11. Section 9008.53 is amended by republishing the heading of 
    paragraph (b), and by revising the introductory language of paragraph 
    (b)(1) to read as follows:
    
    
    Sec. 9008.53  Receipts and disbursements of government agencies and 
    municipal corporations.
    
    * * * * *
        (b) Receipt of donations to a separate fund or account. (1) Local 
    businesses (including banks), local labor organizations, and other 
    local organizations or individuals who maintain a local residence or 
    who work for a local business, local labor organization, or local 
    organization may donate funds or make in-kind donations to a separate 
    fund or account of a government agency or municipality to pay for 
    expenses listed in 11 CFR 9008.52(c), provided that:
    * * * * *
    
    PART 9032--DEFINITIONS
    
        12. The authority citation for part 9032 continues to read as 
    follows:
    
        Authority: 26 U.S.C. 9032 and 9039(b).
    
        13. Section 9032.11 is revised to read as follows:
    
    
    Sec. 9032.11  State.
    
        State means each State of the United States, Puerto Rico, American 
    Samoa, the Virgin Islands, the District of Columbia, and Guam.
    
    PART 9033--ELIGIBILITY FOR PAYMENTS
    
        14. The authority citation for Part 9033 continues to read as 
    follows:
    
        Authority: 26 U.S.C. 9003(e), 9033 and 9039(b).
    
        15. Section 9033.11 is amended by revising paragraphs (b)(1)(iv) 
    and (b)(3)(ii) to read as follows:
    
    
    Sec. 9033.11  Documentation of disbursements.
    
    * * * * *
        (b) * * *
        (1) * * *
        (iv) If the purpose of the disbursement is not stated in the 
    accompanying documentation, it must be indicated on the canceled check 
    negotiated by the payee.
    * * * * *
        (3) * * *
        (ii) Purpose means the full name and mailing address of the payee, 
    the date and amount of the disbursement, and a brief description of the 
    goods or services purchased. Examples of acceptable and unacceptable 
    descriptions of goods and services purchased are listed at 11 CFR 
    104.3(b)(3)(i)(B).
    * * * * *
    
    PART 9034--ENTITLEMENTS
    
        16. The authority citation for Part 9034 continues to read as 
    follows:
    
    
    [[Page 49364]]
    
    
        Authority: 26 U.S.C. 9034 and 9039(b).
    
        17. Section 9034.4 is amended by revising paragraph (a)(3)(iii), 
    paragraph (b)(8), the heading and introductory text of paragraph (e), 
    and paragraph (e)(6)(i) to read as follows:
    
    
    Sec. 9034.4  Use of contributions and matching payments.
    
        (a) * * *
        (3) * * *
        (iii) In the case of a candidate who does not receive public 
    funding for the general election, for purposes of the expenditure 
    limitations set forth in 11 CFR 9035.1, 100% of salary, overhead and 
    computer expenses incurred after a candidate's date of ineligibility 
    may be treated as exempt legal and accounting compliance expenses 
    beginning with the first full reporting period after the candidate's 
    date of ineligibility. For candidates who continue to campaign or re-
    establish eligibility, this paragraph shall not apply to expenses 
    incurred during the period between the date of ineligibility and the 
    date on which the candidate either re-establishes eligibility or ceases 
    to continue to campaign. For purposes of the expenditure limitations 
    set forth in 11 CFR 9035.1, candidates who receive public funding for 
    the general election must wait until the end of the expenditure report 
    period described in 11 CFR 9002.12 before they may treat 100% of 
    salary, overhead and computer expenses as exempt legal and accounting 
    compliance expenses.
    * * * * *
        (b) * * *
        (8) Lost, misplaced, or stolen items. The cost of lost, misplaced, 
    or stolen items may be considered a nonqualified campaign expense. 
    Factors considered by the Commission in making this determination shall 
    include, but not be limited to, whether the committee demonstrates that 
    it made conscientious efforts to safeguard the missing equipment; 
    whether the committee sought or obtained insurance on the items; 
    whether the committee filed a police report; the type of equipment 
    involved; and the number and value of items that were lost.
    * * * * *
        (e) Attribution of expenditures between the primary and the general 
    election spending limits. The following rules apply to candidates who 
    receive public funding in either the primary or the general election, 
    or both.
    * * * * *
        (6) * * *
        (i) Solicitations and fundraising costs. The costs of fundraising, 
    including that of events and solicitation costs, shall be attributed to 
    the primary election or to the GELAC, depending on the purposes of the 
    fundraising. If a candidate raises funds for both the primary election 
    and for the GELAC in a single communication or through a single 
    fundraising event, the allocation of fundraising costs and the 
    distribution of net proceeds will be made in the same manner as 
    described in 11 CFR 9034.8(c)(8)(i) and (ii).
    * * * * *
        18. Section 9034.5 is amended by revising paragraph (c)(1) to read 
    as follows:
    
    
    Sec. 9034.5  Net outstanding campaign obligations.
    
    * * * * *
        (c) (1) Capital assets. For purposes of this section, the term 
    capital asset means any property used in the operation of the campaign 
    whose purchase price exceeded $2000 when received by the committee. 
    Property that must be valued as capital assets under this section 
    includes, but is not limited to, office equipment, furniture, vehicles 
    and fixtures acquired for use in the operation of the candidate's 
    campaign, but does not include property defined as ``other assets'' 
    under paragraph (c)(2) of this section. Capital assets include items 
    such as computer systems and telecommunications systems, if the 
    equipment is used together and if the total cost of all components that 
    are used together exceeds $2000. A list of all capital assets shall be 
    maintained by the committee in accordance with 11 CFR 9033.11(d). The 
    fair market value of capital assets shall be considered to be 60% of 
    the total original cost of such items when acquired, except that items 
    received after the date of ineligibility must be valued at their fair 
    market value on the date received. A candidate may claim a lower fair 
    market value for a capital asset by listing that capital asset on the 
    statement separately and demonstrating, through documentation, the 
    lower fair market value. If the candidate receives public funding for 
    the general election, a lower fair market value shall not be claimed 
    under this section for any capital assets transferred or sold to the 
    candidate's general election committee.
    * * * * *
    
    PART 9035--EXPENDITURE LIMITATIONS
    
        19. The authority citation for part 9035 continues to read as 
    follows:
    
        Authority: 26 U.S.C. 9035 and 9039(b).
    
        20. Section 9035.1 is revised to read as follows:
    
    
    Sec. 9035.1  Campaign expenditure limitation; compliance and 
    fundraising exemptions.
    
        (a) Spending limit. (1) No candidate or his or her authorized 
    committee(s) shall knowingly incur expenditures in connection with the 
    candidate's campaign for nomination, which expenditures, in the 
    aggregate, exceed $10,000,000 (as adjusted under 2 U.S.C. 441a(c)), 
    except that the aggregate expenditures by a candidate in any one State 
    shall not exceed the greater of: 16 cents (as adjusted under 2 U.S.C. 
    441a(c)) multiplied by the voting age population of the State (as 
    certified under 2 U.S.C. 441a(e)); or $200,000 (as adjusted under 2 
    U.S.C. 441a(c)).
        (2) The Commission will calculate the amount of expenditures 
    attributable to the overall expenditure limit or to a particular state 
    using the full amounts originally charged for goods and services 
    rendered to the committee and not the amounts for which such 
    obligations were settled and paid, unless the committee can demonstrate 
    that the lower amount paid reflects a reasonable settlement of a bona 
    fide dispute with the creditor.
        (b) Allocation of expenditures. Each candidate receiving or 
    expecting to receive matching funds under this subchapter shall also 
    allocate his or her expenditures in accordance with the provisions of 
    11 CFR 106.2.
        (c) Compliance and fundraising exemptions. (1) A candidate may 
    exclude from the overall expenditure limitation set forth in paragraph 
    (a) of this section an amount equal to 15% of the overall expenditure 
    limitation as exempt legal and accounting compliance costs under 11 CFR 
    100.8(b)(15).
        (2) A candidate may exclude from the overall expenditure limitation 
    of 11 CFR 9035.1 the amount of exempt fundraising costs specified in 11 
    CFR 100.8(b)(21)(iii).
        (d) Candidates not receiving matching funds. The expenditure 
    limitations of 11 CFR 9035.1 shall not apply to a candidate who does 
    not receive matching funds at any time during the matching payment 
    period.
        21. The title of Part 9036 is revised to read as follows:
    
    PART 9036--REVIEW OF MATCHING FUND SUBMISSIONS AND CERTIFICATION OF 
    PAYMENTS BY COMMISSION
    
        22. The authority citation for Part 9036 continues to read as 
    follows:
    
        Authority: 26 U.S.C. 9036 and 9039(b).
    
        23. Section 9036.1 is amended by revising paragraph (b)(3) to read 
    as follows:
    
    [[Page 49365]]
    
    Sec. 9036.1  Threshold submission.
    
    * * * * *
        (b) * * *
        (3) The candidate shall submit a full-size photocopy of each check 
    or written instrument and of supporting documentation in accordance 
    with 11 CFR 9034.2 for each contribution that the candidate submits to 
    establish eligibility for matching funds. For purposes of the threshold 
    submission, the photocopies shall be segregated alphabetically by 
    contributor within each State, and shall be accompanied by and 
    referenced to copies of the relevant deposit slips. In lieu of 
    submitting photocopies, the candidate may submit digital images of 
    checks and other materials in accordance with the procedures specified 
    in 11 CFR 9036.2(b)(1)(vi). Digital images of contributions do not need 
    to be segregated alphabetically by contributor within each State.
    * * * * *
        24. Section 9036.2 is amended by revising paragraph (b)(1)(vi) to 
    read as follows:
    
    
    Sec. 9036.2  Additional submissions for matching fund payments.
    
    * * * * *
        (b) * * *
        (1) * * *
        (vi) The photocopies of each check or written instrument and of 
    supporting documentation shall either be alphabetized and referenced to 
    copies of the relevant deposit slip, but not segregated by State as 
    required in the threshold submission; or such photocopies may be 
    batched in deposits of 50 contributions or less and cross-referenced by 
    deposit number and sequence number within each deposit on the 
    contributor list. In lieu of submitting photocopies, the candidate may 
    submit digital images of checks, written instruments and deposit slips 
    as specified in the Computerized Magnetic Media Requirements. The 
    candidate may also submit digital images of contributor redesignations, 
    reattributions and supporting statements and materials needed to verify 
    the matchability of contributions. The candidate shall provide the 
    computer equipment and software needed to retrieve and read the digital 
    images, if necessary, at no cost to the Commission, and shall include 
    digital images of every contribution received and imaged on or after 
    the date of the previous matching fund request. Contributions and other 
    documentation not imaged shall be submitted in photocopy form. The 
    candidate shall maintain the originals of all contributor 
    redesignations, reattributions and supporting statements and materials 
    that are submitted for matching as digital images.
    * * * * *
        Dated: September 7, 1999.
    Scott E. Thomas,
    Chairman, Federal Election Commission.
    [FR Doc. 99-23578 Filed 9-10-99; 8:45 am]
    BILLING CODE 6715-01-P
    
    
    

Document Information

Published:
09/13/1999
Department:
Federal Election Commission
Entry Type:
Rule
Action:
Final Rule and Transmittal of Regulations to Congress.
Document Number:
99-23578
Dates:
Further action, including the publication of a document in the Federal Register announcing an effective date, will be taken after these regulations have been before Congress for 30 legislative days pursuant to 26 U.S.C. 9009(c) and 9039(c).
Pages:
49355-49365 (11 pages)
Docket Numbers:
Notice 1999-17
PDF File:
99-23578.pdf
CFR: (15)
11 CFR 9003.3
11 CFR 9003.5
11 CFR 9004.4
11 CFR 9004.9
11 CFR 9008.7
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